Secretary, The Eravipuram Service Co-op Bank Ltd, Kollam V. The ITO, Kollam

ITA 674/COCH/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8070 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 25-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRITUNJAYA SHARMA
• Keywords: Rectification of order; Competent authority
• Section: 143(3); 80P; 250; 201; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN SMC BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K , JUDICIAL MEMBER ITA NO S . 674 - 677 /COCH/201 9: AYS 201 1 - 12 TO 2014 - 15 M/S. THE ERAVIPURAM SERVICE CO - OPERATIVE BANK LIMITED, NO. Q234, V A LATHUNGAL, ERAVIPURAM, KOL L AM - 691 018 PAN : AA E AT 0364K] VS. THE INCOME TAX OFFICER WARD - 4, KOLLAM. (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SRI.MRITUNJAYA SHARMA , J R.DR DATE OF HEARING : 2 1 . 01 .20 20 DATE OF PRONOUNCEMENT : 2 1 . 01.2020 O R D E R TH ESE APPEAL S AT THE INSTANCE OF THE ASSESSEE ARE DIRECTED AGAINST THE FOUR DIFFERENT ORDER S OF THE CIT(A) , TRIVANDRUM , ALL DATED 0 3.09.2019 , PASSED U/S . 1 54 R.W.S. 250 OF THE I.T.ACT . THE RELEVANT ASSESSMENT YEAR S ARE 2011 - 12 TO 2014 - 15. 1.1 SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON CONSOLIDATED ORDER. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT LE TTER WAS FILED BEFORE THE TRIBUNAL. HOWEVER, I PROCEED TO DISPOSE OF THE APPEALS EX PARTE AFTER HEARING THE LD. DR. ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 2 THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: 3. THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEAR S 20 11 - 12 TO 20 14 - 15 , THE RETURN S OF INCOME W ERE FILED, CLAIMING DEDUCTION U/S 80P OF THE I.T.ACT. THE ASSESSING OFFICER PASSED ASSESSMENT ORDER S U/S 143(3) OF THE I.T.ACT FOR AYS 2011 - 12 TO 2014 - 15, DISALLOWING THE CLAIM OF DEDUCTION U/S 80P OF THE I.T.ACT. THE REASONING OF THE ASSESSING OFFICER TO DISALLOW THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT WAS THAT THE ASSESSEE WAS DOING THE BUSINESS OF BANKING, AND THEREFORE, IN VIEW OF INSERTION OF S ECTION 80P(4) OF THE I.T.ACT WITH EFFECT FROM 01.04.2007, THE ASSESSEE WILL NOT BE ENTITLED TO THE DEDUCTION U/S 80P(2) OF THE I.T.ACT. THE ASSESSING OFFICER ALSO DISALLOWED THE CLAIM OF DEDUCTION WITH REGARD TO INTEREST INCOME RECEIVED BY THE ASSESSEE ON INVESTMENTS MADE WITH DISTRICT CO - OPERATIVE BANKS. 4 . AGGRIEVED BY THE ORDER S OF ASSESSMENT DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT, THE ASSESSEE PREFERRED APPEALS BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) ALLOWED THE APPEAL S BY HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80P OF THE I.T.ACT. THE INTEREST INCOME RECEIVED FROM OTHER BANKS AND TREASURY ALSO WAS ALLOWED AS DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. IN ALLOWING THE APPEAL S OF THE ASSESSEE, THE CIT(A) FOLLO WED THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE CO - OPERATIVE BANK LTD. V. CIT [(2016) 384 ITR 490 (KER.). ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 3 5 . SUBSEQUENTLY, THE CIT(A) ISSUED NOTICE S U/S 154 OF THE I.T.ACT PROPOSING TO RECTIFY HIS OR DER S PASSED, IN VIEW OF THE SUBSEQUENT JUDGMENT OF THE FULL BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT [ITA NO.97/2016 ORDER DATED 19 TH MARCH, 2019]. THE ASSESSEE OBJECTED TO THE ISSUANC E OF NOTICE. HOWEVER, THE CIT(A) REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE AND PASSED ORDERS U/S 154 OF THE I.T.ACT, DISALLOWING THE CLAIM OF THE ASSESSEE U/S 80P(2) OF THE I.T.ACT FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 6. AGGRIEVED BY THE OR DER S OF THE CIT(A), THE ASSESSEE HAS FILED TH ESE APPEAL S BEFORE THE TRIBUNAL RAISING THE FOLLOWING COMMON GROUNDS: - 1. THE ORDER UNDER SECTION 154 READ WITH SECTION 250 OF THE ACT IS AGAINST LAW FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE DECIDED THE CASE ON JUST AND EQUITABLE GROUNDS. 3. RECTIFICATION OF MISTAKE APPARENT FROM RECORDS UNDER SECTION 154 IS NOT WARRANTED IN THIS CASE. 4. THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE GRANTED SUFFICIENT TIM E ON CONSIDERING THE ADJOURNMENT PETITION. 5. SINCE THE INCOME OF THE SOCIETY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT, THE ASSESSING AUTHORITY AS WELL AS THE APPELLATE AUTHORITY OUGHT TO HAVE ALLOWED IT. ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 4 6. INTEREST INCOME FROM BANK AND TREASURY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(D) OF THE ACT, THE AUTHORITIES OUGHT TO HAVE ALLOWED IT. 7. FURTHER POINTS ARISING OUT OF THE ABOVE AND OTHER SHALL BE SUBMITTED AT THE TIME OF HEARING. 8. IT IS HUMBLY PRAYED THAT ON THE BASIS OF FACTS, LAW AND CIRCUMSTANCES THE APPEALS MAY BE ALLOWED. 7. T HE LD. DR. STR ONGLY SUPPORTED THE ORDERS OF THE INCOME - TAX AUTHORITIES. 8 . I HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CHIRAKKAL SERVICE CO - OPERATIVE CO - OPERATIVE BANK LTD. V. CIT [(2016) 384 ITR 490 (KER.)] HAD HELD THAT WHEN A CERTIFICATE HAS BEEN ISSUED TO AN ASSESSEE BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES CHARACTERIZING IT AS PRIMARY AGRICULTURAL CREDIT S OCIETY, NECESSARILY, THE DEDUCTION U/S 80P(2) OF THE I.T.ACT HAS TO BE GRANTED TO THE ASSESSEE. HOWEVER, THE FULL BENCH OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPRA) HAD REVERSED THE ABOVE FINDIN GS OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE CO - OPERATIVE BANK LTD. V. CIT (SUPRA) . THE LARGER BENCH OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPRA) HELD THAT T HE ASSESSING OFFICER HAS TO CONDUCT AN INQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY TO DETERMINE THE ELIGIBILITY OF DEDUCTION U/S 80P OF THE I.T.ACT. IT WAS HELD BY ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 5 THE HONBLE HIGH COURT THAT THE ASSESSING OFFICER IS NOT BOUND BY THE REGISTRATION CERTIFICATE ISSUED BY THE REGISTRAR OF KERALA CO - OPERATIVE SOCIETY CLASSIFYING THE ASSESSEE - SOCIETY AS A CO - OPERATIVE SOCIETY. THE HONBLE HIGH COURT HELD THAT EACH ASSESSMENT YEAR IS SEPARATE AND ELIGIBILITY SHALL BE VERIFIED BY THE ASSESSING OFFICER FOR EACH OF THE ASSESSMENT YEARS. THE FINDING OF THE LARGER BENCH OF THE HONBLE HIGH COURT READS AS FOLLOWS: - 33. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] IT CANNOT BE CONTENDED T HAT, WHILE CONSIDERING THE CLAIM MADE BY AN ASSESSEE SOCIETY FOR DEDUCTION UNDER SECTION 80P OF THE IT ACT, AFTER THE INTRODUCTION OF SUB - SECTION (4) THEREOF, THE ASSESSING OFFICER HAS TO EXTEND THE BENEFITS AVAILABLE, MERELY LOOKING AT THE CLASS OF THE SO CIETY AS PER THE CERTIFICATE OF REGISTRATION ISSUED UNDER THE CENTRAL OR STATE CO - OPERATIVE SOCIETIES ACT AND THE RULES MADE THEREUNDER. ON SUCH A CLAIM FOR DEDUCTION UNDER SECTION 80P OF THE IT ACT, THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY AND ARRIVE AT A CONCLUSION WHETHER BENEFITS CAN BE EXTENDED OR NOT IN THE LIGHT OF THE PROVISIONS UNDER SUB - SECTION (4) OF SECTION 80P. 33. IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH HELD THAT THE APPELLANT SOCIETIES 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 ACTIVI TIES AND TO PROVIDE LOANS AND ADVANCES FOR AGRICULTURAL PURPOSES, THE RATE OF INTEREST ON SUCH LOANS AND ADVANCES TO BE AT THE RATE TO BE FIXED BY THE REGISTRAR OF CO - OPERATIVE SOCIETIES UNDER THE KCS ACT AND HAVING ITS AREA OF OPERATION CONFINED TO A VILL AGE, PANCHAYAT OR A MUNICIPALITY AND AS SUCH, THEY ARE ENTITLED FOR THE BENEFIT OF SUB - SECTION (4) OF SECTION 80P OF THE IT ACT TO EASE THEMSELVES OUT FROM THE COVERAGE OF SECTION 80P AND THAT, THE AUTHORITIES UNDER THE IT ACT CANNOT PROBE INTO ANY ISSUES OR SUCH MATTERS RELATING TO SUCH SOCIETIES AND THAT, PRIMARY AGRICULTURAL CREDIT SOCIETIES REGISTERED AS SUCH UNDER THE KCS ACT AND CLASSIFIED SO, UNDER THE ACT, INCLUDING THE APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 6 34. IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH EXPRESSED A DIVERGENT OPINION, WITHOUT NOTICING THE LAW LAID DOWN IN ANTONY PATTUKULANGARA [2012 (3) KHC 726] AND PERINTHALMANNA [363 ITR 268]. MOREOVER, THE LAW LAID DOWN BY THE DIVISION BENCH IN CHIRAKKAL [384 ITR 490] IS NOT GOOD LAW, SIN CE, IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1], ON A CLAIM FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT, BY REASON OF SUB - SECTION (4) THEREOF, THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ASSESSEE SOCIETY AND ARRIVE AT A CONCLUSION WHETHER BENEFITS CAN BE EXTENDED OR NOT IN THE LIGHT OF THE PROVISIONS UNDER SUB - SECTION (4) OF SECTION 80P OF THE IT ACT. IN VIEW OF THE LAW LAID DOWN BY THE APEX C OURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] THE LAW LAID DOWN BY THE DIVISION BENCH PERINTHALMANNA [363 ITR 268] HAS TO BE AFFIRMED AND WE DO SO. 35. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN ACE MULTI AXES SYSTEMS CASE (SUPRA), SINCE EACH ASSESSMENT YEAR IS A SEPARATE UNIT, THE INTENTION OF THE LEGISLATURE IS IN NO MANNER DEFEATED BY NOT ALLOWING DEDUCTION UNDER SECTION 80P OF THE IT ACT, BY REASON OF SUB - SECTION (4) THEREOF, IF THE ASSESSEE SOCIETY CEASES TO BE THE SPECIFIED CLASS OF SOCIE TIES FOR WHICH THE DEDUCTION IS PROVIDED, EVEN IF IT WAS ELIGIBLE IN THE INITIAL YEARS. 8 .1 THE CIT(A) HAD INITIALLY ALLOWED THE APPEAL S OF THE ASSESSEE AND GRANTED DEDUCTION U/S 80P(2) OF THE I.T.ACT. SUBSEQUENTLY, THE CIT(A) PASSED ORDER S U/S 154 OF TH E I.T.ACT, WHEREIN THE CLAIM OF DEDUCTION U/S 80P OF THE I.T.ACT WAS DENIED, BY RELYING ON THE JUDGMENT OF THE LARGER BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPRA). THE CIT(A) OUGHT NOT TO HAVE REJECTED THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT WITHOUT EXAMINING THE ACTIVITIES OF THE ASSESSEE - SOCIETY. THE FULL BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPR A) HAD HELD THAT THE A.O. HAS TO CONDUCT AN INQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 7 ASSESSEE SOCIETY TO DETERMINE THE ELIGIBILITY OF DEDUCTION U/S 80P OF THE I.T.ACT. IN VIEW OF THE DICTUM LAID DOWN BY THE FULL BENCH OF THE HONBLE J URISDICTIONAL HIGH COURT (SUPRA), I RESTORE THE ISSUE OF DEDUCTION U/S 80P(2) TO THE FILES OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ACTIVITIES OF THE ASSESSEE AND DETERMINE WHETHER THE ACTIVITIES ARE IN COMPLIANCE WITH THE ACTIVITI ES OF A CO - OPERATIVE SOCIETY FUNCTIONING UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969 AND ACCORDINGLY GRANT DEDUCTION U/S 80P(2) OF THE I.T.ACT. 8 .2 AS REGARDS THE INTEREST ON THE INVESTMENTS WITH CO - OPERATIVE BANKS AND OTHER BANKS, THE CO - ORDINATE B ENCH ORDER OF THE TRIBUNAL IN THE CASE OF KIZHATHADIYOOR SERVICE CO - OPERATIVE BANK LIMITED IN ITA NO.525/COCH/2014 (ORDER DATED 20.07.2016), HAD HELD THAT INTEREST INCOME EARNED FROM INVESTMENTS WITH TREASURIES AND BANKS IS PART OF BANKING ACTIVITY OF THE ASSESSEE, AND THEREFORE, THE SAID INTEREST INCOME WAS ELIGIBLE TO BE ASSESSED AS `INCOME FROM BUSINESS INSTEAD OF `INCOME FROM OTHER SOURCES. H OWEVER, AS REGARDS THE GRANT OF DEDUCTION U/S 80P OF THE I.T.ACT ON SUCH INTEREST INCOME, THE ASSESSING OFFICER SHALL FOLLOW THE LAW LAID DOWN BY THE LARGER BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BA NK LTD. V. CIT (SUPRA) AND EXAMINE THE ACTIVITIES OF THE ASSESSEE - SOCIETY BEFORE GRANTING DEDUCTION U/S 80P OF THE I.T.ACT ON SUCH INTEREST INCOME. IT IS ORDERED ACCORDINGLY. ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 8 9. IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED ON THIS 2 1 ST DAY OF JANUARY, 2020 . SD/ - ( GEORGE GEORGE K ) JUDICIAL MEMBER COCHIN ; DATED : 2 1 ST J ANUARY, 2020 . GJ COPY OF THE ORDER FORWARDED TO : 1. M/S.THE ERAVIPURAM SERVICE CO - OPERATIVE BANK LIMITED, NO. Q234, VALATHUNGAL, ERAVIPURAM, KOL L AM - 691 018 2 . 3. 4. 5. 6. THE INCOME TAX OFFICER WARD - 4, KOLLAM. THE CIT(A) TRIVANDRUM. THE PR.CIT , TRIVANDRUM. THE DR, ITAT, COCHIN GUARD FILE BY ORDER (ASSISTANT REGISTRAR) I.T.A.T. COCHIN ITA NO S . 674 - 677 / COCH /201 9 M/S. ERAVIPURAM SCB LTD. 9