The ACIT, Kollam V. Paravur SNV Regional Co-op Bank Ltd, Kollam

ITA 11/COCH/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8576 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 15-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Keywords: Question of law; Competent authority

Judgement Text

ITA NO S 10 & 11/COCH/2016 . 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI B P JAIN , A M & G EORGE GEORGE.K , J M ITA NO S. 10 & 11/COCH/2 0 16 (ASST YEAR S 2007 - 08 & 2011 - 12 ) THE ASST COMMR OF INCOME TAX CIRCLE 1 KOLLAM VS PARAVUR SNV REGIONAL COOP BANK LTD PARA VUR KOLLAM ( APPELLANT) (RESPONDENT) PAN NO. AAATP1499A ASSESSEE BY NONE REVENUE BY SH K P GOPAKUMAR, SR DR DATE OF HEARING 24 TH MAY 2016 DATE OF PRONOUNCEMENT 1 ST JUNE 2016 OR D ER PER GEORGE GEORGE. K. J M: THESE APPEALS, AT THE INSTANCE O F THE REVENUE , ARISE OUT OF THE CONSOLIDATED ORDER OF THE CIT(A) DATED 26 TH OCT 2015. THE RELEVANT ASSESSMENT YEARS ARE 2007 - 08 AND 2011 - 12. 2 SINCE COMMON ISSUE IS INVOLVED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSE D OFF BY THIS CO NSOLIDATED ORDER. 3 NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, WE PROCEED TO DISPOSE OFF THE SAME ON MERIT AFTER HEARING THE LD DR. ITA NO S 10 & 11/COCH/2016 . 2 4 IDENTICAL GROUNDS OF APPEAL ARE RAISED FOR BOTH THE ASSESSMENT YEARS AND THEY READ AS UNDER: 1 . THE LE AR N E D C OMMIS S IO N E R O F I NCOME T A X (APPEALS) , HAVING CONCLUD ED TH A T TH E ASSESS E E 'CA N NOT BE A PRIM A RY AGRICULTURAL CREDIT C O O P E RAT I V E SOC I ET Y O R PR IMAR Y CO - O P E R AT IVE AGRICULTURAL AND RUR AL DEVE LOP M E NT B ANK . ' AND THAT THE A S S E SS EE' HAS FAILED TO FULFILL TH E CO NDITI O N S CO N T E MPLATE D UNDER P A RT V OF THE BANKING REGULATI ON A C T , 1 9 49 AND T H E R EB Y THE AS S ESS ING OFFICER HAS JUSTIFIED T H E R E J ECTI O N O F ITS C L A IM ', OUGHT TO H A VE REJECTED THE ASSESSE E'S C L A IM F OR D E D U CTION I N F ULL . 2 . THE LE A R NE D CO MMISSIO N ER OF INC OME TAX (A PP EA LS HAS FAILED TO APPRECI A T E TH A T TH E ASSESS EE I S NOT E L IG I BLE F O R DEDUCTION U/S 80(P)(2)( A )(I) FOR AN Y PA RT OF IT S IN CO M E, ONCE TH E ASSESSEE FALLS WITHIN TH E SC OP E OF S E CTIO N 80 P(4). 3 . FOR THES E A ND OTH E R G ROU N DS T H A T M AY BE ADV ANCED AT THE TIME OF HE ARING T H E OR D E R OF TH E L EA RN ED COMM ISSIONER OF APPEALS, TRIVANDR UM ON TH E A BOVE P O INTS M A Y BE S E T AS ID E A ND THAT OF THE ASSESSIN G OFFICE R R ES TO RED . 5 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE AO WHILE COMPLETING THE ASSESSMENT DENIED T HE BENEFIT OF DEDUCTION U /S 80P(2) OF THE ACT FOR THE REASON THAT THE ASSESSEE IS A SOCIETY ENGAGED IN BANKING BUSINESS AND NOT PRIMARILY AGRICULTURAL SOCIETY. IT WAS STATED BY THE AO THAT IN VIEW OF INSERTION OF SECTION 80P(4), THE ASSESSEES SOCIETY IS NOT ELIGIBLE F OR DEDUCTION U/S 80P(2) OF THE ACT. 6 AGAINST THE ASSESSMENT ORDER FOR THE AYS 2007 - 08 AND 2011 - 12, THE ASSESSEE PREFERRED APPEALS TO THE FIRST APPELLATE AUTHORITY. IT WAS CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY THAT THE ASSESSEE IS A PRIMARILY AGRICULTURAL CREDIT SOCIETY AND IS PROVIDING CREDIT FACILITIES ONLY TO ITS MEMBERS, WHO ARE ITA NO S 10 & 11/COCH/2016 . 3 PRIMARILY AGRICULTURALISTS. THE REPRESENTATIVE FURTHER CLAIMED THAT THE CERTIFICATE FROM THE JOINT REGISTRAR OF COOPERATIVE SOCIETIES CLEAR EVIDENCE THAT THE ASSESSEE SOCIETY AS A PRIMARY AGRICULTURAL CREDIT SOCIETY. THE CIT(A) DISPOSED OFF THE APPEALS BY PARTLY ALLOWING THE PLEA OF THE ASSESSEE. THE CIT(A) IN THE IMPUGNED ORDER STATED THAT THE ASSESSEE IS ENTITLED TO EXEMPTION OF ITS INCOME FROM LO ANS AND ADVANCES GIVEN FOR AGRICULTURAL PURPOSES AND RESTRICTED THE DENIAL OF EXEMPTION ONLY TO THE EXTENT OF INTEREST INCOME EARNED FROM LOANS AND ADVANCES GIVEN FOR NON AGRICULTURAL PURPOSES. FOR THE ABOVE MENTIONED REASONS THE MATTER WAS RESTORED TO THE AO WITH A DIRECTION TO THE ASSESSEE TO PLACE ALL THE RELEVANT MATERIALS BEFORE THE AO FOR CLAIMING EXEMPTION U/ 80P(2). 7 THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US RAIS ING THE ABOVE MENTIONED GROUNDS. THE LD DR FAIRLY SUBMITTED THAT IN VIEW OF THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF THE CHIRAKKAL SERVICE COOPERATIVE BANK LTD & OTHERS IN ITA NO.212 OF 2013 (JUDGMENT DATED 15 TH FEBRUARY 2016), THE ISSUE NEEDS TO BE RECONSIDERED BY THE AO AFRESH TAKING INTO CON SIDERATION THE BYE LAWS OF THE ASSESSEE SOCIETY AND THE CERTIFICATE OF THE REGISTRAR, COOPERATIVE SOCIETIES. 8 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN THE RECENT JUDGMENT IN THE CA SE OF THE CHIRAKKAL SERVICE COOPERATIVE BANK LTD & OTHERS (CITED SUPRA) HAS HELD THAT THE ITA NO S 10 & 11/COCH/2016 . 4 PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). THE HONBLE HIG H 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 DECIDING AGAINST THE ASSESSEE, THE ISSUE REGARDING ENTITLEMENT FOR EXEMPT ION UNDER SECTION 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? 8 .1 IN CONSIDERING THE ABOVE QUESTION OF LAW, THE HONBLE HIGH COURT RENDERED THE FOLLOWING FINDINGS: 15. APPELLANTS IN THESE DIFFERENT APPEALS ARE INDIS PUTABLY SOCIETIES REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969, FOR SORT, KCS ACT AND 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 AGRICULTU RAL CREDIT SOCIETIES BY THE COMPETENT 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 S TATE LAW RELATING TO CO - OPERATIVE SOCIETIES FOR THE TIME BEING; IT CANNOT BUT BE TAKEN THAT THE PURPOSE OF THE SOCIETIES SO REGISTERED UNDER THE STATE LAW AND ITS OBJECTS HAVE TO BE UNDERSTOOD AS THOSE WHICH HAVE BEEN APPROVED BY THE COMPETENT AUTHORITY U NDER SUCH STATE 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 P RIMARY 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 SOCIETIES IS TO UNDERTAKE AGR I CULTURAL CREDIT ACTIVITIES AND TO PROVIDE LOANS AND ADVANCES FOR AGRICULTURAL PURPOSES , THE RATE ' OF INTEREST ON SUCH LOANS AND ADVANCES TO BE AT THE RATE FIXED BY THE REGISTRAR 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 DEFINITION 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 APPLICANTS. 16. THE POSITION OF 1 AW BEING AS ABOVE WITH REFERENCE TO THE STATUTORY PROVISIONS, THE APPELL ANTS HAD SHOWN TO THE AUTHORITIES AND THE TRIBUNAL 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 PRINCIPAL ITA NO S 10 & 11/COCH/2016 . 5 BUSINESS OF EACH OF THE APPELLANTS. IT IS ALSO CLE AR 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 MEMBER, 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 EFFECT THAT THE BYE - 1AWS OF ANY OF THE APPELLANT OR ITS CLASS I FICATION BY THE COMPETENT AUTHORITY UNDER THE KCS ACT IS ANYTHING DIFFERENT FROM WHAT WE H AVE 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 SUBSTANTIA 1 QUESTION 'A' IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW IN DECIDING THE ISSUE REGARDING THE ENTITLEMENT OF EXEMPT I ON UNDER SECTION 80P AGAINST THE APPELLANTS. WE HOLD THAT THE PRIMARY AGRICULTURAL CREDIT SOCIETIES, REGISTERED AS SUCH UNDER THE KCS ACT; AND CLASSIFIED SO, UNDER THAT ACT, INCLUDING THE APPELLANTS AR E ENTITLED TO SUCH EXEMPTION. 8 .2 THE ASSESSEE HAS NOT PRODUCED THE BYE - LAWS OF THE SOCIETY AND ALSO THE CERTI FICATE FROM THE REGISTRAR OF COOPERATIVE SOCIETIES HOLDING THE ASSESSEE IS A PACS, HENCE, THE MATTER IS REMANDED TO THE FILE OF THE AO . THE AO SHALL CONSIDER THE ISSUE AFRESH IN VIEW OF THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE C ASE OF THE CHIRAKKAL SERVICE COOPERATIVE BANK LTD & OTHERS (SUPRA). THE ASSESSEE IS DIRECTED TO PLACE BEFORE THE AO ALL NECESSARY MATERIAL AND THE CERTIFICATE FROM THE REGISTRAR OF COOPERATIVE SOCIETIES AND THE BYE LAWS OF THE ASSESSEE SOCIETY TO PROVE THA T THE ASSESSEE IS A PRIMARILY AGRICULTURAL CREDIT SOCIETY ENTITLED TO THE BENEFIT OF SECTION 80P(2) OF THE ACT. THE AO SHALL DISPOSE OFF THE MATTER AS EXPEDITIOUSLY AS POSSIBLE IN ACCORDANCE WITH LAW AFTER AFFORDING REASONABLE OPPORTUNITY FO BEING HEARD TO THE ASSESSEE. IT IS ORDERED ACCORDINGLY. ITA NO S 10 & 11/COCH/2016 . 6 9 IN THE RESULT, THE APPEALS F ILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 1 ST JUNE 2016 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN