M/s.Vadayar Service Co-op Bank Ltd, Kottayam V. The ITO, Kottayam

ITA 711/COCH/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8834 (ITAT-COCHIN)
• Duration Of Justice: 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 06-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRITHUNJAYA SHARMA
• Keywords: Application of stay; Competent authority
• Section: 143(3); 80P; 250; 201; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJARI, AM & SHRI GEORGE GEORGE K, JM ITA NO. 711 /COCH/201 9 : ASST.YEAR 201 1 - 201 2 SA NO. 121 /COCH/2019 : ASST.YEAR 201 1 - 201 2 M/S. VADAYAR SERVICE CO - OPERATIVE BANK LIMITED, C/O.ANIL D.NAIR & ASSOCIATES 2 ND FLOOR, PANTHIYIL TOWERS WARRIAM ROAD KOCHI 682 016. PAN : AAAAT5444N . VS. THE INCOME TAX OFFICER WARD 5 KOTTAYAM . (APPELLANT / APPLICANT ) (RESPONDENT) APPELLANT BY : SRI. ANIL D.NAIR , ADVOCATE RESPONDENT BY : SRI.MRITHUNJAYA SHARMA, SR.DR DATE OF HEARING : 09 .01.2020 DATE OF PRONOUNCEMENT : 10 .01.2020 O R D E R PER GEORGE GEORGE K, JM : THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) , DATED 30.09.2019, PASSED U/S 154 R.W.S. 250 OF THE INCOME - TAX ACT. THE ASSESSEE HAS ALSO PREFERRED A STAY APPLICATION SEEKING TO STAY THE RECOVERY OF OUTSTANDING TAX ARREARS. THE RELEVANT ASSESSMENT YEAR IS 201 1 - 201 2 . 2. THE BRIEF FACTS OF THE CAS E ARE AS FOLLOW: THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969. FOR THE ASSESSMENT YEAR 201 1 - 201 2 , THE RETURN OF INCOME WAS FILED ON 1 8.0 3 .201 3 DECLARING INCOME OF RS.NIL, AFTER CLAIMING DEDUCTION U/S 80P OF THE I.T.ACT. THE ASSESSING OFFICER PASSED ORDER U/S 143(3) OF THE I.T.ACT, DISALLOWING THE CLAIM OF ITA NO. 711 / COCH /201 9. SA NO.1 21 /COCH/2019. M/S. VADAYAR SERVICE CO - OP BANK LTD. 2 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 AS SESSEE WAS DOING THE BUSINESS OF BANKING, AND THEREFORE, IN VIEW OF INSERTION OF SECTION 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. 3. AGGRIEVED BY THE ORDER OF ASSESSMENT DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) ALLOWED THE APPEAL 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 OF THE ASSESSEE, THE CIT(A) FOLLOWED 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 U/S 154 OF THE I.T.ACT PROPOSING TO RECTIFY HIS ORDER 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. 711 / COCH /201 9. SA NO.1 21 /COCH/2019. M/S. VADAYAR SERVICE CO - OP BANK LTD. 3 NOTICES. HOWEVER, THE CIT(A) REJECTED THE OBJECTIONS RAISED B Y THE ASSESSEE AND PASSED ORDER 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 OF THE CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL RAISING THE FOLLOWING GROUNDS: - A. THE IMPUGNED ORDER TO THE EXTENT OBJECTED TO HEREIN IS ABSOLUTELY ILLEGAL, ARBITRARY AND UNAUTHORIZED. B. THE APPELLATE AUTHORITY WENT WRONG IN INVOKING POWERS UNDER SEC.154 AND UPSETTING ITS OWN ORDER, WHEN THE ASSESSING AUTHORITY HAS ACCEPTED THE ORDER IN APPEAL AND DID NOT FILE ANY APPEAL TO THE TRIBUNAL AGAINST THE SAID ORDER. IT IS SUBMITTED THAT IT IS AN ABUSE OF SEC.154 OF THE ACT. C. THE LEARNED COMMISSIONER (APPEALS) IS NOT APPRECIATING THE RATIO OF THE JUDGMENT OF THE FULL BENCH REPORTED IN 41 4 ITR 67. THE JURISDICTIONAL HIGH COURT HAS ONLY DECLARED THAT REGISTRATION PER SE WOULD NOT BE SUFFICIENT FOR WANT OF DEDUCTION UNDER SEC.80P. THEREFORE IN THE ABSENCE OF ENQUIRY AS TO THE NATURE OF THE ACTIVITY UNDERTAKEN BY THE ASSESSEE, THE DENIAL OF D EDUCTION UNDER SEC.80P IS BAD IN LAW. D. THE OFFICER OUGHT TO HAVE REMANDED THE MATTER BACK FOR DE NOVO CONSIDERATION IN TUNE WITH JUDGMENT OF THE FULL BENCH OF KERALA HIGH COURT RATHER THAN USURPING THE JURISDICTION OF THE ASSESSING AUTHORITY AND RESTOR ING THE ASSESSMENT AS COMPLETED BY HIM. FOR THESE AND OTHER GROUNDS AND DOCUMENTS TO BE SUBMITTED AT THE TIME OF HEARING AND IT IS HUMBLY PRAYED THAT THE TRIBUNAL BE PLEASED TO ALLOW THE APPEAL. 6. THE LEARNED AR RELIED ON THE GROUNDS RAISED. THE LEARN ED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDERS OF THE INCOME - TAX AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 711 / COCH /201 9. SA NO.1 21 /COCH/2019. M/S. VADAYAR SERVICE CO - OP BANK LTD. 4 THE CASE OF CHIRAKKAL SERVI CE 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. 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 FINDINGS 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 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 REGISTRATIO N 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 FO R 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 THAT, WHILE CONSIDERING THE CLAIM MADE BY AN ASSESSEE SOCIETY FOR DEDUCTION UNDER SECTION 80P OF THE IT ACT, AFTER THE INTRODUCTION OF SUB - SEC TION (4) THEREOF, THE ASSESSING OFFICER HAS TO EXTEND THE BENEFITS AVAILABLE, MERELY LOOKING AT THE CLASS OF THE SOCIETY AS PER THE ITA NO. 711 / COCH /201 9. SA NO.1 21 /COCH/2019. M/S. VADAYAR SERVICE CO - OP BANK LTD. 5 CERTIFICATE OF REGISTRATION ISSUED UNDER THE CENTRAL OR STATE CO - OPERATIVE SOCIETIES ACT AND THE RULES MADE THEREUNDER. ON S UCH 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 LIG HT 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 ACTIVITIES 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 FI XED 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 THEM SELVES 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 CLASSIFI ED 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 PATTUKULANGARA [2012 (3) KHC 726] AND PERINTHALMA NNA [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 O F 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 LI GHT 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 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 ITA NO. 711 / COCH /201 9. SA NO.1 21 /COCH/2019. M/S. VADAYAR SERVICE CO - OP BANK LTD. 6 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 SOCIETIES FOR WHICH THE DEDUCTION IS PROVIDED, EVEN IF IT WAS ELIGIBLE IN THE INITIAL YEARS. 7.1 THE CIT(A) HAD INITIALLY ALLOWED THE APPEAL OF THE ASSESSEE AND GRANTED DEDUCTION U/S 80P(2) OF THE I.T.ACT. SUBSEQUENTLY, THE CIT(A) PASSED ORDER U/S 154 OF THE 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 JUR ISDICTIONAL 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 BENC H 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 ACTIVITIES OF THE ASSESSEE SOCIETY TO DETERMINE THE E LIGIBILITY 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), WE RESTORE THE ISSUE OF DEDUCTION U/S 80P(2) TO THE FILES OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SH ALL 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 - OPERATIVE 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 ITA NO. 711 / COCH /201 9. SA NO.1 21 /COCH/2019. M/S. VADAYAR SERVICE CO - OP BANK LTD. 7 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 . 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 - OPERATIV E 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. SINCE WE HAVE DISPOSED OF THE APPEAL FILED BY THE ASSESSEE, THE STAY APPL ICATION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND THE SAME IS DISMISSED AS SUCH. 9 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE STAY APPLICATION IS DISMISSED. ORDER PRONOUNCED ON THIS 10 TH DAY OF JANUARY, 2020 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN ; DATED : 10 TH JANUARY, 2020 . DEV A DAS G * ITA NO. 711 / COCH /201 9. SA NO.1 21 /COCH/2019. M/S. VADAYAR SERVICE CO - OP BANK LTD. 8 COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A) , KOTTAYAM. 4. THE PR.CIT , KOTTAYAM . 5. DR, ITAT, COCHIN 6. GUARD FILE.