THE MOWANCHERRY CO-OP RURAL BANK LTD,,KANNUR vs. THE ITO, KANNUR

PER GEORGE GEORGE K,JM:

This appeal is restored to the Tribunal by the judgment of the Hon’ble

Kerala High Court dated 16th Feb 2016 in ITA no. 3 of 2016.

2 Brief facts of the case are as follows:

The assessee is a cooperative bank registered as a primary agricultural

credit society under the Kerala Cooperative Societies Act, 1969. The claim of

deduction u/s 80P(2) was denied by the Assessing Officer for the reason that the

assessee is primarily engaged in the business of banking and in view of section

80P(4) of the Act, the assessee is not entitled to deduction u/s 80P(2) of the Act.

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3 Aggrieved by the assessment, the assessee preferred an appeal to the

first appellate authority. The CIT(A) confirmed the assessment order.

4 Aggrieved by the order of the CIT(A), the assessee preferred appeal to

the Tribunal. The Tribunal vide its order dated 6th March 2015 disposed off the

appeal of the assessee holding that the assessee was not entitled to the benefit

of deduction u/s 80P of the Act.

5 Aggrieved by the order of the Tribunal, the assessee preferred further

appeal before the Hon’ble Kerala High Court, u/s 260A of the Act. The Hon’ble

High Court vide judgment dated 16..2.2016 in ITA No. 3 of 2016, restored the

issues to the Tribunal. It is in this context, the case was heard on 13th March

2017.

The Hon’ble High Court in the case of Chirakkal Service Co-op Bank Ltd vs CIT

reported in 384 ITR 490 had held that the Tribunal was not justified in denying the

benefit of exemption u/s 80P of the Act. 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?

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6.1 In considering the above substantial 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 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.

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appellant or its classification by the competent authority under the KCS Act lS 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 80P of the IT Act by virtue of sub- section 4 of that sect; on. In this view of the matter, the appeals succeed.

6.2 In the instant case, the assessee is a primary agricultural credit society

registered under the Kerala Cooperative Societies Act, 1969. The certificate

has been issued by the Registrar of Cooperative Societies to the above said

effect and the same is on record. The Hon’ble High Court, in assessee’s own

case and other batch of cases, had held that primary agricultural credit

society, registered under the Kerala Cooperative Societies Act, 1969, is entitled

to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the

Registrar of Cooperative Societies, stating that the assessee is a primary

agricultural credit society, we hold that the assessee is entitled to the benefit of

deduction u/s 80P(2) of the Act.

7 No other issues were argued by the ld counsel for the assessee during the

course of hearing of this appeal.

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8 In the result, the appeal filed by the assessee is partly allowed.

Order pronounced in the open Court on this 13th March 2017.

Sd/- Sd/- (ABRAHAM P GEROGE) (GEORGE GEORGE K ) Accountant Member Judicial Member

Cochin: Dated 13th March 2017 Raj*

Copy to: 1. Appellant – 2. Respondent – 3. CIT(A) 4. CIT, 5. DR 6. Guard File

By order

Assistant Registrar ITAT, COCHIN