M/s.Dharmadam Service Co-op Bank Ltd, Kannur V. The ITO, Kannur

ITA 330/COCH/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96700 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 01-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2015
• Court: TRIBUNAL
• Department Lawyers: T M SREEDHARAN
• Assessee Lawyers: V R GOPAKUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NOS.330&331/COCH/2015 ASSESSMENT YEARS : 2007-08 & 2010-11 M/S. DHARMADAM SERVICE CO- OPERATIVE BANK LTD., DHARMADAM, TELLICHERRY, KANNUR-670 661. [PAN:AADFD 8098E] VS. THE INCOME TAX OFFICER, WARD-2, KANNUR. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI T.M. SREEDHARAN, SR. ADV. ASSESSEE BY SHRI V.R. GOPAKUMAR, SR. DR DATE OF HEARING 01/09/2015 DATE OF PRONOUNCEMENT 03/09/2015 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE ARISIN G FROM THE SEPARATE ORDERS OF THE CIT(A), MANANCHIRA, KOZHIKOD E DATED 17/03/2015 FOR THE ASSESSMENT YEARS 2007-08 AND 2010-11. 2. SINCE THE ISSUES IN BOTH THE APPEALS ARE IDE NTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CO MMON, CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. I.T.A. NOS.330 &331/COCH/2015 2 3. WE SHALL FIRST TAKE UP THE APPEAL FOR THE AS SESSMENT YEAR 2010-11 AND SINCE THE ISSUES IN BOTH THE APPEALS ARE IDENTICAL IN NATURE, OUR ORDER FOR THE ASSESSMENT YEAR 2010-11 SHALL BE IDENTICALLY APPLIC ABLE TO THE ORDER FOR THE ASSESSMENT YEAR 2007-08. I.T.A. NO. 331/COCH/2015 FOR A.Y. 2010-11 4. THE ASSESSEE HAS RAISED AS MANY AS 11 GROUNDS OF APPEAL WITH REGARD TO THE DISALLOWANCE OF DEDUCTION U/S. 80P OF THE AC T. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO-OPERATIVE BANK MAINLY ENGAGED IN BANKING BUSINESS. ITS CLAIM OF DEDUCTION MADE U/S. 80P OF THE ACT WAS DISALLOWED BY THE ASSESSING OFFICER. 5. BEFORE THE CIT(A), THE LD. COUNSEL FOR THE ASSE SSEE FILED WRITTEN SUBMISSION WHICH WAS SENT TO THE ASSESSING OFFICER FOR REMAND REPORT WHO IN TURN SUBMITTED THE REMAND REPORT ON 05/03/2015. FOR THE SAKE OF CONVENIENCE, THE REMAND REPORT IS REPRODUCED BELOW: 3. THE ASSESSEE IS AGGRIEVED THAT THE ASSESSING OF FICER HAS ADDED BACK THE LOAN GIVEN BY THE ASSESSEE GIVEN FOR AGRICULTUR AL PURPOSE DISALLOWING THE DEDUCTION U/S. 80P OF THE INCOME TAX ACT. AS P ER THE RETURN OF INCOME FOR THE A.Y. 2007-08, THE ASSESSEE HAS CLAIM ED DEDUCTION U/S. 80P FOR THE ENTIRE TOTAL INCOME OF R.18,89,410/-. 4. ON ANALYZING THE R&D STATEMENT FILED BY THE BAN K FOR BOTH THE ASSESSMENT YEARS, IT WAS NOTICED THAT THE BANK PROV IDES LOAN AND ADVANCES TO ITS MEMBERS, NON-MEMBERS AND ALSO TO IT S EMPLOYEES. REGARDING A.Y. 2007-08 , THE BANK HAS GIVEN A TOTAL LOAN OF I.T.A. NOS.330 &331/COCH/2015 3 RS.44,67,23,847/- OUT OF WHICH AGRICULTURE LOAN GIV EN TO MEMBERS WAS RS.69,572/- WHICH COMES TO ONLY 0.01%. DURING THE PREVIOUS YEAR RELEVANT TO A.Y.2010-11 TOO FROM THE R&D STATEMENT IT IS SHOWN THAT OUT OF TOTAL LOAN OF RS. 77,15,25,256/-, AGRICULTURAL L OAN GIVEN TO MEMBERS WAS ONLY RS.4,65,000/- WHICH IS ONLY 0.6%. THE BAN K IS PROVIDING LOANS AND ADVANCES TO EMPLOYEES WHO ARE NOT MEMBERS OF TH E BANK AND THE MAJOR PORTION OF THE ADVANCES MADE IS GOLD LOAN ETC . AND NOT LOANS GIVEN FOR AGRICULTURAL PURPOSES. FURTHER ON ANALYSIS OF THE ACTIVITIES OF THE ASSESSEE ALSO, IT IS EVIDENT THAT THE AGRICULTURAL CREDITS PROVIDED BY THE ASSESSEE BANK IS NEGLIGIBLE IF NOT EXTINCT. 5. ON DETAIL VERIFICATION IT IS SEEN THAT THE PRINCIPAL BUSINESS CARRIED OUT BY THE ASSESSEE CO-OP SOCIETY IS TRANSACTION OF BANKING BUSINESS . SECTION 5(B) OF THE BANKING REGULATION ACT, 1949 DEFINES BANKING TO MEAN ACCEPTING, FOR THE PURPOSE OF LEN DING OR INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC, REPAYABLE ON DEM AND OR OTHERWISE, AND WITHDRAWABLE BY CHEQUE, DRAFT OR OTHERWISE. 5.1 ON ANALYSIS OF THE BUSINESS ACTIVITIES OF THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE WAS DOING EXACTLY BANKING BUSINES S AND WAS ENGAGED IN THE FOLLOWING ACTIVITIES LIKE PROVIDE OVERDRAFT FAC ILITIES, LOAN FOR PURCHASE OF HOUSEHOLD ARTICLES, CONSTRUCTION OF RESIDENTIAL HOU SES, REPAIR OF HOUSE, PROVIDE BANKING FACILITIES, OPEN ATM CENTRES ETC. T HUS, ALL PRIMARY CHARACTERISTICS OF A BANKING BUSINESS WAS FOUND IN ASSESSEES ACTIVITY WHICH CLEARLY SHOWED THAT, THE PRINCIPAL BUSINESS C ARRIED OUT BY THE SOCIETY WAS TRUE BANKING BUSINESS. 5.2 FROM THE EARLIER PARAGRAPHS, IT IS LAID BARE THAT THE PRIMARY OBJECT OR PRIMARY BUSINESS OF THE ASSESSEE IS NOT PROVIDING F INANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PUR POSES CONNECTED WITH AGRICULTURAL ACTIVITIES BY DOING BANKING BUSINESS A T PAR OTHER COMMERCIAL BANKS. A CO-OPERATIVE SOCIETY THAT HAD PROVIDED ONL Y A LESSER PERCENTAGE OF TOTAL LOANS TOWARDS AGRICULTURAL PURPOSES CANNOT BE TREATED AS PRIMARY AGRICULTURAL CREDIT SOCIETY. DUE TO THE REASONS GI VEN ABOVE, THE ASSESSEE BANKS CLAIM OF IT AS A PRIMARY AGRICULTURAL CREDIT SOCIETY IS NOT ACCEPTED. HENCE THE ASSESSEE IS TO BE TREATED AS CO-OPERATIVE BANK WHICH IS NOT ELIGIBLE FOR ANY DEDUCTION U/S. 80P. 6. THE ASSESSING OFFICER DISAGREES WITH THE ASSE SSEES CONTENTION ON SPECIFIC POINTS AS NARRATED IN THE ASSESSMENT ORDER . THE ASSESSEE BANK HAS ABSOLVED ITSELF FROM TAX LIABILITY BY ERRONEOUS LY CLAIMING DEDUCTION U/S. 80P. WITH EFFECT FROM 01.04.2007, DEDUCTION U/S. 8 0P IS ONLY FOR PRIMARY AGRICULTURAL CREDIT SOCIETIES. IT IS AN ACCEPTED FA CT THAT A SOCIETY WHICH I.T.A. NOS.330 &331/COCH/2015 4 CLAIM THE STATUS AND BENEFITS OF A PRIMARY AGRICULT URAL CREDIT SOCIETY NEEDS TO SUBSTANTIATE THAT IN ADDITION TO BEING INC ORPORATED AS SUCH, THEY HAVE TO CARRY ON FULFILLING THAT IN ADDITION TO BEI NG INCORPORATED AS SUCH, THE Y HAVE TO CARRY ON FULFILLING AND SATISFYING TH E MAIN OBJECTIVES OF A PRIMARY AGRICULTURAL CREDIT SOCIETY. CLASSIFICATIO N MADE BY CO-OPERATIVE DEPARTMENT OF GOVT. OF KERALA MERELY FOR STATISTICA L PURPOSES HAS NO RELEVANCE TO THE APPLICABILITY TO SECTION 80P OF TH E INCOME TAX ACT, 1961. SOCIETIES WHICH ARE FUNCTIONING TO PROVIDE NON AGRI CULTURAL CREDITS AND DOING BANKING ACTIVITIES ARE THEREFORE NOT ELIGIBLE FOR ANY DEDUCTION U/S. 80P OF THE INCOME TAX ACT, 1961. THE NOMENCLATURE P ER SE DOES NOT ENTITLE THE ASSESSEE BANK TO THE STATUS OF A PRIMAR Y AGRICULTURAL CREDIT SOCIETY 7. THE ASSESSING OFFICER, ON VERIFICATION OF THE RATIO OF LONG TERM AGRICULTURAL CREDITS TO THE GROSS LOANS ADVANCED BY THE BANK AND AFTER ANALYZING THE ACTIVITIES OF THE ASSESSEE IN THE LIG HT OF EVIDENCE/DOCUMENTS ON HAND, AS ARRIVED AT THE CONCLUSION THAT ASSESSEE DOES NOT QUALIFY AS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND THEREFORE N OT ELIGIBLE FOR DEDUCTION U/S. 80P OF THE INCOME TAX ACT, 1961. 6. AFTER CONSIDERING THE REMAND REPORT AND AFTE R DISCUSSION OF THE REMAND REPORT WITH THE LD. COUNSEL FOR THE ASSESSEE , THE CIT(A) FOLLOWED THE DECISION OF THE ITAT, COCHIN BENCH IN THE CASES OF M/S. KUNNAMANGALAM CO-OPERATIVE BANK VS. INCOME TAX OFFI CER, WARD-2(3), CALICUT IN I.T.A. NO. 156/COCH/2014 DATED 25/07/201 4 FOR THE ASSESSMENT YEAR 2009-10 AND M/S. PINARAYI SERVICE CO-OPERATIVE BANK LTD. VS. INCOME TAX OFFICER, WARD-2, KANNUR IN I.T.A. NO. 123/COCH/ 2012 DATED 31/07/2014 FOR THE ASSESSMENT YEAR 2009-10 WHEREIN THE COCHIN BENCH OF THE TRIBUNAL IN THESE CASES HELD THAT THE ASSESSEE IS NOT ENTITL ED TO DEDUCTION U/S. 80P OF THE ACT IF THE ASSESSEES FAILED TO FULFIL THE PRIMA RY OBJECT OR PRINCIPAL BUSINESS OF PROVIDING FINANCIAL ACCOMMODATION TO IT S MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTED WIT H AGRICULTURAL ACTIVITIES. I.T.A. NOS.330 &331/COCH/2015 5 MOREOVER, DURING THE REMAND PROCEEDINGS, THE ASSESS ING OFFICER VERIFIED THE R&D REGISTER MAINTAINED BY THE ASSESSEE AND FOUND N EGLIGIBLE AMOUNT GIVEN AS LOAN FOR AGRICULTURAL OR PURPOSES CONNECTED THER ETO. ACCORDINGLY, THE CIT(A), ON THE FACTS OF THE CASE AND IN VIEW OF THE DECISIONS HEREINABOVE, DISMISSED THE GROUND OF THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN THE PRESENT CASE, AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE ITAT, COCHIN BENCH IN THE CASES OF M/S. KUNNAMANGALAM CO- OPERATIVE BANK (CITED SUPRA) AND M/S. PINARAYI SERVICE CO-OPERATIV E BANK LTD. (CITED SUPRA) AND THE ASSESSEE IN THE PRESENT CASE ALSO HAS FAILE D TO FULFIL THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF PROVIDING FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES C ONNECTED WITH AGRICULTURAL ACTIVITIES. IN THE PRESENT CASE, AS I S EVIDENT FROM THE REMAND REPORT REPRODUCED HEREINABOVE, THE ASSESSING OFFICE R VERIFIED THE R&D REGISTER MAINTAINED BY THE ASSESSEE AND FOUND NEGLI GIBLE AMOUNT WAS GIVEN AS LOAN FOR AGRICULTURAL OR PURPOSES CONNECTED THER ETO. IN THE CIRCUMSTANCES AND FACTS OF THE CASE AND THE DECISIO N ON AN IDENTICAL ISSUE IN THE CASES OF M/S. KUNNAMANGALAM CO-OPERATIVE BANK ( CITED SUPRA) AND M/S. PINARAYI SERVICE CO-OPERATIVE BANK LTD. (CITED SUPR A), THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT AS CLAIMED. ACCORDINGLY, I.T.A. NOS.330 &331/COCH/2015 6 WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). A CCORDINGLY, ALL THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE DISMISSED. I.T.A. NO. 330/COCH/2015 FOR THE A.Y. 2007-08 8. IN THE PRESENT CASE ALSO, THE ASSESSEE HAS RAI SED AS MANY AS 11 GROUNDS OF APPEAL MAINLY ON THE ISSUE OF DEDUCTION U/S. 80P OF THE ACT. SINCE THE FACTS IN THE PRESENT ARE IDENTICAL TO THE FACTS IN ASSESSEES OWN CASE IN I.T.A. NO. 331/COCH/2015 FOR THE ASSESSMENT YEAR 2010-11, OUR ORDER HEREINABOVE IN I.T.A. 331/COCH/2015 SHALL BE IDENTICALLY APPLICABLE TO THE PRESENT CASE IN I.T.A. NO. 330/COCH/2015 FOR TH E ASSESSMENT YEAR 2007-08. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY, ALL THE GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. 9. IN THE RESULT, BOTH THE APPEALS IN I.T.A. NOS. 330/COCH/2015 AND 331/COCH/2015 FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 03-09-2015. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 3RD SEPTEMBER, 2015 GJ COPY TO: 1. M/S. DHARMADAM SERVICE CO-OPERATIVE BANK LTD., D HARMADAM, TELLICHERRY, I.T.A. NOS.330 &331/COCH/2015 7 KANNUR-670 661. 2. THE INCOME TAX OFFICER, WARD-2, KANNUR. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOZHIKO DE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN