Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
This appeal and Cross Objection was disposed of by the Tribunal vide its order dated 17/01/2019. On Miscellaneous Petition filed by the Revenue and assessee, the Tribunal vide its order dated 04/09/2019 recalled its earlier order dated 17/01/2019 in view of the judgment of the Larger Bench of the Hon’ble Jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. vs. CIT (ITA No.97/2016 judgment dated 19th March, 2019).
C.O. No. 88/Coch/2018 2. Brief facts of the case are as follows:
The assessee in this case is registered as co-operative society under the Kerala State Co-operative Societies Act, 1969. The assessment was completed in assessee’s case by denying deduction claimed u/s 80P of the I.T. Act. The Assessing Officer for denying the claim of deduction u/s 80P of the I.T. Act, treated the assessee as co-operative bank and not co-operative society.
3. Aggrieved by the order of the assessment, the assessee filed appeal before the first appellate authority. The CIT(A) by following the judgment of the Hon’ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (384 ITR 490) allowed the claim of deduction u/s 80P of the I.T. Act.
4. Aggrieved by the order of the CIT(A), the Revenue filed appeal to the ITAT.
The ITAT vide its order dated 17/01/2019 confirmed the order of the CIT(A). The assessee had also filed Cross Objection in C.O. No.88/Coch/2019. The Cross Objection filed by the assessee was disposed of as infructuous since the ITA filed by the Revenue was dismissed by the Tribunal.
The Revenue filed Miscellaneous Petition (M.A. No. 60/Coch/2019) for recalling the order of the Tribunal dated 17/01/2019 in .
The assessee filed Miscellaneous Petition in M.A. No. 74/Coch/2019 for recalling the order of Tribunal in C.O. No.88/Coch/2018. The Miscellaneous Petition filed
C.O. No. 88/Coch/2018 by the Revenue and the assessee were allowed by the Tribunal vide it order dated 04/09/2019. In pursuant to the order of the Tribunal in M.A. No. 60/Coch/2019 & M.A. No.74/Coch/2019, the appeal of the Revenue in and C.O. No. 88/Coch/2018 of the assessee were posted for hearing on 24/09/2019.
The learned Departmental Representative relied on the grounds raised in the appeal. Further, the learned DR placed reliance on the latest judgment of the Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. vs. CIT [ITA No.97/2016 judgment dated 19th March, 2019].
6.1 The Ld. AR for the assessee submitted that following issues are raised in the Cross Objection filed by the assessee.:
Whether the provisions of section 80P(4) are applicable to the respondent?
Whether the doctrine of mutuality is applicable?
Whether the assessment of the respondent in the status of AOP is correct?
Whether the respondent is eligible for deductions provided to a co- operative bank u/s. 36 in a situation where the respondent is held to be a co-operative bank as per 1949 Act?
C.O. No. 88/Coch/2018 6.2 The Ld. AR had filed elaborate written submission stating therein condition for invoking 80P(4) of the Act is absent in this case as the assessee is Primary Agricultural Credit Society (PACS). Further, it was submitted that even assuming without admitting assessee is not a PACS, still Revenue has to establish the assessee is co-operative bank to invoke provisions of section 80P(4) to deny the deduction. The Ld. AR in the written submission has also elaborated on history of banking, co-operative credit societies in India, co-operative banks in India etc.
The gist of written submissions is that the assessee is not providing any banking business, since no banking licence is obtained from RBI and the assessee is providing only credit facilities to its members for agricultural purposes.
We have heard the rival submissions and perused the material on record.
The Larger Bench of the Hon’ble Jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. (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 Hon’ble High Court that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Cooperative Society classifying the assessee-society as a cooperative society. The Hon’ble 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 Hon’ble 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-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 subsection (4) of Section 80P.
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 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 ITA No.446/Coch/2019. 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.
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 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 subsection (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.
C.O. No. 88/Coch/2018 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.”
7.1 In view of the dictum laid down by the Full Bench of the Hon’ble High Court (supra), the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. It is ordered accordingly.
7.2 Since the department’s appeal is allowed for statistical purposes, the independent issues raised in the Cross Objection filed by the assessee are also restored to the Assessing Officer. We find that independent issues raised in the Cross Objection was never examined by the Assessing Officer and the CIT(A) properly. The CIT(A) has merely decided the issue in favour of the assessee by following the dictum laid down by the Hon’ble High Court in the case of Chirakkal Service Co-operative Bank Ltd. (supra). Since certain dictum laid down by Hon’ble High Court in the case of Chirakkal Service Co-operative Bank Ltd. (supra) was reversed by the Full Court of Hon’ble High Court in the case of The Mavilayi Service Co-operative Bank Ltd. vs. CIT (supra), all the issues raised in C.O. No. 88/Coch/2018 the ITA and CO need consideration afresh by the Assessing Officer. It is ordered accordingly.