M/s.The Uliyacoil Service Co-op Bank Ltd, Kollam V. The ITO, Kollam

ITA 681/COCH/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7244 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRITUNJAYA SHARMA
• Assessee Lawyers: K M V PANDALAI
• Keywords: Rectification of order
• Section: 80P; 250; 13; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN SMC BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K , JUDICIAL MEMBER ITA NO S . 681 - 684/ COCH/201 9: AY 2010 - 11 TO 2012 - 13 & 2014 - 15 M/S. ULIYACOIL SERVICE CO - OPERATIVE BANK LIMITED, ASRAMAM P.O., KOLLAM - 691 002. [PAN:AAAAU 8787B] VS. THE INCOME TAX OFFICER WARD 4, KOLLAM. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K .M.V. PANDALAI, ADV. RESPONDENT BY : SRI.MRITUNJAYA SHARMA , SR.DR DATE OF HEARING : 30 . 01 .20 20 DATE OF PRONOUNCEMENT : 30 . 01.2020 O R D E R T HESE APPEAL S AT THE INSTANCE OF THE ASSESSEE ARE DIRECTED AGAINST FOUR ORDER S OF THE CIT(A) , TRIVANDRUM, ALL DATED 0 3.09.2019 , PASSED U/S . 154 R.W.S. 250 OF THE I.T.ACT . THE RELEVANT ASSESSMENT YEAR S ARE 2010 - 11 TO 2012 - 13 AND 2014 - 15. 2. THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEAR S, 2010 - 11 TO 2012 - 13 AND 2014 - 15 , THE RETURN S OF INCOME WERE FILED A FTER CLAIMING DEDUCTION U/S 80P OF THE I.T.ACT. THE ASSESSING OFFICER PASSED ASSESSMENT ORDER S FOR THE ABOVE MENTIONED ASSESSMENT YEARS, DISALLOWING THE ITA NO S. 681 TO 684/ COCH /201 9 M/S. ULI YACOIL SCB LTD. 2 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 SECTION 80P(4) OF THE I.T.ACT WITH E FFECT 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 - O PERATIVE BANKS. 3. AGGRIEVED BY THE ORDER S OF ASSESSMENT DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT, THE ASSESSEE PREFERRED APPEAL S TO 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) F OLLOWED 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.). 4. SUBSEQUENTLY, THE CIT(A) ISSUED NOTICE S U/S 154 OF THE I.T.ACT PROPOSING TO RECTIFY HIS ORDER 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 ISSUANCE OF ITA NO S. 681 TO 684/ COCH /201 9 M/S. ULI YACOIL SCB LTD. 3 NOTICE S . HOWEVER, THE CIT(A) REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE AND PASSED O RDER S U/S 154 OF THE I.T.ACT, DISALLOWING THE CLAIM OF THE ASSESSEE U/S 80P(2) OF THE I.T.ACT. 5. AGGRIEVED BY THE ORDER S OF THE CIT(A), THE ASSESSEE HAS FILED TH ESE APPEAL S BEFORE THE TRIBUNAL . IDENTICAL GROUNDS ARE RAISED IN THESE APPEALS. THE GROUNDS RELATING TO AY 2010 - 11 READ AS FOLLOWS: - 1. THE IMPUGNED ORDER BY THE COMMISSIONER OF INCOME TAX(APPEALS) UNDER SECTION 154 R.W.S. 250 OF THE I.T. ACT, 1961 IS ILLEGAL AND UNSUSTAINABLE. 2. UNDER THE GUISE OF RECTIFICATION OF MISTAKE THE COMMISSIONER OF INCOME TAX HAS REVERSED ITS ORDER U/S. 250 BY AN ELABORATE ORDER WHICH IS BEYOND THE SCOPE OF SECTION 154 O F THE I.T. ACT. 3. IN THE ORIGINAL ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX(APPEALS ) ON 17 - 12 - 2018 THERE WAS NO MISTAKE TO BE RECTIFIED AS THE DECISION REFERRED TO (414 ITR 67) IN THE IMPUGNED ORDER, BASED ON WHICH HE INVOKED SECTION 154, WAS REND ERED BY THE FULL BENCH OF THE HONBLE HIGH COURT OF KERALA ONLY LATER, ON 19 - 03 - 2019. 4. THE CIT(A) ERRED IN RESORTING TO A LATER DECISION FOR RECTIFYING AN ALLEGED MISTAKE IN AN EARLIER ORDER PASSED BY HIM. THE REVENUE OUGHT TO HAVE APPROACHED THIS HON BLE TRIBUNAL BY WAY OF APPEAL. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS HUMBLY PRAYED THAT THIS HONBLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL QUASHING THE IMPUGNED ORDER. ITA NO S. 681 TO 684/ COCH /201 9 M/S. ULI YACOIL SCB LTD. 4 6. THE LEARNED AR RELIED ON THE GROUNDS RAISED. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDERS OF THE INCOME - TAX AUTHORITIES. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. T HE HONBLE KERALA HIGH COURT IN THE CASE OF KIL KOTAGIRI TEA & COFFEE ESTATES CO. LTD. V. ITAT REPORTED IN 174 ITR 579 HAD HELD THAT WHEN AN AUTHORITY HAS DECIDED ON THE BASIS OF A DECISION OF THE HIGH COURT WHICH IS SUBSEQUENTLY REVERSED, THERE WOULD BE A RECTIFIABLE MISTAKE COMING WITHIN THE SECTION 154 OF THE INCOME - TAX ACT. THE LARGER BENCH OF THE HONBLE KERALA HIGH C OURT HAS REVERSED THE DICTUM LAID DOWN BY THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. (SUPRA) BY HOLDING THAT THE ACTIVITIES OF THE ASSESSEE HAS TO BE EXAMINED TO DETERMINE WHETHER THE ASSESSEE IS C O - OPERATIVE SOCIETY OR COOPERATIVE BANK. IN THE LIGHT OF THE LARGER BENCH JUDGMENT OF THE HONBLE KERALA HIGH COURT, THE EARLIER CIT(A) ORDERS GRANTING DEDUCTION U/S. 80P(2) OF THE I.T. ACT HAVE BEEN RIGHTLY RECALLED BY THE CIT(A). THEREFORE THE GROUNDS RAISED BY THE ASSESSEE THAT THE CIT(A) HAS ERRED IN PASSING ORDERS U/S. 154 OF THE I.T. ACT ARE DISMISSED. 7.1 THE HONBLE JURISDICTIONAL HIGH COURT IN THE 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 SOCIETY, NECESSARILY, THE DEDUCTION U/S 80P(2) OF THE I.T.ACT HAS TO BE GRANTED TO THE ASSESSEE. HO WEVER, THE FULL BENCH OF THE HONBLE KERALA HIGH COURT IN THE CASE OF THE ITA NO S. 681 TO 684/ COCH /201 9 M/S. ULI YACOIL SCB LTD. 5 MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT (SUPRA) HAD REVERSED THE ABOVE FINDINGS OF THE HONBLE KERALA HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE CO - OPERATIVE BAN K 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 THE 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 THE HONBLE HIGH COURT THAT THE ASSESSING OFFICER IS NOT BOUND BY THE REGISTRATION CERTIFICATE ISSUED BY THE REGISTRAR OF KERALA CO - OPERATIVE SOCIETY CLAS SIFYING 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 HO NBLE 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 THAT, WHILE CONSIDERING THE CLAIM MADE BY AN ASSESSEE SOCIETY FOR DEDUCTION UNDER SECTION 80P OF TH E 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 SOCIETY AS PER THE CERTIFICATE OF REGISTRATION ISSUED UNDER THE CENTRAL OR STATE CO - OPERATIVE SOCIET IES 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 T HE COMPETENT ITA NO S. 681 TO 684/ COCH /201 9 M/S. ULI YACOIL SCB LTD. 6 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 TO PROVIDE LOANS AND ADVANCES FOR AGRICULTURAL PURPOSES, THE RATE OF INTEREST ON SUCH LOA NS 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 VILLAGE, 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 REGISTE RED AS SUCH UNDER THE KCS ACT AND CLASSIFIED SO, UNDER THE ACT, INCLUDING THE APPELLANTS ARE ENTITLED TO SUCH EXEMPTION. 34. IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH EXPRESSED A DIVERGENT OPINION, WITHOUT NOTICING THE LAW LAID DOWN IN ANTONY PATTUKU LANGARA [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, SINCE, 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 COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] THE LAW LAID DOWN BY THE DIVISION BENCH PERINTHAL MANNA [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 N OT 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 SOCIETIES FOR WHICH THE DEDUCTION IS PROVIDED, EVEN IF IT WAS ELIGIBLE IN THE INITIAL YEARS. 7. 2 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 THE I.T.ACT, ITA NO S. 681 TO 684/ COCH /201 9 M/S. ULI YACOIL SCB LTD. 7 WHEREIN THE CLAIM OF DEDUCTION U/S 80P OF THE I.T.ACT WAS DENIED, BY RELYING ON THE JU DGMENT 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 ACTI VITIES 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 (SUPRA) HAD HELD THAT THE A.O. HAS TO CONDUCT AN INQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITI ES OF THE 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 JURISDICTIONAL HIGH COURT (SUPRA), I RESTORE THE ISSUE OF DEDUCTION U/S 80P(2) TO THE FILES OF THE ASSESSING OFFICER FOR THE ABOVE ASSESSMENT YEARS. THE ASSESSING OFFICER SHALL EXAMINE THE ACTIVITIES OF THE ASSESSEE AND DETERMINE WHETHER THE ACTIVITIES ARE IN COMPLIANCE WITH THE ACTIVITIES OF A CO - OPERATIVE SOCIETY FUNCTIONING UNDER THE KERALA CO - OPERA TIVE SOCIETIES ACT, 1969 AND ACCORDINGLY GRANT DEDUCTION U/S 80P(2) OF THE I.T.ACT. 7.2 AS REGARDS THE INTEREST ON THE INVESTMENTS WITH CO - OPERATIVE BANKS AND OTHER BANKS, THE CO - ORDINATE BENCH ORDER OF THE TRIBUNAL IN THE CASE OF KIZHATHADIYOOR SERVICE C O - 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 ITA NO S. 681 TO 684/ COCH /201 9 M/S. ULI YACOIL SCB LTD. 8 INSTEAD OF `INCOME FROM OTHER SOURCES. HOWEVER, 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 BANK 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. 8 . IN THE RESULT, TH ESE APPEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS DAY OF 30 TH JANUARY, 2020 . SD/ - ( GEORGE GEORGE K ) JUDICIAL MEMBER COCHIN ; DATED : 30 TH J ANUARY, 2020 . GJ COPY OF THE ORDER FORWARDED TO : 1. M/S. ULIYACOIL SERVICE CO - OPERATIVE BANK LIMITED, ASRAMAM P.O., KOLLAM - 691 002. 2. THE ITO, WARD - 4, KOLLAM. 3. THE CIT (A) , TRIVANDRUM. 4. THE PR.CIT , TRIVANDRUM . 5. 6. DR/ITAT, COCHIN BENCH GUARD FILE BY ORDER (ASSISTANT REGISTRAR) I.T.A.T. COCHIN