The Revenue State That The Questions Are Concluded By Thejudgment In Peravoor Range Kallu Chethu Vyavasaya Thozhilali. Sahakarana Sangham v. Commissioner Of Income Tax[1

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI TUESDAY, THE 23 DAY OF NOVEMBER 2021 / 2ND AGRAHAYANA, 1943 ITA NO. 57 OF 2019 AGAINST THE ORDER IN ITA 267/2015 OF I.T.A.TRIBUNAL,COCHIN BENCH,ERNAKULAM APPELLANT/S: M/S.HOSDURG RANGE KALLU CHETHU THOZHILALI VYAVASAYA SAHAKARANA SANGHAM,KOTTACHERY, KANHANGAD, KASARAGOD DISTRICT - 671 315. BY ADVS.S.ARUN RAJSMT.C.T.SUJA RESPONDENT/S: THE COMMISSIONER OF INCOME TAX,AAYAKAR BHAVAN, MANANCHIRA, CALICUT - 673 001. OTHER PRESENT: SC CHRISTOPHER ABRAHAM THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 23.11.2021,ALONG WITH ITA.58/2019, 44/2019, THE COURT ON THE SAME DAY DELIVEREDTHE FOLLOWING: I.T.A. No.57, 44 & 58/2019 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI TUESDAY, THE 23 DAY OF NOVEMBER 2021 / 2ND AGRAHAYANA, 1943 ITA NO. 58 OF 2019 AGAINST THE ORDER IN ITA 266/2015 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: M/S.HOSDURG RANGE KALLU CHETHU THOZHILALI VYAVASAYA SAHAKARANA SANGHAM, KOTTACHERY, KANHANGAD, KASARAGOD DISTRICT - 671 315. BY ADVS.S.ARUN RAJSMT.C.T.SUJA RESPONDENT/S: THE COMMISSIONER OF INCOME TAX,AAYAKAR BHAVAN, MANANCHIRA, CALICUT -673 001. SC CHRISTOPHER ABRAHAM THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 23.11.2021,ALONG WITH ITA.57/2019 AND CONNECTED CASES, THE COURT ON THE SAME DAYDELIVERED THE FOLLOWING: I.T.A. No.57, 44 & 58/2019 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI TUESDAY, THE 23 DAY OF NOVEMBER 2021 / 2ND AGRAHAYANA, 1943 ITA NO. 44 OF 2019 AGAINST THE ORDER IN ITA 265/2015 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: M/S.HOSDURG RANGE KALLU CHETHU THOZHILALI VYAVASAYA SAHAKARANA SANGHAMKOTTACHERY, KANHANGAD, KASARAGOD DISTRICT. BY ADVS.S.ARUN RAJSMT.C.T.SUJA RESPONDENT/S: THE COMMISSIONER OF INCOME TAX,AAYAKAR BHAVAN, MANANCHIRA, CALICUT- 673001. SC CHRISTOPHER ABRAHAM THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 23.11.2021,ALONG WITH ITA.57/2019 AND CONNECTED CASES, THE COURT ON THE SAME DAYDELIVERED THE FOLLOWING: I.T.A. No.57, 44 & 58/2019 J U D G M E N T [ITA Nos.57/2019, 58/2019, 44/2019] S.V.Bhatti, J. Heard learned Advocate Mr Arun Raj S for appellant andlearned Standing Counsel Mr Christopher Abraham forrespondent. 2.M/s. Hosdurg Range Kallu Chethu ThozhilaliVyavasaya Sahakarana Sangham/assessee is the appellant. Commissioner of Income Tax, Calicut/Revenue is therespondent. The details of orders from which respectiveappeals arise are stated in the following tabular statement: I.T.A. No.57, 44 & 58/2019 -5- 2.The assessee is a registered Co-operative Society formed in the year 2001. The Society is formed for enabling financial and social welfare of toddy tappers/workers; fortapping and selling toddy within Hosdurg jurisdiction. Theassessee claimed exemption under Section 80P(2)(a)(vi) of theAct. 2.1 ITA No.44/2019 is treated as representative appeal for considering and disposing of the substantial questionsraised by the assessee in the set of appeals since the question I.T.A. No.57, 44 & 58/2019 are same. The issues for adjudication substantially arise under Section 80P(2) of the Income Tax Act 1961 (for short 'the Act').I.T.A. No.44/2019 Substantial Question Nos.1 & 2 3.Substantial question nos.1 and 2 read thus: I.T.A. No.57, 44 & 58/2019 -5- 2.The assessee is a registered Co-operative Society formed in the year 2001. The Society is formed for enabling financial and social welfare of toddy tappers/workers; fortapping and selling toddy within Hosdurg jurisdiction. Theassessee claimed exemption under Section 80P(2)(a)(vi) of theAct. 2.1 ITA No.44/2019 is treated as representative appeal for considering and disposing of the substantial questionsraised by the assessee in the set of appeals since the question I.T.A. No.57, 44 & 58/2019 are same. The issues for adjudication substantially arise under Section 80P(2) of the Income Tax Act 1961 (for short 'the Act').I.T.A. No.44/2019 Substantial Question Nos.1 & 2 3.Substantial question nos.1 and 2 read thus: “1. Whether, on the facts and in the circumstances of the case,the Tribunal is right in holding that the appellant societycannot be considered as Co operative Societies engaged in thecollective disposal of labour of its 2016 members ascontemplated under section 80P(2) (a) (vi) of the Act andtherefore not eligible for deduction under section 80 P of theAct.? Is not such a finding of the Tribunal illegal, arbitrary andperverse? 2. Whether the Tribunal is right in law and facts of the case inupholding the finding of the assessing officer/contention of therevenue that the appellant society having granted registrationunder the Kerala Co-operative Societies Act, 1969 and the Rulesas a "Miscellaneous Society" and therefore assessee cannot betreated as a society engaged in collective disposal of labour ofits members and therefore is not eligible/entitled for thededuction under Section 80P(2)(a)(vi) of the Act?” I.T.A. No.57, 44 & 58/2019 3.1The learned Counsel appearing for the assessee and the Revenue state that the questions are concluded by thejudgment in Peravoor Range Kallu Chethu Vyavasaya Thozhilali. Sahakarana Sangham v. Commissioner of Income Tax[1] 3.2The statement is placed on record, accepted andaccordingly by following the principle laid down in PeravoorcaseRange Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham the questions are answered in favour of the Revenue andagainst the assessee. Substantial Question No.3 4.Substantial question no.3 is framed as follows: 3. Whether the Tribunal was right in law and facts of the case innot considering the issue of eligibility of the appellant fordeduction under section 80 P (2) (a) (iii) of the Act? 4.1Reference to Section 80P(2)(a)(iii) of the Act would be useful and reads thus: “80P. (1) Where, in the case of an assessee being a co-operativesociety, the 57gross total income includes any income referredto in sub-section (2), there shall be deducted, in accordancewith and subject to the provisions of this section, the sumsspecified in sub-section (2), in computing the total income ofthe assessee. (2) The sums referred to in sub-section (1) shall be thefollowing, namely :— (a)in the case of a co-operative society engaged in - xxxxxxxxx (iii) the marketing of agricultural produce grown by itsmembers, xxxxxxxxx” 4.2A Division Bench of High Court of Telangana and Andhra Pradesh in Vavveru Co-operative Rural Bank Ltd v. Chief Commissioner of Income Tax[2], has succinctly tabulated theSocieties and the benefits to which each one of the category of Societies is entitled to, would be benefiting in our narrative toexcerpt the relevant portion as under: I.T.A. No.57, 44 & 58/2019 (2) The sums referred to in sub-section (1) shall be thefollowing, namely :— (a)in the case of a co-operative society engaged in - xxxxxxxxx (iii) the marketing of agricultural produce grown by itsmembers, xxxxxxxxx” 4.2A Division Bench of High Court of Telangana and Andhra Pradesh in Vavveru Co-operative Rural Bank Ltd v. Chief Commissioner of Income Tax[2], has succinctly tabulated theSocieties and the benefits to which each one of the category of Societies is entitled to, would be benefiting in our narrative toexcerpt the relevant portion as under: I.T.A. No.57, 44 & 58/2019 “28. We have carefully considered the above submissions. Beforeconsidering the effect of the various decisions cited on both sides,we think it would be ideal to look at the statutory prescription inpure and simple form. As we have indicated earlier, Section 80P(2) isactually divided into six parts, categorised under clauses (a), (b), (c),(d), (e), and (f). Each one of these clauses deal with different types ofco-operative societies engaged in different types of activities. Thebenefit made available to each one of them is also different from theother. Therefore, it may be useful to present a tabular form, the sixcategories of co-operative societies covered by clause (a) to (f) andthe nature and extent of the benefit available to each one of them,as follows: Category of Co-Op., Societies covered bysub-clauses (a) to (f) Nature and Extent of benefit available (a) (1) Co-operative society carrying onthe business of banking or providingcredit facilities to its members; The whole of the amount of profits andgains of business attributable to any oneor more of such activities. (2) Co-op society engaged in CottageIndustry; (3) Co-operative engaged in marketingof agricultural produce grown by itsmembers. (4) Co-operative society engaged inpurchase of agricultural implements,seeds etc., for the purpose of supplying toits members; (5) Co-operative society engaged inprocessing of agricultural produce of itsmembers without the aid of power (6) Co-operative society engaged in collectivedisposal of the labour of its members (7) Co-operative society engaged in fishingor allied activities. (b) Primary co-operative societyengaged in supplying milk, oil seeds,fruits or vegetables grown by itsmembers to1) a federal co-operative society,engaged in the same business; 2) the Government or a local authority;3) the Government company orCorporation engaged in the samebusiness; (c) 1) A consumer co-operative societyengaged in activities other than thosespecified in clause (a) or clause (b)either independently of, or in additionto, all or any of the activities sospecified. 2) Co-operative society other than aconsumer co-operative society engagedin activities other than those specifiedin clauses (a) and (b). (d) Interest or dividends derived by theco-operativesocietyfromitsinvestments with any other co-operative society;(e) Any income derived by the co-operative society from the letting ofgodowns or warehouses for storage,processing or facilitating the marketingof commodities; (f) A co-operative society other than 1) A housing society; 2) An urban consumer society; 3) A society carrying on transportbusiness; 4) A society engaged in the performanceof any manufacturing operations withthe aid of power, where the gross totalincome does not exceed Rs.20,000/-(twenty thousand rupees) The whole of the amount of profits andgains on such business So much of the profits and gainsattributable to such activities notexceeding Rs.100,000/- (one hundredthousand rupees). So much to these profits and gainsattributable to such activities notexceeding Rs.50,000/- (fifty thousandrupees).The whole of such income. The whole of such income. The income by way of interest onsecurities and the income from houseproperty chargeable under Section 22. (f) A co-operative society other than 1) A housing society; 2) An urban consumer society; 3) A society carrying on transportbusiness; 4) A society engaged in the performanceof any manufacturing operations withthe aid of power, where the gross totalincome does not exceed Rs.20,000/-(twenty thousand rupees) The whole of the amount of profits andgains on such business So much of the profits and gainsattributable to such activities notexceeding Rs.100,000/- (one hundredthousand rupees). So much to these profits and gainsattributable to such activities notexceeding Rs.50,000/- (fifty thousandrupees).The whole of such income. The whole of such income. The income by way of interest onsecurities and the income from houseproperty chargeable under Section 22. 29. From the Tabular form presented above, it may be clear that thedeductions available under Clauses (a) to (c) are activity-based. Thededuction available under Clauses (d) and (e) are investment-basedand the deduction under Clause (f) is institution-based. To put itdifferently, (A) to be eligible for deduction under Clause (a), the claim shouldrelate to the profits and gains of business attributable to anyone ormore of the activities listed in Clause (a), (B) to be eligible for deduction under Clause (b), the society shouldbe a primary society engaged in supplying milk, oilseeds, fruits, etc.to named institutions, such as, Government, Local Authority,Federal Co-operative Society, or Government Company, (C) to be eligible for deduction under Clause (c), the institution mustbe engaged in activities other than those covered by Clauses (a) and(b) subject to the further condition that such profits and gainsshould not exceed a particular limit, (D) to be eligible for deduction under Clause (d), the income shouldbe derived from investments with another Co- operative Society, (E) to be eligible for deduction under Clause (e), the income shouldbe derived from letting of godowns or warehouses, etc.” 4.3The argument of Mr Arun Raj is that each one of the seven sub-clauses deals with different criteria and combinations of computation. Sub-clause (iii) deals with marketing of I.T.A. No.57, 44 & 58/2019 agricultural produce grown by its members. According to him,toddy vending by the members of assessee/Society is, for allpurposes, marketing an agricultural produce. Therefore, itsclaim for deduction of income earned by the Society under sub-clause (iii) of Section 80P(2)(a) is a legitimate deduction claimedby the assessee. The Tribunal has noted the grounds covered bySection 80P(2)(a)(iii) in its order dated 26.09.2017, but has notconsidered or recorded a finding on the entitlement of assesseein this regard. Trying to impress this Court for availingdeduction as agricultural produce, he invites our attention tothe judgment dated 20.06.2018 of this Court in I.T.A.No.273/2015; firstly, prays for answering the question in favourof the assessee and grant deduction under Section 80P(2)(a)(iii).Alternatively, it is argued that the finding that the Tribunalbeing a final Court of fact the questions covered by Section80P(2)(a)(iii) can be remitted to the Tribunal for consideration I.T.A. No.57, 44 & 58/2019 and disposal in accordance with law. 5. Mr Christopher Abraham objects to entertaining the merits on the nature of toddy: whether it is an agriculturalproduce or not. For, such an exercise could explore into therealm of pure and simple facts. So, this Court if is convinced onthe objection of assessee that the Tribunal has notindependently examined the grounds raised under Section80P(2)(a)(iii), the matter could be remitted to Tribunal forconsideration and disposal afresh. Stated briefly, after takingnote of the consideration by the Tribunal, the learned StandingCounsel desires this question could be remitted to Tribunal forconsideration and disposal afresh, in accordance with law. I.T.A. No.57, 44 & 58/2019 and disposal in accordance with law. 5. Mr Christopher Abraham objects to entertaining the merits on the nature of toddy: whether it is an agriculturalproduce or not. For, such an exercise could explore into therealm of pure and simple facts. So, this Court if is convinced onthe objection of assessee that the Tribunal has notindependently examined the grounds raised under Section80P(2)(a)(iii), the matter could be remitted to Tribunal forconsideration and disposal afresh. Stated briefly, after takingnote of the consideration by the Tribunal, the learned StandingCounsel desires this question could be remitted to Tribunal forconsideration and disposal afresh, in accordance with law. 6.We have taken note of the limited submissions madein this behalf and we are persuaded to accept the second limb ofassessee's argument, namely that the matter needs to be re-examined by the Tribunal. For, our examining the question of I.T.A. No.57, 44 & 58/2019 -14- law independently, the possibility of treading into pure andsimple facts cannot be obliterated. Which, for informed reasonsin law, we do not want to undertake. Therefore, the question is answered, to the extent indicated above, in favour of the assessee and against the Revenue.Substantial question no.3 is remitted to Tribunal forconsideration and disposal, in accordance with law. Substantial Question Nos.4 and 5 7.Substantial question nos. 4 and 5 read thus: “4. Whether, the Tribunal is right in law and facts of the case innot remanding the matter back to the assessing officer toconsider whether the appellant society falls in any othercategory as contemplated under section 80 P(2) (a) and eligiblefor deduction under 80 P of the Act.? 5. Whether the Tribunal is right in law and facts andcircumstance of the case in not considering the issue on thefinding of the assessing officer that the bye-laws of theappellant does not restrict the voting rights and therefore noteligible for deduction under section 80 P (2) (a) of the Act?.circumstance of the case in not considering the issue on thefinding of the assessing officer that the bye-laws of theappellant does not restrict the voting rights and therefore noteligible for deduction under section 80 P (2) (a) of the Act?. I.T.A. No.57, 44 & 58/2019 -15- 7.1In our view and also from the tenor of arguments made in this behalf, this Court records a finding that thesequestions may not arise for the view already we have taken onsubstantial question no.3. The questions are not taken up nor any view expressed inthis behalf. ITA No.57/2019 8.The substantial questions raised read as follows: 1. Whether, on the facts and in the circumstances of the case,the Tribunal is right in holding that the appellant societycannot be considered as Co operative Societies engaged in thecollective disposal of labour of its members as contemplatedunder section 80P(2) (a) (vi) of the Act and therefore noteligible for deduction under section 80 P of the Act.? Is not sucha finding of the Tribunal illegal, arbitrary and perverse? 2. Whether the Tribunal is right in law and facts of the case inupholding the finding of the assessing officer/contention of therevenue that the appellant society having granted registrationunder the Kerala Co-operative Societies Act, 1969 and the Rulesas a "Miscellaneous Society" and therefore assessee cannot be treated as a society engaged in collective disposal of labour ofits members and therefore is not eligible/entitled for thededuction under section 80 P (2) (a) (vi) of the Act? 3. Whether the Tribunal was right in law and facts of the casein not considering the issue of eligibility of the appellant fordeduction under section 80 P (2) (a) (iii) of the Act? 2. Whether the Tribunal is right in law and facts of the case inupholding the finding of the assessing officer/contention of therevenue that the appellant society having granted registrationunder the Kerala Co-operative Societies Act, 1969 and the Rulesas a "Miscellaneous Society" and therefore assessee cannot be treated as a society engaged in collective disposal of labour ofits members and therefore is not eligible/entitled for thededuction under section 80 P (2) (a) (vi) of the Act? 3. Whether the Tribunal was right in law and facts of the casein not considering the issue of eligibility of the appellant fordeduction under section 80 P (2) (a) (iii) of the Act? 4. Whether, the Tribunal is right in law and facts of the case innot remanding the matter back to the assessing officer toconsider whether the appellant society falls in any othercategory as contemplated under section 80 P(2) (a) and eligiblefor deduction under 80 P of the Act.? 8.1Substantial question nos.1 and 2 are similar to substantial question nos. 1 and 2; substantial question no. 3 issimilar to substantial question no.3; and substantial questionno.4 is similar to substantial question nos.4 and 5 in I.T.A. No.44/2019. By adopting the same reasoning these questions are answered accordingly. I.T.A. No.57, 44 & 58/2019 I.T.A. No.58/2019 9.The substantial questions raised read as follows: 1. Whether, on the facts and in the circumstances of the case,the Tribunal is right in holding that the appellant societycannot be considered as Co operative Societies engaged in thecollective disposal of labour of its members as contemplatedunder section 80P(2) (a) (vi) of the Act and therefore noteligible for deduction under section 80 P of the Act.? Is not sucha finding of the Tribunal illegal, arbitrary and perverse? 2. Whether the Tribunal is right in law and facts of the case inupholding the finding of the assessing officer/contention of therevenue that the appellant society having granted registrationunder the Kerala Co-operative Societies Act, 1969 and the Rulesas a "Miscellaneous Society" and therefore assessee cannot betreated as a society engaged in collective disposal of labour ofits members and therefore is not eligible/entitled for thededuction under section 80 P (2) (a) (vi) of the Act? 3. Whether the Tribunal was right in law and facts of the casein not considering the issue of eligibility of the appellant fordeduction under section 80 P (2) (a) (iii) of the Act? 4. Whether, the Tribunal is right in law and facts of the case innot remanding the matter back to the assessing officer tonot remanding the matter back to the assessing officer to consider whether the appellant society falls in any othercategory as contemplated under section 80 P(2) (a) and eligiblefor deduction under 80 P of the Act.? 5. Whether the Tribunal is right in law and facts of the case innot considering the issue of rejection of claim under section 80P by the Lower authorities as hit by Section 80 A (5) of the Actas the claim made in a belated return, which issue is nowsquarely covered in favour of the asssessee by the of thisHonourble Court in the case of Chirakkal Service Co operativeBank Ltd. Vs CIT and other connected cases reported in(2016)384 ITR 490 (Ker). 9.1Substantial question nos.1 and 2 are similar to substantial question nos. 1 and 2; substantial question no. 3 is similar to substantial question no.3; and substantial questionno.4 and 5 are similar to substantial question nos.4 and 5 inI.T.A. No. 44/2019. By adopting the same reasoning these questions are answeredaccordingly. I.T. Appeal Nos. 44, 57 and 58/2019 are answeredaccordingly.Sd/- S.V.BHATTIJUDGESd/- BASANT BALAJIJUDGE jjj APPENDIX OF ITA 57/2019 PETITIONER ANNEXURE ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 19.02.2014 PASSED BY THE ASSESSING OFFICER FOR THE AY 2011-12. 9.1Substantial question nos.1 and 2 are similar to substantial question nos. 1 and 2; substantial question no. 3 is similar to substantial question no.3; and substantial questionno.4 and 5 are similar to substantial question nos.4 and 5 inI.T.A. No. 44/2019. By adopting the same reasoning these questions are answeredaccordingly. I.T. Appeal Nos. 44, 57 and 58/2019 are answeredaccordingly.Sd/- S.V.BHATTIJUDGESd/- BASANT BALAJIJUDGE jjj APPENDIX OF ITA 57/2019 PETITIONER ANNEXURE ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 19.02.2014 PASSED BY THE ASSESSING OFFICER FOR THE AY 2011-12. ANNEXURE BA TRUE COPY OF ORDER DATED 16.02.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-KOZHIKODE FOR THE AY 2011-12. ANNEXURE C A TRUE COPY OF THE ORDER DATED 26.09.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN FOR THE AY 2011-12. APPENDIX OF ITA 58/2019 PETITIONER ANNEXURE ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 8/3/2018 PASSED BY THE ASSESSING OFFICER FOR THE AY 2010-11. ANNEXURE BA TRUE COPOY OF ORDER DATED 16/2/2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-KOZHIKODE FOR THE AY 2010-11. ANNEXURE C A TRUE COPY OF THE ORDER DATED 26/9/2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN FOR THE AY 2010-11. I.T.A. No.57, 44 & 58/2019 APPENDIX OF ITA 44/2019 PETITIONER ANNEXURE ANNEXURE A A TRUE COPY OF THE ASSESSMENT ORDER DATED 28.03.2013 PASSED BY THE ASSESSING OFFICER FOR THE AY 2009-10. ANNEXURE BA TRUE COPY OF ORDER DATED 16.02.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-KOZHIKODE FOR THE AY 2009-10. ANNEXURE C A TRUE COPY OF THE ORDER DATED 26.09.2017 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN FOR THE AY 2009-10.