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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Chandra Poojari, AM & Shri George George K, JM
Per George George K, JM :
These appeals at the instance of the Revenue are directed against separate orders of the CIT(A). Since common issue is involved in these appeals, they were heard together and are being disposed off by this consolidated order.
The solitary issue raised in these appeals is whether the assessees are entitled to deduction u/s 80P of the I.T.Act?
Brief facts of the case are as follows: The assessees in these cases are registered as co- operative societies under the Kerala State Co-operative Societies Act, 1969. The assessments were completed in assessees 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 assessees as co- operative banks and not co-operative societies.
Aggrieved by the orders of the assessment, the assessees filed appeals 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.
ITA No.385/Coch/2019 & Ors. 3 M/s.The Pazhuvil SCB Ltd.
Aggrieved by the orders of the CIT(A), the Department has filed the present appeals before the Tribunal. Since the grounds raised are almost similar, except variance in figure, we reproduce the grounds raised in case of The Pazhuvil Service Co-operative Bank Ltd. in ITA No.385/Coch/2019 as follows:-
“1. The order of the Ld.Commissioner of Income Tax (Appeals), Thrissur in ITA No.463/15-16 dated 28.02.2019 for the Assessment year 2013-14 is erroneous in law, facts and circumstances of the case.
The learned Commissioner of Income-tax (Appeals) has erred in deleting the disallowance of deduction of Rs.90,12,260/- claimed by the assessee under section 80P(2)(a)(i) of the Act solely on the basis of the decision of the Hon’ble Kerala High Court in the case of M/s.Chirakkal Service Co-operative Bank & others in ITA No.212 of 2013 without perusing the facts of the case in detail.
The learned Commissioner of Income-tax (Appeals) ought to have appreciated the fact that the Hon.High Court of Kerala has based its decision on allowing deduction u/s 80P(2)(a)(i) of the Income-tax Act, 1961 on the certificate issued by the competent authority (as defined in the Kerala Co-operative Societies Act, 1969 (KCS Act) for classifying a cooperative society as Primary Agricultural Credit Society.
The learned CIT(A) has erred in equating a society registered as a Primary Agricultural Credit Society under KCS Act to a Primary Agricultural Credit Society under the Banking Regulation Act and Income-tax Act, 1961 and thereby allowing deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 without perceiving the difference in definition of a Primary Agricultural Credit Society in the two Acts.
The Full Bench of the Hon’ble High Court of Kerala in ITA Nos.97, 135 of 2016 and 3, 11,12, 22, 25, 26, 32, 33, 55, 68, 69, 72, 73, 74, 75 & 76 of 2017 in the case of M/s.Vazhappally Service Co-operative Bank Ltd. & Others has over ruled the decision in the case of Chirakkal Service Co- operative Bank Ltd. (384 ITR 490) and held that the decision of the Division Bench in Perinthalmanna Service Co-operative Bank Ltd. (363 ITR 268) has been declared to be the correct position in law.
ITA No.385/Coch/2019 & Ors. 4 M/s.The Pazhuvil SCB Ltd. 6. The jurisdictional Hob’ble High Court in the case of M/s.Perinthalmanna Service Co-operative Bank Ltd. held that with the introduction of section 80P(4) of the Act, deduction u/s 80P(2) cannot be allowed merely on the strength of certificate of registration as “Primary Agricultural Credit Society”. 7. For these and other grounds that may be urged at the time of hearing, the order of the CIT(A) may be set aside and that of the Assessing Officer be restored. 8. The appellant craves leave to add or amend any grounds of appeal before it is finally disposed off.”
The learned Departmental Representative relied on the grounds raised in the appeals. 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. V. CIT [ITA No.97/2016 order dated 19th March, 2019]. The learned Counsel for the assessees, on the other hand, supported the orders of the CIT(A).
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 Co- operative Society classifying the assessee-society as a co- operative 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
ITA No.385/Coch/2019 & Ors. 5 M/s.The Pazhuvil SCB Ltd.
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 sub- section (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 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
ITA No.385/Coch/2019 & Ors. 6 M/s.The Pazhuvil SCB Ltd. 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.”
7.1 In view of the dictum laid down by the Full Bench of the Hon’ble High Court, 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 assessees and determine whether their activities are in compliance with the activities of a co- operative 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.
In the result, the appeals filed by the Revenue are allowed for statistical purposes.
Order pronounced on this 08th day of July, 2019.
Sd/- Sd/- (Chandra Poojari) (George George K.) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 08th July, 2019. Devdas*
ITA No.385/Coch/2019 & Ors. 7 M/s.The Pazhuvil SCB Ltd.
Copy of the Order forwarded to : 1. The Appellants 2. The Respondent. 3. The CIT (Appeals) Thrissur. 4. The Pr.CIT Thrissur. 5. DR, ITAT, Cochin 6. Guard file.
BY ORDER,
(Asstt. Registrar) ITAT, Cochin