ITO, Kannur V. The Kuttiyeri Service Co-op Bank Ltd, Kannur

MA 4/COCH/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3694 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 29-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A KUMAR
• Keywords: Set aside
• Section: 80P; 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri George George K, JM & Shri Laxmi Prasad Sahu, AM MA No .4/C och/2022 : Ass t.Ye ar 20 09-2010 (Arising out of ITA No .6/Coc h/2013) The Income Tax Officer Ward 4 Kannur. v. The Kuttiyeri Service Co- operative Bank Limited, Kuttiyeri, Taliparamba Kannur PAN : AAABK0485D (Applicant) (Respondent) Applicant by : Smt.J.M.Jamunna Devi, Sr.DR Respondent by : Sri. A Kumar, Advocate Date of Hearing : 01.07.2022 Date of Pronouncement : 01.07.2022 O R D E R Per George George K, JM : This Miscellaneous Petition filed by the Department in seeking to recall the orders of the Tribunal, wherein the benefit of deduction u/s 80P of the I.T.Act was granted to the assessee by following the judgment of the Hon’ble jurisdictional High Court in the case of Chirakkal Service Co-operative Co- operative Bank Ltd. v. CIT [(2016) 384 ITR 490 (Ker.)]. The department in this miscellaneous application, submits that the order of the Tribunal needs to be recalled in view of the judgment of the Hon’ble Full Bench of the 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], which has reversed the judgment of the Hon’ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd. v. CIT (supra). MA No.4/Coch/2022. M/s.The Kuttiyeri SCB Limited. 2 2. We have heard rival submissions and perused the material on record. The judgment of the Hon’ble Full Bench of the Kerala High Court in the case of The Mavilayi Service Co- operative Bank Ld. v. CIT (supra) was set aside by the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. reported in (2021) 431 ITR 1 (SC). The relevant finding of the Hon’ble Supreme Court reads as follows:- “45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word “agriculture” into Section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co- operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm’s way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. 46. It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) considered, ‘nominal members’ are ‘members’ as defined under the Kerala Act. This Court in U.P. Cooperative Cane Unions’ Federation Ltd., Lucknow v.Commissioner of Income Tax, Lucknow-I (1997) 11 SCC 287 referred to section 80P of the IT Act and then held: “8. The expression “members” is not defined in the Act. Since a cooperative society has to be established under the provisions of MA No.4/Coch/2022. M/s.The Kuttiyeri SCB Limited. 3 the law made by the State Legislature in that regard, the expression “members” in Section 80-P(2)(a)(i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression “members” in Section 80- P(2)(a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: “2. (n) ‘Member’ means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to ‘members’ anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power or have no such liability or duty;”” Considering the definition of ‘member’ under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i). 47. Further, unlike the facts in Citizen Cooperative Society Ltd.(supra), the Kerala Act expressly permits loans to non-members under section 59(2) and (3), which reads as follows: “59. Restrictions on loans.- (1) A society shall not make a loan to any person or a society other than a member: Provided that the above restriction shall not be applicable to the Kerala State Co-operative Bank. Provided further that, with the general or special sanction of the Registrar, a society may make loans to another society. (2) Notwithstanding anything contained in sub-section (1), a society may make a loan to a depositor on the security of his deposit. (3) Granting of loans to members or to non-members under sub- section (2) and recovery thereof shall be in the manner as may be specified by the Registrar.” Thus, the giving of loans by a primary agricultural credit society to non-members is not illegal, unlike the facts in Citizen Cooperative Society Ltd. (supra). 48. Resultantly, the impugned Full Bench judgment is set aside. MA No.4/Coch/2022. M/s.The Kuttiyeri SCB Limited. 4 The appeals and all pending applications are disposed of accordingly. These appeals are directed to be placed before appropriate benches of the Kerala High Court for disposal on merits in the light of this judgment.” 3. In view of the judgment of the Hon’ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT (supra), which has reversed the Full Bench judgment of the Hon’ble Kerala High Court (supra), we hold that there is no mistake apparent from record warranting interference u/s 254(2) of the I.T.Act. Moreover, the Revenue has not filed the present miscellaneous application within the time limit prescribed u/s 254(2) of the I.T.Act. Therefore, on this count also the MA would not survive. It is ordered accordingly. 4. In the result, the miscellaneous applications filed by the Revenue are dismissed. Order pronounced on this 01 st day of July, 2022. Sd/- (Laxmi Prasad Sahu) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Kochi ; Dated : 01 st July, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-Trichur. 4. The CIT, Cochin. 5. The DR, ITAT, Cochin. 6. Guard File. Asst.Registrar/ITAT, Cochin