M/s. Koduvally Service Co-op Bank, Calicut V. The ITO, Calicut

ITA 165/COCH/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4048 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 09-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DHANARAJ
• Keywords: Question of law; Competent authority

Judgement Text

ITA NO 165/C/2015 1 IN THE INCOME TAX APPEL L A TE T R IBUNAL COCHIN BENCH (SMC) KOCHI BEFORE S/ SH RI B P JAIN , A M & GEORGE GEORGE K, JM ITA NO. 165 /COCH/2015 (ASST YEAR 2010 - 11 ) THE KODUVALLY SERVICE COOP BANK LTD NO.F 1240 PO KO DU VALLY KOZHIKODE 673 572 VS THE INCOME TAX OFFICER WARD 2(3), KOZHIKODE ( APP ELLANT ) (RESPONDENT) PAN NO. A ABA K9453D ASSESSEE BY MS SOUMYA REVENUE BY SH S DHANARAJ, SR DR DATE OF HEARING 1 9 TH AUG 2016 DATE OF PRONOUNCEMENT 19 TH AUG 2016 OR D ER PER B P JAIN, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 2.12.2014 O F THE CIT(A) FOR THE ASSESSMENT YEAR 20 10 - 1 1 . 2 THE SOLITARY ISSUE THAT ARISES F OR OUR CONSIDERATION IS WHETHER THE CIT(A) IS JUSTIFIED IN DENYING THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE I T ACT OR NOT ? 3 BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE, IN THIS CASE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. IT IS ENGAGED IN THE BUSINESS OF PROVIDING AGRICULTURAL CREDIT ITA NO 165/C/2015 2 TO ITS MEMBERS. THE CLAIM OF DEDUCTION U/S 80P (2) WAS DENIED BY THE AO FOR THE REASON THAT THE ASSESSEE IS PRIMARILY ENGAG ED IN THE BUSINESS OF BANKING AND IN VIEW OF SECTION 80P(4) OF THE ACT, THE ASSESSEE 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 NOW COVERED IN FAVOUR OF THE ASSESSEE BY 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 ( JUDGME NT DATED 15 TH FEBRUARY 2016). ON THE OTHER HAND, THE LD DR WAS UNABLE TO CONTROVERT THE ABOVE SUBMISSIONS OF THE ASSESSEE. 5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE 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 AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). THE HONBLE HIGH COURT WAS CONS IDERING 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 EXEMPTION UNDER SECTIO N 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? ITA NO 165/C/2015 3 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 SOCIETIE S 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 SOCIE TIES 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 STATE LAW RELATIN G 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 AGRICULTU RAL 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 RA TE ' 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 APPELLANTS HAD SHOWN T O 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 BUSINESS OF EACH OF THE APPELLANTS. IT IS ALSO CLEAR FROM THE MATE RIALS 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 T RIBUNAL WHICH ARE IMPEACHED IN THESE APPEALS DO NOT CONTAIN ANY FINDING OF FACT TO THE EFFECT THAT THE BYE - 1AWS OF ANY OF THE ITA NO 165/C/2015 4 APPELLANT OR ITS CLASS I FICATION BY THE COMPETENT AUTHORITY UNDER THE KCS ACT LS ANYTHING DIFFERENT FROM WHAT WE HAVE STATED HEREI N 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 LIGH T 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 ION UNDER SECTION 80P AGAINST THE APPELLANTS. WE HOLD THAT THE PRIMARY AGRIC ULTURAL CREDIT SOCIETIES, REGISTERED AS SUCH UNDER THE KCS ACT; AND CLASSIFIED SO, UNDER THAT ACT, INCLUDING THE APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. 5 .2 SOCIETIES ACT A ND THE BYE - LAWS, ARE PLACED ON RECORD. IT IS CLEAR FROM THE PERUSAL OF THE SAME THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIET Y AND PROVIDING AGRICULTURAL CREDIT FACILITIES TO ITS MEMBERS. THE HONBLE JURISDICTIONAL HIGH COURT, IN THE ABOVE CITE D JUDGMENT HAS HELD THAT SUCH SOCIETIES ARE ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT. IN VIEW OF THE ABOVE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA), WE ALLOW THE APPEAL OF THE . IT IS ORDERED ACCORDINGLY. 6 IN THE RESULT , THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF AUG 2016 . SD/ - SD/ - ( GEORGE GEORGE K ) ( B P JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 19 TH A UG 2016 RAJ* ITA NO 165/C/2015 5 COPY TO: 1 . APPELLANT 2 . RESPON DENT 3 . CIT(A) 4 . CIT , 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN