The Mowancherry Co-op Rural Bank Ltd, Kannur V. The ITO, Kannur

ITA 597/COCH/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7272 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 31-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Question of law; Competent authority; Benefit of exemption
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 260A; 80P; 201; 13

Judgement Text

ITA NO 597 /C/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/ SHRI AB RAHAM P GEORGE , AM & GEORGE GEORGE K, JM ITA NO 5 97 / COCH/2014 (A SST YEAR 20 11 - 12 ) M/S THE MOWANCHERRY COOP RURAL BANK LTD PO MOWANCHERRY KANNUR DIST 670 613 VS THE INCOME TAX OFFICER WARD 1 KANNUR ( APPELLANT) (RESPONDENT) PAN NO. AA BAT4821C ASSESSEE BY DR K P PRADEEP REVENUE BY SHRI A DHANARAJ, SR DR DATE OF HEARING 13 TH MARCH 2017 DATE OF PRONOUNCEMENT 13 TH MARCH 2017 ORDER PER GEORGE GEORGE K,JM: THIS APPEAL IS RESTORED TO THE TRIBUNAL BY THE JUDGMENT OF THE HONBLE KERALA HIGH COURT DATED 16 TH FEB 2016 IN ITA NO . 3 OF 201 6 . 2 BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A COOPERATIVE BANK REGISTERED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969. THE CLAIM OF DEDUCTION U/S 80P(2) WAS DENIED BY THE ASSESSING OFFICER FOR THE REASON THAT THE ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF BANKING AND IN VIEW OF SECTION 80P(4) OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80P(2) OF THE ACT. ITA NO 597 /C/2014 2 3 AGGRIEVED BY THE ASSESSMENT, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE ASSESSMENT ORDER. 4 AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSESSEE PREFERRED APPEAL TO THE TRIBUNAL. THE TRIBUNAL VIDE ITS ORDER DATED 6 TH MARCH 2015 DISPOSED OFF THE APPEAL OF THE ASSESSEE HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P OF THE ACT. 5 AGGRIEVED BY THE O RDER OF THE TRIBUNAL, THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE T H E HONBLE KERALA HIGH COURT, U/S 260A OF THE ACT . THE HON BLE HIGH COURT VIDE JUDGMENT DATED 16..2.2016 IN ITA NO. 3 OF 2016 , RESTOR ED THE ISSUES TO THE TRIBUNAL. IT IS IN THIS CONTEXT, THE CASE WAS HEARD ON 13 TH MARCH 2017 . 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - O P BANK LTD VS CIT REPORTED IN 384 ITR 490 HAD HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN DENYING THE BENEFIT OF EXEMPTION U/S 80P OF THE ACT. THE HONBLE HIGH COURT WAS CONSIDERING THE FO LLOWING 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, IGNORI NG THE FACT THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY? ITA NO 597 /C/2014 3 6.1 IN CONSIDERING THE ABOVE SUBSTANTIAL 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 SOCIET IES 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 L AW. THIS, WE VISUALISE AS DUE RECIPROCATIVE LEGISLATIVE EXERCISE BY THE PARLIAMENT RECOGN I SING THE PREDOMINANCE 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 AGRICULTUR AL 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 OBJECT OF SUCH SOCIETIES IS TO UNDERTAKE AGR I CULTURAL CREDIT ACTIVITIES AND TO PROVIDE LOANS AND ADVANCES FOR AGRICULTURAL PURPOSES , THE RAT E ' OF INTEREST ON SUCH LOANS AND ADVANCES TO BE AT THE RATE FIXED BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES 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 C LAUSE 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 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 MATER IALS 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 TR IBUNAL 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 597 /C/2014 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 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 AGRICU LTURAL 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 THE INSTANT CASE, THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY REGISTERED UNDER TH E KERALA COOPERATIVE SOCIETIES ACT, 1969. THE CERTIFICATE HAS BEEN ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES TO THE ABOVE SAID EFFECT AND THE SAME IS ON RECORD. THE HONBLE HIGH COURT, IN ASSESSEES OWN CASE AND OTHER BATCH OF CASES, HAD HELD THA T PRIMARY AGRICULTURAL CREDIT SOCIETY, REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT, 1969, IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2). SINCE THERE IS A CERTIFICATE ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES, STATING THAT THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE ACT. 7 NO OTHER ISSUES WERE ARGUED BY THE LD COUNSEL FOR THE ASSESSEE DURING THE COURSE OF HEARING OF THIS APPEAL. ITA NO 597 /C/2014 5 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH MARCH 2017 . SD/ - SD/ - ( ABRAHAM P GE ROGE ) (GEORGE GEORG E K ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 13 TH MARCH 2017 RAJ* COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN