Navaikulam Service Co-op Bank Ltd, Trivandrum V. The DCIT, Trivandrum

MA 04/COCH/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7525 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 09-12-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRITUNJAYA SHARMA
• Keywords: Business income; Question of law; Competent authority; Set aside
• Section: 68; 56; 80(P); 80P; 201; 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJARI, AM & SHRI GEORGE GEORGE K, JM M A N O . 01 /COC H/20 20 : ASST.YEAR 201 4 - 2015 M A N O . 02/COC H/20 20 : ASST.YEAR 2015 - 2016 THE DY.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), RANGE - 2 TRIVANDRUM. VS. M/S.NAVAIKULAM SERVICE CO - OPERATIVE BANK LIMITED NAVAIKULAM P.O. TRIVANDRUM 695 603. PAN : AAAAN6970B. ( APPLICANT ) (RESPONDENT) M A N O . 03/COC H/20 20 : ASST.YEAR 2014 - 2015 M A N O . 04/COC H/20 20 : ASST.YEAR 2015 - 2016 M/S.NAVAIKULAM SERVICE CO - OPERATIVE BANK LIMITED NAVAIKULAM P.O. TRIVANDRUM 695 603. PAN : AAAAN6970B. VS. THE DY.COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), RANGE - 2 TRIVANDRUM. ( APPLICANT ) (RESPONDENT) REVENUE BY : SRI.MRITUNJAYA SHARMA, SR.DR ASSESSEE BY : SRI.JOJO C.A., ADVOCATE DATE OF HEARING : 1 3 .03.2020 DATE OF PRONOUNCEMENT : 13 .03.2020 O R D E R PER CHANDRA POOJARI, AM : THESE MISCELLANEOUS APPLICATIONS AT THE INSTANCE OF BOTH THE DEPARTMENT AND ASSESSEE ARE ARISING OUT OF THE CONSOLIDATED ORDER OF THE TRIBUNAL DATED 24.06.2019 IN ITA NOS.139, 140, 154 AND 155/COCH/2019. 2. FIRST, WE SHALL ADJUDICATE THE DEPARTMENTS M.A . M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 2 MA NOS.1 & 2/COCH/2020 : BY DEPARTMENT : 3 . THE ISSUES RAISED IN THE MISCELLANEOUS APPLICATIONS FILED BY THE DEPARTMENT ARE IDENTICAL, VIZ., THE ITAT HAS ERRED IN TREATING THE INTEREST INCOME RECEIVED FROM SUB - TREASURY AND BANKS AS INCOME ASSESSABLE AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER SOURCES. THE REVENUE HAS ALSO RELIED ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF M/S.TOTGARS CO - OPERATIVE SALES SOCIETY LTD. REPORTED IN 322 ITR 283 (SC). THE FINDING OF THE ITAT WITH REGARD TO THE ISSUE RAISED IN THE DEPARTMENTS MISCELLANEOUS APPLICATIONS READS AS FOLLOW: - 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. WITH REGARD TO THE INTEREST INCOME EARNED BY THE ASSESSEE FROM OTHER BANKS AND TREASURY ON WHICH DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IS TO BE GRANTED, THERE IS NO DISPUTE THAT THE ASSESSEE HAS MADE INVESTMENTS IN THE COURSE OF BANKING ACTIVITIES AND SUCH INTEREST INCOME WAS RECEIVED ON INVESTMENTS MADE WITH COOPERATIVE BANKS AND OTHER SCHEDULED BANKS. THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF KIZHATHADIYOOR CO - OPERATIVE BANK LIMITED CITED SUPRA HAD HELD THAT SUCH INTEREST INCOME RECEIVED BY THE ASSESSEE SHOULD BE ASSESSED AS INCOME FROM BUSINESS INSTEAD OF INCOME FROM OTHER SOURCES. IN VIEW OF THE ORDER OF THE CO - ORDINATE BENCH, WE HOLD THAT THE CIT(A) IS JUSTIFIED IN HOLDING THAT INTEREST INCOME RECEIVED BY THE ASSESSEE SHOULD BE ASSESSED A S INCOME FROM BUSINESS. 10.1 AS REGARDS GRANT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT, THE ASSESSING OFFICER SHALL FOLLOW THE LAW LAID DOWN BY THE LARGER BENCH OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT CITED SUPRA AND EXAMINE THE ACTUAL ACTIVITIES OF THE ASSESSEE SO AS TO GRANT DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION IN ACCORDANCE WITH THE ABOVE DIRECTION. TH US, THIS GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES FOR BOTH THE ASSESSMENT YEARS. 4 . T HE TRIBUNAL IN THE ABOVE ORDER, HAD CATEGORICALLY FOUND THAT THE ASSESSEE IN THE COURSE OF BUSINESS OF BANKING / M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 3 PROVIDING CREDIT FACIL ITIES TO ITS MEMBERS HAD MADE INVESTMENTS IN SUB - TREASURY , OTHER BANKS ETC. AND INTEREST INCOME EARNED ON SUCH INVESTMENTS ARE BUSINESS INCOME INSTEAD OF `INCOME FROM OTHER SOURCES. IN OTHER WORDS, ACCORDING TO THE TRIBUNAL, THE CASH IN HAND IS STOCK IN T RADE OF THE ASSESSEE AND INVESTMENTS MADE IN THE COURSE OF ITS BUSINESS OF BANKING / PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS NOTHING BUT INCOME ARISING UNDER THE HEAD BUSINESS. 5. THE JUDGMENT OF THE HONBLE APEX COURT RELIED ON BY THE REVENUE IN THE CASE OF M/S.TOTGARS CO - OPERATIVE SALES SOCIETY LTD. (SUPRA) IS DISTINGUISHABLE ON FACTS. THE HONBLE APEX COURT IN THE CASE OF M/S TOTGARS COOPERATIVE SALES SOCIETY LTD (SUPRA) WAS DEAL ING WITH THE CASE WHERE THE ASSESSEE APART FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS WAS ALSO MARKETING AGRICULTURAL PRODUCES GROWN BY ITS MEMBERS. SALE CONSIDERATION RECEIVED FROM THE MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED BY THE ASSESSEE IN THAT CASE AND WAS INVESTED IN SHORT TERM DEPOSITS/SECURITIES. SUCH AMOUNT RETAINED BY ASSESSEES SOCIETY WAS SHOWN AS A LIABILITY IN THE BALANCE SHEET AND THEREFORE, TO THAT EXTENT INTEREST INCOME CANNOT BE ATTRIBUTABLE NEITHER TO THE ACTIV ITY MENTIONED IN SECTION 80P(2)(A)(I) OR U/S 80P(2)(A)(III) OF THE ACT. THIS DISTINGUISHABLE FEATURE HAS BEEN TAKEN NOTE BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD IN ITA NO.307 OF 2014 (JUDGMENT DAT ED 28TH OCT 2014). THE HONBLE KARNATAKA M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 4 HIGH COURT WAS CONSIDERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW: WHETHER THE TRIBUNAL FAILED IN LAW TO APPRECIATE THAT THE INTEREST EARNED ON SHORT TERM DEPOSITS WERE ONLY INVESTMENT IN THE COURSE OF ACTIVITY OR PROVIDING CREDIT FACILITIES TO MEMBERS AND THAT THE SAME CANNOT BE CONSIDERED AS INVESTMENT MADE FOR THE PURPOSE OF EARNING INTEREST INCOME AND CONSEQUENTLY PASSED A PERVERSE ORDER? 5 .1 IN ANSWERING THE ABOVE QUESTION OF LAW, THE HONBLE KARNTAKA HIGH COURT DISTINGUISHED THE JUDGMENT OF THE APEX COURT IN THE CASE OF TOTGARS COOPERATIVE SALES SOCIETY LTD (SUPRA) AND RENDERED THE FOLLOWING FINDINGS: 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S TOTGARS COOPERATIVE SALES SOCIETY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE - COOPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, DEPOSIT/ SECURITY. WAS INVESTED IN A SHORT - TERM SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DU E TO ANY MEMBERS. IT WAS NET THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAK ERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 5 SIMILAR V IEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTH ORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY, IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER : APPEAL IS ALLOWED. 5 . 2 IN VIEW OF THE ABOVE CATEGORICAL FINDING OF THE TRIBUNAL THAT THE INVESTMENTS ARE MADE BY THE ASSESSEE IN THE COURSE OF ITS BANKING BUSINESS / PROVIDING CREDIT FACILITIES TO ITS MEMBERS, WE HAVE NO HESITATION TO HOLD THAT THE INTEREST INCOME RECEIVED ON SUCH INVESTMENTS ARE TO BE ASSESSED AS INCOME FROM BUSINESS. THEREFORE, THE MISCELLANEOUS APPLICATIONS FILED BY THE DEPARTME NT ARE REJECTED. 6 . IN THE RESULT, THE MISCELLANEOUS APPLICATIONS FILED BY THE REVENUE ARE DISMISSED. MA NOS. 3 & 4 /COCH/2020 : BY ASSESSEE : 7 . THE PRAYER IN THE ASSESSEES MISCELLANEOUS APPLICATIONS IS IDENTICAL, EXCEPT VARIANCE IN FIGURES, THEY READS AS FOLLOW: - THE HON'BLE ITAT OUGHT TO HAVE SEEN THAT THE ASSESSING OFFICER ISSUED THE ASSESSMENT ORDER WITHOUT FOLLOWING THE CLARIFICATION OF C BD T AND THE DECISIONS OF VARIOUS APPELLATE AUTHORITIES AS WELL AS THE JUDGMENT OF HON'BLE HIGH COURT OF KERALA. THE HON'BLE IT A T OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HELD THAT PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETIES ONLV ARE ELIGIBLE FOR DEDUCTION U/S 80P AND THUS WENT AGAINST THE C BD T CLARIFICATION AND DECISIONS OF VARIOUS APPELLA TE AUTHORITIES. THE ASSESSMENT ORDER WAS ISSUED WITHOUT FOLLOWING THE DIRECTION OF THE HON'BLE HIGH COURT OF KERALA IN CHERTHALA SOUTH SERVICE CO - OPERATIVE BANK LTD., NO. 1344 VS. LT.O., WARD NO.1, ALAPPUZHA (ITA NO.32 OF 2016). HON'BLE ITAT FAILED TO COMP REHEND THAT THE ASSESSMENT ORDER BY THE ASSESSING OFFICER AND APPELLATE RDER M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 6 PASSED BY THE COMMISSIONER (APPEALS), THIRUVANANTHAPURAM WERE DEFICIENT FOR THE AFORESAID REASONS AND THUS COMMITTED MISTAKE APPARENT FROM RECORDS, IN VIEW OF THE DECISION OF HON' BLE HIGH COURT OF KERALA IN THE CASE OF KIL KOTAGIRI TEA & COFFEE ESTATES CO. LTD., 42 TAXMAN 33. A. THE SAME TRIBUNAL HAD ALLOWED CLAIM FOR DEDUCTION UNDER SECTION 80P OF INCOME TAX ACT, 1961 TO SEVERAL CO - OPERATIVE SOCIETIES IRRESPECTIVE OF THE NATURE OF THE ACTIVITIES OF THE SOCIETIES, WHETHER IT IS PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETY OR N OT. CBDT HAS CLARIFIED THAT CO - OPERATIVE SOCIETIES WHICH ARE NOT 'CO - OPERATIVE BANKS' ARE ELIGIBLE FOR DEDUCTION U/S 80P. HON'BLE HIGH COURT OF KERALA IN THE CASE MAVILAYI SERVICE CO - OPERATIVE BANK LID., VS INCOME TAX OFFICER, KANNUR HELD THAT THE ASSESSIN G OFFICER SHALL MAKE ENQUIRY TO ASCERTAIN WHETHER A CO - OPERATIVE SOCIETY IS ELIGIBLE FOR DEDUCTION U/S 80P. THE CUMULATIVE EFFECT IS THAT THE ASSESSING OFFICER SHALL MAKE ENQUIRY TO ASCERTAIN WHETHER THE ASSESSEE WHICH IS A CO - OPERATIVE SOCIETY IS A 'CO - OP ERATIVE BANK' ALSO. SINCE THIS PROCESS HAS ALREADY BEEN COMPLETED BY THE ASSESSING OFFICER AT THE TIME OF THE ORIGINAL ASSESSMENT, ITA T COULD NOT HAVE REMITTED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION. B. THE SAME TRIBUNAL IN SEVERAL C ASES HAD ALLOWED DEDUCTION U/S 80P IN RESPECT OF DEPOSITS RECEIVED BY THE CO - OPERATIVE SOCIETIES TREATING THE SAME AS 'INCOME FROM BUSINESS'. IN THE CASE OF THE PETITIONER DEPOSITS OF MEMBERS ARE TREATED AS 'INCOME FROM OTHER SOURCES'. IT IS A SETTLED POSI TION IN LAW WHEN THE SOURCE OF INCOME IS CLEAR NO ADDITION SHALL BE MADE TO INCOME U/S 68 OF THE ACT. HON'BLE ITAT OUGHT TO HAVE APPRECIATED THAT THE CASE OF KERALA SPONGE IRON LTD., IS PENDING WITH THE HON'BLE SUPREME COURT IN SLP (C) NO.003182 - 0031831201 8. C. THE DISPUTE WHETHER THE ASSESSING OFFICER SHALL PROBE INTO THE ISSUE WHETHER A CO - OPERATIVE SOCIETY IS ELIGIBLE FOR DEDUCTION U/S 80P OF THE INCOME TAX ACT 1961 OR WILL IT BE HIT BY SECTION 80P(4) OF THE ACT, IS A MATTER TO BE DECIDED BY THE HON'BL E SUPREME COURT IN THE CASES FILED BY THE CO - OPERATIVE SOCIETIES IN KERALA. SUPREME COURT HAS ADMITTED THE APPEAL [SLP (CIVIL) DIARY NO. 27628/2019] FILED BY THE CO - OPERATIVE SOCIETIES AGAINST THE REFERENCE ORDER DATED 19 - 03 - 2019 OF THE FULL BENCH OF HON'B LE HIGH COURT OF KERALA IN THE CASE MAVILAYI SERVICE CO - OPERATIVE BANK LT D., VS INCOME TAX OFFICER, KANNUR AND SIMILAR CASES. APEX COURT HAS ISSUED NOTICE ON THE PRAYER FOR STAY OF THE ORDER OF HIGH COURT. M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 7 D. THERE IS NO ENABLING PROVISION IN THE INCOME TAX ACT 1961 TO REMIT THE ISSUE IN D ISPUTE TO THE FILE O F THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THERE IS ALSO NO PROVISION WHICH EMPOWERS THE ASSESSING OFFICER TO ISSUE FRESH ORDER ON THE BASIS OF ORDER OF ITAT. IN THE PETITIONER'S CASE, THE ITAT REMITTED THE ISSUE IN DISPUTE TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO EXAMINE THE ACTUAL ACTIVITIES CARRIED ON BY THE PETITIONER SO AS TO GRANT DEDUCTION U/S 80P OF THE INCOME TAX ACT 1961 FOR FRESH CONSIDERATION, WHICH IS NOT PERMISSIBLE U NDER THE INCOME TAX ACT 1961. E. THE SOCIETY IS NOT A CO - OPERATIVE BANK AND IS ELIGIBLE FOR DEDUCTION U/S 80P OF THE INCOME TAX ACT 1961 IN THE LIGHT OF THE CLARIFICATION NO.133/06/2006 - 07 DATED 19 - 05 - 2007 ISSUED BY CBDT, NEW DELHI WHICH WAS BINDING ON THE ASSESSING OFFICER. F. THE BYELAW OF THE APPELLANT PERMITS THE ADMISSION OF OTHER CO - OPERATIVE SOCIETIES AS MEMBERS AND THEREFORE IS NOT COVERED BY THE DEFINITION OF PRIMARY CO - OPERATIVE BANK AS PER SEC.5 (CCV) IN PART V OF THE BANKING REGULATION ACT 1949. G. THE APPELLANT IS NOT A 'CO - OPERATIVE BANK' IN AS MUCH AS APPELLANT IS ACCEPTING DEPOSITS FROM MEMBERS ONLY. H. THE VIEW THAT PRIMARY AGRICULTURAL CREDIT CO - OPERATIVE SOCIETIES ONLY ARE ELIGIBLE FOR DEDUCTION U/S SECTION 80(P) IS DIAMETRICALLY OPPOSITE TO THE C BDT CL ARIFICATION ON SECTION 80P AND THE STAND POINTS OF THE VARIOUS APPELLATE AUTHORITIES ALL OVER THE COUNTRY. SOME OF THESE DECISIONS ARE MENTIONED BELOW: - (A) HIGH COURT OF KARNATAKA - BANGALORE COMMERCIAL TRANSPORT CREDIT SOCIETY LTD - ITA N O: 598/2013 DATED 27 - 06 - 2014 (B) HIGH COURT OF GUJARAT - JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD. IN TAX APPEALS NO. 442 OF 2013, 443 OF 2013 AND 863 OF 2013 ON 15 - 01 - 2014 (C) ITAT, PANAJI - ATHANI TALUKA PRIMARY TEACHERS CO - OPERATIVE CREDIT SOCIETY LTD. ITA NO. 06/PNJ/2014 ON 04 - 07 - 2014 (D) ITAT, POONA - JANKALYAN NAGRI SAHAKARI PAT SANSTHA LTD. REPORTED IN 24 TAXMANN.COM (PUNE TRIBUNAL) 127 (E) ITAT, AHAMADABAD - JAFARI M9MIN VIKAS CO - OP. CREDIT SOCIETY ON 31 OCTOBER, 2012 M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 8 (F) ITAT, INDORE BHEE THRIT & CREDIT CO - OPERATIVE SOCIETY ON 6 AUGUST 2012. (G) ITAT, BANGALORE YESHWANTPUR CREDIT CO - OPERATIVE SOCIETY ON 11 APRIL 2012. (H) ITAT, AHMEDABAD - SARVODAY CREDIT CUM CONSUMERS CO - OPERATIVE SOCIETY ON : MAY, 2013 (I) ITAT, PUNE - JAIN NAGRI SAHKARI PAT SANSTHA DEPARTMENT OF INCOME TAX ON 1 4 SEPTEMBER, 2012 (J) ITAT, PUNE - DHARASUR MARDINI NAGAR SAHAKARI ON 20 NOVEMBER, 2012 (K) ITAT, PUNE - VARDHMAN NAGARI SAHAKARI PATH SANSTA ON 22 NOVEMBER, 2012 ( L ) ITA T, DELHI - PALHAWAS PRIMARY AGRICULTURE CO - OP. SOCIETY LTD. PALHAWAS DISTT. LTANO. 2368/ DE I/ 2011 (M) ITAT, DELHI - DHARUHERA PRIMARY AGRICULTURE CO - OP. SOCIETY LTANO. 2371 / DEL/2011 (N) ITAT, MUMBAI - THE INCOME TAX OFFICER, WARD - 20(2)(1), MUMBAI - ITA NO. 1820 / MUM/2017 DATED 02 - 08 - 2018 ( O ) HIGH COURT OF BOMBAY AT GOA - QUEPEM URBAN CO - OPERATIVE CREDIT SOCIETY LTD., VS. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 1, MARG OA [ITA NOS.22,23 & 24 OF 2015 DATED 17 - 04 - 2015]. (P) HIGH COURT OF KERALA - KUTHUPARAMBA RANGE KALLUCHETTU VYAVASAYA THOZHILALI SAHAKARANA SANGHAM LTD., VS. COMMISSIONER OF INCOME TAX, KOZHIKODE [ITA NO.273 OF 2015 DATED 20 - 06 - 2018 (Q) ITAT , COCHIN - THE INCOME TAX OFFICER, WARD - 2(1), TRIVANDRUM VS. TRIVANDRUM DISTRICT ELECTRICITY BOARD EMPLOYEES CO - OP. SOCIETY[ ITA NO. 273/COCH/2019] DATED 01 - 08 - 2019 (R) ITAT, MUMBAI - THE INCOME TAX OFFICER, WARD - 20(2)(1), MUMBAI VS. MUMBAI SALES TAX STAFF CO - OPER ATIVE SOCIETY LTD., [ITA NO.1820/MUM/2017 DATED 02 - 08 - 2018]. THE HON'BLE ITAT PASSED THE APPELLATE ORDER WITHOUT TAKING THE FACTS MENTIONED ABOVE INTO CONSIDERATION AND THEREFORE COMMITTED MISTAKE APPARENT FROM RECORDS WHICH IS LIABLE TO BE RECTIFIED. M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 9 FURTHER, SUBJECT MATTER OF THE REFERENCE ORDER DATED 19.03.2019 OF THE FULL BENCH OF HONBLE HIGH COURT OF KERALA IN THE CASE OF MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. INCOME TAX OFFICER,KANNUR ON WHICH RELIANCE WAS SEEN PLACED BY THE ITAT TO ISSUE THE ORDER IS PENDING DECISION OF THE HON'BLE SUPREME COURT IN THE CASES FILED BY THE CO - OPERATIVE SOCIETIES IN KERALA AND THE SUPREME COURT HAS ADMITTED THE APPEALS [SLP (CIVIL) DIARY NO. 27628/2019] AND HAS ISSUED NOTICE ON THE PRAYER FOR STAY OF THE ORDER O F HIGH COURT. THEREFORE, THE ORDER ISSUED BY THE IT AT ON THE BASIS OF REFERENCE ORDER IN MAVILAYI SERVICE CO - OPERATIVE BANK LTD., VS INCOME TAX OFFICER, KANNUR (SUPRA) IS LIABLE TO BE WITHDRAWN. PRAYER 1. ON THE GROUNDS MENTIONED ABOVE AND THAT MAY BE ADDUCED DURING PERSONAL HEARING IT IS PRAYED THAT THE IMPUGNED ORDER MAY BE RECTIFIED BY ISSUING A SEPARATE SPEAKING ORDER ON THE QUESTI ON OF DISALLOWANCE OF SECTION 80 P IN THE ASSESSMENT ORDER PASSED BY T HE ASSESSING OFFICER, IN THE LIGHT OF C B DT CLARIFICATION AND JUDGMENT OF THE HON'BLE HIGH COURT OF KERALA AND THE DECISIONS OF VARIOUS APPELLATE AUTHORITIES AS MENTIONED ABOVE. 8 . ESSENTIALLY, THE PAYER IN THE M.A. FILED BY THE ASSESSEE IS THAT IN VIEW OF CBDT CIRCULAR NO.133/06/2006 - 07 DATED 19.05.2007, THE TRIBUNAL HAS ERRED IN REMITTING THE ISSUE TO THE ASSESSING OFFICER TO EXAMINE THE ACTIVITIES OF THE ASSESSEE - SOCIETY TO DETERMINE WHETHER IT IS A PRIMARY AGRICULTURAL CREDIT SOCIETY O R NOT. 9 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. 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 CERTIFICA TE 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 M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 10 80P(2) OF THE I.T.ACT HAS TO BE GRANTED TO THE ASSESSEE. HOWEVER, THE FULL BENCH OF THE HO NBLE KERALA HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT ( 414 ITR 67 ) 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 DE TERMINE 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 CLASSIFYING THE ASSESSEE - SOCIE TY 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 THAT, WHILE CONSIDERING THE CLAIM MADE BY AN ASSESSEE SOCIETY FOR DEDUCTION UNDER SECTION 80P OF THE IT ACT, AFTER THE INTROD UCTION 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 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. M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 11 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 UND ER 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 T HE 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 REGISTERED 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 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, 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 UND ER 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 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 SOCIETIES FOR WHICH THE DEDUCTION IS PROVIDED, EVEN IF IT WAS ELIGIBLE IN THE INITIAL YEARS. 9 . 1 IN VIEW OF THE CATEGORICAL FINDING GIVEN IN THE JUDGMENT OF THE FULL BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN M A NO S . 1 - 4 COCH/2020 M/S. NAVAIKULAM SCB LTD. 12 THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT ( SUPRA ) , NECESSARILY THE ACTIVITIES OF THE ASSESSEE HAS TO BE EXAMINED TO DETERMINE WHETHER IT IS A COOPERATIVE SOCIETY OR A CO - OPERATIVE BANK . THEREFORE, THERE IS NO ERROR IN THE TRIBUNAL ORDER DATED 24.06.2019 IN REMITTING THE ISSUE TO THE A.O. TO EXAMINE THE ACTIVITIES OF THE ASSESSEE - SOCIETY. IT IS ORDERED ACCORDINGLY. 10 . IN THE RESULT, THE MISCELLANEOUS APPLICATIONS FILED BY THE ASSESSEE IS REJECTED . ORDER PRONOUNCED ON THIS 13 TH DAY OF MARCH, 2020 . SD/ - SD/ - ( GEORGE GEORGE K. ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN , DATED 13 TH MARCH, 2020 DEVADAS G* COPY TO : 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT(A), TRIVANDRUM . 4. THE PR.CIT, TRIVANDRUM . 5. THE DR, ITAT, KOCHI 6. GUARD FILE. ASST.REGISTRAR/ITAT/KOCHI