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Income Tax Appellate Tribunal, : COCHIN BENCH: KOCHI.
Before: SHRI ABRAHAM P. GEORGE & SHRI GEORGE GEORGE. K.]
आदेश आदेश / O R D E R आदेश आदेश
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER This appeal is remitted back to this Tribunal by Hon’ble Jurisdictional High Court through its judgment dated 16th February, 2016 in ITA No.159 of 2015.
Assessee having not filed a return of income for the impugned assessment year within the time allowed under section 139
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of the Income Tax Act, 1961 (in short ‘the Act’’), the ld. Assessing
Officer issued a notice under section 142(1) of the Act. Since there
was no compliance with such notice also, proceedings were initiated
for a best judgment assessment under section 144 of the Act.
Assessee eventually filed a return on 20.07.2012, wherein it claimed
deduction under section u/s.80P(2)(a) (i) of the Act in respect of its
income from banking. However, this return was considered by the ld.
Assessing Officer as an invalid one, having been filed beyond the time
prescribed under section 139 and section 142(1) of the Act. Claim of
the assessee that it was only a primary agricultural credit society and
income earned by it from providing credit facilities to its members was
exempt under section 80P(2) (a)(i) of the Act was declined by the ld.
Assessing Officer, relying on sub section (4) of Sec. 80P of the Act and
also citing a reason that the return filed was belated and hit by Section
80A(5) of the Act. As per ld. Assessing Officer assessee could only be
deemed as a co-operative bank and was not eligible for such claim.
Further, according to ld. Assessing Officer assessee having filed the
return late claim under section 80P(2) of the Act could not be
considered at all. Ld. Assessing Officer also made a disallowance
under section 36(1) (iv) of the Act for contribution to unapproved
gratuity fund for employees.
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Assessee’s appeal before ld. Commissioner of Income Tax
(Appeals), was limited to disallowance of the claim under section
80P(2) of the Act, but did not meet with any success. This persuaded
assessee’s to move this Tribunal. This Tribunal vide its order dated 31st July, 2014 confirmed the orders of the lower authorities.
Thereupon assessee’s moved in further appeal before Hon’ble
Jurisdictional High Court and Hon’ble Jurisdictional High Court through
its judgment dated 15.04.2016 following its own judgment in the case
of Chirakkal Service Co-operative Bank Ltd vs. CIT 384 ITR 490 held
that the assessee was not hit by sub section (4) of Sec. 80P of the
Act, since it was classified as a primary agricultural credit society by
the competent authority under the State Law relating to Co-operative
Societies. Hon’ble Jurisdictional High Court also held that late filing of
return of income was not fatal. What was held by the Hon’ble
Lordship in the case of Chirakkal Service Co-operative Bank Ltd (supra)
at paragraphs 9 to 21 is apposite and this is reproduced hereunder:-
‘’9. Section 80P of the Income-tax Act deals with deduction in respect of income of co-operative societies. Sub-section (1) of that section provides that where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2) of that section, there shall be deducted, in accordance with and subject to the provisions of section 80P, the sums specified in sub-section (2) thereof, in computing the total income of the assessee. Sub-section (4) of section 80P provides that the provisions of section 80P shall not apply in relation to any co-operative bank
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other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. This provision in sub-section (4) of section 80P means that the provisions of section 80P shall not apply to a primary agricultural credit society. Hence, the levy of tax in terms of the provisions of section 80P does not apply to a primary agricultural credit society. 10. The terms "co-operative bank" and "primary agricultural credit society" for the purpose of sub-section (4) of section 80P of the Income-tax Act, shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 ; for short ; BR Act, going by Explanation (a) occurring after section 80P(4) of the Income-tax Act. For the purpose of that sub-section, "primary co- operative agricultural and rural development bank" is defined to mean what is stated in Explanation (b) to section 80P(4) of the Income-tax Act. 11. Part V of the Banking Regulation Act carries section 56 of that Act, which prescribes modifications to the provisions of the Banking Regulation Act in their application and in relation to co-operative societies. 12. "Co-operative bank" is a term defined in section 5(cci) of the Banking Regulation Act to mean, inter alia, a primary co-operative bank. A primary co-operative bank is a co-operative society other than a primary agricultural credit society, going by clause (ccv) of section 5 of the Banking Regulation Act. Therefore, a primary agricultural credit society is not to be treated as a primary co- operative bank and therefore, not to be reckoned as a co- operative bank. We state this here and now to point out that the appellants which are primary agricultural credit societies are not of such type that they would fall for consideration as a co-operative bank for the purpose of sub-section (4) of section 80P of the Income-tax Act. Resultantly, the consequential legal implication is that a primary agricultural credit society is one among the two types of institutions which gain the benefit of sub-section (4) of section 80P to ease themselves out from the coverage of section 80P. The argument advanced on behalf of the Revenue, to the contrary is repelled." 13. Reverting to section 5(cciv) of the Banking Regulation Act ; "primary agricultural credit society" means a co-operative society, the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes
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or for purposes connected withagricultural activities including the marketing of crops ; and the bye-laws of which do not permit admission of any other co-operative society as member. However, the provisions in sub-clause (2) of section 5(cciv) shall not apply to the admission of a co-operative bank as a member by reason of such co- operative bank subscribing to the share capital of such co- operative society out of funds provided by the State Government for the purpose. This is the effect of the proviso occurring after sub-clause (2) of section 5(cciv) which is referred to herein only for continuity, though we are not really concerned with the effect of that proviso. Keeping in mind that "primary agricultural credit society" is defined with reference to the term "co-operative society" ; reverting to section 5(cciia) of the Banking Regulation Act, it can be seen that for the purpose of that Act, "co-operative society" means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co- operative societies, or any other Central or State law relating to co- operative societies for the time being in force. 14. In all the clauses referred to above, the legislative tool used is "means" ; and not "includes". Therefore, when the term "co-operative society" is defined to mean, inter alia, a society registered under any State law relating to co-operative societies for the time being in force ; one such is a co-operative society for the purposes of the Banking Regulation Act and if that co- operative society satisfies the definition of "primary agricultural credit society", it would be one to which the exemption as per sub-section (4) of section 80P of the Income-tax Act would apply. 15. Appellants 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 show that they have been classified as primary agricultural credit societies by the competent authority under the provisions of that Act. Parliament, having defined the term "co-operative society" for the purposes of the Banking Regulation 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
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law and its objects have to 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 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 Kerala Co- operative Societies 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 Kerala Co- operative Societies 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 Kerala Co-operative Societies Act. The authorities under the Income-tax Act cannot probe into any issue or such matter relating to such applicants. 16. 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 Banking Regulation 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 Banking Regulation 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 Kerala Co-operative Societies Act is anything different from what we have stated hereinabove. For this reason, it cannot but be held that the appellants are entitled to exemption from the provisions of section 80P of the Income-tax Act by virtue of sub-section (4) of that section. In this view of the matter, the appeals succeed’’.
In the light of the aforesaid, we answer the substantial 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
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against the appellants. We hold that the primary agricultural credit societies, registered as such under the Kerala Co-operative Societies Act ; and classified so, under that Act, including the appellants are entitled to such exemption. 18. Questions B and C relate to denial of exemption on ground referable to belated filing of return, that is to say, returns filed beyond the period stipulated under section 139(1) or section 139(4), as the case may be, as well as section 142(1) or section 148, as the case may be. There are no cases among these appeals where returns were not filed. There are cases where claims have been made along with the returns and the returns were filed within time. Still further, there are cases where returns were filed belatedly, that is to say, beyond the period stipulated under sub-section (1) or (4) of section 139 ; and, there are also returns filed after the period with reference to sections 142(1) and 148 of the Income-tax Act. 19. Section 80A(5) provides that where the assessee fails to make a claim in his return of income for any deduction, inter alia, under any provision of Chapter VI-A under the heading "C.—Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder. Therefore, in cases where no returns have been filed for a particular assessment year, no deductions shall be allowed. This embargo in section 80A(5) would apply, though section 80P is not included in section 80AC. This is so because, the inhibition against allowing deduction is worded in quite similar terms in sections 80A(5) and 80AC, of which section 80A(5) is a provision inserted through the Finance Act 33 of 2009 with effect from April 1, 2013, after the insertion of section 80AC as per the Finance Act of 2006 with effect from April 1, 2006. This clearly evidences the legislative intendment that the inhibition contained in sub-section (5) of section 80A would operate by itself. In cases where returns have been filed, the question of exemptions or deductions referable to section 80P would definitely have to be considered and granted if eligible.
Here, questions would arise as to whether belated returns filed beyond the period stipulated under section 139(1) or section 139(4) as well as following sections 142(1) and 148 proceedings could be considered for exemption. If those returns are eligible to be accepted in terms of law, going by the provisions of the statute and the governing binding precedents, it goes without saying that the claim for exemption will also stand effectuated as
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a claim duly made as part of the returns so filed, for due consideration.
When a notice under section 142(1) is issued, the person may furnish the return and while doing so, could also make claim for deduction referable to section 80P. Not much different is the situation when pre- assessment enquiry is carried forward by issuance of notice under section142(1) or when notice is issued on the premise of escaped assessment referable to section 148 of the Income-tax Act. This position notwithstanding, when an assessment is subjected to first appeal or further appeals under the Income-tax Act or all questions germane for concluding the assessment would be relevant and claims which may result in modification of the returns already filed could also be entertained, particularly when it relates to claims for exemptions. This is so because the finality of assessment would not be achieved in all such cases, until the termination of all such appellate remedies. Under such circumstances, the Tribunal was not justified in denying exemption under section 80P of the Income-tax Act on the mere ground of belated filing of return by the assessee concerned. A return filed by the assessee beyond the period stipulated under section 139(1) or 139(4) or under section 142(1) or section 148 can also be accepted and acted upon provided further proceedings in relation to such assessments are pending in the statutory hierarchy of adjudication in terms of the provisions of the Income-tax Act. In all such situations, it cannot be treated that a return filed at any stage of such proceedings could be treated as non est in law and invalid for the purpose of deciding exemption under section 80P of the Income-tax Act. We thus answer substantial questions of law B and C formulated and enumerated above.
Hon’ble Jurisdictional High Court had thus remitted this appeal back to
the Tribunal for consideration afresh with the following directions.
‘’ With the aforesaid, we remit all these matters for reconsideration by the Income Tax Appellate Tribunal in the light of the answers rendered herein on substantial questions of law (A), (B) and (C). The Tribunal will thereupon consider the issues relating to the bad and doubtful debts and the claim of the assessee in that regard by treating that in all cases where
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exemptions are claimed under section 80P and such matters were pending before the assessing authority or before the appellate authority, including in these appeals, the question of exemption available under section 80P was still available for decision’’.
Now before us, ld. Counsel for the assessee, submitted that
certificate issued by the competent authority certifying that assessee
was a primary agricultural credit society as defined in Section 2(oa) of
Kerala Co-operative Societies Act, 1969, was available before ld.
Assessing Officer but still it was considered as a Co-operative Bank.
Further, according to him, assessee had made the claim u/s.80P of the
Act in the return of income filed, though belatedly and therefore was
eligible for such deduction. Ld. Counsel submitted that he was not
pressing any of the other grounds, except those relating to
disallowance of the claim under section 80P(2) of the Act.
Per contra, ld. Departmental Representative strongly
supporting the orders of the authorities below submitted that this
Tribunal had in a number of cases held similar societies engaged in
the business of banking as not eligible for deduction claimed u/s.80P
(2) of the Act.
We have considered the rival contentions and perused the
orders of the authorities below. Assessee had produced certificate from
the competent authority under Kerala Co-operative Societies Act, 1969
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which certified that it was a primary agricultural credit society before
the ld. Assessing Officer. The ld. Assessing Officer has specifically
mentioned this at para 8.6 of his order, though he held it to be not
relevant. Their lordship in the case of Chirakkal Service Co-operative
Bank Ltd (supra), pertinent part of which has been reproduced in the
earlier part of our order, has clearly held that once an assessee was
classified as a primary agricultural credit society by the competent
authority under Kerala Co-operative Societies Act, it necessarily had to
be considered as a society having as its principle object providing
agricultural credit activities and providing loan and advances for
agricultural purposes. Their lordship had taken this view considering
definition of clause in Sec. 2(oa) of Kerala Co-operative Societies Act.
Their lordship also held that belated filing of return would not deprive
an assessee, the benefit under section 80P(2) of the Act, as long as
such claim was made though such return . Assessee having produced
the certificate from competent authority reflecting its nature as a
primary agricultural credit society and assessee having preferred the
claim under section 80P(2) of the Act in the return filed, though
belatedly, we are of the opinion that it was eligible for deduction
claimed u/s.80P(2) of the Act. Ex-consequenti, we direct the ld.
Assessing Officer to grant the deduction claimed by the assessee
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under such Section. Related grounds are allowed. Other grounds are dismissed as not pressed.
In the result, the appeal of the assessee is treated as partly allowed.
Order pronounced in the open court on 15-03-2017.
Sd/- Sd/- (ABRAHAM P. GEORGE) (GEORGE GEORGE. K) लेखा सदःय सदःय/ACCOUNTANT MEMBER लेखा लेखा लेखा सदःय सदःय �याियक सदःय �याियक �याियक �याियक सदःय सदःय/JUDICIAL MEMBER सदःय
Cochin �दनांक/Dated: 15th March, 2017 KV
आदेश क� ूितिल�प अमे�षत/Copy to: 1 M/s. Karassery Service Co-Operative Bank, Karassery P.O. Kozhikode. 2. The Income Tax Officer, Ward 2(3), Kozhikode 3. The Commissioner of Income Tax (Appeals), Kozhikode 4. The Principal Commissioner of Income Tax (Appeals), Kozhikode 5. D.R. I.T.A.T., Cochin Bench, Cochin. 6. Guard File By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin.