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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 assessee is directed against CIT(A)’s order dated 16.03.2018. The relevant assessment year is 2011-2012.
The grounds raised by the assessee read as follows:-
The Income Tax officer and the Commissioner of Income-tax (Appeals) were not correct in law and fact in rejecting the eligibility of the Appellant for deduction u/s. 80(P) of The Income Tax Act 1961.
The grounds relied on by the Income Tax officer and the Commissioner of Income-tax (Appeals) for denying the Appellants eligibility for deduction U/s. 80(P) of The Income Tax Act is not well based.
The Appellant being a duly registered Co-
ITA No.270/Coch/2018 2 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd. Operative Society u/s 7(1) of The Kerala Co- Operative Societies Act 1969 is a Co-Operative Society as defined U/s.2(19) of the Income Tax Act 1961.
Therefore the appellant Society is evidently a primary Co-operative, Agricultural & Rural Development Bank as defined U/s.80(P)(4) of The Income Tax Act, providing credit facilities to its members for Agricultural And allied Rural Development activities and eligible for deductions provided in Section 80P of the Act.
The Appellant do not accept any deposits and the Loans are provided to the members out of the funds obtained from the Apex Co-operative Bank, namely the Kerala State Co-operative Agricultural & Rural Development Bank Ltd., Trivandrum.
The Appellant Society is eligible for deduction provided U/s. 80(P)(2)(a)(i) &(d) of the Income Tax Act, being a primary Co-operative Agricultural And Rural Development Bank described u/s.80(P) (4) (a) (b), providing credit facility to its members for Agricultural and Allied Rural Development Activities.
The Assessing Officer's interpretation of Section 80(P)(4)(b) relating to the expression therein, "A Society having its area of operation confined TO "A" TALUK and the principle object of which is to provide for long term credit for Agricultural And Rural Development activities." is disputed by the appellant as under:-
(a) The Assessing officer and the Commissioner of Income-tax (A) have totally misunderstood the expression "CONFINED TO" A" TALUK." In Section 80(P) (4)(b) which does not indicate a singular number.
(b) It is evident from the following case laws that: :- i) C.I.T Vs. Gita Duggal (Delhi High Court),
ITA No.270/Coch/2018 3 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd. ii) Ananda Basappa 309 ITR 329 (Kar), iii) K.G. Rukminiamma 331 ITR 211 (Kar), Though the decision is with reference to section- 54 the issue considered is squarely applicable in the Assessee's case.
The CIT (Appeals) has not properly understood the argument notes, submitted at the time of hearing and also the explanations given there in, regarding the case laws, relied on by the Assessing Officer, as misplaced relating to the amended clause 80P (4) and the Impact of article" a" used therein.”
Brief facts of the case are as follows:-
The assessee is a Co-operative Agricultural and Rural Development Bank, registered under the Kerala Co-operative Societies Act, 1969. For the assessment year 2011-2012, the return of income was filed on 28.09.2011 declaring total income at rupees `Nil’, after claiming deduction u/s 80P of the I.T.Act, amounting to Rs.83,93,293. The assessment was completed u/s 143(3) r.w.s. 147 of the I.T.Act vide order dated 29.09.2015 by disallowing the deduction u/s 80P(2) and 80P(2)(c) of the I.T.Act.
Aggrieved by the assessment completed, the assessee preferred an appeal to the first appellate authority. The CIT(A), following the order of the Cochin Bench of the Tribunal, confirmed the assessment order.
The assessee being aggrieved by the orders of the Income-tax authorities, has filed the present appeal before the Tribunal. The learned Counsel for the assessee relied on the
ITA No.270/Coch/2018 4 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd. grounds of appeal. The learned AR also filed a detailed submission, which reads as follows:-
The Appellant is a duly registered Co-operative Society u/s 7(1) of the Kerala Co-operative Societies Act 1969, hence a Co-operative Society as defined u/s 2(19) of the Income Tax Act 1961.
The Appellant Society is a primary Co-operative, Agricultural & Rural Development Bank as defined u/s 80(P)(4) of the Income Tax Act, providing credit facilities to its members for Agricultural and allied Rural Development activities and eligible for deduction provided in Section 80P of the Act.
The principal object of Appellant Society is to provide for long term credits for Agricultural and Rural Development activities to its members.
The area of operation of the Appellant is confined to the rural taluks of Meenachil and Kanjirappally.
The Assessing Officer's interpretation of Section 80(P)(4) relating to the expression therein, "A Society having its area of operation confined to a Taluk even if the principle object of which is to provide for long term credit for Agricultural and Rural Development activities" is disputed by the appellant as under:-
The Assessing Officer has totally misunderstood the expression "CONFINED TO “A" TALUK" in Section 80(P)(4)(b) which does not indicate a singular number.
The Assessing Officer has denied the exemption to the Appellant relaying on the following cases mentioned in Para 15 and 16 of the Assessment Order which are totally out of context.
ITA No.270/Coch/2018 5 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd. (a) In Para 15 the Assessing Officer referred to the Hon'ble Appellate Tribunal Jaipur Bench in ITA No.764/JP/20ll (Kekri Sahakari Bhumi Vikas Bank Ltd. case dated 23/03/2012), in fact the Hon'ble Tribunal subsequently during the second round of litigation allowed the appeal with clear directions to the Assessing Officer to give all the benefits of 80P of the act in its Order No.ITA 938/JP/2013 dated 24/09/2015.
(b) In Para 16 of the Assessment Order the AO has referred to the Hon'ble Income Tax Appellate Tribunal Indore Bench in Vidisha Bhopal Kshetriya Gramin Bank case in ITA No.215 & 216/Ind/20ll dated 18/06/2012, is totally out of context since the assessee is a Regional Rural Bank engaged in banking activities not confined to taluk but is extended to entire district of Bhopal and Vidisha.
Therefore the conclusion of the Assessing Officer as mentioned in Para 17 of the Assessment order is not well based and fails.
Kindly refer to the following case laws in support: 1) Income Tax Appellate Tribunal, Jaipur Bench ITA 938/JP/2013 dated 24/09/2015.
2) Gujrat High Court in tax appeal No:1149 of 2013 CIT/II Vs. Surat Vankar Sahkari Sangh Ltd. vide order dated 17th January 2014.
ITA No.938/IP/2013 dated 24/09/2015 (Pages 14,15,16)(Para 2.7,2.8,2.9,3)
Thus in our view the benefit of the provision is available to the co-operative society which are Other Than the Co-Operative Bank and further the benefit is also available to a Primary Agricultural Credit society and the Primary Co-Operative Agricultural and Rural Development Bank.
ITA No.270/Coch/2018 6 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd.
The explanation to subsection 4 of 80P has also defined the Primary Co-operative Agricultural and Rural Development Bank "means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities". (Para 2.7, Page 14)
Thus it is clear if the society’s principal object is to provide long term credit for agricultural and rural development activities is entitled to deduction under this provision of the act (Para 2.8, page 14).
Moreover the Hon'ble Gujarat High Court in Tax Appeal No. 1149 of 2013 titled as CIT-II Vs. Surat Vankar Sahkari Sangh Ltd. vide order dated 17th January, 2014 held vide paragraph 7 as under: (Para 2.9, Page 14,15)
From the above clarification, it can be gathered that sub-section (4) of section 80P will not apply to an assessee which is not a co-operative bank. In the case clarified by CBDT, Delhi Coop Urban Thrift & Credit Society Ltd. was under consideration. Circular clarified that the said entity not being a Co-operative bank, section 80P (4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenues contention that section 80P (4) would exclude not only the Co-operative banks other than those fulfilling the description contained therein but also credit societies, which are not Co-operative banks. In the present case, respondent assessee is admittedly not a credit Co-operative bank but a credit co-operative society. Exclusion clause of subsection (4) of section 80P, therefore would not apply.
In the result thereof we hereby allow the appeal with the direction to the AO to give all the benefits to the assessee under 80P of the Act. (Para 3, Page 16)
ITA No.270/Coch/2018 7 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd. 10. ITA 41/COCH/2015 dated 24/05/2017 Page 8 Para 6.4 of Hon'ble Tribunal Cochin Bench
In the case of Jugal Kishore Saraf Vs. Raw Cotton Co. Ltd. in AIR 1955 SC 376 at page 381 Justice S.R Das held thus:
"The cardinal rule of construction of statues is to read the statues literally, that is, by giving to the words their ordinary, natural and grammatical meaning. If however, such a reading leads to absurdity and the words are susceptible of another meaning, the court may adopt the same. But if no such alternative construction is possible, the court may adopt the ordinary rule of literal interpretation."
In the light of the above observations, kindly consider the following proposition. Example: A pharmaceutical company launches a wonder drug for a common disease among the children with a clear warning inscribed as under:
" Application should be confined to a child or To be applied only on a child"
Here the meaning is well understood without any further effort or clarification.
Keeping in mind the above principle of construction, the words “having its area of operation confined to a Taluk” contained in the explanation (b) to sub-section (4) of Section 80P should be understood as ‘limited to’ or ‘within bounds’ of Taluks only.
The predominant condition for exemption/ deduction is for providing financial assistance to the Rural Agricultural population in the small rural villages and taluks to boost up the rural economy which is the very objective of Co-operative scheme brought in by the FIVE year plans of the nation.
ITA No.270/Coch/2018 8 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd. 13. Therefore, the mischief of sub-section (4) will not fall on a primary Co-operative, Agricultural & Rural Development Bank provided its operation is limited to rural villages or taluks and principal object of which is to provide for long term credit for agricultural and rural development activities" as in the case of the appellant.
However the appellant has two submissions by way of requests-
i. Without prejudice to the above submissions it is prayed that exemption Us.80P may be granted for the income relating to one taluk atleast.
OR
ii. Since the same issue is pending before the Hon'ble High court of Kerala for the A.Y.2010-11. This appeal may be kept in abeyance awaiting orders of the Hon'ble High Court in the matter, since the entire tax demanded is paid.”
The Departmental Representative, on the other hand, relied on orders of the Income-tax authorities.
We have heard the rival submissions and perused the material on record. We find that an identical issue has been considered by the Tribunal in case of M/s.Kottayam Co- operative Agricultural & Rural Development Bank Limited v. ITO (ITA No. 295/Coch/2018 order dated 17.10.2018), wherein the Tribunal held that the assessee was not entitled to the benefit of deduction u/s 80P(2) of the I.T.Act. The relevant finding of the Tribunal reads as follows:-
ITA No.270/Coch/2018 9 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd.
“8. We have heard the rival submissions and perused the material on record. We find that an identical issue has been considered by the Tribunal in assessee’s own case for the immediately assessment year 2010-2011 (ITA No.41/Coch/ 2015 – order dated 24.05.2017), wherein the Tribunal held that the assessee was not entitled to the benefit of deduction u/s 80P(2) of the I.T.Act. The relevant finding of the Tribunal reads as follows:-
“6. We have heard the rival contentions and perused the material on record. The Assessing Officer had denied 80P deduction for the following two reasons, namely, i) Assessee’s area of operation is not confined to a taluk. ii) Agricultural credit provided by the assessee-bank is very less compared to the normal banking activities. 6.1 The CIT(A) confirmed the disallowance of deduction u/s. 80P(2) made by the Assessing Officer on both counts. However, the CIT(A) with regard to the computation/calculation of the percentage of agricultural credit provided by the assessee, restored the issue to the file of the Assessing Officer in para 12 of the impugned order. 6.2 Therefore, the solitary issue for our consideration is whether 80P deduction can be denied to the assessee for the reason that its area of operation is not confined to ‘a taluk . As per clause 1(c) of the Bye-laws of the assessee, its area of operation for the relevant period is in three taluks, namely, Kottayam, Changnacherry and Vaikom. The Ld. Counsel appearing for the assessee contended that usage of Article ’A’ before the word ‘Taluk’ is not ‘to be understood to indicate a single Taluk. The Ld. Sr. Counsel relying on section 13(2) of the General Clauses Act contended that words in the singular shall include the plural, and vice versa. The Ld. Sr. Counsel relied on certain judicial pronouncements interpreting Article ‘A’ in the context of deduction u/s. 54 and 54F of the I.T. Act. 6.3 The Finance Act, 2006 has defined the expression “Primary Co- operative Agricultural and Rural Development Bank” by inserting Explanation to section 80P(4) which reads as under: “(b) “primary co-operative agricultural and rural development bank” means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.” 6.4 Explanation (b) to section 80P(4) is a defining provision employing the word ‘means’. The Hon’ble Apex Court in the case of West Bengal State Warehousing Corporation vs. Indrapuri Studio Pvt. Ltd.(AIR 2011
ITA No.270/Coch/2018 10 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd.
SC 47) held that when the word ‘means’ is used in a definition, it signifies strict interpretation. It is trite law that an exemption provision is to be strictly construed. Moreover, the Cardinal rule of construction is that a provision must be given its ordinary meaning. Natural and ordinary meaning of words should not ordinarily be departed from. In the case of Jugal Kishore Saraf vs. Raw Cotton Co.Jugal Ltd. Kishoirin AIR 1955 SC 376 at page 381 Justice S.R. Das held thus: “The cardinal rule of construction of statutes is to read the Statutes literally, that is, by giving to the words their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning, the Court may adopt the same. But if no such alternative construction is possible, the court must adopt the ordinary rule of literal interpretation. In the present case, the literal construction leads to no apparent absurdity and therefore, there can be no compelling reason for departing from that golden rule of construction.”
6.5 Keeping in mind the above principle of construction, the words “having its area of operation confined to a taluk” obtained in the Explanation (b) to sub-section (4) of Section 80P should be understood as ‘limited to’ or ‘within bounds’ of a taluk. The first letter of the English alphabet which precedes the word ‘Taluk’ is used “before nouns and noun phrases that denote a single, but unspecified, person or thing…….”. [Webster’s Dictionary] ’A’ is used to mean or denote ‘one’. A Taluk is a revenue division. Few villages constitute a taluk and few taluks constitute a District. 6.6 The mischief of sub-section (4) will not fall on a primary co- operative agricultural and rural development bank provided it’s operation is limited to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities. Since the assessee’s area of operation was not confined to a Taluk for the relevant assessment year, we hold that it was not entitled to the benefit of deduction u/s. 80P(2) of the Act. Therefore, we see no reason to interfere with the order of the CIT(A) and we uphold the same as correct and in accordance with law. It is ordered accordingly.”
In view of the above order of the Tribunal in assessee’s own case for the immediately preceding assessment year, i.e. A.Y. 2010-2011 (supra), we hold that the Income-tax authorities are justified in denying the assessee the benefit of deduction u/s 80P(2) of the I.T.Act, for the impugned year, as well. It is ordered accordingly.
In view of the order of the Tribunal in case of M/s.Kottayam Co-operative Agricultural & Rural Development Bank Limited v. ITO (supra), which is similar to that of the case
ITA No.270/Coch/2018 11 M/s.The Meenachil Co-op Agri. & Rural Dev. Bank Ltd. under consideration, we hold that the lower authorities are justified in denying the assessee benefit of deduction u/s 80P(2) of the I.T.Act. It is ordered accordingly.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced on this 25th day of October, 2018.
Sd/- Sd/- (Chandra Poojari) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 25th October, 2018. Devdas*
Copy of the Order forwarded to : 1. The Applicant. 2. The Respondent. 3. The CIT (A) - Kottayam. 4. The CIT, Kottayam. 5. DR, ITAT, Cochin 6. Guard file.
BY ORDER,
(Asstt. Registrar) ITAT, Cochin