Kottayam Co-op Agricultural & Rural Dev Bank Ltd, Kottayam v. Addl. Commissioner of Income Tax, Kottayam

ITA 9/COCH/2014 | 2009-2010
Pronouncement Date: 25-04-2014 | Result: Dismissed

Appeal Details

RSA Number 921914 RSA 2014
Assessee PAN AAAAT6523E
Bench Cochin
Appeal Number ITA 9/COCH/2014
Duration Of Justice 3 month(s) 12 day(s)
Appellant Kottayam Co-op Agricultural & Rural Dev Bank Ltd, Kottayam
Respondent Addl. Commissioner of Income Tax, Kottayam
Appeal Type Income Tax Appeal
Pronouncement Date 25-04-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-04-2014
Date Of Final Hearing 22-04-2014
Next Hearing Date 22-04-2014
Assessment Year 2009-2010
Appeal Filed On 13-01-2014
Judgment Text
1 ITA NO.09/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 09/COCH/2014 (ASSESSMENT YEAR 2009-10) KOTTAYAM CO-OPERATIVE AGRICULTURAL & VS ADDL CIT CIR.1 RURAL DEVELOPMENT BANK LTD KOTTAYAM RANGE KOTTAYAM KOTTAYAM PAN : AAAAT6523E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ABRAHAM K THOMAS RESPONDENT BY : SHRI K.K. JOHN DATE OF HEARING : 22-04-2014 DATE OF PRONOUNCEMENT : 25-04-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)- V KOCHI DATED 13-11-2013 AND PERTAINS TO ASSESSMEN T YEAR 2009-10. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF RS.50 000 CLAIMED AS DEDUCTION U/S 80P(2)(C) OF THE INCOME-TA X ACT. 3. SHRI ABRAHAM K THOMAS THE LD.REPRESENTTIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A CO-OPERATIVE AGRIC ULTURAL AND RURAL 2 ITA NO.09/COCH/2014 DEVELOPMENT BANK. THE ASSESSEE RETURNED INCOME UND ER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND INCOME FR OM HOUSE PROPERTY. IN RESPECT OF INCOME FROM BUSINESS THE ASSESSING O FFICER HAS ALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 80P(1)(A)(I ) AND 80P(D) OF THE ACT. HOWEVER IN RESPECT OF CLAIM OF EXEMPTION U/S 80P(2 )(C) TO THE EXTENT OF RS.50 000 FROM THE INCOME FROM HOUSE PROPERTY THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. REFERRING TO PROVISIONS OF SECTION 80P(2)(C) OF THE ACT THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT WHEN THE CO-OPERATIVE SOCIETY ENGAGED IN AN ACTIVIT Y OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) THE INCOME A TTRIBUTABLE TO SUCH ACTIVITY NOT EXCEEDING RS.50 000 SHALL BE ALLOWED AS EXEMPTI ON. ON A QUERY FROM THE BENCH WHETHER THE ACTIVITY REFERRED TO IN SECTI ON 80P(2)(C) INCLUDES LETTING OUT OF THE IMMOVABLE PROPERTY AND RECEIVING RENTAL INCOME OR IT REFERS ONLY TO BUSINESS ACTIVITY THE LD.REPRESENTA TIVE CLARIFIED THAT THE TERM ACTIVITIES REFERRED TO IN SECTION 80P(2)(C) REFER TO ALL KINDS OF ACTIVITIES INCLUDING LETTING OUT OF HOUSE PROPERTY. 4. ON THE CONTRARY SHRI K.K. JOHN THE LD.DR SUBMI TTED THAT THE ACTIVITY REFERRED TO IN SECTION 80P(2)(C) IS ONLY CONFINED T O BUSINESS ACTIVITY OTHER THAN THOSE MENTIONED IN SUB CLAUSES (A) OR (B) OF S ECTION 80P(2)(C) OF THE ACT. ACCORDING TO THE LD.DR SECTION 80P(2)(C) DOES NOT REFER TO LETTING OUT OF THE PROPERTY AND RECEIPT OF RENTAL INCOME WHICH HAS TO BE CLASSIFIED AS 3 ITA NO.09/COCH/2014 INCOME FROM HOUSE PROPERTY. THEREFORE ACCORDING T O THE LD.DR THE ASSESSING OFFICER HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY THE ASSESSEE RETURNED INCOME FROM BUSINESS AND INCOME FROM HOUSE PROPERTY. IN RESPECT OF INCOME FROM BUSINESS THE ASSESSING OFFIC ER ALLOWED EXEMPTION U/S 80P(1)(A)(I) AND 80P(D) OF THE ACT THEREFORE THERE IS NO DISPUTE WITH REGARD TO INCOME FROM BUSINESS. IN RESPECT OF INCO ME FROM HOUSE PROPERTY THE ASSESSEE CONFINED THE CLAIM OF EXEMPT ION TO THE EXTENT OF RS.50 000 AS PROVIDED IN SECTION 80P(2)(C) OF THE A CT. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE ACTIVITIES REFERRE D TO IN SECTION 80P(2)(C) OF THE ACT INCLUDES LETTING OUT OF PROPERTY AND RENTAL INCOME RECEIVED AS INCOME FROM HOUSE PROPERTY? 6. WE FIND THAT THERE ARE CONFLICTING JUDICIAL OPIN IONS ON THIS ISSUE. THE GAUHATI HIGH COURT IN CIT VS THE INDUSTRIAL CO-OPER ATIVE BANK LTD VS CIT (1992) 196 ITR 174 (GAUH) HAD AN OCCASION TO EXAMIN E THE PROVISIONS OF SECTION 80P(2)(C) OF THE ACT. THE ASSESSEE BEFORE THE GAUHATI HIGH COURT IS A CO-OPERATIVE SOCIETY ENGAGED ITSELF IN THE BUS INESS OF BANKING. IN ADDITION TO INCOME FROM BANKING THE ASSESSEE ALSO HAD INCOME FROM LETTING OUT OF HOUSE PROPERTY. THE ASSESSEE CLAIME D DEDUCTION U/S 4 ITA NO.09/COCH/2014 80P(2)(C) IN RESPECT OF INCOME RECEIVED ON LETTING OUT OF THE HOUSE PROPERTY. THE GAUHATI HIGH COURT FOUND THAT CONSTR UCTING A HOUSE AND LETTING IT OUT TO EARN RENTAL INCOME IS ALSO AN ACT IVITY. THEREFORE INCOME DERIVED BY WAY OF RENT FROM SUCH PROPERTY WILL BE P ROFIT AND GAINS ATTRIBUTABLE TO THE ACTIVITY OF CONSTRUCTING AND LE TTING OUT OF THE HOUSE. A SIMILAR VIEW HAS BEEN TAKEN BY BOMBAY HIGH COURT IN CIT VS RATANABAD CO-OPERATIVE HOUSING SOCIETY LTD (1995) 215 ITR 549 (BOM). THE BOMBAY HIGH COURT IN FACT FOUND THAT THE SHOP CON STRUCTED BY THE ASSESSEE SOCIETY WAS LET OUT ON LEAVE AND LICENCE B ASIS TO HELP THE MAINTENANCE OF THE SOCIETY. THE BOMBAY HIGH COURT FOUND THAT THE INCOME DERIVED BY THE ASSESSEE SOCIETY FROM LETTING OUT OF THE SHOP WAS EXEMPT U/S 80P(2)(C) OF THE ACT. IN FACT THE BOMB AY HIGH COURT PLACED ITS RELIANCE ON THE JUDGMENT OF THE GAUHATI HIGH COURT IN THE INDUSTRIAL CO- OPERATIVE BANK LTD (SUPRA). WE ALSO FIND THAT THE REVENUE CARRIED THE MATTER BEFORE THE APEX COURT BY WAY OF SPECIAL LEAV E PETITION AGAINST THE JUDGMENT OF THE GAUHATI HIGH COURT IN THE INDUSTRIA L CO-OPERATIVE BANK LTD (SUPRA). HOWEVER THE APEX COURT DISMISSED THE SPECIAL LEAVE PETITION ON THE GROUND OF DELAY IN FILING THE SPECI AL LEAVE PETITION. THE APEX COURT HAS ALSO OBSERVED THAT THE PRINCIPLES RA ISED IN THAT APPEAL MAY BE TAKEN IN ANOTHER APPROPRIATE CASE. THE DISMISSA L OF THE SPECIAL LEAVE PETITION WAS REFERRED TO AND REPORTED IN (1993) 201 ITR (ST) 63 (SC). THEREFORE IT IS OBVIOUS THAT THE APEX COURT HAS NO T GONE TO THE MERIT OF THE 5 ITA NO.09/COCH/2014 MATTER AND EXPRESSLY OBSERVED THAT THE PRINCIPLES R AISED IN THE APPEAL MAY BE TAKEN OUT IN ANOTHER APPROPRIATE CASE. BUT SO F AR THE APEX COURT DID NOT HAVE ANY OCCASION TO CONSIDER THIS ISSUE IN ANY OTHER MATTER. BOTH THE LD.REPRESENTATIVE FOR THE ASSESSEE AND THE LD.DR CO ULD NOT BRING TO OUR NOTICE ANY JUDGMENT OF THE APEX COURT IN THIS RESPE CT. 7. WE ALSO FIND THAT THE KERALA HIGH COURT HAD AN O CCASION TO EXAMINE THIS ISSUE IN KOTTAYAM CO-OPERATIVE LAND MORTGAGE B ANK LTD VS CIT (1988) 172 ITR 443 (KER). THE KERALA HIGH COURT FOUND THA T THE TERM ACTIVITIES REFERRED TO IN SECTION 80P(2)(C) OF THE ACT INTENDE D TO COVER RECEIPTS FROM SOURCES OTHER THAN ACTUAL CONDUCT OF BUSINESS BUT A TTRIBUTABLE TO AN ACTIVITY WHICH RESULTS IN PROFIT OR GAIN. THE KERALA HIGH C OURT FOUND THAT RENTAL INCOME RECEIVED ON LETTING OUT OF THE PROPERTY CANN OT PARTAKE THE CHARACTER OF PROFIT AND GAINS ATTRIBUTABLE TO AN ACTIVITY CAR RIED OUT BY THE ASSESSEE SOCIETY THEREFORE NOT ENTITLED FOR EXEMPTION U/S 80P(2)(C) OF THE ACT. IN FACT THE KERALA HIGH COURT OBSERVED AS FOLLOWS ON PAGE 446 OF THE ITR: ..WHERE HOWEVER THE ASSESSEE AS OWNER OF CERTAI N PROPERTY LETS OUT THAT PROPERTY AND RECEIVES RENTAL INCOME THE INCOME THUS RECEIVED CANNOT PARTAKE OF THE CHARACTE R OF PROFITS AND GAINS ATTRIBUTABLE TO AN ACTIVITY CARRIED ON BY THE SOCIETY. THE BUILDING LET OUT IS NOT A COMMERCIAL ASSET OR T HE RENT RECEIVED IS NOT PROFIT OR GAIN ARISING FROM THE EXP LOITATION OF A 6 ITA NO.09/COCH/2014 BUSINESS ASSET. THE WORD ACTIVITY IS WIDER THAN THE WORD BUSINESS. IT CONNOTES A SPECIFIED FORM OF SUPERV ISED ACTION OR FIELD OF ACTION. READ IN THE CONTEXT OF THE PRO FIT-EARNING ACTIVITY OF A CO-OPERATIVE SOCIETY IT MEANS THE CO RPORATE ACTIVITY OF THE SOCIETY THAT IS TO SAY THE COMBIN ATION OF OPERATIONS UNDERTAKEN BY THE CO-OPERATIVE SOCIETY W HETHER OR NOT THEY AMOUNT TO A BUSINESS TRADE OR PROFESSION IN THE ORDINARY SENSE. CLAUSE (C) OF SECTION 80P(2) IS IN TENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL C ONDUCT OF THE BUSINESS BUT ATTRIBUTABLE TO AN ACTIVITY WHICH RESULTS IN PROFITS OR GAINS. LETTING OUT OF SURPLUS SPACE IN THE BUILDING OWNED AND USED BY THE ASSESSEE IS NOT SUCH AN ACTIV ITY FALLING UNDER CLAUSE (C). THE RENT THUS RECEIVED BY THE AS SESSEE IS NOT ELIGIBLE FOR THE EXEMPTION PROVIDED THEREUNDER. IN THIS VIEW THE APPELLATE TRIBUNAL WAS JUSTIFIED IN REJEC TING THE ASSESSEES CLAIM. 8. THIS JUDGMENT OF THE KERALA HIGH COURT IN KOTTAY AM CO-OPERATIVE LAND MORTGAGE BANK LTD (SUPRA) WAS FOLLOWED BY ANOT HER DIVISION BENCH OF THE KERALA HIGH COURT IN KOTTAYAM DISTRICT CO-OPERA TIVE BANK LTD VS CIT (1991) 188 ITR 568 (KER). 9. THE MADHYA PRADESH HIGH COURT BY FOLLOWING THE JUDGMENT OF THE KERALA HIGH COURT IN SINDHI SAHITI MULTIPURPOSE AN D TRANSPORT CO- OPERATIVE SOCIETY LTD VS CIT (1995) 214 ITR 232 (MP ) FOUND THAT LETTING 7 ITA NO.09/COCH/2014 OUT OF THE PROPERTY AND RECEIPT OF RENTAL INCOME IS NOT AN ACTIVITY REFERRED TO IN SECTION 80P(2)(C) OF THE ACT. 10. NOW THE GAUHATI HIGH COURT IN THE INDUSTRIAL CO -OPERATIVE BANK LTD (SUPRA) AND THE BOMBAY HIGH COURT IN CIT VS RATANAB AD CO-OPERATIVE HOUSING SOCIETY LTD (SUPRA) HAVE FOUND THAT LETTING OUT OF PROPERTY AND RECEIPT OF INCOME IS ALSO AN ACTIVITY REFERRED TO I N SECTION 80P(2)(C) OF THE ACT; WHEREAS THE KERALA HIGH COURT IN KOTTAYAM CO-O PERATIVE LAND MORTGAGE BANK LTD (SUPRA) AND KOTTAYAM DISTRICT CO- OPERATIVE BANK LTD VS CIT (SUPRA) AND THE MADHYA PRADESH HIGH COURT IN SI NDHI SAHITI MULTIPURPOSE AND TRANSPORT CO-OPERATIVE SOCIETY LTD (SUPRA) HELD THAT LETTING OUT OF THE PROPERTY AND RECEIPT OF RENTAL I NCOME IS NOT AN ACTIVITY REFERRED TO IN SECTION 80P(2)(C) OF THE ACT THEREF ORE NOT ENTITLED FOR DEDUCTION U/S 80P(2)(C) OF THE ACT. THIS BENCH OF THIS TRIBUNAL IS UNDER THE TERRITORIAL JURISDICTION OF THE KERALA HIGH COURT. HENCE THE JUDGMENTS OF THE KERALA HIGH COURT ARE BINDING ON THIS TRIBUNAL RATHER THE JUDGMENTS OF OTHER HIGH COURTS. THE OTHER HIGH COURT JUDGMENTS MAY HAVE A PERSUASIVE VALUE; HOWEVER THE JUDGMENT OF THE JURI SDICTIONAL HIGH COURT IS BINDING ON THIS TRIBUNAL. IN THE ABSENCE OF ANY AP EX COURT JUDGMENT THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE KERA LA HIGH COURT JUDGMENT NEEDS TO BE FOLLOWED BY THIS BENCH OF THIS TRIBUNAL . AS OBSERVED EARLIER THE APEX COURT HAS LEFT THE ISSUE OPEN TO BE DECIDE D IN APPROPRIATE CASES 8 ITA NO.09/COCH/2014 BY DISMISSING THE SPECIAL LEAVE PETITION ON THE GRO UND OF DELAY. THEREFORE THIS TRIBUNAL HAS NO OTHER OPTION EXCEPT TO FOLLOW THE JURISDICTIONAL HIGH COURT JUDGMENT. THEREFORE BY RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE KERALA HIGH COURT IN KOTTAYAM CO-O PERATIVE LAND MORTGAGE BANK LTD (SUPRA) AND KOTTAYAM DISTRICT CO- OPERATIVE BANK LTD VS CIT (SUPRA) THE ORDER OF THE LOWER AUTHORITY IS CO NFIRMED AND THE APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH APRIL 2014. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN DT : 25 TH APRIL 2014 PK/- COPY TO: 1. KOTTAYAM CO-OPERATIVE AGRICULTURAL & RURAL DEVEL OPMENT BANK LTD POST OFFICE ROAD KOTTAYAM-686 01 2. ADDL CIT RANGE KOTTAYAM 3. THE COMMISSIONER OF INCOME-TAX KOTTAYAM 4. THE COMMISSIONER OF INCOME-TAX(A)-V 7 TH FLOOR KERA BHAVAN OPP SRV HIGH SCHOOL KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL COCHIN BENCH