Appeal Details
Counselvise Citation
[2015] 123 COUNSELVISE.COM (IT) 0950 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 9 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
07-07-2015
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
02-07-2015
Assessment Year
2007-2008
Appeal Filed On
12-09-2013
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 762/CHD/2013 (ASSESSMENT YEAR : 2007-08) THE A.C.I.T., VS. THE C.D. BLOCK CO-OPERATIVE CIRCLE MANDI, CREDIT SOCIETY LTD., H.P. VPO GOHAR CHACHIOT MANDI, H.P. PAN: AAABT2301D AND C.O.NO.42/CHD/2013 ARISING OUT OF ITA NO. 762/CHD/2013 (ASSESSMENT YEAR : 2007-08) THE C.D. BLOCK CO-OPERATIVE VS. THE A.C.I.T., CREDIT SOCIETY LTD., CIRCLE MANDI, VPO GOHAR CHACHIOT MANDI, H.P. H.P. PAN: AAABT2301D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY JAIN DEPARTMENT BY : DR.AMARVEER SINGH, CIT DR DATE OF HEARING : 02.07.2015 DATE OF PRONOUNCEMENT : 07.07.2015 O R D E R PER BHAVNESH SAINI, J.M. : THE DEPARTMENTAL APPEAL AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAIN ST THE 2 ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S), SHIMLA DATED 17.4.2013 FOR ASSESSMENT YEAR 2007-08. 2. THE REVENUE IN THE DEPARTMENTAL APPEAL CHALLENGED THE ORDER OF THE LEARNED CIT (APPEALS) I N ALLOWING BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AMOUNTING TO RS.40,19,598/- TO THE ASSESSEE SOCIETY WHICH IS PRO VIDING CREDIT FACILITIES AND ACCEPTING DEPOSITS FROM ITS M EMBERS AND NON-MEMBERS AS PER THEIR OBJECTIVES. 3. THE LEARNED COUNSEL FOR THE ASSESSEE DURING THE COURSE OF ARGUMENTS SEEKS PERMISSION TO WITHDRAW TH E CROSS OBJECTION. THE ENDORSEMENT TO THAT EFFECT IS MADE IN THE CROSS OBJECTION. THE SAME IS, THEREFORE, DISMISSE D AS WITHDRAWN. 4. THE ISSUE LEFT FOR CONSIDERATION IS DEDUCTION U NDER SECTION 80P(2)(A)(I) OF THE ACT AS RAISED IN THE DE PARTMENTAL APPEAL. 5. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS O F PROVIDING CREDIT FACILITIES TO ITS MEMBERS. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER OBSERVED THAT THE ASSESSEE HAD PAID ADVANCE TAX ON ITS INCOME AND HAD NOT CLAIMED ANY DEDUCTION UNDER SECT ION 80P OF THE ACT. HOWEVER, THE ASSESSEE SOCIETY CLA IMED DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT DUR ING THE 3 COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFF ICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE FOR THE SAID D EDUCTION ON THE GROUND THAT AS PER THE PROVISIONS OF THE INC OME TAX ACT AS AMENDED W.E.F. THE ASSESSMENT YEAR 2007-08, THE EXEMPTION WAS NOT AVAILABLE TO THE CO-OPERATIVE BAN KS OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMA RY CO- OPERATIVE AGRICULTURAL & RURAL DEVELOPMENT BANK. ACCORDINGLY, THE ASSESSING OFFICER HELD THAT THE AS SESSEE WAS NEITHER A PRIMARY AGRICULTURAL CREDIT SOCIETY N OR A PRIMARY CO-OPERATIVE AGRICULTURAL & RURAL DEVELOPME NT BANK. THE ASSESSING OFFICER NOT ONLY DENIED THE D EDUCTION UNDER SECTION 80P OF THE ACT TO THE ASSESSEE BUT AL SO MADE ADDITION ON ACCOUNT OF VARIOUS EXPENSES DEBITED BY THE ASSESSEE. 6. THE ASSESSEE CHALLENGED THE ORDER OF THE ASSESS ING OFFICER BEFORE THE LEARNED CIT (APPEALS) DENYING DE DUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT AND WRITTEN SUBMISSIONS OF THE ASSESSEE ARE QUOTED IN THE IMPUG NED ORDER, IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THA T THE ASSESSEE IS A CO-OPERATIVE SOCIETY FORMED UNDER THE HIMACHAL PRADESH CO-OPERATIVE SOCIETY ACT, 1968, IS ENGAGED IN THE BUSINESS OF BANKING AND PROVIDING CR EDIT FACILITIES TO ITS MEMBERS FOR MORE THAN 20 YEARS BA CK. THE ASSESSEE HAS BEEN ENJOYING THE DEDUCTION UNDER SECT ION 80P OF THE ACT. FOR THE YEAR UNDER CONSIDERATION ALSO , THE ASSESSEE FILED ITS RETURN OF INCOME AND CLAIMED DED UCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. DUE TO INS ERTION OF 4 SUB-SECTION (4) IN SECTION 80P OF THE ACT W.E.F. AS SESSMENT YEAR 2007-08, THE ASSESSEE DEPOSITED ADVANCE INCOME TAX AS CORRECT INTERPRETATION OF THIS SUB-SECTION WAS NOT CLEAR. THE ASSESSING OFFICER WITHOUT CONSIDERING THE INTER PRETATION OF SUB-SECTION (4) OF SECTION 80P OF THE ACT MADE A DDITION DESPITE THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SE CTION 80P OF THE ACT. THE ASSESSEE ALSO RELIED UPON TH E CBDT CIRCULAR WITH REGARD TO APPLICABILITY OF SUB-SECTIO N (4) OF SECTION 80P OF THE ACT AND ALSO SUBMITTED THAT THE ASSESSEE IS NOT COVERED BY THE BANKING REGULATION ACT. IT WAS ALSO EXPLAINED THAT THE ASSESSEE HAD BEEN DOING ITS ACTI VITIES ONLY WITH THE MEMBERS SO AS TO FURTHER THE CO-OPERA TIVE MOVEMENT. THE ASSESSEE DID NOT SOLICIT CUSTOMERS FROM AMONG THE PUBLIC AT LARGE AS THE BANKS DO. THE AR EA OF OPERATION OF THE ASSESSEE SOCIETY AND PROVIDING CRE DIT FACILITIES IS LIMITED TO ITS MEMBERS ONLY AND CONFI NED TO DISTRICT ONLY. THE ASSESSEE RELIED UPON CERTAIN DECISIONS IN SUPPORT OF ITS CONTENTION. THE LEARNED CIT (AP PEALS) CONSIDERING THE ISSUE IN DETAIL AND AMENDMENT IN TH E ACT ALLOWED THE CLAIM OF THE ASSESSEE. THE FINDINGS O F THE LEARNED CIT (APPEALS) IN PARAS 4 TO 4.2 OF THE APPE LLATE ORDER ARE REPRODUCED AS UNDER : 4. THE RIVAL SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED W.R.T. THE FACTS OF THE CASE, THE RELEVA NT PROVISIONS OF LAW AND THE RELATED ASSESSMENT RECORDS. IT IS NOTE D THAT IN THE SHOW CAUSE NOTICE DATED 21.10.2009 TO THE ASSESSE E SOCIETY, THE SOLE GROUND RAISED BY THE A.O. FOR HIS PROPOSED DISALLOWANCE OF DEDUCTION U/S 80P OF THE ACT WAS TH AT THE AMENDED PROVISIONS OF SECTION 80P W.E.F. THE A.Y. 20 07-08 DO 5 NOT PERMIT THE DEDUCTION TO CO-OPERATIVE BANKS OTHER T HAN A PRIMARY AGRICULTURAL SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. AFTER ISSUING THE SAID SHOW CAUSE NOTICE, THE A.O. PROCEEDED TO DISALL OW THE DEDUCTION ONLY ON THE GROUND THAT 'THE ASSESSEE SOCIE TY COULD NOT FURNISH ANY PLAUSIBLE REPLY TO THIS SHOW CAUSE A S SEEN FROM FURTHER ASSESSMENT PROCEEDINGS.' THE A.O. HAS ALSO M ENTIONED ON PAGE 2 OF THE ASSESSMENT ORDER IN THE OPENING PAR AGRAPH THAT 'IT HAS BEEN NOTICED IN THE RETURN OF INCOME TH AT THE ASSESSEE HAS DECLARED ITSELF TO BE TAXABLE AND DID NOT CLAIM ANY DEDUCTION AND PAID ADVANCE TAX ON INCOME........,' 4 .1 THE ABOVE MENTIONED OBSERVATIONS OF THE A.O. WERE CHECKED W.R.T. THE RELEVANT ASSESSMENT RECORDS AND ARE NOT FOUND TO BE FACTUALLY AND LEGALLY CORRECT AS PER THE DISCUSSION BELOW. (A) A PERUSAL OF THE INCOME TAX RETURN FILED BY THE ASSESSEE SHOWS THAT THE ASSESSEE IN ITR-V HAD SHOWN GROSS TO TAL INCOME AT RS.31,07,165/- AND HAD ALSO CLAIMED DEDUCTION UNDER CHAPTER VI-A AT RS.31,07,165/-. ACCORDINGLY THE ASS ESSEE HAD SOUGHT THE REFUND OF RS.9,96,510/-AGAINST THE A DVANCE TAX PAID AND THE TDS SUFFERED. AS PER THE AUDIT REPOR T SIGNED BY RAJEEV SOOD & CO., CHARTERED ACCOUNTANT, WHICH WA S FILED ALONG WITH THE RETURN OF INCOME, DEDUCTION UNDER CHAPT ER VI-A WAS SHOWN ADMISSIBLE TO THE ASSESSEE. AS PER THE AUDIT R EPORT IN FORM NO. 3CD AND 3 CA, THE STATUS OF THE ASSESSEE HAS BEEN CLEARLY SHOWN AS 'CO-OPERATIVE SOCIETY'. IN FACT, THE A.O. HIMSELF KNEW THAT THE ASSESSEE HAD DULY CLAIMED DEDUCTION UN DER SECTION 80P OF THE ACT EVEN IN ITS RETURN OF INCOME. THAT'S WHY, IN CLEAR CONTRADICTION OF HIS OWN STATEMENT IN THE OPENING PARAGRAPH ON PAGE 2(SUPRA) OF THE ASSESSMEN T ORDER, THE A. O. IN THE VERY NEXT PARAGRAPH HAS REPRO DUCED HIS SHOW CAUSE NOTICE WHEREIN HE HAS MENTIONED AS FOLLOWS: 'PLEASE NOTE THAT AS PER YOUR RETURN OF INCOME YOU HAVE SHOWN GROSS TOTAL INCOME OF RS.31,07,165/- ANDCLAIMEDDEDUCTIONU/S80P ON THE SAME ' 6 THE ABOVE SHOW CAUSE NOTICE OF THE A.O. THUS DOES NOT SUPPORT HIS STATEMENT MADE IN THE PRECEDING PARAGRAPH THAT THE ASSESSEE HAD NOT CLAIMED ANY DEDUCTION AND HAD DECLA RED ITSELF TO BE TAXABLE. (B) THE A.O. HAS SUMMARILY REJECTED THE ASSESSEE'S CLAIM F OR DEDUCTION U/S 80P OF THE ACT BY SIMPLY OBSERVING THA T THE ASSESSEE SOCIETY COULD NOT FURNISH ANY PLAUSIBLE REP LY TO HIS SHOW CAUSE NOTICE. THE A.O. HAS NEITHER CARED TO GIVE THE DETAILS OF THE REPLY FURNISHED BY THE ASSE SSEE IN RESPONSE TO HIS SHOW CAUSE NOTICE, NOR HAS HE ELABORATED AS TO HOW THE SAID REPLY WAS NOT A 'PLAUS IBLE REPLY'. A PERUSAL OF THE ASSESSMENT RECORDS REVEALS TH AT THE ASSESSEE HAD SUBMITTED A LUCID REPLY IN RESPONS E TO THE A.O.'S SHOW CAUSE NOTICE WHICH IS REPRODUCED AS FOLLOWS: ' SUB: ASSESSMENT PROCEEDINGS IN CASE OF M/S CD COOPERATIVE CREDIT SOCIETY LTD. FOR THE A.Y. 2007-0 8. YOUR GOOD SELF HAS POINTED OUT THE PROVISIONS OF SEC. 80P OF INCOME TAX ACT 1961 WHICH AS PER YOUR INTERPRETATION DO ES NOT COVER THE ASSESSEE IN PREVIEW OF THE DEDUCTION. IT IS RESPECTFULLY SUBMITTED THAT THE SAID INTERPRE TATION IS NOT CORRECT. THE SOCIETY IS ELIGIBLE FOR DEDUCTION U/S 80P (2) (A) OF THE INCOME TAX ACT 1961, WHICH PROVIDES THAT 'WHERE IN THE CASE OF AN ASSESSEE BEING A COOPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN S UB SECTION (2) THERE SHALL BE DEDUCTED IN ACCORDANCE WI TH AND SUBJECT TO THE PROVISIONS OF THIS SECTION THE S UM SPECIFIED IN SUB SECTION (2) IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUM REFERRED TO IN SUB SECTION (1) SHALL BE THE FOLLOWING NAMELY:- (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN- 7 I. CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE FINANCE ACT 2006 W.E.F. 1-4-2007 INSERTED SUB SECTION 4 TO SECTION 80P WHICH PROVIDES THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN R ELATION TO ANY COOPERATIVE BANK OTHER THAN A PRIMARY AGRICULTUR AL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. (THIS SECTION HAS THE IMPACT OF TAKING OUT THE COOPERATIVE BANKS FROM THE PREVIEW O F DEDUCTION LEAVING THE COOPERATIVE SOCIETIES ENGAGED IN BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS) EXPLANATION. FOR THE PURPOSES OF THIS SUB-SECTION, (A) CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATIO N ACT, 1949 ( 10 OF 1949); (B) PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG-THEM CREDIT F OR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. IT MAY BE NOTED THAT SUB SECTION 4 HAS BEEN INSERTED TO TAKE OUT COOPERATIVE BANKS FROM THE PREVIEW OF THE DEDUCTION U/S SOP. FURTHER WHILE EXCLUDING COOPERATIVE BANKS FROM THE SCOPE OF DEDUCTION EXCEPTION HAS BEEN PROVIDED TO CERTAIN KIND OF COOPERATIVE BANKS SO THAT THE EXCLUSION FROM DEDUCTION DOES NOT BECOME BLANKET EXCLUSION TO ALL COOPERATIVE BANKS. THESE COOPERATIVE BANKS INCLUDE PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THUS THE SUB SECTION 4 TO SEC 80 P TAKES OUT THE CO OPERATIVE BANKS OTHER THAN PRIMARY AGRICULTURAL CREDIT SOCIET Y 8 OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK FROM THE PREVIEW OF THE DEDUCTION. IT DOES NOT IN ANY WAY EFFECTS THE PRIMARY COOPERATIVE SOCIETIES ENGAGED IN THE BUSINESS OF PROVIDING CR EDIT TO ITS MEMBERS. YOUR CONTENTION THAT THE ASSESSEE IS NOT A PRIMARY AGRICULTURE CREDIT SOCIETY IS ABSOLUTELY CORRECT ALONG WITH THE CONTENTION THAT IT IS ALSO NOT A PRIMARY COOPERA TIVE BANK. SINCE THE DEDUCTION U/S 80P (2)(A)(I) I S AVAILABLE TO A COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND YOUR ASSESSEE IN THE INSTANT CASE ENGAGED IN THE SAME LINE OF BUSINE SS PROVIDING CREDIT FACILITIES TO ITS MEMBERS HENCE IT IS ELIGIB LE FOR CLAIMING THE DEDUCTION. TO SUPPORT THE CLAIM OF ASSESSEE A CLARIFICATION SOU GHT FROM CBDT ON THE SAID ISSUE BY THE DELHI COOPERATIV E URBAN T & C SOCIETY LTD IS ENCLOSED WITH WHICH CLEARL Y SUPPORT THE CLAIM OF THE ASSESSEE.' IT IS CLEAR FROM ABOVE THAT THE ASSESSEE HAD ARGUED ITS CASE ON LAW BUT THE A.O. SIMPLY OPTED TO CLEARLY IGNORE THE SAID ARGUMENT OF THE ASSESSEE WITHOUT CONSIDERING THE SA ME ON MERIT. ACCORDINGLY THE REASON GIVEN BY THE AO FOR D ISALLOWING THE DEDUCTION U/S 80P OF THE ACT THAT THE ASSESSEE HAD NOT SUBMITTED ANY PLAUSIBLE REPLY IS FOUND TO BE TOTALLY MI SLEADING. (C) THE A.O. HAS CLEARLY AND CATEGORICALLY ADMITTED ON PAGE 1 OF THE ASSESSMENT ORDER THAT THE ASSESSEE IS A COOPERATIVE SOCIETY 'DOING THE BUSINESS OF PROVIDIN G CREDIT FACILITY TO ITS MEMBERS.' THUS THERE IS NO DISPUTING THE FACT THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENG AGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBE RS. A PERUSAL OF THE CERTIFICATES ISSUED BY THE REGISTR AR CO- OPERATIVE SOCIETY, MANDI REVEALS THAT THE ASSESSEE SOCIETY WAS REGISTERED WAY BACK IN JUNE, 1957 AND AN 9 AMENDMENT WAS SUBSEQUENTLY REGISTERED ON 1 ST MARCH, 2005. A PERUSAL OF THE PROVISIONS OF SECTION 80P (2)(A)(I) REVEALS THAT THE SAID SECTION IS APPLICABLE TO A CO- OPERATIVE SOCIETY CARRYING ON THE CREDIT FACILITY FOR ITS MEMBERS. IF THE INTENTION OF THE LEGISLATURE WAS NO T TO GRANT DEDUCTION U/S 80P(2)(A)(I) TO SUCH CO-OPERATIVE SOCIETY, THIS SECTION WOULD HAVE BEEN DELETED BY TH E LEGISLATURE. INSTEAD THE LEGISLATURE HAS BROUGHT ON THE STATUTE ONLY A NEW PROVISO TO SECTION 80P (4) WHICH IS APPLICABLE ONLY TO THE CO-OPERATIVE BANKS AND NOT TO THE CREDIT CO-OPERATIVE SOCIETIES. IT APPEARS THAT THE INTE NTION BEHIND THIS AMENDMENT WAS TO BRING THE CO-OPERATIVE BANKS INTO THE TAXATION SYSTEM AT PAR WITH OTHER COMMERCIAL BANKS. THE ASSESSEE IS NOT A COOPERATIVE BANK IN THE INSTANT CASE, AND, THEREFORE, THE PROVISION S OF SECTION 80P(4) WILL HAVE NO APPLICATION IN THE ASSESSEE'S CASE. THE A.O. HAS CLEARLY MISDIRECTED HIMSELF BY CONCENTRATING ONLY ON THE PROVISIONS OF SECTION 80P(4) AND BY NOT PAYING ANY ATTENTION TO THE EXISTING SUB-SECTION (2) (A)(I) OF SECTION 80P . AND, IN THE PROCESS, THE A.O. HAS CONCLUDED THAT THE ASSESSEE IS NEITHER A PRIMARY AGRICULTURAL CREDIT SOCIETY, NOR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPME NT BANK WITHIN THE MEANING OF SECTION 80P (4), BUT HAS OVERLOOKED THE VITAL FACT THAT THE ASSESSEE IS A CO- OPERATIVE SOCIETY WITHIN THE MEANING OF SECTION 80P(2)(A)(I). (D) CBDT CIRCULAR BEARING NO. 3/2008 DATED 12/03/2008 ALSO MAKES IT CLEAR THAT THE AMENDMENT TO SECTION 80P (4) HAS WITHDRAWN THE DEDUCTION UNDER SECTION 80P IN RESPECT OF CO-OPERATIVE BANKS. FURTHER, THE AMENDMENT TO SECTION 36 (1) (VIIA) BY FINANCE ACT, 2007 W.E.F. 01/04/2007 ALSO PROVIDES THAT THE DEDUCTION IN RESPECT OF BAD DEBTS SHALL BE ALLOWABLE ALSO TO CO- OPERATIVE BANKS. THIS AMENDMENT ALSO SUGGESTS THAT TH E DEDUCTION U/S 80P HAS BEEN WITHDRAWN BY FINANCE ACT, 10 2006 W.E.F. 01/04/2007 IN RESPECT OF CO-OPERATIVE BAN KS ONLY. (E) IT IS ALSO NOTED THAT THE CENTRAL BOARD OF DIRE CT TAXES VIDE CLARIFICATION BEARING F. NO. 133/06/2007- TPL VIDE LETTER DATED 09/05/2008 HAS CLARIFIED THAT THE DELHI CO-OPERATIVE URBAN THRIFT & CREDIT SOCIETY LTD., DOES NOT FALL WITHIN THE MEANING OF CO-OPERATIVE BAN KS AS DEFINED IN PART-V OF THE BANKING REGULATION ACT, 194 9. SUB-SECTION -4 OF SECTION 80P WILL NOT APPLY IN ITS 'CA SE. THE CBDT HAS ALSO CLARIFIED THAT IN PART-V OF THE BANKING REGULATION ACT, 1949 'CO-OPERATIVE BANKS' MEANS A STATE CO-OPERATIVE BANK, A CENTRAL CO-OPERATIVE BANK AN D PRIMARY COOPERATIVE BANK. FROM THE CLARIFICATION, IT IS EVIDENT THAT CREDIT COOPERATIVE SOCIETIES ARE NOT COVER ED BY THE MEANING OF CO-OPERATIVE BANKS AS DEFINED IN PA RT- V OF THE BANKING REGULATION ACT, 1949 AND ARE ENTITLED TO DEDUCTION U/S SOP (2)(I) OF THE ACT.' 4.2 FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE PROVISIONS OF SECTION 80P (4) HAVE APPLICATION ONLY TO CO-OPERA TIVE BANKS. SECTION 80P (4) DOES NOT DEFINE THE WORD 'CO-OPERATIV E SOCIETY'. THE EXISTING SUB-SECTION 80P(2 )(A)(I) SHALL, THEREFORE, BE APPLICABLE TO A CO-OPERATIVE SOCIETY E XTENDING CREDIT FACILITY TO ITS MEMBERS. SINCE THERE IS NOTHING ON RECORD TO ESTABLISH THAT THE ASSESSEE IS A CO-OPERATIVE BANK AND NOT A COOPERATIVE SOCIETY, IT IS HELD THAT THE APPELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P ( 2)(A)(I) OF THE I.T. ACT. MERELY BECAUSE THE APPELLANT, BY WAY OF EXTREME CAUTION, HA D DEPOSITED THE ADVANCE TAX, DOES NOT DEBAR IT FROM MAKI NG THE CLAIM OF DEDUCTION U/S 80P (2)(A)(I) WHILE FILING ITS R ETURN OF INCOME.' SIMILARLY, MERELY BECAUSE AN INADVERTENT ERROR HAS OCCURRED WHILE FILLING THE COLUMN OF 'STATUS' IN ITR -V DOES NOT NULLIFY THE REMAINING VITAL PARTICULARS FURNISHED BY THE ASSESSEE IN ITR-V IN RESPECT OF ITS INCOME, DEDUCTION CLAIM AND REFUND DUE. HOWEVER, THE A.O. IS DIRECTED TO FIND OUT WHET HER THERE WAS ANY INTEREST INCOME ON THE SHORT-TERM BANK DEPO SITS AND SECURITIES INCLUDED IN THE TOTAL INCOME OF THE SOCIETY WHICH HAS 11 BEEN CLAIMED BY THEM AS EXEMPT. THE SAID ISSUE WAS DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP. SALE SOCIETY LTD VS ITO KARNATAKA. IN THE AFOREMENTIONED JUDGMENT, THE ISSUE FOR DETERMINATION WAS WHETHER INTEREST INCO ME ON THE SHORT TERM BANK DEPOSITS SECURITIES WOULD BE QUALIFI ED AS BUSINESS INCOME U/S 80P (2)(A)(I) OF THE IT ACT, 196 1. THE HON'BLE SUPREME COURT HAD DECIDED THE ISSUE AS UNDER: 'AT THE OUTSET AN IMPORTANT CIRCUMSTANCE NEEDS TO B E HIGHLIGHTED. IN THE PRESENT CASE, THE INTEREST HELD NOT ELIGIBLE FOR DEDUCTION U/S 80P(2) (A) (I) OF THE INCOME TAX ACT IS NOT THE INTEREST RECEIVED FROM THE MEMBERS FOR PROV IDING THE CREDIT FACILITIES TO THEM. WHAT IS SOUGHT TO BE TAXED U/S 36 OF THE ACT IS THE INTEREST INCOME ARISING ON THE SU RPLUS INVESTED IN SHORT TERM DEPOSITS AND SECURITIES WHIC H SURPLUS WAS NOT REQUIRED FOR BUSINESS PURPOSE. ASSESSEE MAR KETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TI MES WERE RETAINED BY IT. IN THIS CASE, WE ARE CONCERNED W ITH THE TAX TREATMENT OF SUCH AMOUNT. SINCE THE FUND CREATED BY SUCH RETENTION WAS NOT REQUIRED IMMEDIATEL Y FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SECURITIES. THE QUESTION BEFORE US, IS WHETHER INTER EST ON SUCH DEPOSITS/SECURITIES WHICH STRICTLY SPEAKING AC CRUES TO THE MEMBERS ACCOUNT COULD BE TAXED AS BUSINESS INCOME UNDER SECTION 28 OF THE ACT. AN IMPORTANT POINT NEEDS TO BE MENTIONED. THE WORDS THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS EMPHASISE THAT THE INCOME IN RESPECT OF WHICH DEDUCT ION IS SOUGHT MUST CONSTITUTE THE OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY, IN THE PARTICULAR CASE, THE EVIDENCE SHOWS THAT THE ASSESS EE SOCIETY EARNS INTEREST ON FUNDS WHICH ARE NOT REQUI RED FOR BUSINESS PURPOSES AT THE GIVEN POINT OF TIME. THEREFORE, ON THE FACTS AND CIRCUMSTANCES OF THIS C ASE, IN OUR VIEW, SUCH INTEREST INCOME FAILS IN THE CATEG ORY OF 'OTHER INCOME WHICH HAS BEEN RIGHTLY TAXED BY THE DEPARTMENT UNDER SECTION 56 OF THE I.T. ACT'. 12 IN THE LIGHT OF THE ABOVE THE INTEREST INCOME IF AN Y, EARNED FROM KEEPING THE SURPLUS FUND IN BANKS WOULD BE TAXABLE U/S 56 AND WILL NOT QUALIFY FOR REDUCTION U/S 80P. THE AO IS DIRECT ED TO FIND OUT IF THERE IS ANY SUCH INCOME FROM BANKS [OTHER THAN FRO M COOPERATIVE SOCIETIES; THE INCOME OF INTEREST OR DIVIDEND FROM WHOM IS OTHERWISE EXEMPT U/S 80P (2) (D)] AND INCLUDE IT IN THE TOTAL INCOME AS INCOME FROM OTHER SOURCES' AND NO DEDUCTION U/S 80P BE ALL OWED ON IT. THE AO SHOULD GIVEN AN OPPORTUNITY OF BEING HEARD TO THE APPELLANT WHILE DETERMINING SUCH INCOME, WHILE GIVI NG EFFECT TO THIS ORDER. IN THE RESULT, THE APPEAL IS ALLOWED SUBJECT T ABOV E OBSERVATIONS AND DIRECTIONS TO THE A.O. 7. THE LEARNED D.R FOR THE REVENUE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND REFERRED TO THE PROVISIONS OF SECTION 80P(4) OF THE ACT. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE HAS SUBMIT TED THAT THE ASSESSEE GOT THE AMENDMENT OF ITS BYE-LAWS AND IT WAS CLARIFIED IN THE HEADING FUNDS THAT THE ASSESSEE WOULD ACCEPT THE DEPOSITS FROM THE MEMBERS AND WOULD ALSO BE RAISING OF LOAN FROM THE MEMBERS, WHICH WAS APPROVE D BY THE REGISTRAR, COOPERATIVE SOCIETIES (PB-32), AND A LSO FILED AFFIDAVIT OF SHRI BHINDER PAUL GAUTAM (PB-34), IN W HICH IT WAS CLARIFIED THAT THE ASSESSEE SOCIETY TRANSACTS W ITH ITS MEMBERS ONLY AND NO PERSON OTHER THAN MEMBER IS ALL OWED TO TRANSACT WITH THE SOCIETY AND THE OPERATION OF T HE ASSESSEE IS MANDI DISTRICT ONLY. HE HAS ALSO SUBM ITTED THAT AFTER PASSING OF THE ORDER BY THE ASSESSING OF FICER, THE ASSESSMENTS WERE REOPENED FOR ASSESSMENT YEARS 2008 -09, 13 2009-10, 2010-11 AND 2011-12 AND THE ASSESSING OFFI CER PASSED THE ORDERS UNDER SECTION 143(3)/148 OF THE A CT AND ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 80P (2)(A)(I) OF THE ACT. THE COPIES OF THE ASSESSMENT ORDERS U NDER SECTION 143(3)/148 OF THE ACT ARE FILED ON RECORD. THE LEARNED D.R FOR THE REVENUE DID NOT DISPUTE THE PAS SING OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER IN TH E CASE OF THE SAME ASSESSEE FOR SUBSEQUENT YEAR ACCEPTING THE CLAIM OF THE ASSESSEE UNDER SECTION 80P(2)(A)(I) OF THE A CT. 8. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE FINDINGS OF THE LEARNED CIT (APPEALS) AND MATER IAL ON RECORD INCLUDING THE SUBSEQUENT ASSESSMENT ORDER PA SSED BY THE ASSESSING OFFICER UNDER SECTION 143(3/148 OF THE ACT, WE ARE OF THE VIEW THAT THE DEPARTMENTAL APPEAL HAS NO MERIT AND IS LIABLE TO BE DISMISSED. THE ASSESSEE HAS PRODUCED SUFFICIENT EVIDENCE AND MATERIAL BEFORE TH E LEARNED CIT (APPEALS) TO PROVE THAT THE ASSESSEE IS A COOPE RATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT WAS ALSO SUPPORTED BY THE AMENDMENT IN THE BYE-LAWS OF THE ASSESSEE. THEREFORE, THE LEARNED CIT (APPEALS) CO RRECTLY GOING THROUGH THE MATERIAL ON RECORD ALLOWED THE CL AIM OF THE ASSESSEE. THE REVENUE DEPARTMENT IN SUBSEQUEN T ASSESSMENT YEARS 2008-09, 2009-10, 2010-11 AND 201 1-12 WHILE REOPENING THE ASSESSMENTS PASSED THE ORDERS U NDER SECTION 143(3)/148 OF THE ACT AND ACCEPTED THE CLAI M OF THE ASSESSEE FOR DEDUCTION/EXEMPTION UNDER SECTION 80P( 2)(A)(I) OF THE ACT. THEREFORE, ONCE THE SIMILAR CLAIM OF THE 14 ASSESSEE HAS BEEN ACCEPTED BY THE REVENUE DEPARTMEN T FOR SUBSEQUENT YEARS, NOTHING SURVIVES IN FAVOUR OF THE REVENUE TO CHALLENGE THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT YEAR UNDER APPEAL. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS CO- OP. CREDIT SOCIETY LTD., 49 TAXMANN.COM 571 (GUJ) (362 ITR 331) HELD AS UNDER : IT : WHERE ASSESSEE WAS NOT A CREDIT CO-OPERATIVE BANK BUT A CREDIT CO-OPERATIVE SOCIETY, ITS CLAIM F OR DEDUCTION UNDER SECTION 80P(2)(A)(I) COULD NOT BE REJECTED BY INVOKING EXCLUSION CLAUSE OF SUB-SECTIO N (4) OF SECTION 80P. 9. CONSIDERING THE ABOVE DISCUSSION, WE DO NOT FIN D ANY MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS ACCORDINGLY, DISMISSED. 10. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSE D AND CROSS OBJECTION OF THE ASSESSEE IS DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF JULY, 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 7 TH JULY, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 15
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Startup Compliance
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1:1 Consultation on Tax Litigation
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1:1 Consultation on SME Listing
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Research Collaboration Agreement
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Executive Hiring Offer Letter
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