Kottayam Co-op Agricultural & Rural Dev Bank Ltd, Kottayam V. Addl. Commissioner of Income Tax, Kottayam

ITA 295/COCH/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9006 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-10-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 11-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Section: 143(3); 54F; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 295 /COCH/201 8 : ASST.YEAR 201 1 - 201 2 M/S.KOTTAYAM CO - OPERATIVE AGRICULTURAL & RURAL DEVELOPMENT BANK LIMITED NO.K.18, KOTTAYAM - 686 001. PAN : AAAAT6523E. VS. THE INCOME - TAX OFFICER WARD 5 KOTTAYAM. ( APPELLANT ) (RESPONDENT) APPELLANT BY : SRI.ABRAHAM K.THOMAS RESPONDENT BY : SMT.A.S.BINDHU, SR.DR DATE OF HEARING : 16 .10.2018 DATE OF PRONOUNCEMENT : 17 .10.2018 O R D E R PER GEORGE GEORGE K, JM THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST CIT(A)S ORDER DATED 18.04.2018 . THE RELEVANT ASSESSMENT YEAR IS 2011 - 201 2 . 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLOWS: - 1. THE INCOME TAX OFFICER WAS NOT CORRECT IN LAW AND FACT IN REJECTING THE ELIGIBILITY OF THE APPELLANT FOR DEDUCTION U/S. 80(P) OF THE INCOME TAX ACT 1961. 2. THE GROUNDS RELIED ON BY THE INCOME TAX OFFICER FOR DENYING THE APPELLAN TS ELIGIBILITY FOR DEDUCTION U/ S. 80(P) OF THE INCOME TAX ACT IS NOT WELL BASED. 3. THE APPELLANT BEING A DULY REGISTERED CO - OPERATIVE SOCIETY U/S 7(1) OF THE KERALA CO - OPERATIVE SOCIETIES ACT 1969 IS A CO - OPERATIVE SOCIETY AS DEFINED U/S.2 (19) OF THE INCOME TAX ACT 1961. ITA NO. 295 /COCH/201 8 M/S. KOTTAYAM CO - OP AGRI. & RURAL DEV. BANK LTD. 2 4. THE APPELLANT SOCIETY IS EVIDENTLY A PRIMARY CO - OPERATIVE, AGRICULTURAL & RURAL DEVELOPMENT BANK AS DEFINED U/S.80(P) (4) OF THE INCOME TAX ACT, PROVIDING CREDIT FACILITIES TO ITS MEMBERS FOR AGRICULTURAL AND ALLIED RURAL DEVELOPMENT ACTIVITIES IN KOTTAY AM, CHANGANACHERRY AND VAIKOM TALUKS. 5. THE OBJECT OF THE APPELLANT SOCIETY IS DESCRIBED IN CLAUSE 3 (A) TO (M)[PAGES2,3 &4]. THE ELIGIBILITY OF MEMBERSHIP IS STATED IN CLAUSE 8 (PAGE 5) AND THE ELIGIBILITY OF LOANS AND ITS PURPOSE IS CLEARLY MENTIONED I N CLAUSE 34 (PAGE 20) OF THE BYE - LAWS. 6. THE APPELLANT DO NOT ACCEPT ANY DEPOSITS AND THE LOANS ARE PROVIDED OUT OF THE FUNDS OBTAINED FROM THE APEX CO - OPERATIVE BANK, NAMELY THE KERALA STATE CO - OPERATIVE AGRICULTURAL & RURAL DEVELOPMENT BANK LTD., TRIV ANDRUM. 7. THE APPELLANT SOCIETY IS ELIGIBLE FOR DEDUCTION PROVIDED U/S. 80(P)(2)(A)(I) &(D) OF THE INCOME TAX ACT, BEING A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK DESCRIBED U/S. 80(P) (4) (A) (B), PROVIDING CREDIT FACILITY TO ITS MEMB ERS FOR AGRICULTURAL AND ALLIED RURAL DEVELOPMENT ACTIVITIES. 8. THE ASSESSING OFFICER'S INTERPRETATION OF SECTION 80(P)(4)(B) RELATING TO THE EXPRESSION THEREIN, 'A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO 'A' TALUK AND THE PRINCIPLE OBJECT OF WH ICH IS TO PROVIDE FOR LONG TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES.' IS DISPUTED BY THE APPELLANT AS UNDER: - (A) THE ASSESSING OFFICER HAS TOTALLY MISUNDERSTOOD THE EXPRESSION 'CONFINED TO' A' TAL U K. ' IN SECTION 80 (P) (4)(B) WHICH DOES NOT INDICATE A SINGULAR NUMBER. ( B ) IT IS EVIDENT FROM THE FOLLOWING CASE LAWS THAT: : - I) C. I. T VS. GITA DUGGAL (DELHI HIGH COURT), II) ANANDA BASAPPA 309 ITR 329 (KAR), ITA NO. 295 /COCH/201 8 M/S. KOTTAYAM CO - OP AGRI. & RURAL DEV. BANK LTD. 3 III) K.G. RUKMINIAMMA 331 ITR 211 (KAR), THOUGH THE DECISION IS WITH REFERENCE TO SECTION - 54 THE ISSUE CONSIDERED IS SQUARELY APPLICABLE IN THE ASSESSEE'S CASE. 9. THE CIT (APPEALS) HAS NOT PROPERLY UNDERSTOOD THE ARGUMENT NOTES, SUBMITTED AT THE TIME OF HEARING AND ALSO THE EXPLANATIONS GIVEN T HERE IN, REGARDING THE CASE LAWS, RELIED ON BY THE ASSESSING OFFICER, AS MISPLACED RELATING TO THE AMENDED CLAUSE 80 P (4) AND THE IMPACT OF ARTICLE' A' USED THEREIN . 4 . BRIEF FACTS OF THE CASE ARE AS FOLLOWS: - THE ASSESSEE IS A CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEAR 201 1 - 201 2 , THE RETURN OF INCOME WAS FILED ON 28.09.2011 DECLARING TOTAL INCOME OF RS.1,70,260 AFTER CLAIMING DEDUCTION U/S 80P O F THE I.T.ACT , AMOUNTING TO RS.35,39,804. THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147 OF THE I.T.ACT VIDE ORDER DATED 29.09.2015 BY DISALLOWING THE DEDUCTION U/S 80P(2) AND 80P(2)(C) OF THE I.T.ACT. 5 . AGGRIEVED BY THE ASSESSMENT COMPLETED, THE AS SESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A), FOLLOWING THE ORDER OF THE TRIBUNAL IN ITA NO.41/COCH/2015 (ORDER DATED 24 TH MAY, 017) FOR THE IMMEDIATELY PRECEDING YEAR, I.E. , ASST.YEAR 2010 - 2011 , IN ASSESSEES OWN CASE, CONFIRMED THE ASSESSMENT ORDER. 6 . THE ASSESSEE BEING AGGRIEVED BY THE ORDER S OF THE INCOME - TAX AUTHORITIES , HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ITA NO. 295 /COCH/201 8 M/S. KOTTAYAM CO - OP AGRI. & RURAL DEV. BANK LTD. 4 GROUNDS OF APPEAL. THE LEARNED COUNSEL FURTHER SUBMITT ED THAT THE ASSESSEE IS EVIDENTLY A PRIMARY CO - OPERATIVE AGRICULTURAL & RURAL DEVELOPMENT BANK AS DEFINED U/S 80P (4) OF THE I.T.ACT, AS AMENDED W.E.F 01 .04.2007. THE ASSESSING OFFICER HAS DENIED THE DEDUCTION U/S 80P TO THE ASSESSEE ON THE FOLLOWING GROUNDS THAT THE AREA OF OPERATION OF THE ASSESSEE - SOCIETY IS CONFINED TO KOTTAYAM, CHANGANASSERRY AND VAIKOM TALUKS. HENCE ACCORDING TO THE A.O. THE AREA OF OPERATION IS NOT CONFINED 'TO A TALUK' U/S 80P (4) AS AMENDED W.E.F . 01 .04. 2007 (P AGE NO.3, PARA 7(II) OF THE ASSESSMENT ORDER). THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE A MENDMENT MADE TO SEC. 80 (P) BY INSERTION OF SUBSECTION ( 4 ) W.E.F 01 .04. 2007 , DOES NOT TAKE AWAY THE APPLICABILITY OF THE SECTION TO AGRICULTURAL AND RURAL DEVEL OPMENT BANKS HAVING ITS AREA OF OPERATION IN MORE THAN ONE TALUK. WHILE THE AMENDMENT ALSO DEFINES PRIMARY CO - OPERATIVE AGRICULTURAL & RURAL DEVELOPMENT BANKS AS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO 'A' TALUK. THE USAGE OF THE ARTICLE 'A' BE FORE THE WORD TALUK IS NOT TO BE UNDERSTOOD TO INDICATE A SINGLE TALUK. HE FURTHER SUBMITTED THAT THE RELIANCE PLACED BY THE ASSESSING OFFICER IN THE CASE OF WEST BENGAL WAREHOUSING CORPORATION V. INDRAPURI STUDIO PVT. LTD. IS CLEARLY MISPLACED. IN THAT C ASE THE HONBLE APEX COURT WAS ONLY CONCERNED WITH THE SCOPE OF DEFINITION CLAUSE , WHICH USES THE EXPRESSION 'MEANS' INSTEAD OF 'INCLUDES' AND THE HONBLE APEX COURT HAS HELD THAT WHILE 'INCLUDES' IS NOT AN EXHAUSTIVE DEFINITION 'MEANS' SHOULD BE UNDERSTOO D AS A HARD AND FAST DEFINITION. THE QUESTION HERE IS WITH RESPECT TO THE MEANING OF THE ARTICLE' A' USED IN THE DEFINITION AND NOT SCOPE OF THE ITA NO. 295 /COCH/201 8 M/S. KOTTAYAM CO - OP AGRI. & RURAL DEV. BANK LTD. 5 DEFINITION . LIKEWISE, IN VIDISHA BHOPAL KSHETRIYA GRAMIN BANK VS. ACIT THE ITAT WAS DEALING WITH A BANK WHICH HAD AN ENTIRE DISTRICT AS ITS AREA OF OPERATION AND THE RESTRICTION OF THE DEFINITION IS TO BE THUS UNDERSTOOD AS APPLICABLE TO BANKS WHICH HAS ITS OPERATION AT THE DISTRICT LEVEL OR STATE LEVEL. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ORDER OF THE ITAT, JAIPUR BENCH IN ITA NO.764/JP/2011 DATED 23.3. 2012 RELIED ON BY THE ASSESSING OFFIC ER AND C OMMISSIONER OF INCOME - TAX (APPEALS) IS REVERSED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE JAIPUR BENCH IN THE SECOND ROUND OF LITIGATION OF THE SAME CASE VIDE ORDER NO.ITA /938/JP/2013 DATED 24.9.2015. THE LEARNED COUNSEL FURTHER SUBMITTED THAT , E XCLUSION IN SEC.80P(4) APPLIES ONLY TO CREDIT CO - OPERATIVE BANKS BUT NOT TO CREDIT CO - OPERATIVE SOCIETIES , AND FROM THE CBDT CIRCULAR NO.133 OF 2007 DATE D 9 .5. 2007 IT CAN BE GATHERED THAT SUB - SECTION (4) OF SECTION 80P WILL NOT APPLY TO AN ASSESSEE WHICH IS NOT A CO - OPERATIVE BANK ; AND (C) THE ASSESSEE IS ADMITTEDLY NOT A CREDIT CO - OPERATIVE BANK BUT A CREDIT CO - OPERATIVE SOCIETY. EXCLUSION CLAUSE OF SUB - S ECTION (4) OF SECTION 80P, THEREFORE WOULD NOT APPLY. HOWEVER THE ISSUE HAS BEEN FURTHER CLEARLY SETTLED IN ITA NO.212 OF 2013 BY THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF THE CHIRACKKAL SERVICE CO - OPERATIVE BANK LTD. HOLDING THAT THE PRIMARY AGRICU LTURAL CREDIT SOCIETIES REGISTERED AS SUCH UNDER THE KAC ACT AND CLASSIFIED SO UNDER THAT ACT ARE ENTITLED TO EXEMPTION U/S 80P OF THE I.T. ACT. THE LEARNED COUNSEL, THEREFORE, PRAYED THAT THE USAGE OF ARTICLE 'A' BEFORE THE WORD TALUK IS NOT TO B E UNDERSTO OD TO INDICATE A SINGLE TALUK BY THE ASSESSING OFFICER AND DENY THE BENEFIT OF ITA NO. 295 /COCH/201 8 M/S. KOTTAYAM CO - OP AGRI. & RURAL DEV. BANK LTD. 6 SEC. 80P(4) (A) , (B) IN THE CASE OF THE ASSESSEE AND THE DEDUCTION GRANTED U/S 80 P(2)(A) OF THE I.T.ACT . 7 . THE DEPARTMENTAL REPRESENTATIVE , ON THE OTHER HAND, RELIED ON ORD ERS OF THE INCOME - TAX AUTHORITIES. 8 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY ASSESSMENT YEAR 2010 - 2011 (ITA NO .41/COCH/ 2015 ORDER DATED 24.05.2017), WHEREIN THE TRIBUNAL HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE I.T.ACT. THE RELEVANT FINDING OF THE TRIBUNAL READS AS FOLLOWS: - 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAD DENIED 80P DEDUCTION FOR THE FOLLOWING TWO REASONS, NAMELY, I) ASSESSEES AREA OF OPERATION IS NOT CONFINED TO A TALUK. II ) AGRICULTURAL CREDIT PROVIDED BY THE ASSESSEE - BANK IS VERY LESS COMPARED TO THE NORMAL BANKING ACTIVITIES. 6.1 THE CIT(A) CONFIRMED THE DISALLOWANCE OF DEDUCTION U/S. 80P(2) MADE BY THE ASSESSING OFFICER ON BOTH COUNTS. HOWEVER, THE CIT(A) WITH REGARD T O THE COMPUTATION/CALCULATION OF THE PERCENTAGE OF AGRICULTURAL CREDIT PROVIDED BY THE ASSESSEE, RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER IN PARA 12 OF THE IMPUGNED ORDER. 6.2 THEREFORE, THE SOLITARY ISSUE FOR OUR CONSIDERATION IS WHE THER 80P DEDUCTION CAN BE DENIED TO THE ASSESSEE FOR THE REASON THAT ITS AREA OF OPERATION IS NOT CONFINED TO A TALUK . AS PER CLAUSE 1(C) OF THE BYE - LAWS OF THE ASSESSEE, ITS AREA OF OPERATION FOR THE RELEVANT PERIOD IS IN THREE TALUKS, NAMELY, KOTTAYAM , CHANGNACHERRY AND VAIKOM. THE LD. COUNSEL APPEARING FOR THE ASSESSEE CONTENDED THAT USAGE OF ARTICLE A BEFORE THE WORD TALUK IS NOT TO BE UNDERSTOOD TO INDICATE A SINGLE TALUK . THE LD. SR. COUNSEL RELYING ON SECTION 13(2) OF THE GENERAL CLAUSES ACT CONTENDED THAT WORDS IN THE SINGULAR SHALL INCLUDE THE PLURAL, AND VICE VERSA. THE LD. SR. COUNSEL RELIED ON CERTAIN JUDICIAL PRONOUNCEMENTS INTERPRETING ARTICLE A IN THE CONTEXT OF DEDUCTION U/S. 54 AND 54F OF THE I.T. ACT. ITA NO. 295 /COCH/201 8 M/S. KOTTAYAM CO - OP AGRI. & RURAL DEV. BANK LTD. 7 6.3 THE FINANCE ACT, 2 006 HAS DEFINED THE EXPRESSION PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK BY INSERTING EXPLANATION TO SECTION 80P(4) WHICH READS AS UNDER: (B) PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK MEANS A SOCIETY HAVING ITS A REA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG - TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 6.4 EXPLANATION (B) TO SECTION 80P(4) IS A DEFINING PROVISION EMPLOYING THE WORD MEANS. T HE HONBLE APEX COURT IN THE CASE OF WEST BENGAL STATE WAREHOUSING CORPORATION VS. INDRAPURI STUDIO PVT. LTD.(AIR 2011 SC 47) HELD THAT WHEN THE WORD MEANS IS USED IN A DEFINITION, IT SIGNIFIES STRICT INTERPRETATION. IT IS TRITE LAW THAT AN EXEMPTION PRO VISION IS TO BE STRICTLY CONSTRUED. MOREOVER, THE CARDINAL RULE OF CONSTRUCTION IS THAT A PROVISION MUST BE GIVEN ITS ORDINARY MEANING. NATURAL AND ORDINARY MEANING OF WORDS SHOULD NOT ORDINARILY BE DEPARTED FROM. IN THE CASE OF JUGAL KISHORE SARAF VS. RA W COTTON CO. JUGAL LTD. KISHOIR IN AIR 1955 SC 376 AT PAGE 381 JUSTICE S.R. DAS HELD THUS: THE CARDINAL RULE OF CONSTRUCTION OF STATUTES IS TO READ THE STATUTES LITERALLY, THAT IS, BY GIVING TO THE WORDS THEIR ORDINARY, NATURAL AND GRAMMATICAL MEANING. IF, HOWEVER, SUCH A READING LEADS TO ABSURDITY AND THE WORDS ARE SUSCEPTIBLE OF ANOTHER MEANI NG, THE COURT MAY ADOPT THE SAME. BUT IF NO SUCH ALTERNATIVE CONSTRUCTION IS POSSIBLE, THE COURT MUST ADOPT THE ORDINARY RULE OF LITERAL INTERPRETATION. IN THE PRESENT CASE, THE LITERAL CONSTRUCTION LEADS TO NO APPARENT ABSURDITY AND THEREFORE, THERE CAN BE NO COMPELLING REASON FOR DEPARTING FROM THAT GOLDEN RULE OF CONSTRUCTION. 6.5 KEEPING IN MIND THE ABOVE PRINCIPLE OF CONSTRUCTION, THE WORDS HAVING ITS AREA OF OPERATION CONFINED TO A TALUK OBTAINED IN THE EXPLANATION (B) TO SUB - SECTION (4) OF SECTION 80P SHOULD BE UNDERSTOOD AS LIMITED TO OR WITHIN BOUNDS OF A TALUK. THE FIRST LETTER OF THE ENGLISH ALPHABET WHICH PRECEDES THE WORD TALUK IS USED BEFORE NOUNS AND NOUN PHRASES THAT DENOTE A SINGLE, BUT UNSPECIFIED, PERSON OR THING.. [WE BSTERS DICTIONARY] A IS USED TO MEAN OR DENOTE ONE. A TALUK IS A REVENUE DIVISION. FEW VILLAGES CONSTITUTE A TALUK AND FEW TALUKS CONSTITUTE A DISTRICT. 6.6 THE MISCHIEF OF SUB - SECTION (4) WILL NOT FALL ON A PRIMARY CO - OPERATIVE AGRICULTURAL AND RU RAL DEVELOPMENT BANK PROVIDED ITS OPERATION IS LIMITED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. SINCE THE ASSESSEES AREA OF OPERATION WAS NOT CONFINED TO A TALUK F OR THE RELEVANT ASSESSMENT YEAR, WE HOLD THAT IT WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S. 80P(2) OF THE ACT. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND WE UPHOLD THE SAME AS CORRECT AND IN ACCORDANCE WITH LAW. IT I S ORDERED ACCORDINGLY. 9. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR , I.E. ITA NO. 295 /COCH/201 8 M/S. KOTTAYAM CO - OP AGRI. & RURAL DEV. BANK LTD. 8 A.Y. 2010 - 2011 (SUPRA) , WE HOLD THAT THE INCOME - TAX AUTHORITIES ARE JUSTIFIED IN DENYING THE ASSESSEE THE BENE FIT OF DEDUCTION U/S 80P(2) OF THE I.T.ACT, FOR THE IMPUGNED YEAR, AS WELL. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 17 TH DAY OF OCTOBER, 2018 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN ; DATED : 17 TH OCTOBER, 2018 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPLICANT. 2. THE RESPONDENT. 3. THE CIT (A) - KOTTAYAM . 4. THE CIT, KOTTAYAM . 5. DR, ITAT, COCHIN 6. GUARD FILE.