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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:
These are appeals filed by the Revenue against a consolidated order dated
22/06/2016 passed by CIT(A)-III, Kochi for the impugned assessment years.
Revenue is aggrieved by the order of CIT(A) which held assessee to be
eligible for deduction u/s. 80P(2) (a)(i) of the Income Tax Act, 1961 (in short the
Act). Ld. Counsel for the Revenue submitted that assessee did not pursue its
2 I.T.A. Nos.402-405/Coch/2016
principal object which was of providing agricultural credits to its members. As
per Ld. DR, the Society, therefore, lost all the characteristics of a Primary
Agricultural Credit Society. Relying on the judgment of Hon’ble Jurisdictional
High Court in the case of Perithalmanna Service Co-operative Bank vs. ITO (363
ITR 268), Ld. AR submitted that a factual enquiry had to be conducted before
concluding whether assessee was conducting business of a Primary Agricultural
Credit Society or a Primary Co-operative Agricultural and Rural Development
Bank. As per Ld. DR, CIT(A) had went by registration certificate issued by the
competent authority under the Kerala Co-operative Societies Act, 1969 and gave
undue importance to the classification given to the assessee in the said
certificate. According to Ld. DR, CIT(A) himself fell in error when he relied on
the judgment of Hon’ble Jurisdictional High Court in the case of Chirakkal Service
Co-operative Bank Ltd. v. CIT (384 ITR 490).
Per contra, Ld. AR, in support of the order of CIT(A), submitted that reliance
placed by the Ld. CIT(A) on the judgment of Hon’ble Jurisdictional High Court in
the case of Chirakkal Service Co-operative Bank Ltd. v. CIT (supra) while giving
relief to the assessee was correct.
We have heard the rival submissions and perused the orders. It has not been
disputed by the Revenue that during the course of original assessment
proceedings, assessee had produced certificate from the competent authority
3 I.T.A. Nos.402-405/Coch/2016
under the provisions of Kerala Co-operative Societies Act, 1969 which classified it
as a Primary Agricultural Credit Society. Assessing Officer held that assessee
was in the business of banking and section 80P(4) stood attracted and
disallowed the claim of the assessee u/s. 80P(2)(a)(i) of the Act. Assessee was
successful before the CIT(A) since, CIT(A), by relying on the judgment of Hon’ble
Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd.
v. CIT (supra) accepted the claim of the assessee u/s. 80P(2)(a)(i) of the Act.
Relevant part of the judgment of Hon’ble Jurisdictional High Court in the case of
Chirakkal Service Co-operative Bank Ltd. v. CIT (supra) is reproduced hereunder:
“Appellant in these different appeals are indisputably societies registered under the Kerala Co-operative Societies Act, 1969 for short, KCS Act and the bye-laws of each of them, as made available to this court as part of the paper books, clearly shows 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 referent 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 be understood as those which have been approved by the competent authority under state law. This, we visualize as due reciprocate legislature exercise by the 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 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.
4 I.T.A. Nos.402-405/Coch/2016
The position of law 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-section 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 laws of any of the appellant or its classification by the competent authority under the KCS Act is anything different 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 80 P of the IT Act by virtue of sub-section 4 of that section. In this view of the matter, the appeals succeed.”
Assessee having produced the certificate which clearly indicated its nature
as a primary agricultural credit society, in our opinion, section 80P(4) could not
have been invoked for denying the claim u/s. 80P(2)(a)(i) of the Act. We cannot
find fault with the order of the CIT(A). As for the judgment of Hon’ble
Jurisdictional High Court in the case of Perithalmanna Service Co-operative Bank vs. CIT (supra) relied on by Ld. DR, this was pronounced on 31st January, 2014
prior to the judgment of Hon’ble Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. v. CIT (supra) which came on 15th February,
2016. Further the said case dealt with the revisionary powers of the CIT u/s. 263
of the Act when the Assessing Officer had failed to make necessary enquiries.
Under such circumstances, we do not find any reason to interfere with the order
of the CIT(A).
5 I.T.A. Nos.402-405/Coch/2016
In the result, the appeals of the Revenue stand dismissed.
Pronounced in the open court on 22-03-2017.
sd/- sd/- (GEORGE GEORGE K.) ( ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi Dated: 22 March, 2017 GJ Copy to: 1. The Karuvrarakundu Service Co-operative Bank Ltd., Karuvarakundu, THARISH, Nilambur Taluk, Malappuram-676 523. 2. The Income Tax Officer, Ward-2, Tirur.. 3. The Commissioner of Income-tax(Appeals)-III,Kochi 4. The Principal Commissioner of Income-tax, Calicut.. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin