ACIT, Bangalore V. M/s Bangalore Commercial Transport Credit Co-operative Society Ltd., Bangalore

ITA 1069/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5650 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B ARULAPPA
• Assessee Lawyers: S RANGANATH
• Keywords: Gift
• Section: 143(3); 6

Judgement Text

PAGE 1 OF 5 ITA NO.1069/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.1069/BANG/2010 (ASSESSMENT YEAR 2007-08) THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(1), BANGALORE. - APPELLANT VS M/S BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LTD., NO.21, 1 ST CROSS, CHIKKANNA GARDEN, CHAMRAJPET, BANGALORE. - RESPONDENT APPELLANT BY : SHRI B ARULAPPA, ADDL. CIT RESPONDENT BY : SHRI S RANGANATH, FCA. ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-II, BANGALORE D ATED 15/3/2010. THE ASST. YEAR CONCERNED IS 2007-08. 2. THE SOLITARY ISSUE THAT IS RAISED IN THE APPEAL IS WHETHER THE CIT(A) IS JUSTIFIED IN DIRECTING THE AO TO GRANT DEDUCTION U/S 80-P(2)(A)(I) OF THE I T ACT. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- PAGE 2 OF 5 ITA NO.1069/BANG/2010 2 THE ASSESSEE IS A COOPERATIVE SOCIETY, REGISTERED UNDER THE COOPERATIVE SOCIETY ACT. FOR THE CONCERNE D ASST. YEAR, RETURN OF INCOME WAS FILED ON 31.10.2007 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S 80-P(2)(A)(I) AMOUNTIN G TO RS.37,73,700/-. THE ASSESSMENT WAS SELECTED FOR SC RUTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. THE ASSES SMENT WAS COMPLETED VIDE ORDER DATED 15/12/2009 U/S 143(3) OF THE ACT. DETERMINING THE TOTAL INCOME AT RS.37,88,800/-. TH E AO DENIED THE DEDUCTION U/S 80-P(2)(A)(I) OF THE ACT BY HOLDIN G THAT THE ASSESSEE IS A COOPERATIVE BANK DOING BANKING BUSINE SS AND THEREFORE, NOT ENTITLED TO THE CLAIM, BY VIRTUE OF I NTRODUCTION OF SUB-SECTION 4 TO SECTION 80P. 4. AGGRIEVED BY THE ASSESSMENT COMPLETED BY DENYING THE CLAIM OF DEDUCTION U/S 80-P(2)(A)(I) OF THE ACT , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY. 5. THE FIRST APPELLATE AUTHORITY FOR HIS ELABORATE REASONS MENTIONED IN PARA 3.2 TO 3.6, ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. 7. THE LEARNED DR SUBMITTED THAT THE MAIN MOTTO OF THE ASSESSEE IS LENDING FOR ITS MEMBERS, WHICH IS IN TH E NATURE OF BANKING TRANSACTION AND COMES UNDER THE PURVIEW OF 80-P(4) OF THE ACT [INSERTED IN FINANCE ACT, 2006 W.E.F. 1/4/2007] . PAGE 3 OF 5 ITA NO.1069/BANG/2010 3 8. THE LEARNED AR, ON THE OTHER HAND, REITERATED T HE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UPPORTED THE FINDING/CONCLUSION OF THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE WAS DENIED THE DE DUCTION U/S 80- P(2)(A)(I) OF THE ACT FOR THE REASON OF INTRODUCTIO N OF SUB SECTION 4 TO SECTION 80P. SECTION 80P(4) READS AS FOLLOWS:- (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY COOPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. 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 REGULATION ACT, 1949 (10 OF 1949); (B) PRIMARY COOPERATIVE 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 TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 9.1 THE ABOVE SUB-SECTION 4 OF SECTION 80P PROVIDE S THAT DEDUCTION UNDER THE SAID SECTION SHALL NOT BE AVAIL ABLE TO ANY COOPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL C REDIT SOCIETY OR RURAL DEVELOPMENT BANK. FOR THE PURPOSE OF THE SAI D SUB SECTION, PAGE 4 OF 5 ITA NO.1069/BANG/2010 4 COOPERATIVE BANK SHALL HAVE THE MEANING ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949. IN PART V OF THE BANKING REGULATION ACT, COOPERATIVE BANK MEANS A STATE CO OPERATIVE BANK, A CENTRAL COOPERATIVE BANK AND A PRIMATE COOPERATIV E BANK. 9.2 FROM THE ABOVE SECTION, IT IS CLEAR THAT THE P ROVISIONS OF SECTION 80P(4) HAS GOT ITS APPLICATION ONLY TO CO OPERATIVE BANKS. SECTION 80P(4) DOES NOT DEFINE THE WORD COOPERATIV E SOCIETY. THE EXISTING SUB-SECTION 80P(2)(A)(I) SHALL BE APPLICAB LE TO A COOPERATIVE SOCIETY CARRYING ON CREDIT FACILITY TO ITS MEMBERS. THIS VIEW IS CLARIFIED BY CENTRAL BOARD OF DIRECT TAX VIDE ITS CL ARIFICATION NO.133/06/2007-TPL DATED 9 TH MAY, 2007. THE DIFFERENCE BETWEEN A COOPERATIVE BANK AND A COOPERATIVE SOCIET Y ARE AS FOLLOWS:- NATURE COOPERATIVE SOCIETY REGISTERED UNDER BANKING REGULATION ACT, 1949 COOPERATIVE SOCIETY REGISTERED UNDER KARNATAKA COOPERATIVE SOCIETY ACT, 1959. REGISTRA -TION UNDER THE BANKING REGULATION ACT, 1949 AND COOPERATIVE SOCIETIES ACT, 1959. COOPERATIVE SOCIETIES ACT, 1959. NATURE OF BUSINESS 1. AS DEFINED IN SECTION 6 OF BANKING REGULATION ACT. 2. CAN OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, OVERDRAFT ACCOUNT, CASH CREDIT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFTS (DD), PAY ORDERS, GIFT CHEQUES, LOCKERS, BANK GUARANTEES ETC. 3. COOPERATIVE BANKS CAN ACT AS CLEARING AGENT FOR CHEQUES, DDS, PAY ORDERS AND OTHER FORMS. 4. BANKS ARE BOUND TO FOLLOW THE RULES, REGULATIONS AND DIRECTIONS ISSUED BY RESERVE BANK OF INDIA (RBI). 1. AS PER THE BYE LAWS OF THE COOPERATIVE SOCIETY. 2. SOCIETY CANNOT OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFTS, PAY ORDERS, GIFT CHEQUES, LOCKERS, BANK GUARANTEES ETC. 3. SOCIETY CANNOT ACT AS CLEARING AGENT, FOR CHEQUES, DDS, PAY ORDERS AND OTHER FORMS. 4. SOCIETY ARE BOUND BY RULES AND REGULATIONS AS SPECIFIED BY IN THE COOPERATIVE SOCIETIES ACT. FILING OF RETURNS COOPERATIVE BANKS HAVE TO SUBMIT ANNUAL RETURN TO RBI EVERY YEAR. SOCIETY HAS TO SUBMIT THE ANNUAL RETURN TO REGISTRAR OF SOCIETIES. INSPEC- TION RBI HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. REGISTRAR HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. PART V PART V OF THE BANKING REGULATION ACT IS APPLIC ABLE TO COOPERATIVE BANKS. PART V OF THE BANKING REGULATION ACT IS NOT APPLICABLE TO COOPERATIVE BANKS. USE OF WORDS THE WORD BANK, BANKER, BANKING CAN BE USED BY A COOPERATIVE BANK. THE WORD BANK, BANKER, BANKING CANNOT BE USED BY A COOPERATIVE SOCIETY. PAGE 5 OF 5 ITA NO.1069/BANG/2010 5 9.3 IF THE INTENTION OF THE LEGISLATURE WAS NOT TO GRANT DEDUCTION U/S 80P(2)(A)(I) TO COOPERATIVE SOCIETIES CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS, THEN THIS SECTION WOULD HAVE BEEN DELETED. THE NEW PROVISO T O SECTION 80P(4) WHICH IS BROUGHT INTO STATUTE IS APPLICABLE ONLY TO COOPERATIVE BANKS AND NOT TO CREDIT COOPERATIVE SOCIETIES. THE INTEN TION OF THE LEGISLATURE OF BRINGING IN COOPERATIVE BANKS INTO T HE TAXATION STRUCTURE WAS MAINLY TO BRING IN PAR WITH COMMERCIAL BANKS. SINCE THE ASSESSEE IS A COOPERATIVE SOCIETY AND NOT A COOP ERATIVE BANK, THE PROVISIONS OF SECTION 80P(4) WILL NOT HAVE APPL ICATION IN THE ASSESSEES CASE AND THEREFORE, IT IS ENTITLED TO DE DUCTION U/S 80P(2)(A)(I) OF THE ACT. HENCE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED ON FRIDAY, THE 8 TH DAY OF APRIL, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/17/3. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.