COMMISSIONER OF INCOME TAX, V. M/S SAGAR CREDIT CO-OPERATIVE

ITA/385/2014

AI Insights

The case revolves around the eligibility of M/s. Sagar Credit Co-operative Society Limited to claim deductions under Section 80P(2) of the Income Tax Act, 1961, for the Assessment Year 2009-10. The Commissioner of Income Tax appealed against the ITAT's decision which favored the society. The primary legal contention was whether the society, engaged in providing credit facilities to its members, could be denied the benefits of Section 80P(2) following the introduction of Section 80P(4) and its interpretation in light of the Banking Regulation Act. The High Court of Karnataka examined precedents and statutory provisions to determine the correct application of these laws.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 701094 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-09-2014
• Assessment Year: misc
• Other Referred Cases: THE COMMISSIONER OF INCOME TAX (APPEALS) VS. GENERAL INSURANCE EMPLOYEES' CO-OPERATIVE CREDIT SOCIETY LIMITED, THE COMMISSIONER OF INCOME TAX VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAHESH UPPIN
• Assessee Lawyers: E I SANMATHI
• Keywords: Banking Business; Co-operative Society; Deduction; Income Tax; Section 80P
• Section: 80P(2); 80P(4); 2(24)(viia); 260-A

Judgement Text

" : : 1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 22ND DAY OF SEPTEMBER 2014 PRESENT: THE HON'BLE MR.JUSTICE N.KUMAR AND THE HON'BLE MRS.JUSTICE RATHNAKALA ITA NO.385 OF 2014 BETWEEN: Commissioner of Income Tax Attavara Central Revenue Buildings Mangalore 575 001. …APPELLANT (By Sri.E.I.Sanmathi, Advocate) AND: M/s.Sagar Credit Co-operative Society Limited NH 66, Byndoor Kundapura Udupi District – 576 214 PAN: AABAS 4278 A ...RESPONDENT (By Sri.Mahesh R.Uppin, Advocate) This ITA is filed under Section 260-A of Income Tax Act, 1961 arising out of Order dated 04.04.2014 passed in ITA No.306/Bang/2014, for the Assessment Year 2009-10 : : 2 praying to decide the foregoing question of law and/or such other questions of law as may be formulated by the Hon’ble Court as deemed fit and to set aside the appellate order dated 04.04.2014 passed by the ITAT ‘A’ Bench, Bangalore, in appeal proceedings ITA No.306/Bang/2014 for Assessment Year 2009-10. This Appeal coming on for Admission, this day, N.KUMAR, J., delivered the following: J U D G M E N T The Revenue has preferred this appeal against the order passed by the Tribunal. 2. The substantial questions of law, which is raised in this appeal, are as under:- 1. “Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal was right in law to hold that the CIT is not justified in denying the benefit of Section 80P(2) to the assessee society? 2. Whether, on the facts and circumstances of the case, the appellate Tribunal was justified in law in holding that the assessee society is entitled to deduction under Sections 80P(2) of the Income Tax Act? : : 3 3. Whether the Hon’ble Tribunal is correct in allowing deduction under Section 80P(2) to assessee’s society even though same is covered under Section 80P(2) r.w.s. 2(24)(viia) being income from providing credit facilitates carried on by co-operative society with its member? 4. Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal is right in law in not following the decision of the Hon’ble Tribunal, Hyderabad Bench held in the case of Citizen Co-operative Society Ltd., wherein it is held that the society is carrying on banking business and for all practical purposes, it acts like a co-operative bank, therefore society being co-operative bank providing banking facilities to its members was not eligible to claim deduction under Section 80P after the introduction of Sec.80P(4)?” 3. The said questions came up for consideration before this Court in the case of THE COMMISSIONER OF INCOME TAX (APPEALS) VS. GENERAL INSURANCE : : 4 EMPLOYEES’ CO-OPERATIVE CREDIT SOCIETY LIMITED in ITA NO.273/2013 wherein at Para 4 it was held as under:- “4. This Court had an occasion to consider the said question in ITA No.5006/2013 dated 05.02.2014 in the case of THE COMMISSIONER OF INCOME TAX VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT, where, after referring to the relevant provisions of the Income Tax Act, and the banking Regulation Act, held as under: “If a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co- operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to : : 5 extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society. Therefore the said issue was held in favour of the assessee and against the revenue”. 4. Following the aforesaid judgment, as the said question is answered in favour of the assessee and against the revenue, we do not see any merit in this appeal Accordingly, the appeal is dismissed. : : 6 Sri.Mahesh R.Uppin is permitted to file power for respondent within four weeks from today. Sd/- JUDGE Sd/- JUDGE Prs* "