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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
This appeal at the instance of the Revenue is directed against the CIT(A)’s order dated 15.11.2018. The relevant assessment year is 2015-2016.
The solitary issue that is raised is whether the assessee is entitled to deduction u/s 80P(2) of the I.T.Act?
Briefly stated the facts of the case are as follows: The assessee is registered as a primary agricultural credit society under the Kerala Co-operative Societies Act, 1969. For the assessment year 2015-2016, the assessee’s claim of deduction u/s 80P(2) of the I.T.Act was denied by the Assessing Officer. The Assessing Officer held that the assessee was doing the business of banking and loans
ITA No.119/Coch/2019. 2 M/s.Orumanayur SCB Ltd. disbursed by the assessee was for non-agricultural purpose. For these reasons the claim of deduction was denied.
Aggrieved by the denial of deduction u/s 80P(2) of the I.T.Act, the assessee preferred appeal to the first appellate authority. The learned CIT(A) allowed the claim of the assessee by following the judgment of the Hon’ble jurisdictional High Court in the case of Chirakkal Service Co- operative Bank Ltd.(384 ITR 490). The CIT(A) held that the assessee being registered as a primary agricultural credit society would be sufficient to grant the benefit of deduction u/s 80P(2) of the I.T.Act going by the dictum laid down by the judgment of the Hon’ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (supra).
Aggrieved by the order of the CIT(A), the Revenue has filed the present appeal before the Tribunal. The learned Departmental Representative relied on the grounds. The learned Counsel for the assessee, on the other hand, relied on the order of the CIT(A). The learned AR has also filed a brief written submission and the same reads as follow:-
Your respondent is providing financial accommodation to its members only. The loans provided by the respondent is by way of direct agricultural loans, gold loans ( which includes agri- gold loan also) and ordinary loans. The mid term loan and gold loan provided by the respondent are mostly for agriculture/ agriculture allied activities. The assessing officer while calculating the percentage of agricultural advances to find out the nature of activity, he has only considered the loans disbursed during the year, without giving any merit to the total outstanding of the loans. The loan disbursed during the year is mainly gold loan which is short term in nature. Taking the transaction during the year alone in isolation is not proper for arriving at the percentage of agricultural loan, without considering the total advance outstanding. .
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The details of loans outstanding at the end of the year as per the Audit report of Registrar is as follows:
2015-2016
Particulars loans outstanding at the % end of the year Short Telm Agricultural Loan(KCC Rs. 14,37,94,719/- 44.45% , Mid OlD) Term Agricultural Loan(MMT) Ordinary Loans/ Gold Loans etc. Rs.17,96,66,722/- 55.55% Grand Total Rs.32,34,61,441/-
This was clearly considered by the first appellate authority while deciding the case in favour of the assessee. In view of the above matter this Bench of the Tribunal may please uphold the order of the CIT (appeals) Thrissur and dismiss the second appeal of the department. '
We have heard the rival submissions and perused the material on record. The Assessing Officer denied deduction u/s 80P of the I.T.Act to the assessee by treating that its activities are that of a co-operative bank and not a co- operative society. The assessee is admittedly registered as a primary agricultural society under the Kerala Co-operative Societies Act, 1969 by the Registrar of Societies. The Full Bench of the Hon’ble High Court in the case of The The Mavilayi Service Co-operative Bank Ltd. V. CIT [ITA No.97/2016 order dated 19th March, 2019] 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
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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 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
ITA No.119/Coch/2019. 5 M/s.Orumanayur SCB Ltd. 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.”
6.1 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 assessee and determine whether its 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 appeal filed by the Revenue is allowed for statistical purposes.
Order pronounced on this 17th day of May, 2019.
Sd/- Sd/- (Chandra Poojari) (George George K.) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 17th May, 2019. Devdas*
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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