M/s.vilappil Service co-op Bank Ltd, Trivandrum V. The ITO, Trivandrum

CO 5/COCH/2017

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2945 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 27-02-2017
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: LISHA M
• Keywords: Question of law; Competent authority
• Section: 147; 148

Judgement Text

ITA NO.24/C/2017 & CO 5 /C/2017 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH ( SMC) KOCHI BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NOS 24/COCH/2017 (ASST YEAR 2008-09) & CROSS OBJECTION NO. 5/COCH/2017 THE INCOME TAX OFFICER WARD 2(4) RANGE 2 TRIVANDRUM VS M/S VILAPPIL S ERVICE COOP BANK PEYAD - PO TRIVANDRUM 695 573 ( APPELLANT /RESPONDENT ) (RESPONDENT /CROSS OBJECTOR ) PAN NO. AAAAV4785E ASSESSEE BY SMT LISHA M REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 29 TH MARCH 2017 DATE OF PRONOUNCEMENT 04 - 04 - 2 017 ORDER PER GEROGE GEORGE K, JM: THIS APPEAL, AT THE INSTANCE OF THE REVENUE AND THE CROSS OBJECTION, AT THE INSTANCE OF THE ASSESSEE, ARISE OUT OF THE ORDER OF THE CIT(A) DATED 5.12.2016. THE RELEVANT ASSESSMENT YEAR IS 2008-09. 2 COMMON ISSUE ARISES IN THE APPEAL AND THE CROSS O BJECTION AND THEY PERTAIN TO THE SAME ASSESSEE, HENCE, THE APPEAL AND CROSS OBJE CTION WERE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDER. 3 THE GROUNDS RAISED BY THE REVENUE READ AS FOLLO WS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , ERRED ITI CONCLUDING THAT 'THE ASSESSEE BEING A PRIMARY AGRICULTURAL CREDIT C O- OPERATIVE SOCIETY REGISTERED ITA NO.24/C/2017 & CO 5 /C/2017 UNDER THE KERALA CO-OPERATIVE SOCIETY ACT IS ENTITL ED FOR EXEMPTION ITS INCOME U/S 80(P)(2) AS CLAIMED IN THE RETURN FILED'. 2. IT IS RESPECTFULLY SUBMITTED THAT THE RESPONDENT IS ESSENTIALLY, A CO- OPERATIVE BANK AND NOT MERELY A PRIMARY AGRICULTURAL CREDIT S OCIETY AND HENCE THE ALLOWANCE OF DEDUCTION IX] S. 80 P TO THE RESPONDEN T ASSESSEE WHILE COMPUTING THE TOTAL INCOME WAS IRREGULAR IN NATURE AND ALSO A GAINST LAW. 3. THE PRESENT APPEAL INVOLVES SUBSTANTIAL QUESTION OF LAW. THE APPEAL INVOLVING SIMILAR QUESTION IS PENDING BEFORE THE HON'BLE SUPR EME COURT OF INDIA IN THE CASE OF M / S. KARAKULAM SERVICE CO-OPERATIVE BANK LTD. [CIVIL APPEAL NO. 11288 OF 2016 DATED 25/11/2016] AND THE LD. CIT(APPEAL) S HOULD HAVE AWAITED DECISION OF HON'BLE SUPREME COURT. 4. WITHOUT PREJUDICE TO ABOVE GROUNDS THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE VERIFIED WHETHER DEDUCTION VX ] S. 80P( 1) R.W. 80P(2) IS AVAILABLE FOR THE ASSESSEE IF HELD AS A PRIMARY AGR ICULTURAL CREDIT SOCIETY. 5. THE LD. CIT(APPEALS) NOT WITHSTANDING GROUNDS 1 TO 3 ABOVE, AFTER HOLDING THAT THE APPELLANT IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AS DEDUCTIBLE U/ S. 80P SHOULD HAVE DIRECTED EXAMINATION AND RESTRICTION OF DEDUCTION TO INCOME SPECIFIED IN SECTION 80P(2)(A) TO (F) SUBJECT TO SP ECIFIED CONDITIONS. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING THE ORDER OF THE LEARNED COMMISSIONER OF APPEALS, TRIVA NDRUM, ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4 THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED U NDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEARS 2008- 09, THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME. THE ASSESSING OFFICER ISSUES NOTI CE U/S 148 OF THE ACT ON 15.3.2013. IN RESPONSE TO THE NOTICE ISSUED U/S 148, THE ASSES SEE FILED RETURNS OF INCOME DECLARING NIL INCOME AFTER CLAIMING EXEMPTION U/S 80P(2) OF THE ACT. THE CLAIM OF DEDUCTION U/S 80P FOR THE RELEVANT ASSESSMENT YEAR WAS RS 45,457, 476/- ITA NO.24/C/2017 & CO 5 /C/2017 4.1 THE CLAIM OF DEDUCTION U/S 80P(2) OF THE ACT W AS DENIED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S 143 R.W .S 147 OF THE ACT FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSING OFFICER HEL D THAT THE ASSESSEE COULD NOT BE TREATED AS PRIMARY AGRICULTURAL SOCIETY AS IT WAS E NGAGED IN THE BUSINESS OF BANKING AND THE PROVISIONS OF SECTION 80P(4) DISENTITLE THE AS SESSEE, WHO IS DOING THE BUSINESS OF BANKING, FOR CLAIMING DEDUCTION U/S 80P(2) OF THE A CT. 4.2 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE PREFERRED APPEAL FOR THE AY 2008-09 BEFORE THE FIRST APPELLATE AUTHO RITY. THE CIT(A) FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CHIRAKKAL SERVICE CO- OPERATIVE BANK LTD REPORTED IN 384 ITR 490(KER) D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 5 REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE THE T RIBUNAL. THE LD DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND RELIED ON TH E GROUNDS RAISED IN THE MEMORANDUM OF APPEAL. THE LD AR SUBMITTED THAT THE ISSUE IN QU ESTION IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CA SE OF CHIRAKKAL SERVICE CO-OPERATIVE BANK LTD (SUPRA). 6 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TH E CHIRAKKAL SERVICE COOPERATIVE BANK LTD & OTHERS (SUPRA) HAS HELD THAT THE PRIMARY AGRI CULTURAL CREDIT SOCIETY REGISTERED ITA NO.24/C/2017 & CO 5 /C/2017 UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969, I S ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). THE HONBLE HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, THE TRIBUNAL IS CORRECT IN LAW IN DE CIDING AGAINST THE ASSESSEE, THE ISSUE REGARDING ENTITLEMENT FOR EXEMPTION UNDER SEC TION 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? 6.1 IN CONSIDERING THE ABOVE QUESTION OF LAW, THE H ONBLE HIGH COURT RENDERED THE FOLLOWING FINDINGS: 15. APPELLANTS IN THESE DIFFERENT APPEALS ARE INDI SPUTABLY SOCIETIES REGISTERED UNDER THE KERALA CO- OPERATIVE SOCIETIES ACT, 1969, FOR SORT, KCS ACT AN D THE BYE-LAWS OF EACH OF THEM, AS MADE AVAILABLE TO THIS COURT AS PART OF THE PAPER BOOKS, CLEARLY SHOW THAT THEY HAVE BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE COMPET ENT AUTHORITY UNDER THE PROVISIONS OF THAT ACT. THE PARLIAMENT, HAVING DEFINED THE TERM 'CO-OPERATI VE SOCIETY' FOR THE PURPOSES OF THE BR ACT WI TH REFERENCE TO, AMONG OTHER THINGS, THE REGISTRATION OF A SOCIETY U N DER ANY STATE LAW RELATING TO CO-OPERATIVE SOCIETIES FOR THE TIME BEING; IT CANN OT BUT BE TAKEN THAT THE PURPOSE OF THE SOCIETIES SO REGISTERED UNDER THE STATE LAW AND ITS OBJECTS H AVE TO BE UNDERSTOOD AS THOSE WHICH HAVE BEEN APPROVED BY THE COMPETENT AUTHORITY UNDER SUCH STAT E LAW. THIS, WE VISUALISE AS DUE RECIPROCATIVE LEGISLATIVE EXERCISE BY THE PARLIAMENT RECOGN I SING THE PREDOMINANCE OF DECISIONS RENDERED UNDER THE RELEVANT STATE LAW. IN TH I S VIEW OF THE MATTER, ALL THE APPELLANTS HAV I NG BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CRED I T SOC I ET I ES B Y THE COMPETENT AUTHOR I TY UNDE R TH E KCS ACT , I T HAS NECESSAR IL Y TO BE HELD THAT THE PRINCIPAL OBJECT OF SUCH SOCI ETIES IS TO UNDERTAKE AGR I CULTURAL CREDIT ACTIVITIES AND TO PROVIDE LOANS AND ADVANCES FOR A GRICULTURAL PURPOSES , THE RATE ' OF INTEREST ON SUCH LOANS AND ADVANCES TO BE AT THE RATE FIXED BY THE R EGISTRAR OF CO - OPERATIVE SOCIETIES UNDER THE KCS ACT AND HAV I NG I TS AREA OF OPERATION CONFINED TO A VILLAGE, PANCHAYAT OR A MUNICIPALITY. THIS IS THE CONSEQUENCE OF THE DEFINI TION CLAUSE IN SECTION 2(OAA) OF THE KCS ACT. THE AUTHORITIES UNDER THE IT ACT CANNOT PROBE INTO ANY ISSUE OR SUCH MATTER RELATING TO SUCH APPLICANT S. 16. THE POSITION OF 1 AW BEING AS ABOVE WITH REFERENCE TO THE STATUTORY PROVISIONS, THE APPELLANTS HAD SHOWN TO THE AUTHORI TIES AND THE TRIBUNAL ITA NO.24/C/2017 & CO 5 /C/2017 THAT THEY ARE PRIMARY AGRICULTURA L CREDIT SOCIETIES IN TERMS OF CLAUSE (CCIV) OF SECTION 5 OF THE BR ACT, HAVING REGARD TO THE PRIMARY OBJECT OR PRINCIP AL BUSINESS OF EACH OF THE APPELLANTS. IT IS ALSO CLEA R FROM THE MATERIALS ON RECORD THAT THE BYE-LAWS OF EACH OF THE APPELLANTS DO . NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS MEMB ER, EXCEPT MAY BE, IN ACCORDANCE WITH THE PROVISO TO SUB - CLAUSE 2 OF SECTION 5(CCIV) OF THE BR ACT. THE DIFFERENT ORDERS OF THE TRIBUNAL WHICH ARE IMPEACHED IN THESE APPEALS DO NOT CONTAIN ANY FINDING OF FACT TO THE E FFECT THAT THE BYE- 1AWS OF ANY OF THE APPELLANT OR ITS CLASS I FICATION BY THE COMPETENT AUTHORITY UNDER THE KCS ACT LS ANYTHING DIFFERENT FROM WHAT WE HAVE STATED HEREIN ABOVE. FOR THIS REASON, IT CANNOT BUT BE HELD THAT THE APPELLANTS ARE ENTITLED TO EXEMPTION FROM THE PROVISIONS OF SECTION 80P OF THE IT ACT BY VIRTUE OF SUB- SECTION 4 OF THAT SECT; ON. IN THIS VIEW OF THE MATTER, THE APPEALS SUCCEED. 17. IN THE LIGHT OF THE AFORESAID, WE ANSWER SUBSTAN TIA 1 QUESTION 'A' IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW IN DECIDING THE ISSUE REGARDING THE ENTITLEMENT OF EXEMPTION UNDER SECTION 80P AGAINST THE APPELLANTS. WE HOLD TH AT THE PRIMARY AGRICULTURAL CREDIT SOCIETIES, REGISTERED AS SUCH UNDER THE KCS ACT; AND CLASSIFIE D SO, UNDER THAT ACT, INCLUDING THE APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. 6.2 RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BLE JUDICIAL HIGH COURT, IN THE CASE OF CHIRAKKAL SERVICE CO-OPERATIVE BANK LTD (SUPRA), I HOLD THAT THE CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRA NT BENEFIT OF SECTION 80P(2) OF THE ACT. IT IS ORDERED ACCORDINGLY. 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. CROSS OBJECTION NO. 5/COCH/2017( BY THE ASSESSEE) ITA NO.24/C/2017 & CO 5 /C/2017 8 THE CROSS OBJECTION FILED BY THE ASSESSEE IS SUPP ORTING THE ORDER OF THE CIT(A). SINCE I HAVE DISMISSED THE APPEAL FILED BY THE REVE NUE, THE CROSS OBJECTION BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND THE SAME ARE DI SMISSED. 9 TO SUM-UP, THE APPEAL BY THE REVENUE AND THE CROS S OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF APRIL 2017. SD/- (GEORGE GEORGE K) JUDICIAL MEMBER COCHIN: DATED 4-4-2017 RAJ* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT, 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN