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

ITA 439/COCH/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7339 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 20-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DHANARAJ
• Assessee Lawyers: SOUMYA JAYAPRAKASH
• Keywords: Question of law; Competent authority

Judgement Text

ITA NO .439/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH (SMC) KOCHI ITA NO. 439/COCH/2016 (ASST YEAR 20 12 - 13 ) THE INCOME TAX OFFICER WARD 3 TIRUR VS PALLIKKAL SERVICE COOP BANK LTD NO.F 1936 PALLIKAL PO MALAPP URAM ( APP ELLANT ) (RESPONDENT) PAN NO. AABAP2889A ASSESSEE BY MS SOUMYA JAYAPRAKASH , REVENUE BY SH S DHANARAJ, SR DR DATE OF HEARING 6 TH JAN 2017 DATE OF PRONOUNCEMENT 6 TH JAN 2017 ORDER THIS APPEAL, AT THE INSTANCE OF THE REVENUE , IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 22.6.2016 . THE RELEVANT ASSESSMENT YEAR IS 201 2 - 13 . 2 TH OUGH SEVERAL GROUNDS ARE RAISED , ALL THE GROUNDS RELATED TO THE ISSUE WHETHER THE CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE I T ACT TO THE ASSESSEE SOCIETY. 3 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 . T HE R ETURN OF INCOME FOR THE ASSESSMENT YEAR ITA NO .439/C/2016 2 2012 - 13 WAS FILED ON 8.7.2013 DECLARING THE TOTAL INCOME AT NIL AFTER CLAIMING EXEMPTION U/S 80P(2) OF THE ACT AMOUNTING TO RS. 38,92,714/ - . THE ASSESSING OFFICER , IN THE COURSE OF ASSESSMENT PROCEE DINGS , NOTICED THAT THE ASSESSEE WAS PRIMARILY LENDING LOAN S FOR NON AGRICULTURAL PURPOSES . IT WAS HELD BY THE ASSESSING O FFICER THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BANKING LIKE ANY OTHER COMMERCIAL BANKS AND FOR THE AFORESAID REASONS, HELD THAT IN VIEW OF INSERTION OF SECTION 80P(4) OF T HE ACT, THE ASSESSEE SOCIETY WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE AC T. 4 AGGRIEVED BY THE DISALLOWANCE OF SECTION 80P(2) OF THE ACT , THE ASSE SSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. T HE CIT(A) FOLLOWING THE JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD REPORTED IN 384 ITR 490(KER) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 5 REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE THE TRIBUNAL. THE LD DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER . THE LD AR SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGMENT OF THE HON BLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD (SUPRA). 6 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE ITA NO .439/C/2016 3 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 HI GH 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 ASSESSEE, THE ISSUE REGARDING ENTITLEMENT FOR EXEMPTION UNDER SECTION 80P, IGNORING THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? 6 .1 IN CONSIDERING THE ABOVE QUES TION 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 TH 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 DEC ISIONS 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 OBJ ECT OF SUCH SOCIETIES IS TO UNDERTAKE AGR I CULTURAL 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 TH E 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 RE LATING TO SUCH APPLICANTS. ITA NO .439/C/2016 4 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 SEC TION 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 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 WITH 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 THE COMPETENT AUTHORITY UNDER THE KCS ACT LS 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 ENTITLEMENT OF EXEMPT ION 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 APPELL ANTS ARE ENTITLED TO SUCH EXEMPTION. 6 .2 RESPECTFULLY FOL LOWING THE JUDGMENT OF THE HON BLE JUDICIAL HIGH COURT, IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD (SUPRA) , I HOLD THAT THE CIT(A) IS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO GRANT BENEFIT OF SECTION 80P(2) OF THE AC T. IT IS ORDERED ACCORDINGLY. ITA NO .439/C/2016 5 7 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF JAN 2017 . SD/ - GEORGE GEORGE K JUDICIAL MEMEBR COCHIN: DATED 6 TH JAN 2017 RAJ* COPY TO: APPELLANT RESPONDENT CIT(A) CIT, DR GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN