The iTO, Wd-5, Kollam, Kollam V. M/s. Nedumon Service Co-op Bank Ltd, Kollam

ITA 594/COCH/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8262 (ITAT-COCHIN)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-09-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 02-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: UMIL FITHA
• Keywords: Question of law; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 593 /COCH/201 7 : ASST.YEAR 2014 - 2015 M/S.NEDUMON SERVICE CO - OPERATIVE BANK LIMITED NEDUMON P.O. PATHANAMTHITTA 691 556. PAN : AAAAN2996H. VS. THE INCOME TAX OFFICER WARD 5 KOLLAM. (APPELLANT) (RESPONDENT) ITA NO. 594 /COCH/201 7 : ASST.YEAR 2014 - 2015 THE INCOME TAX OFFICER WARD 5 KOLLAM. VS. M/S.NEDUMON SERVICE CO - OPERATIVE BANK LIMITED NEDUMON P.O. PATHANAMTHITTA 691556. (APPELLANT) (RESPONDENT) REVENUE BY : SMT. A.S.BINDHU ASSESSEE BY : SMT.UMIL FITHA, ADVOCATE DATE OF HEARING : 26 .09.2018 DATE OF PRONOUNCEMENT : 03.10 .2018 O R D E R PER GEORGE GEORGE K., JM THESE ARE CROSS APPEALS, DIRECTED AGAINST CIT(A)S ORDER DATED 31.08.2017. THE RELEVANT ASSESSMENT YEAR IS 2014 - 2015. 2. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: - THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, REGISTERED UNDER THE KERALA CO - OPERA TIVE SOCIETIES ACT, 1969. IT IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS. FOR THE ASSESSMENT YEAR 2014 - 2015, THE ASSESSMENT WAS COMPLETED ITA NO. 593 - 594 / COCH /201 7 . M/S. MEDUMON SCB LTD. 2 VIDE ORDER DATED 30.12.2016, WHEREIN ASSESSEES CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT WAS DENIED, FOR THE REA SON THAT THE ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF BANKING AND IN VIEW OF INSERTION OF SECTION 80P( 4 ) OF THE I.T.ACT , WITH EFFECT FROM 01.04.2007, THE ASSESSEE - SOCIETY WAS NOT ENTITLED TO THE DEDUCTION. THE ASSESSING OFFICER ALSO TREATED A SUM O F RS.1,13,93,354 BEING THE INTEREST RECEIVED FROM INVESTMENTS WITH PATHANAMTHITTA DIS TRICT CO - OPERATIVE BANK LIMITED, AS INCOME FROM OTHER SOURCES, THEREBY DENYING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. FURTHER, THE ASSESSING OFFICER ALSO WAS OF THE VIEW THAT THE ASSESSEE CANNOT BE GRANTED THE BENEFIT OF SECTION 80P(2) (D) OF THE I.T.ACT SINCE THE INTEREST INCOME WAS RECEIVED FROM A CO - OPERATIVE BANK AND NOT FROM A CO - OPERATIVE - SOCIETY. 3. AGGRIEVED BY THE ASSESSMENT COMPLETED, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A), FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. & ORS. VS. CIT [(2016) 384 ITR 490 (KER.)] HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80P(2) OF THE I.T.ACT. AS REGARDS THE INTEREST RECEIVED ON IN INVESTMENTS WITH THE PATHANAMTHITTA DISTRICT CO - OPERATIVE BANK LIMITED, THE CIT(A) CONFIRMED THE VIEW TAK EN BY THE ASSESSING OFFICER. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), BOTH THE ASSESSEE AS WELL AS THE REVENUE HAS FILED APPEALS BEFORE THE TRIBUNAL. WE SHALL FIRST ADJUDICATE THE REVENUES APPEAL. ITA NO. 593 - 594 / COCH /201 7 . M/S. MEDUMON SCB LTD. 3 ITA NO.594/COCH/2017 : REVENUES APPEAL : 5. IN THE ABO VE APPEAL, THE ONLY ISSUE THAT WAS RAISED IS WHETHER THE CIT(A) IS JUSTIFIED IN GRANTING DEDUCTION U/S 80P(2) OF THE I.T.ACT. 6. AFTER HEARING BOTH SIDES, WE ARE OF THE VIEW THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. & ORS. (SUPRA) . THE HONBLE HIGH COURT CONSIDERED FOLLOWING QUESTION OF LAW IN ADJUDICATING THE ABOVE ISSUE. A) WHETHER ON THE FACTS AND IN THE C IRCUMSTANCES 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, AN D 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 HAVI NG 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 PURPOS E 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 REC OGNISING 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 ITA NO. 593 - 594 / COCH /201 7 . M/S. MEDUMON SCB LTD. 4 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 THE KCS AD AND HAVING ITS 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 A NY ISSUE OR SUCH MATTER RELATING TO SUCH APPLICANTS. 16. THE POSITION OF LAW BEING AS ABOVE WITH REFERENCE 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 A CCORDANCE 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 - LAWS OF ANY OF THE APPELLANT OR ITS CLASS IFICATION BY THE COMPETENT AUTHORITY UNDER THE KCS ACT IS 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 VIR TUE 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 SUBSTANTIAL QUESTION A IN FAVOUR OF THE APPELLANTS AND HOLD THAT THE TRIBUNAL ERRED IN LAW IN DECIDING THE ISSUE REGARD ING 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 EXEMPTIO N. 6.2 IN THE INSTANT CASE, THE ASSESSEE IS PRIMARY AGRICULTURAL SOCIETY. A CERTIFICATE TO THE ABOVE EFFECT IS ON RECORD. IN VIEW OF THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE C HIRAKKAL SERVICE CO - OP BANK LTD. & ORS. (SUPRA) , WE HOLD THAT THE ASSESSEE - SOCIETY IS ENTITLE D TO THE BENEFIT OF DEDUCTION U/ S. 80P OF THE ACT. IT IS ORDERED ACCORDINGLY. ITA NO. 593 - 594 / COCH /201 7 . M/S. MEDUMON SCB LTD. 5 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. ITA NO.593/COCH/2017 : ASSESSEES APPEAL : 8. THE ONLY ISSUE THAT IS RAISED IN ASSESSEES APPEAL IS WHETHER INTEREST RECEIVED BY THE ASSESSEE FROM PATHANAMTHITTA DISTRICT CO - OPERATIVE BANK LIMITED, IS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT O R U/S 80P(2)(D) OF THE I.T.ACT? 8.1 AS REGARDS THE CLAIM OF DEDUCTION U/S 8 0P(2)(D) OF THE I.T.ACT, WE ARE OF THE VIEW THAT THE SAID CLAIM CAN BE GRANTED ONLY WHEN INTEREST INCOME IS RECEIVED FROM INVESTMENTS WITH A CO - OPERATIVE SOCIETY AND NOT A CO - OPERATIVE BANK. THEREFORE, THE CLAIM OF THE ASSESSEE U/S 80P(2)(D) OF THE I.T.ACT IS REJECTED. 8.2 AS REGARDS THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT, WITH REGARD TO INTEREST INCOME RECEIVED ON INVESTMENTS WITH CO - OPERATIVE BANKS, W E NOTICED THAT AN IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDICIAL PRONOUNCEMENTS: - (I) CIT V. KARNATAKA STATE CO - OPERATIVE BANK [251 ITR 194 (SC)] (II) VAVERU CO - OPERATIVE RURAL BANK LTD. V CIT [(2017) 396 ITR 371 (THE TELUNGANA AND ANDHRA PRADESH HIGH COURT) (III) MUTTOM SERVICE CO - OPERATIVE BANK LTD. (ITA NO.372/COCH/2010) (IV) MUNDAKKAYAM SERVICE CO - OPERATIVE BANK LTD. (ITA NO.106/COCH/2016). (V) THE MANGALAM SERVICE CO - OPERATIVE BANK LTD. V. ITO (ITA NO.495/COCH/2017 ORDER DATED 17.10.2017) ITA NO. 593 - 594 / COCH /201 7 . M/S. MEDUMON SCB LTD. 6 8 . 3 IT IS ALSO TO BE MENTIONED THAT THE ORDER OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF M/S.MUTHOLY SCB LTD. V. ITO [ITA NO.11/COCH/2014 ORDER DATED 24.09.2014] , WHICH WAS IN FAVOUR OF THE REVENUE, WAS SET ASIDE BY THE HONBLE HIGH COURT AND WAS REMITTED TO THE TRIBUNAL FOR DE NOVO CONSIDERATION. S UBSEQUENT TO THE REMAND, THE TRIBUNAL VIDE ITS ORDER DATED 23.03.2017 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT INTEREST INCOME RECEIVED ON INVESTMENTS WITH SUB - TREASURIES AND CO - OPERATIVE BANKS WAS ENTITLED TO THE BENEFIT OF DEDUCTION U/ S 80P(2)(A)(I) OF THE I.T.ACT. 8 . 4 THE LATEST JUDGMENT OF THE HONBLE TELANGANA & ANDHRA PRADESH HIGH COURT IN THE CASE OF VAVERU CO - OPERATIVE RURAL BANK LTD. V CIT (SUPRA) HAD ALSO DECIDED ON IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEES. THE HONBLE HIGH COURT HAD HELD THAT CO - OPERATIVE SOCIETIES ENGAGED IN PROVIDING CREDIT FACILITIES T O ITS MEMBERS, IN COURSE OF ITS BUSINESS HAD MADE INVESTMENTS WITH TREASURY, BANK ETC. AND EARNED INTEREST INCOME, SUCH INCOME WOULD BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. 8 . 5 IN THE INSTANT CASE THE ASSESSEE HAD MADE INVESTMENTS WITH SUB - TREASURIES AND BANKS IN THE COURSE OF ITS BUSINESS OF BANKING / PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, IT WAS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT IN RESPECT OF INTEREST INCOME THAT WAS RECEIVED ON SUCH INVESTMENTS IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS. IT ITA NO. 593 - 594 / COCH /201 7 . M/S. MEDUMON SCB LTD. 7 IS ORDERED ACCORDINGLY. HENCE, THE ASSESSEES APPEAL IS PARTLY ALLOWED. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON THIS 03 RD DAY OF OCTOBER , 2018 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIA L MEMBER COCHIN ; DATED : 03 RD OCTOBER , 2018 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (APPEALS) - THIRUVANANTHAPURAM . 4. THE PR.CIT THIRUVANANTHAPURAM . 5. DR, ITAT, COCHIN 6 . GUARD FILE.