IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI WEDNESDAY, 08TH DAY OF JANUARY 2020 / 18TH POUSHA, 1941 ITA.No.197 OF 2019 AGAINST ORDER IN ITA 467/COCH/2018 FOR AY 2013-14 DATED 29.11.2018 AND RECEIVED ON 24.12.2018 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/RESPONDENT/ASSESSEE: KUTHANNUR SERVICE CO-OPERATIVE BANK LIMITED, NO.F 1563, KUTHANNUR P.O., PALAKKAD DISTRICT, PIN-678721, REPRESENTED BY ITS SECRETARY. BY ADVS. SRI.C.A.JOJO SRI.JACOB CHACKO SRI.MATHEWS JOSEPH RESPONDENT/APPELLANT: 1 INCOME TAX OFFICER, WARD 5, AYAKAR BHAVAN, ENGLISH CHURCH ROAD, PALAKKAD, PIN-678014. 2 COMMISSIONER OF INCOME TAX (APPEALS), AYAKAR BHAVAN, THRISSUR , PIN-680001. 3 INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, KAKKANAD, COCHIN, REPRESENTED BY ASSISTANT REGISTRAR.682030 4 CENTRAL BOARD OF DIRECTOR TAXES (CBDT), DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI.110011 I.T.A.Nos.197 of 2019 & conn.cases 2 5 RESERVE BANK OF INDIA, CENTRAL OFFICE, CENTRAL OFFICE BUILDING, (21ST FLOOR), SHAHID BHAGAT SINGH MARG, FORT, MUMBAI- 400001. R1-4 BY ADV. SRI.P.K.RAVINDRANATHA MENON (SR.) R1-4 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04-09-2019, ALONG WITH ITA.198/2019, ITA.199/2019, ITA.202/2019, COURT ON 08-01-2020 DELIVERED FOLLOWING: I.T.A.Nos.197 of 2019 & conn.cases 3 IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI WEDNESDAY, 08TH DAY OF JANUARY 2020 / 18TH POUSHA, 1941 ITA.No.198 OF 2019 AGAINST ORDER IN ITA 468/COCH/2018 FOR AY 2013-14 DATED 29.11.2018 AND RECEIVED ON 24.12.2018 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/RESPONDENT/ASSESSEE: PERINGOTTUKURUSSI SERVICE CO-OPERATIVE BANK LTD. NO.519 PARUTHIPULLY P.O., PALAKKAD DISTRICT, PIN- 678573, REPRESENTED BY ITS SECRETARY. BY ADVS. SRI.C.A.JOJO SRI.JACOB CHACKO SRI.MATHEWS JOSEPH RESPONDENT/APPELLANT: 1 INCOME TAX OFFICER WARD 5, AYAKAR BHAVAN, ENGLISH CHURCH ROAD, PALAKKAD, PIN-678014. 2 COMMISSIONER OF INCOME TAX (APPEAL), AYAKAR BHAVAN, THRISSUR, PIN-680001. 3 INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, KAKKANAD, COCHIN, REPRESENTED BY ITS ASSISTANT REGISTRAR. 682030 I.T.A.Nos.197 of 2019 & conn.cases 4 4 CENTRAL BOARD OF DIRECT TAXES (CBDT), DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI.110011 5 RESERVE BANK OF INDIA, CENTRAL OFFICE, CENTRAL OFFICE BUILDING, (21ST FLOOR), SHAHID BHAGAT SINGH MARG, FORT, MUMBAI- 400001. R1-4 BY ADV. SRI.P.K.RAVINDRANATHA MENON (SR.) R1-4 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04- 09-2019, ALONG WITH ITA.197/2019, ITA.199/2019, ITA.202/2019, COURT ON 08-01-2020 DELIVERED FOLLOWING: I.T.A.Nos.197 of 2019 & conn.cases 5 IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI WEDNESDAY, 08TH DAY OF JANUARY 2020 / 18TH POUSHA, 1941 ITA.No.199 OF 2019 AGAINST ORDER IN ITA 469/COCH/2018 FOR AY 2013-14 DATED 29.11.2018 AND RECEIVED ON 24.12.2018 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/RESPONDENT/ASSESSEE VADAKKENCHERY SERVICE CO OP BANK LTD., NO.F 1219, VADAKKENCHERY P.O, PALAKKAD DISTRICT, PIN-678 683, REPRESENTED BY ITS SECRETARY. BY ADVS. SRI.C.A.JOJO SRI.JACOB CHACKO SRI.MATHEWS JOSEPH SMT.SWATHY S. RESPONDENT/APPELLANT: 1 INCOME TAX OFFICER, WARD-5, AYAKAR BHAVAN, ENGLISH CHURCH ROAD, PALAKKAD, PIN-678 014 2 COMMISSIONER OF INCOME TAX (APPEAL) AYAKAR BHAVAN, THRISSUR, PIN-680 001 I.T.A.Nos.197 of 2019 & conn.cases 6 3 INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, KAKKANAD, REPRESENTED BY ITS ASSISTANT REGISTRAR , COCHIN. 682030 4 CENTRAL BOARD OF DIRECT TAXES (CBDT), DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI.110011 5 RESERVE BANK OF INDIA, CENTRAL OFFICE, CENTRAL OFFICE BUILDING, (21ST FLOOR), SHAHID BHAGAT SINGH MARG, FORT, MUMBAI- 400 001 R1-4 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX R1-4 BY ADV. SRI.P.K.RAVINDRANATHA MENON (SR.) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04- 09-2019, ALONG WITH ITA.197/2019, ITA.198/2019, ITA.202/2019, COURT ON 08-01-2020 DELIVERED FOLLOWING: I.T.A.Nos.197 of 2019 & conn.cases 7 IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI WEDNESDAY, 08TH DAY OF JANUARY 2020 / 18TH POUSHA, 1941 ITA.No.202 OF 2019 AGAINST COMMON ORDER IN ITA 470/COCH/2018 FOR AY 2013- 14 DATED 29.11.2018 AND RECEIVED ON 24.12.2018 OF I.T.A.TRIBUNAL,COCHIN BENCH APPELLANT/RESPONDENT/ASSESSEE: VADAKKENCHERY SERVICE CO-OPERATIVE BANK LIMITED NO.F 1219,VADAKKANCHERY.P.O, PALAKKAD DISTRICT,PIN-678683, REPRESENTED BY ITS SECRETARY. BY ADV. SRI.C.A.JOJO RESPONDENT/APPELLANT 1 INCOME TAX OFFICER WARD 5,AYAKAR BHAVAN,ENGLISH CHURCH ROAD,PALAKKAD,PIN-678014. 2 COMMISSIONER OF INCOME TAX(APPEAL), AYAKAR BHAVAN,THRISSUR, PIN-680001. 3 INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, KAKKANAD,REPRESENTED BY ITS ASSISTANT REGISTRAR,COCHIN-682030. I.T.A.Nos.197 of 2019 & conn.cases 8 4 CENTRAL BOARD OF DIRECT TAXES(CBDT), DEPARTMENT OF REVENUE,MINISTRY OF FINANCE,GOVERNMENT OF INDIA, NEW DELHI-110001. 5 RESERVE BANK OF INDIA, CENTRAL OFFICE,CENTRAL OFFICE BUILDING(21ST FLOOR),SHAHID BHAGAT SINGH MARG,FORT,MUMBAI- 400001.REP.BY ITS MANAGER. R1-4 BY ADV. SRI.P.K.RAVINDRANATHA MENON (SR.) R1-4 BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 04- 09-2019, ALONG WITH ITA.197/2019, ITA.198/2019, ITA.199/2019, COURT ON 08-01-2020 DELIVERED FOLLOWING: I.T.A.Nos.197 of 2019 & conn.cases 9 "CR" C.K.ABDUL REHIM & R.NARAYANA PISHARADI, JJ. ************************** I.T.Appeal Nos.197 of 2019, 198 of 2019, 199 of 2019 & 202 of 2019 ---------------------------------------------- Dated this 8th day of January, 2020 JUDGMENT R.Narayana Pisharadi, J appellants/assessees are Co-operative Societies registered under Kerala Co-operative Societies Act, 1969. issue raised in these appeals relates to their claim for deduction under Section 80P(2) of Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 2. claim for deduction under Section 80P (2) of Act made by appellants was denied by Assessing Officer by treating them as Co-operative Banks and not as Primary Agricultural Credit Societies. Aggrieved by assessment orders thus passed by Assessing Officer, appellants filed appeals I.T.A.Nos.197 of 2019 & conn.cases 10 before Commissioner of Income Tax (Appeals). appellate authority, by following judgment of this Court in Chirakkal Service Co-operative Bank Limited v. Commissioner of Income Tax : 2016 (2) KHC 726: 2016 (2) KLT 535, allowed appeals and directed Assessing Officer to grant deduction under Section 80P (2) of Act, on ground that assessees are classified as Primary Agricultural Credit Societies by Registrar of Co-operative Societies. 3. revenue challenged orders passed by first appellate authority in second appeals filed before Income Tax Appellate Tribunal, Cochin Bench. assessees filed cross objections supporting orders passed by first appellate authority, by making reference to circular issued by department. Tribunal also relied upon decision of this Court in Chirakkal Service Co-operative Bank Limited (supra) and dismissed appeals filed by revenue. cross objections filed by assessees were also dismissed on ground that they only supported view taken by first appellate authority. Though decision of Tribunal was in I.T.A.Nos.197 of 2019 & conn.cases 11 their favour, assessees have filed these appeals against orders passed by Tribunal, raising only grievance that Tribunal has not considered effect of circular issued by department in matter. 4. We have heard learned counsel for appellants and also learned Standing Counsel for Income Tax Department. 5. Section 80P of Act deals with deduction in respect of income of co-operative societies. Sub-section (1) of that section provides that where, in case of assessee being co- operative society, 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 provisions of Section 80P, sums specified in sub-section (2) thereof, in computing total income of assessee. Sub-section (4) of Section 80P provides that provisions of Section 80P shall not apply in relation to any co-operative bank other than primary agricultural credit society or primary co-operative agricultural and rural development bank. I.T.A.Nos.197 of 2019 & conn.cases 12 6. In Chirakkal Service Co-operative Bank (supra), Division Bench of this Court held that, societies having been classified as Primary Agricultural Credit Societies by competent authority under Kerala Co-operative Societies Act, it has necessarily to be held that principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes, rate of interest on such loans and advances to be at rate to be fixed by Registrar of Co-operative Societies and having its area of operation confined to village, panchayat or municipality and as such, they are entitled for benefit of sub-section (4) of Section 80P of Act to ease themselves out from coverage of Section 80P and that authorities under Act cannot probe into any issues or such matters relating to such societies and that Primary Agricultural Credit Societies registered as such under Kerala Co-operative Socities Act and classified so under that statute, are entitled to such exemption. 7. Chirakkal (supra) now stands overruled by decision of Full Bench of this Court in Mavilayi Service Co-operative I.T.A.Nos.197 of 2019 & conn.cases 13 Bank Limited v. Commissioner of Income Tax : 2019 (2) KHC 287: 2019 (2) KLT 597, in which it has been held as follows: In view of law laid down by Apex Court in Citizen Co-operative Society v. Assistant Commissioner of Income Tax: AIR 2017 SC 5147, it cannot be contended that, while considering claim made by assessee society for deduction under Section 80P of IT Act, after introduction of sub-section (4) thereof, Assessing Officer has to extend benefits available, merely looking at class of society as per certificate of registration issued under Central or State Co-operative Societies Act and Rules made thereunder. On such claim for deduction under Section 80P of ITAct, Assessing Officer has to conduct enquiry into factual situation as to activities of assessee society and arrive at conclusion whether benefits can be extended or not in light of provisions under sub-section(4) of Section 80P . Full Bench has further held as follows: Moreover, law laid down by Division Bench in Chirakkal is not good law, since, in view of I.T.A.Nos.197 of 2019 & conn.cases 14 law laid down by Apex Court in Citizen Co- operative Society, on claim for deduction under Section 80P of Income Tax Act, by reason of sub-section (4) thereof, Assessing Officer has to conduct enquiry into factual situation as to activities of assessee society and arrive at conclusion whether benefits can be extended or not in light of provisions under sub-section (4) of Section 80P of IT Act . 8. orders passed by Tribunal, confirming decision of first appellate authority merely on basis of Chirakkal (supra), are erroneous, in light of law laid down by Full Bench of this Court in Mavilayi Service Co- operative Bank (supra). However, revenue has not filed any appeal or cross objection challenging orders passed by Tribunal and we cannot interfere with decision of Tribunal in these appeals filed at instance of assessees. 9. grievance of appellants is that, though orders passed by Tribunal are in their favour, Tribunal has not considered effect of Circular No.133/6 of 2007 dated 09.05.2007 issued by Central Board of Direct Taxes. In this I.T.A.Nos.197 of 2019 & conn.cases 15 circular, it was clarified by department that, for purpose of Section 80P(4) of Act, co-operative bank shall have meaning assigned to it in Part V of Banking Regulation Act, 1949. In other words, contention of appellants is that, in view of aforesaid circular, in order to ascertain whether co- operative society is conducting business of banking, what shall be considered is whether it is co-operative bank within meaning of Part V of Banking Regulation Act, 1949 and that criteria shall not be as stated by Full Bench of this Court in Mavilayi (supra). 10. aforesaid contention is misconceived. Clarificatory circulars are issued by Government departments for guidance of officers. Such circulars or instructions do bind department and its officers. But they do not bind Court in interpretation of statutory provisions. Circulars issued by Government department cannot have any primacy over decision of jurisdictional High Court. Circulars and instructions thus issued will not survive, if they are contrary to decision of Constitutional Court. If circular provides I.T.A.Nos.197 of 2019 & conn.cases 16 interpretation of law that runs contrary to interpretation given by jurisdictional High Court, it no longer survives. Circulars or instructions given by department are no doubt binding on authorities under Act, but when Supreme Court or High Court has declared law on question arising for consideration, it will not be open to party to contend that circular should be given effect to and not view expressed in decision of Supreme Court or High Court. Any direction issued by Government in circular would be mere expression of its opinion. But, once provision has been interpreted by superior court, then it will not be open to assessee to project interpretation on concerned provision in tune with circular, but against law laid down by Court. 11. In Commissioner of Central Excise v. M/s Gurukripa Resins Private Limited : (2011) 13 SCC 180, Supreme Court has held as follows: It is well settled proposition of law that Circulars and instructions issued by Central Board of I.T.A.Nos.197 of 2019 & conn.cases 17 Excise and Customs are no doubt binding in law on authorities under respective Statutes but when this Court or High Court declares law on question arising for consideration, it would not be appropriate for Courts or Tribunal, as case may be, to direct that Board's Circular should be given effect to and not view expressed in decision of this Court or High Court . 12. In Commissioner of Central Excise v. M/s Ratan Melting Wire Industries: (2008) 13 SCC 1, Constitution Bench has held as follows: Circulars and instructions issued by Board are no doubt binding in law on authorities under respective statutes, but when Supreme Court or High Court declares law on question arising for consideration, it would not be appropriate for Court to direct that circular should be given effect to and not view expressed in decision of this Court or High Court. So far as clarifications/circulars issued by Central Government and of State Government are concerned they represent merely their understanding of statutory provisions. They are not binding upon Court. It is for Court to declare what particular provision of statute says I.T.A.Nos.197 of 2019 & conn.cases 18 and it is not for Executive. Looked at from another angle, circular which is contrary to statutory provisions has really no existence in law . 13. It is true that, when Tribunal passed orders, decision in Mavilayi (supra) was not in existence. But, decision in Chirakkal (supra), was then in force. In view of decision in Chirakkal (supra), it was not necessary for Tribunal to consider effect of circular issued by department. circular issued by department is not binding on Income Tax Appellate Tribunal also. Authority for this proposition can be had from decision of Supreme Court in Commissioner of Income Tax v. Hero Cycles : AIR 1998 SC 1555, wherein it has been held as follows: We have passed similar orders in large number of cases but in this case on behalf of assessee it has been contended that there is circular issued by Central Board of Direct Taxes, New Delhi which should conclude matter. copy of so called circular dated 9th April, 1981/13th April, 1981 has been handed over in Court. It does not appear that document handed over in Court is copy of Circular at all. ...... Moreover, it is well settled that I.T.A.Nos.197 of 2019 & conn.cases 19 circulars can bind Income Tax Officer but will not bind appellate authority or Tribunal or Court or even assessee . (emphasis supplied). 14. appellants have filed these appeals challenging orders passed by Tribunal in their favour. No substantial question of law arises for consideration in these appeals. appeals are misconceived and they are liable to be dismissed. Consequently, appeals are dismissed. (sd/-) C.K.ABDUL REHIM, JUDGE (sd/-) R.NARAYANA PISHARADI, JUDGE jsr I.T.A.Nos.197 of 2019 & conn.cases 20 APPENDIX OF ITA 197/2019 PETITIONER'S EXHIBITS: ANNEXURE A TRUE COPY OF ASSESSMENT ORDER DATED 24.03.2016 ISSUED BY 1ST RESPONDENT. ANNEXURE B TRUE COPY OF APPELLATE ORDER DATED 31.07.2018 BY 2ND RESPONDENT. ANNEXURE C TRUE COPY OF ORDER OF HON'BLE TRIBUNAL, COCHIN BENCH DATED 29.11.2018. ANNEXURE D TRUE COPY OF CROSS OBJECTION DATED 22.11.2018 FILED BY APPELLANT. RESPONDENT'S EXHIBITS: NIL I.T.A.Nos.197 of 2019 & conn.cases 21 APPENDIX OF ITA 198/2019 PETITIONER'S EXHIBITS: ANNEXURE A TRUE COPY OF ASSESSMENT ORDER DATED 24.03.2016 ISSUED BY 1ST RESPONDENT. ANNEXURE B TRUE COPY OF APPELLATE ORDER DATED 19.07.2018 BY 2ND RESPONDENT. ANNEXURE C TRUE COPY OF ORDER OF HON'BLE TRIBUNAL, COCHIN BENCH DATED 29.11.2018. ANNEXURE D TRUE COPY OF CROSS OBJECTION DATED 29.11.2018 FILED BY APPELLANT. RESPONDENT'S EXHIBITS: NIL I.T.A.Nos.197 of 2019 & conn.cases 22 APPENDIX OF ITA 199/2019 PETITIONER'S EXHIBITS: ANNEXURE A TRUE COPY OF ASSESSMENT ORDER FOR AY 2010-11 DATED 22.03.2016 ISSUED BY 1ST RESPONDENT. ANNEXURE B TRUE COPY OF ASSESSMENT ORDER FOR AY 2013-14 DATED 22.03.2016 ISSUED BY 1ST RESPONDENT. ANNEXURE C TRUE COPY OF APPELLATE ORDER DATED 19.07.2018 BY 2ND RESPONDENT. ANNEXURE D TRUE COPY OF ORDER OF HON'BLE TRIBUNAL, COCHIN BENCH DATED 29.11.2018. ANNEXURE E TRUE COPY OF CROSS OBJECTION DATED 22.11.2018 FILED BY APPELLANT. RESPONDENT'S EXHIBITS: NIL I.T.A.Nos.197 of 2019 & conn.cases 23 APPENDIX OF ITA 202/2019 PETITIONER'S EXHIBITS: ANNEXURE A TRUE COPY OF ASSESSMENT ORDER FOR AY 2013-14 DATED 22.03.2016 ISSUED BY 1ST RESPONDENT. ANNEXURE B TRUE COPY OF APPELLATE ORDER DATED 19.07.2018 BY 2ND RESPONDENT ANNEXURE C TRUE COPY OF ORDER OF HON'BLE TRIBUNAL,COCHIN BENCH DATED 29.11.2018 ANNEXURE D TRUE COPY OF CROSS OBJECTION DATED 22.11.2018 FILED BY APPELLANT. RESPONDENT'S EXHIBITS: NIL TRUE COPY PS TO JUDGE Kuthannur Service Co-Operative Bank Limited v. ITO, Ward-5, Palakkad / CIT(A), Thrissur / Income-tax Appellate Tribunal, Cochin Bench, Cochin / Central Board of Director Taxes (CBDT), New Delhi / Reserve Bank of India