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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 Department is directed against the Commissioner of Income-tax (Appeals)’s order dated 17.10.2016. The relevant assessment year is 2013- 2014.
The grounds raised read as follows:-
The Learned Commissioner of Income tax (Appeals), erred in concluding that "the assessee being a Primary Agricultural Credit Co-operative Society registered under the Kerala Co-operative Society Act is entitled for exemption its income u/s. 80(P)(2) as claimed in the return filed.
ITA No.507/Coch/2016. 2 M/s.Navaikulam SCB Limited. 2. It is respectfully submitted that the respondent is essentially, a Co-operative bank and not merely a primary agricultural credit Society and hence the allowance of deduction u/s. 80P to the respondent assessee while computing the total income was irregular in nature and also against law.
The present appeal involves substantial question of law. The appeal involving similar question is pending before the Hon'ble Supreme Court of India in the case of M/s. Karakulam Service Co-operative Bank Ltd.[Civil Appeal No. 11288 of 2016 dated 25/11/2016] and the Ld. CIT(Appeal) should have awaited decision of Hon'ble Supreme Court.
Without prejudice to above grounds the Learned Commissioner of Income tax (Appeals) should have verified whether deduction u/s.80(P)(1) r.w. 80(P)(2) is available for the assessee if held as a Primary Agricultural Credit Society.
The Ld. CIT(Appeals) not withstanding grounds 1 to 3 above, after holding that the appellant is a Primary Agricultural Credit Society as deductible u/s. 80P should have directed examination and restriction of deduction to income specified in section 80P(2)(a) to (f) subject to specified conditions.
For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Appeals, Trivandrum on the above points may be set aside and that of the Assessing Officer restored.”
Brief facts of the case are as follow:-
3.1 The assessee is a primary agricultural credit society registered under the Kerala Co-operative Societies Act, 1969. For the assessment year 2013-2014, return of income was
ITA No.507/Coch/2016. 3 M/s.Navaikulam SCB Limited. filed on 31.03.2015 declaring `nil’ income after claiming deduction u/s 80P(2) of the Income-tax Act, 1961, amounting to Rs.1,43,31,442. The assessment u/s 1243(3) was completed vide order dated 23.03.2016 by disallowing the claim of deduction u/s 80P(2) of the I.T.Act. The Assessing Officer rejected the assessee’s claim of deduction u/s 80P(2) for the reason that assessee was primarily doing the business of banking, and in view of insertion of section 80P(4) with effect from 01.04.2007, the assessee would not be entitled to deduction u/s 80P(2) of the I.T.Act.
Aggrieved by the assessment order, the assessee preferred an appeal to the first appellate authority. The CIT(A) following the judgment of the Hon’ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others v. CIT [(2016) 384 ITR 490 (Ker.)] held that assessee is entitled to the benefit of deduction u/s 80P(2) of the I.T.Act.
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 raised in the memorandum of appeal and supported the order of assessment. The learned AR, on the other hand, submitted that the issue in question is squarely covered by the judgment of the Hon’ble jurisdictional High Court in the case of The Chirakkal Service Co-operative Bank Ltd. and Others (supra).
ITA No.507/Coch/2016. 4 M/s.Navaikulam SCB Limited. 6. We have heard the rival submissions and perused the material on record. The Hon’ble jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd vs. CIT reported in 384 ITR 490, has held that the primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). The Hon’ble High Court was considering the following substantial question of law:
a) Whether on the facts and in the circumstances of the case under consideration, the Tribunal is correct in law in deciding against the assessee, the issue regarding entitlement for exemption under section 80P, ignoring the fact that the assessee is a primary agricultural credit society?
6.1 In considering the above question of law, the Hon’ble High Court rendered the following findings:
“15. Appellants in these different appeals are indisputably societies registered under the Kerala co- operative societies Act, 1969, for sort, KCS Act and the bye-laws of each of them, as made available to this court as part of the paper books, clearly show that they have been classified as primary agricultural credit societies by the competent authority under the provisions of that Act. The parliament, having defined the term 'co-operative society' for the purposes of the BR Act with reference to, among other things, the registration of a society under any State law relating to co-operative societies for the time being; it cannot but be taken that the purpose of the societies so registered under the State Law and its objects have to
ITA No.507/Coch/2016. 5 M/s.Navaikulam SCB Limited. be understood as those which have been approved by the competent authority under such State law. This, we visualise as due reciprocative legislative exercise by the Parliament recognising the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants 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 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. This is the consequence of the definition clause in section 2(oaa) of the KCS Act. The authorities under the IT Act cannot probe into any issue or such matter relating to such applicants.
The position of 1aw being as above with reference to the statutory provisions, the appellants had shown to the authorities and the Tribunal that they are primary agricultural credit societies in terms of clause (cciv) of section 5 of the BR Act, having regard to the primary object or principal business of each of the appellants. It is also clear from the materials on record that the bye-laws of each of the appellants do . not permit admission of any other co-operative society as member, except may be, in accordance with the proviso to sub-clause 2 of section 5(cciv) of the BR Act. The different orders of the Tribunal which are impeached in these appeals do not contain any finding of fact to the effect that the bye- 1aws of any of the appellant or its classification by the competent authority under the KCS Act is anything different
ITA No.507/Coch/2016. 6 M/s.Navaikulam SCB Limited. from what we have stated herein above. For this reason, it cannot but be held that the appellants are entitled to exemption from the provisions of section 80P of the IT Act by virtue of sub- section 4 of that sect; on. In this view of the matter, the appeals succeed.
In the light of the aforesaid, we answer substantia1 question 'A' in favour of the appellants and hold that the Tribunal erred in law in deciding the issue regarding the entitlement of exemption under section 80P against the appellants. We hold that the primary agricultural credit societies, registered as such under the KCS Act; and classified so, under that Act, including the appellants are entitled to such exemption.”
6.2 The assessee is admittedly only providing credit facilities to its members during the relevant AY’s. The assessee is primary agricultural credit society and has produced a certificate of Registrar of Co-operative Societies under Kerala Co-operative Societies Act, 1969 to the above effect. Since the Hon’ble Kerala High Court has categorically held that a Primary Agricultural Credit Society registered under the Kerala Co-operative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2) of the Act, we are of the view that the CIT(A) is justified in directing the Assessing Officer to grant the benefit of deduction u/s. 80P(2) of the Act. Therefore, the appeals filed by the Revenue are dismissed.
ITA No.507/Coch/2016. 7 M/s.Navaikulam SCB Limited. 7. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on this 14th day of February, 2018.
Sd/- Sd/- (Chandra Poojari) (George George K.) ACCOUNTANT MEMBER JUDICIAL MEMBER
Cochin ; Dated : 14th February, 2018. Devdas*
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The Pr.CIT, Thiruvananthapuram. 4. The CIT(A) Thiruvananthapuram. 5. DR, ITAT, Cochin 6. Guard file.
BY ORDER,
(Asstt. Registrar) ITAT, Cochin