M/s.Ramapuram Service Co-op Bank Ltd, Malappuram V. The ITO, Tirur

ITA 172/COCH/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6740 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-09-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 13-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRITUNJAYA SHARMA
• Assessee Lawyers: HAMID HUSSAIN K P
• Keywords: Competent authority
• Section: 80P; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJARI, AM & SHRI GEORGE MATHAN, JM ITA N O . 172 /COC H/20 20 : ASST.YEAR 20 14 - 201 5 M/S. THE RAMAPURAM SERVICE CO - OPERATIVE BANK LIMITED POST RAMAPURAM MALAPURAM 679 321. PAN : AACAT7644J . VS. THE INCOME TAX OFFICER WARD 4 TIRUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI. HAMID HUSSAIN K.P. , CA RESPONDENT BY : SRI.MRITUNJAYA SHARMA, SR.DR DATE OF HEARING : 14.09.2020 DATE OF PRONOUNCEMENT : 14 .09.2020 O R D E R PER BENCH : THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) , DATED 30.01.202 0 . THE RELEVANT ASSESSMENT YEAR IS 2014 - 2015. 2 . THE SOLITARY ISSUE THAT IS RAISED IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ASSESSING OFFICERS ORDER IN DENYING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. 3 . THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT , 1969. FOR THE ASSESSMENT YEAR 2014 - 2015, RETURN WAS FILED AFTER CLAIMING DEDUCTION U/S 80P OF TH E I.T.ACT. THE ASSESSMENT ORDER W AS PASSED FOR ASSESSM ENT YEAR 2014 - 2015, WHEREIN T HE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S 80P OF ITA NO . 172 /COCH/20 20 M/S. THE RAMAPURAM SCB LTD. 2 THE I.T.ACT. THE REASONING OF THE ASSESSING OFFICER TO DISALLOW THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT WAS THAT THE ASSESSEE WAS ESSENTIALLY DOING THE BUSINESS OF BANKING, AN D THEREFORE, IN VIEW OF INSERTION OF SECTION 80P(4) OF THE I.T.ACT WITH EFFECT FROM 01.04.2007, THE ASSESSEE WILL NOT BE ENTITLED TO DEDUCTION U/S 80P OF THE I.T.ACT. 4 . AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING OFFICER DISALLOWING THE CLAIM OF DEDUC TION U/S 80P(2) OF THE I.T.ACT, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLAT E AUTHORITY FOR ASSESSMENT YEAR 2014 - 2015. THE CIT(A) PLACING RELIANCE ON THE JUDGMENT OF THE FULL BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVI LAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT [(2019) 414 ITR 67 (KER.) (FB) (HC)] HELD THAT THE ASSESSING OFFICER HAD MADE ELABORATE FINDINGS AND HAS COME TO A FACTUAL FINDING THAT AGRICULTURAL CREDIT PROVIDED BY THE ASSESSEE IS ONLY MINUSCULE AND ASSESSEE CANNOT BE TERMED AS PRIMARY AGRICULTURAL CREDIT SOCIETY. ACCORDINGLY DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80P OF THE I.T.ACT MADE BY THE ASSESSING OFFICER WAS UPHELD BY THE C IT(A). IN THE RESULT THE APPEAL FILED BY THE ASSESSEE WAS REJECTED BY THE CIT(A) FOR ASSESSMENT YEAR 2014 - 2015. 5 . AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL , RAISING FOLLOWING GROUNDS: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX APPEALS IS OPPOSED TO FACTS AND AGAINST LAW. THE LEARNED OFFICER OUGHT TO HAVE SEEN THAT DEDUCTION U/S 80P HAS BEEN VALIDLY CLAIMED IN THE RETURN OF INCOME FILED. ITA NO . 172 /COCH/20 20 M/S. THE RAMAPURAM SCB LTD. 3 2. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS OUGHT TO HAVE SEEN THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND HAS BEEN CERTIFIED AS SUCH BY THE REGISTRAR, UNDER THE KERALA STATE CO - OPERATIVE SOCIETIES ACT 1969 AND SO THERE IS NO NEED FOR INDEPENDENT EVALUATION OF THE OBJE CTIVES OR EVEN OTHERWISE THE OBJECTS ARE OF AGRICULTURAL NATURE AND NOT OTHERWISE. THE KERALA EVERY YEAR AND IT HAS NOT BEEN OBJECTED BY THE KERALA CO - OPERATIVE DEPARTMENT WARRANTING TO THE CANCELLATION OR SUSPENSION OF ITS REGISTRATION. 3. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS FURTHER FAILED TO SEE THAT, AS PER SECTION 2(1) OF KCS ACT, A MEMBER INCLUDES A NOMINAL OR ASSOCIATE MEMBER. HENCE, FOR THE COOPERATIVE SOCIETIES REGISTERED UNDER KCS ACT, TRANSACTIONS WITH NOMINAL MEMBERS IS NOT IN VIOLA TION OF THE KCS ACT . 4. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS FURTHER FAILED TO SEE THAT, ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AS DEFINED AND REGISTERED WITH THE REGISTRAR OF CO - OPERATIVE SOCIETIES KERALA. ASSESSEE IS CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETY VIDE RULE 15 OF THE KERALA CO - OP SOCIETIES RULES. THE MAIN OBJECT AND ACTIVITIES ASSESSEE CARRYING ARE THE CREDIT FACILITIES TO OUR MEMBERS. THE AREA INCLUDED IN ASSESSEE'S AREA OF OPERATION IS PREDOMINANTLY AN AGRICUL TURAL AREA AND THE MEMBERS OF OUR SOCIETY ARE MAINLY AGRICULTURISTS. THE BYLAW OF ASSESSEE CO - OP SOCIETY HAS CLEARLY MENTIONED THAT, ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND THE MAIN OBJECT IS TO PROVIDE FINANCIAL ACCOMMODATION TO ASSESSEE ME MBERS FOR AGRICULTURAL PURPOSES OR PURPOSES CONNECTED WITH THE AGRICULTURAL ACTIVITIES. SO THERE IS NO NEED FOR INDEPENDENT EVALUATION OF THE OBJECTIVES OR EVEN OTHERWISE THE OBJECTS ARE OF AGRICULTURAL NATURE AND NOT OTHERWISE. A MAJOR PORTION OF LOANS I NCLUDED IN MEDIUM TERMS, ORDINARY LOANS, OTHERS (LONG TERM), GOLD LOAN ARE ALSO AGRICULTURAL IN NATURE. 5. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS FURTHER FAILED TO SEE THAT, ASSESSE E IS A CO - OPERATIVE SOCIETY REGISTERED WITH THE OBJECT OF PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS. AS PER SECTION 80P(2)(A)(I), A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING OR PROVIDING CREDIT' FACILITIES TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION OF THE WHOLE OF THE PROFITS AND GAINS OF BUSINESS ATTRIBUTA BLE TO SUCH ACTIVITIES. HENCE THE ASSESS E E IS EQUALLY ELIGIBLE TO GET THE CLAIM UNDER SECTION 80P(2)(A)(I). 6. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IS DECIDING THAT, THE ASSESSE E IS BECOME AN AOP DOING BANKING BUSINESS TO STATING THAT, THE ASSESSEE HAD VIOLATED ITS ITA NO . 172 /COCH/20 20 M/S. THE RAMAPURAM SCB LTD. 4 CHARTER FOR IT WAS REGISTERED. THE CO - OPERATIVE DEPARTMENT BEING THE REGISTERING AUTHORITY HAD NO WHERE OBJECTED THAT, THE ASSESS E E HAD VIOLATED THE CHARTER FOR WHICH IT HAD REGISTERED. 7. IT IS SUBMITTED THAT WITHOUT PREJU DICE TO THE ABOVE GROUNDS OTHER GROUNDS MAY BE ALLOWED AT THE TIME OF HEARING. 5 .1 THE LEARNED AR RELIED ON THE GROUNDS RAISED. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDERS PASSED BY THE INCOME TAX AUTHORITIES. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE CO - OPERATIVE BANK LTD. V. CIT [(2016) 384 ITR 490 (KER.)] HAD HELD THAT WHEN A CERTIFICATE HAS BEEN ISSUED TO AN ASSESSEE BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES CHARACTERIZI NG IT AS PRIMARY AGRICULTURAL CREDIT SOCIETY, NECESSARILY, THE DEDUCTION U/S 80P(2) OF THE I.T.ACT HAS TO BE GRANTED TO THE ASSESSEE. HOWEVER, THE FULL BENCH OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPRA) HAD REVERSED THE ABOVE FINDINGS OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE CO - OPERATIVE BANK LTD. V. CIT (SUPRA) . THE LARGER BENCH OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIV E BANK LTD. V. CIT (SUPRA) HELD THAT THE ASSESSING OFFICER HAS TO CONDUCT AN INQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY TO DETERMINE THE ELIGIBILITY OF DEDUCTION U/S 80P OF THE I.T.ACT. IT WAS HELD BY THE HONBLE HIGH C OURT THAT THE ASSESSING OFFICER IS NOT BOUND BY THE REGISTRATION CERTIFICATE ISSUED BY THE REGISTRAR OF KERALA CO - OPERATIVE SOCIETY CLASSIFYING THE ASSESSEE - SOCIETY AS ITA NO . 172 /COCH/20 20 M/S. THE RAMAPURAM SCB LTD. 5 A CO - OPERATIVE SOCIETY. THE HONBLE HIGH COURT HELD THAT EACH ASSESSMENT YEAR IS SEPARAT E AND ELIGIBILITY SHALL BE VERIFIED BY THE ASSESSING OFFICER FOR EACH OF THE ASSESSMENT YEARS. THE FINDING OF THE LARGER BENCH OF THE HONBLE HIGH COURT READS AS FOLLOWS: - 33. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] IT CANNOT BE CONTENDED THAT, WHILE CONSIDERING THE CLAIM MADE BY AN ASSESSEE SOCIETY FOR DEDUCTION UNDER SECTION 80P OF THE IT ACT, AFTER THE INTRODUCTION OF SUB - SEC TION (4) THEREOF, THE ASSESSING OFFICER HAS TO EXTEND THE BENEFITS AVAILABLE, MERELY LOOKING AT THE CLASS OF THE SOCIETY AS PER THE CERTIFICATE OF REGISTRATION ISSUED UNDER THE CENTRAL OR STATE CO - OPERATIVE SOCIETIES ACT AND THE RULES MADE THEREUNDER. ON S UCH A CLAIM FOR DEDUCTION UNDER SECTION 80P OF THE IT ACT, THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY AND ARRIVE AT A CONCLUSION WHETHER BENEFITS CAN BE EXTENDED OR NOT IN THE LIG HT OF THE PROVISIONS UNDER SUB - SECTION (4) OF SECTION 80P. 33. IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH HELD THAT THE APPELLANT SOCIETIES HAVING BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE COMPETENT AUTHORITY UNDER THE KCS ACT, I T HAS NECESSARILY TO BE HELD THAT THE PRINCIPAL OBJECT OF SUCH SOCIETIES IS TO UNDERTAKE AGRICULTURAL 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 TO BE FIX ED BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES UNDER THE KCS ACT AND HAVING ITS AREA OF OPERATION CONFINED TO A VILLAGE, PANCHAYAT OR A MUNICIPALITY AND AS SUCH, THEY ARE ENTITLED FOR THE BENEFIT OF SUB - SECTION (4) OF SECTION 80P OF THE IT ACT TO EASE THEMS ELVES OUT FROM THE COVERAGE OF SECTION 80P AND THAT, THE AUTHORITIES UNDER THE IT ACT CANNOT PROBE INTO ANY ISSUES OR SUCH MATTERS RELATING TO SUCH SOCIETIES AND THAT, PRIMARY AGRICULTURAL CREDIT SOCIETIES REGISTERED AS SUCH UNDER THE KCS ACT AND CLASSIFIE D SO, UNDER THE ACT, INCLUDING THE APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. 34. IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH EXPRESSED A DIVERGENT OPINION, WITHOUT NOTICING THE LAW LAID DOWN IN ANTONY PATTUKULANGARA [2012 (3) KHC 726] AND PERINTHALMAN NA [363 ITR 268]. MOREOVER, THE LAW LAID DOWN BY THE DIVISION BENCH IN CHIRAKKAL [384 ITR 490] IS NOT GOOD ITA NO . 172 /COCH/20 20 M/S. THE RAMAPURAM SCB LTD. 6 LAW, SINCE, IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1], ON A CLAIM FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT, BY REASON OF SUB - SECTION (4) THEREOF, THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY AND ARRIVE AT A CONCLUSION WHETHER BENEFITS CAN BE EXTENDED OR NOT IN THE LIG HT OF THE PROVISIONS UNDER SUB - SECTION (4) OF SECTION 80P OF THE IT ACT. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] THE LAW LAID DOWN BY THE DIVISION BENCH PERINTHALMANNA [363 ITR 268] HAS TO BE AFFIRMED AND WE DO SO. 35. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN ACE MULTI AXES SYSTEMS CASE (SUPRA), SINCE EACH ASSESSMENT YEAR IS A SEPARATE UNIT, THE INTENTION OF THE LEGISLATURE IS IN NO MANNER DEFEATED BY NOT ALLOWING DEDUCTION UNDER SECTION 80P OF THE IT ACT, BY REASON OF SUB - SECTION (4) THEREOF, IF THE ASSESSEE SOCIETY CEASES TO BE THE SPECIFIED CLASS OF SOCIETIES FOR WHICH THE DEDUCTION IS PROVIDED, EVEN IF IT WAS ELIGIBLE IN THE INITIAL YEARS. 6 .1 IN THE INSTANT CASE, THE ASSESSING OFFICER HAD DENIED THE CLAIM OF DEDUCTION U/S 80P OF THE I.T.ACT FOR THE REASON THAT ASSESSEE WAS ESSENTIALLY DOING THE BUSINESS OF BANKING AND DISBURSEMENT OF AGRICULTURAL LOANS BY THE ASSESSEE WAS ONLY MINUSCULE. THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT THE A SSESSEE CANNOT BE TREATED AS CO - OPERATIVE SOCIETY. THE ASSESSING OFFICER AFTER PERUSING THE NARRATION OF THE LOAN EXTRACTS IN THE STATUTORY AUDIT REPORT FOR ASSESSMENT YEAR 2014 - 2015, CAME TO THE CONCLUSION THAT OUT OF THE TOTAL LOAN DISBURSEMENT, ONLY A M INUSCULE PORTION HAS BEEN ADVANCED FOR AGRICULTURAL PURPOSES. WE ARE OF THE VIEW THAT THE NARRATION IN LOAN EXTRACTS IN THE AUDIT REPORTS BY ITSELF MAY NOT CONCLUSIVE TO PROVE WHETHER LOAN IS A AGRICULTURAL LOAN OR A NON - AGRICULTURAL LOAN. THE GOLD LOANS M AY OR MAY NOT BE DISBURSED FOR THE PURPOSE OF AGRICULTURAL PURPOSES. NECESSARILY, THE A.O. HAD TO EXAMINE THE DETAILS OF EACH LOAN ITA NO . 172 /COCH/20 20 M/S. THE RAMAPURAM SCB LTD. 7 DISBURSEMENT AND DETERMINE THE PURPOSE FOR WHICH THE LOANS WERE DISBURSED, I.E., WHETHER IT IS FOR AGRICULTURAL PURPOSE OR NO N - AGRICULTURAL PURPOSE. IN THESE CASES, SUCH A DETAILED EXAMINATION HAS NOT BEEN CONDUCTED BY THE A.O. AT THE TIME OF ASSESSMENT, THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE COOPERATIVE BANK LTD. (SUPRA) WAS RULI NG THE ROOST AND THE CERTIFICATE ISSUED BY THE REGISTRAR OF CO - OPERATIVE SOCIETY TERMING THE ASSESSEE AS A PRIMARY AGRICULTURAL CREDIT SOCIETY WOULD BE SUFFICIENT FOR GRANT OF DEDUCTION U/S 80P OF THE I.T.ACT. IN THE LIGHT OF THE DICTUM LAID DOWN BY THE FU LL BENCH OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPRA ), WE ARE OF THE VIEW THAT THERE SHOULD BE FRESH EXAMINATION BY THE ASSESSING OFFICER AS REGARDS THE NATURE OF EACH LOAN DISBURSEMENT AND PURPOSE FOR WHICH IT HAS BEEN DISBURSED, I.E., WHETHER IT FOR AGRICULTURAL PURPOSE OR NOT. THE A.O. SHALL LIST OUT THE IN STANCES WHERE LOANS HAVE DISBURSED FOR NON - AGRICULTURAL PURPOSES ETC. AND ACCORDINGLY CONCLUDE THAT THE ASSESSEES ACTIVITIES ARE NOT IN COMPLIANCE WITH THE ACTIVITIES OF PRIMARY AGRICULTURAL CREDIT SOCIETY FUNCTIONING UNDER THE KERALA CO - OPERATIVE SOCIETI ES ACT, 1969, BEFORE DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT. FOR THE ABOVE SAID PURPOSE, THE ISSUE RAISED IN THESE APPEALS IS RESTORED TO THE FILES OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ACTIVITIES OF THE ASSESS EE - SOCIETY BY FOLLOWING THE DICTUM LAID DOWN BY THE FULL BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPRA ) AND ITA NO . 172 /COCH/20 20 M/S. THE RAMAPURAM SCB LTD. 8 SHALL TAKE A DECISION IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 14 TH DAY OF SEPTEMBER, 2020 . SD/ - SD/ - ( GEORGE MATHAN ) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN , DATED 14 TH SEPTEMBER , 2020 DEVADAS G* COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), KOZHIKODE. 4. THE PR.CIT, KOZHIKODE. 5. THE DR, ITAT, KOCHI 6. GUARD FILE. ASST.REGISTRAR/ITAT/KOCHI