The ITO,Wd-2, Palakkad V. M/s.Polpully Service Co-op Bank Ltd, Palakkad

ITA 550/COCH/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5013 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 30-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: AMALJIT P J
• Keywords: Question of law; Competent authority
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 550 /COCH/201 8 : ASST.YEAR 201 4 - 201 5 THE INCOME TAX OFFICER WARD 2 PALAKKAD . VS. M/S. POLPULLY SERVICE CO - OP BANK LIMITED POLPULLY, PALAKKAD 678 552 PAN : AAEAT3354K . (APPELLANT) (RESPONDENT) CO NO. 87 /COCH/201 8 : ASST.YEAR 2014 - 2015 M/S.POLPULLY SERVICE CO - OP BANK LIMITED POLPULLY, PALAKKAD 678 552 VS. THE INCOME TAX OFFICER WARD 2 PALAKKAD. ( CROSS OBJECTOR ) (RESPONDENT) REVENUE BY : SMT.A.S.BINDHU, SR.DR ASSESSEE BY : SRI. AMALJIT P.J. DATE OF HEARING : 2 1.01.2019 DATE OF PRONOUNCEMENT : 04 .0 2 .2019 O R D E R PER GEORGE GEORGE K, JM. THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DATED 03.08.2018 . THE CROSS OBJECTION W AS PREFERRED BY THE ASSESSEE TO SUPPORT THE ORDER OF THE CIT(A) . THE RELEVANT ASSESSMENT YEAR 2014 - 2015 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS W HETHER THE ASSESSEE IS ENT ITLED TO DEDUCTION U/S. 80P(2)( A ) (I) OF THE I.T.ACT? ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS PRIMARY AGRICULTURAL CREDIT SOCIET Y REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION , THE ASSESSEE HAD FILED RETURN OF INCOME AFTER CLAIMING DEDUCTION U/S. 80P OF THE I. T. ACT. THE ASSESSMENT WAS COMPLETED BY DENYING THE DEDUCTION U/S. 80P OF THE I. T. ACT. THE REASONING OF THE ASSESSING OFFICER S FOR DENYING THE CLAIM OF DEDUCTION U/S. 80P OF THE ACT WAS THAT THE ASSESSEE WAS PRIMARILY ENGAGED IN THE BUSINESS OF BANKING AND THEREFORE, IN VIEW OF THE PROVISIONS OF SECTION 80P(4) OF THE I. T. ACT WHICH WAS INSERTED WITH EFFECT FROM 0 1 .0 4 . 2007, THE AS SESSEE W AS NOT ENTITLED TO DEDUCTION U/S. 80P OF THE I.T. ACT. 4. AGGRIEVED BY THE ORDER OF THE ASSESSMENT, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A), FOLLOWING THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. (384 ITR 490) HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S. 80P(2) OF THE I.T. ACT AND DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION U/ S. 80P OF THE ACT. THE CIT(A) HAS ALSO HELD THAT THE DECISION IN THE CASE OF M/S.CITIZEN CO - OPERATIVE SOCIETY LTD. V. ACIT, HYDERABAD IS NOT APPLICABLE TO PRIMARY AGRICULTURAL CREDIT SOCIETIES, IN VIEW OF THE ORDER OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. M/S.MARUTHONKARA SERVICE CO - OPERATIVE BANK LTD. [ITA NO.474/COCH/2017]. 5. AGGR IEVED BY THE ORDER OF THE CI T(A), THE REVENUE HAS ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 3 FILED THE PRESENT APPEAL BEFORE US. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE GROUNDS RAISED. THE LEARNED AR, ON THE OTHER HAND , SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF CHIRAKKAL SERVICE CO - OP BANK LTD. REPORTED IN 384 ITR 490. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY , THE ASSESSEE IS PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF CHIRAKKAL SERVICE CO - OP BANK LTD. (SUPRA) HAD HELD THAT A PRIMARY AGRICULTURAL CREDIT SOCIETY, REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969 IS ENTITLED TO THE BENEFIT OF DEDUCTION U/ S. 80P(2). THE HON'BLE HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: A) WH ETHER 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 QUESTION OF LAW, THE HON'BLE 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 SHORT 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 ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 4 PARLIAMENT HAVING DEFINED THE TERM 'CO - OPERATIVE SOCIETY' FOR THE PURPOSES OF THE BR ACT WITH REFERENCE TO, AMONG OTHER THINGS, THE REGISTRATION OF A SOCIETY UNDER 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 WHIC H HAVE BEEN APPROVED BY THE COMPETENT AUTHORITY UNDER SUCH STATE LAW. THIS, WE VISUALISE AS DUE RECIPROCATIVE LEGISLATIVE EXERCISE BY THE PARLIAMENT RECOGNISING THE PREDOMINANCE OF DECISIONS RENDERED UNDER THE RELEVANT STATE LAW. IN THIS VIEW OF THE MATTER . ALL THE APPELLANTS HAVING BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE COMPETENT AUTHORITY UNDER THE KCS ACT IT HAS NECESSARILY TO BE HELD THAT THE PRINCIPAL OBJECT OF SUCH SOCIETIES IS TO UNDERTAKE AGRICULTURAL CREDIT ACTIVITIES AND T O 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 THE KCS AD AND HAVING ITS AREA OF OPERATION CONFINED TO A VILLAGE, PANCHAYAT O R 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 RELATING TO SUCH APPLICANTS. 16. THE POSITION OF LAW BEING AS ABOVE WITH REFERE NCE TO THE STATUTORY PROVISIONS, THE APPELLANTS HAD SHOWN TO THE AUTHORITIES AND THE TRIBUNAL THAT THEY ARE PRIMARY AGRICULTURAL 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 - OPERATIVE SOCIETY AS MEMBER, EXCEPT MAY BE, IN ACCORDANCE WITH THE PROVISO TO SUB - CLAUSE 2 OF SECT ION 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 - LAWS OF ANY OF THE APPELLANT OR ITS CLASSIFICATION BY THE COMPETENT AUTHORITY UNDER THE KCS ACT IS ANYTHING ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 5 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 VI EW OF THE MATTER, THE APPEALS SUCCEED. 17. IN THE LIGHT OF THE AFORESAID, WE ANSWER SUBSTANTIAL QUESTION A IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW IN DECIDING THE ISSUE REGARDING THE ENTITLEMENT OF EXEMPTION 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 APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. 6.2 IN VIEW OF THE JUDGMENT OF THE HON'BLE JU RISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OP BANK LTD. (SUPRA), WE HOLD THAT THE ASSESSEE - SOCIET Y IS ENTITLE D TO THE BENEFIT OF DEDUCTION U/ S. 80P OF THE ACT. IT IS ORDERED ACCORDINGLY. 6.3 FURTHER, THE DECISION OF THE HONBLE APEX COURT, RELIED ON BY THE REVENUE IN THE CASE OF CITIZEN CO - OPERATIVE SOCIETY LTD. V. ACIT, IS NOT APPLICABLE TO CO - OPERATIVE SOCIETIES REGISTERED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES IN KERALA, IN VIEW OF THE OR DER OF ITAT COCHIN BENCH IN THE CASE OF ITO V. M/S.MARUTHONKARA SERVICE CO - OPERATIVE BANK LTD. [ITA NO.474/COCH/2017 ORDER DATED 08.03.2018]. 7 . T HE REVENUE HAS ALSO RAISED GROUND S RELATING TO THE VALIDITY OF CERTIFICATE ISSUED UNDER THE KERALA CO - OPERAT IVE SOCIETIES ACT, 1969, CATEGORIZING THE ASSESSEE A S A PRIMARY AGRICULTURAL CREDIT SOCIETY (PACS). ACCORDING TO THE REVENUE, ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 6 THE CERTIFICATE HAS BEEN ISSUED BY THE ASSISTANT REGISTRAR OF CO - OPERATIVE SOCIETIES, STATING THAT THE ASSESSEE IS A PACS AND THE ASSISTANT REGISTRAR OF CO - OPERATIVE SOCIETIES IS NOT A COMPETENT AUTHORITY TO CLASSIFY THE ASSESSEE AS SUCH. THE ISSUES RAISED IN GROUNDS NO.4 TO 10 REGARDING THE VALIDITY OF CERTIFICATE IN BRIEF ARE AS FOLLOWS: - (I) AS PER SECTION 7 OF KCS ACT, COMPETENT AUTHORITY TO ISSUE THE CERTIFICATE IS REGISTRAR. (II) AS PER SECTION 8 OF KCS ACT, THE CERTIFICATE OF REGISTRATION IS TO BE ISSUED BY THE REGISTRAR SEALED AND SIGNED BY HIM. (III) AS PER RULE 4 OF KCS RULES, THE REGISTRATION CERTIFICATE SHOULD BE ISSUED BY THE REGISTRAR IN FORM 3. (IV) AS PER RULE 11 OF KCS RULES, THE REGISTRAR IS MAINTAINING THE RECORD OF THE COOPERATIVE SOCIETIES REGISTERED BY HIM. THIS RECORD WAS NOT VERIFIED BY THE CIT(A), THRISSUR. 7.1 WE HAVE HEARD THE LEARNED DR AND LEA RNED AR ON THIS ISSUE. IT IS TO BE NOTED THAT DEDUCTION U/S 80P(2) WAS DISALLOWED ONLY FOR THE REASON THAT THE DEPARTMENT HAS FILED A SLP BEFORE THE HONBLE APEX COURT AS AGAINST THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVIC E CO - OPERATIVE BANK LTD. (SUPRA) . THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. (SUPRA) HAS HELD THAT CO - OPERATIVE SOCIETY HAS TO BE CLASSIFIED BY A COMPETENT AUTHORITY. ONCE IT IS CLASSIFIED BY A COMPETENT AUTHORITY , THE CERTIFICATE TO THE EFFECT CAN BE ISSUED BY ANY ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 7 OTHER AUTHORITIES UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969. 7.2 AS PER SECTION 2(P) OF KCS ACT `REGISTRAR MEANS THE REGISTRAR OF CO - OPERATIVE SOCIETIES APPOINTED UNDER SUB - SECTION (1) OF SECTION 3 AND INCLUDES ANY PERSON ON WHOM ALL OR ANY OF THE POWERS OF THE REGISTRAR UNDER THIS ACT ARE CONFERRED. 7. 3 AS PER SECTION 3(2), THE GOVERNMENT MAY BE GENERAL OR SPECIAL ORDER CONFERS ANY PERSON ALL OR ANY OF THE POWERS OF THE REGISTRAR UNDER T HIS ACT. 7.4 THE GOVERNMENT OF KERALA HAS ISSUED NOTIFICATION NO. 255/69/AD DATED 28.06.1969. AS PER THIS NOTIFICATION, JOINT REGISTRAR CAN EXERCISE ALL THE POWERS OF REGISTRAR. SECTION 8(2) WAS INSERTED IN KCS ACT W.E.F. 14.02.2013 AND RULE 4A AND FORM 3 A WERE INSERTED W.E.F. 26.11.2014. AS PER SECTION 8(2), WHERE THE REGISTRAR IS SATISFIED THAT THE ORIGINAL CERTIFICATE IS IRRECOVERABLY LOST, A CERTIFICATE STATING THE REGISTRATION NUMBER AND DATE OF REGISTRATION CAN BE ISSUED IN FORM 3A. A CERTIFICATE IN FORM 3A STATING THAT THE ASSESSEE IS A PACS WAS SUBMITTED BEFORE THE INCOME - TAX AUTHORITIES AND A COPY OF THE SAME IS PLACED ON RECORD. TH E CERTIFICATE IN FORM 3A IS SIGNED AND SEALED BY THE JOINT REGISTRAR, WHO IS EMPOWERED BY THE NOTIFICATION ISSUED BY T HE KERALA GOVERNMENT (SUPRA) FOR EXERCISING ALL THE POWERS OF REGISTRAR . I N OTHER WORDS, IN THE INSTANT CASE THE CLASSIFICATION OF ASSESSEE - SOCIETY AS PACS IS ADMITTEDLY DONE BY THE JOINT REGISTRAR OF CO - OPERATIVE SOCIETIES, WHO IS A COMPETENT ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 8 AUTHORITY UN DER THE KCS ACT. THE CERTIFICATE STATING THAT THE ASSESSEE IS CLASSIFIED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY WA S ISSUED BY THE ASSISTANT REGISTRAR . THEREFORE, THE CLASSIFICATION WA S NOT DONE BY THE ASSISTANT REGISTRAR, HENCE THE CERTIFICATE ISSUED IS VALID AS PER LAW. HENCE, GROUND S NO.4 TO 10 RAISED BY THE REVENUE ARE DISMISSED. 8 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS ONLY SUPPORTIVE OF THE CIT(A)S ORDER FOR GRANT OF DEDUCTION U/S 80P(2). SINCE WE HAVE ALREADY DISMISSED THE REVENUES APPEAL, THE CO FILED BY THE ASSESSEE BECOME INFRUCTUOUS AND THE SAME IS DISMISSED AS INFRUCTUOUS. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE C.O. FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THIS 04 TH DAY OF FEBRUARY , 2019 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIA L MEMBER COCHIN ; DATED : 04 TH FEBRUARY , 2019 . DEVDAS* ITA NO. 550 / COCH /201 8 & CO 87/COCH/2018 . M/S. POLPULLUY SERVICE CO - OP BANK LTD. 9 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (APPEALS) - KOZHIKODE 4. THE PR.CIT KOZHIKKODE. 5. DR, ITAT, COCHIN 6 . GUARD FILE.