The Vadakara Co-op Rural Bank Ltd, Calicut V. The ITO, Calicut

ITA 53/COCH/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3889 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: V S NARAYANAN
• Keywords: Question of law; Competent authority
• Section: 263

Judgement Text

ITA NO 53 TO 55/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/ SHRI B P JAIN , AM & GEORGE GEORGE K, JM ITA NO S 53 TO 55/COCH/2016 (A SST YEAR S 2008 - 09;09 - 10 & 11 - 12 ) THE VADAKARA COOP RURAL BANK LTD VO ROAD, VADAKARA PO KOZHIKODE VS THE INCOME TAX OFFICER WARD 2(2), KOZHIKOE ( APP ELLANT ) (RESPONDENT) PAN NO. AAAAT6785E ASSESSEE BY SH V S NARAYANAN REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 15 TH SEPT 2016 DATE OF PRONOUNCEMENT 15 TH SEPT 2016 ORDER PER BENCH : TH ESE APPEALS, AT THE INSTANCE OF THE ASSESSEE, ARE DIRECTED AGAINST THE SEPARATE ORDERS; ALL DATED 27 TH NOV 2015 OF THE CIT PASSED U/S 263 OF THE I T ACT. THE RELEVANT ASSESSMENT YEARS ARE 2008 - 09, 2009 - 10 AND 2011 - 12. 2 THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2008 - 09, 2009 - 10 AND 2011 - 12 WAS SET ASIDE BY THE COMMISSIONER BY INVOKING HIS POWERS U/S 263 OF THE I T ACT. ACCORDING TO THE COMMISSIONER, THE AO HAD WRONGLY ALLOWED THE CLAIM OF DEDUCTION U/S 80P OF THE ACT. THE CIT WAS OF THE VIEW THAT THOUGH, THE ASSESSEE IS R EGISTERED AS PRIMARY AGRICULTURAL CREDIT SOCIETY UNDER THE KERALA COOPERATIVE ITA NO 53 TO 55/C/2016 2 SOCIETIES ACT, 1969 , THE MAJORITY OF THE LOANS WHICH HAD BEEN DISBURSED WAS FOR NON AGRICULTURAL PURPOSES; AND HENCE, WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P OF TH E ACT. WITH THE ABOVE SAID REASONING, THE CIT PASSED ORDER U/S 263 OF THE ACT BY SETTING ASIDE THE ASSESSMENTS FOR THE RELEVANT ASSESSMENT YEARS AND DIRECTED THE AO TO MAKE FRESH ASSESSMENT. 3 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4 NONE AP PEARED ON BEHALF OF THE ASSESSEE. HOWEVER, WE PROCEED TO DISPOSED OF THE MATTER AFTER HEARING THE LD DR. 5 WE HAVE HEARD THE LD DR AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, IN THIS CASE, THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED AS PRIMARY A GRICULTURAL CREDIT SOCIETY UNDER THE KERALA COOPERATIVE SOCIETIES ACT 1969. THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE COOPERATIVE BANK LTD & OTHERS REPORTED IN 384 ITR 490 HAS HELD THAT THE PRIMARY AGRICULTURAL CREDIT SOC IETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). THE HONBLE HIGH 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? ITA NO 53 TO 55/C/2016 3 5.1 IN CONSIDERING TH E ABOVE QUESTION 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 S O 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 PREDOMI NANCE 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 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 P RINCIPAL OBJECT 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 SOCIET IES 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 SU CH MATTER RELATING TO SUCH APPLICANTS. 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 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 MATERIALS ON RECORD THAT THE BYE - LAWS OF EACH OF THE APPELLANTS DO . NOT PERMIT ADMISSION OF ANY OTHER CO - OPERA TIVE 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 ITA NO 53 TO 55/C/2016 4 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 PR OVISIONS 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 TRIBUN AL 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, INCLUDIN G THE APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. 5.2 SOCIETIES ACT AND THE BYE - LAWS ARE PLACED ON RECORD. IT IS CLEAR FROM THE PERUSAL OF THE SAME THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND PROVIDING AGRICULTURAL CREDIT FACILITIES TO ITS MEMBERS. THE HONBLE JURISDICTIONAL HIGH COURT, IN THE ABOVE CITED 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 APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15TH DAY OF SEPT 2016 . SD/ - SD/ - ( B P JAIN ) ( GEORGE GEORGE K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 15 TH SEPT 2016 RAJ* ITA NO 53 TO 55/C/2016 5 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN