M/s Karakulam Service Co-op Bank Ltd, Trivandrum V. The ITO, Trivandrum

ITA 118/COCH/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8620 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 10-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOPAKUMAR
• Assessee Lawyers: VANDANA MENON
• Keywords: Question of law; Competent authority

Judgement Text

ITA NO . 118/C/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 . 118/COCH/2016 (ASST YEAR 2007 - 08 ) M/S KARAKULAM SERVICE COOP BANK LTD KARAKULAM PO THIRUVANANTHAPURAM VS THE INCOME TAX OFFICER WARD 1(1) , THIRUVANANTHAPURAM ( APPELLANT) (RESPONDENT) PAN NO. AAAAT768C ASSESSEE BY MS VANDANA MENON REVENUE BY SH GOPAKUMAR, SR DR DATE OF HEARING 23 RD MAY 2016 DATE OF PRONOUNCEMENT 24TH MAY 2016 OR D ER PER GEORGE GEORGE. K. J M: THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 18.12.2015, TRIVANDRUM. THE RELEVANT ASSESSMENT YEAR IS 2007 - 08. 2 THE SOLITARY ISSUE INVOLVED IN THIS APPEAL FOR OUR CONSIDERATION IS WHETHER THE CIT(A) IS JUSTIFIED IN CON FIRMING THE ACTION OF THE AO IN DENYING THE DEDUCTION U/S 80P(2) OF THE ACT. 3 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: ITA NO . 118/C/2016 2 THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. IT IS E NGAGED IN THE BUSINESS OF PROVIDING AGRICULTURAL CREDIT TO ITS MEMBERS. THE CLAIM OF DEDUCTION U/S 80P (2) WAS DENIED BY THE AO FOR THE REASON THAT THE ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF BANKING AND IN VIEW OF SECTION 80P(4) OF THE ACT, THE A SSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80P(2) OF THE ACT. THE VIEW TAKEN BY THE AO WAS CONFIRMED BY THE CIT(A). 4 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF TH E ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE AY 2008 - 09 IN ITA NO.156 OF 2014 (JUDGMENT DATED 15.2.2016). THE LD DR PRESENT WAS DULY HEARD. 5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN THE RECENT JUDGMENT IN ASSESSEES OWN CASE IN ITA NO. 1 56 OF 2014 (JUDGMENT DATED 15.2.2016) HAS HELD THAT THE PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES A CT, 1969 IS 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 DECIDING AGAINST THE ITA NO . 118/C/2016 3 ASSESSEE, THE ISSUE REGARDING ENTITLEMENT FOR EXEMPTION UNDER SECTION 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? 5.1 IN CONSIDERING THE ABOVE QUESTION OF LAW, THE HONBLE HIGH COURT RENDERED THE FOLLOWING FINDINGS: 15. APPELLANTS IN THESE DIFFERENT APPEALS ARE INDISPUTABLY 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 AGRICULTURAL 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 T H 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 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 UNDER 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 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 SOCIETIES IS TO UNDERTAKE AGR I CU LTURAL 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 C ONFINED 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 APPELLANTS 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 P RIMARY OBJECT OR PRINCIPAL BUSINESS OF EACH OF THE APPELLANTS. IT IS ALSO CLEAR 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 WIT H 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 T HE COMPETENT AUTHORITY UNDER THE ITA NO . 118/C/2016 4 KCS ACT IS 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 SUBSTANTIA 1 QUESTION 'A' IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW IN DECIDING THE ISSUE REGARDING THE ENTI TLEMENT 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. 5.2 IN THE INSTANT CASE, THE CIT(A) IN PARA 2 OF THE IMPUGNED ORDER HAS ADMITTED THAT THE ASSESSEE IS PRIMARILY AGRICULTURAL CREDIT SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT AND BANKING FACILITIES TO ITS MEMBERS. IN VIEW OF THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE , CITED SUPRA , THE ASSESSEE IS NOT HIT BY THE INSERTION OF SECTION 80P(4) OF THE A CT AND IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT. THEREFORE, THE ORDER OF THE AUTHORITIES BELOW IS S ET ASIDE. I T IS ORDERED ACCORDINGLY. 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF MA Y 2016 . SD/ - S D/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 24 TH , M AY 2016 RAJ* ITA NO . 118/C/2016 5 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN