Banhatti Hatagar Co-op Credit Society Ltd., Bagalkot V. ITO, Bijapur

ITA 1218/BANG/2013

• Counselvise Citation: 121821114 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Keywords: Question of law
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1218/BANG/2013 ASSESSMENT YEAR : 2009-10 BANHATTI HATAGAR COOPERATIVE CREDIT SOCIETY LTD., A/P BANHATTI. TAL: JAMKHANDI. DIST: BAGALKOT. PAN : AAALB 0084D VS. THE INCOME TAX OFFICER, WARD 2, BIJAPUR. APPELLANT RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI P.K. SRIHARI, ADDL. CIT(DR) DATE OF HEARING : 25.09.2014 DATE OF PRONOUNCEMENT : 26.09.2014 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL IS BY THE ASSESSEE DIRECTED AGAINST THE ORDER DATED 28.5.2013 OF THE CIT(APPEALS), BELGAUM AND PERTAINS TO ASSESSMENT YEAR 2009-10. ITA NO.1218/BANG/2013 PAGE 2 OF 6 2. IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEV ANCE IS THAT DEDUCTION U/S. 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 [THE ACT] WAS NOT GRANTED TO IT. 3. THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTERE D UNDER THE KARNATAKA STATE COOPERATIVE SOCIETIES ACT, ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT HAD CLAIMED DEDUCTIO N U/S. 80P(2)(A)(I) OF THE ACT OF RS.13,94,460. THE AO DENIED SUCH DEDUCTION TAKING A VIEW THAT THE ASSESSEE FELL WITHIN THE DEFINITION OF A COOPERATIV E BANK UNDER THE BANKING REGULATION ACT, 1949. AS PER THE AO, COOPERATIVE B ANK AS PER SECTION 5(CCV) OF BANKING REGULATION ACT, 1949, INCLUDED A PRIMARY COOPERATIVE BANK. SINCE THE BYE LAWS OF THE SOCIETY HAD NO CLA USE, WHICH PERMITTED ADMISSION OF ANY OTHER COOPERATIVE SOCIETY AS A MEM BER, THE AO DEEMED THE ASSESSEE TO BE A COOPERATIVE BANK. AS PER THE AO, THE ASSESSEE SATISFIED ALL THREE CONDITIONS PRESCRIBED U/S. 5(CC V) OF THE BANKING REGULATION ACT, 1949. THUS, AS PER THE AO, SECTION 80P(4) STOOD ATTRACTED. 4. AGGRIEVED, THE ASSESSEE MOVED AN APPEAL BEFORE THE CIT(APPEALS). THE ARGUMENT OF THE ASSESSEE WAS THAT IT WAS NOT A COOPERATIVE BANK AND THEREFORE DEDUCTION CLAIMED U/S. 80P(2)(A)(I) COULD NOT BE DENIED TO IT. RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO V. YESHWANTPUR CREDIT CO- OPERATIVE SOCIETY LTD . (ITA NO.717/BANG/2011 DATED 11.4.2012) , ACIT V. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHA KARI LTD., ITA NO.1218/BANG/2013 PAGE 3 OF 6 ( ITA NOS.1 TO 3/PNJ/2012); AND BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LTD., ( ITA.NO.1069/BANG/2010 DATED 8/4/2011) . HOWEVER, THE CIT(APPEALS) WAS NOT IMPRESSED. AC CORDING TO HIM, THE ASSESSEE WAS A PRIMARY COOPERATIVE BANK AS PER THE BANKING REGULATION ACT, 1949 AND THEREFORE SECTION 80P(4) S TOOD ATTRACTED. RELYING ON THE DECISIONS OF THE HYDERABAD BENCH OF THE TRIB UNAL IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY V. ADDL. CIT (ITA NO.1 003 & 1004/HYD/2011 DATED 2.7.2012) AND PANAJI BENCH OF THE TRIBUNAL IN JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. (SUPRA) , HE UPHELD THE ACTION OF THE AO IN DENYING DEDUCTION U/S. 80P(2)(A )(I) OF THE ACT. 5. WE HAVE PERUSED THE ORDERS AND ALSO HEARD THE L D. DR. THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80P(2)(A)(I) WAS DISALLOWED BY THE AO FOR THE REASON THAT THE ASSESSEE FELL WITHIN THE RE ALM OF A CO-OPERATIVE BANK AS DEFINED UNDER BANKING REGULATION ACT, 1949. NO DOUBT, THE ASSESSEE MIGHT HAVE SATISFIED THE THREE PRIMARY CONDITIONS M ENTIONED IN SECTION 5(CCV) OF THE BANKING REGULATION ACT, 1949. BUT, W E FIND FROM THE BYE LAWS, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFFICER IN HIS ORDER, THAT THERE WAS NOTHING WHICH FORBID A COOPERATIVE SOCIETY FROM BECOMING A MEMBER. JUST BECAUSE CLAUSE (VIIA) HAS BEEN ADDED TO SECTIO N 2(24) OF THE ACT, WHEREBY INTEREST EARNED ON CREDIT FACILITIES PROVID ED BY A COOPERATIVE SOCIETY TO ITS MEMBERS IS ALSO DEEMED AS INCOME, WI LL NOT, IN OUR OPINION, PRECLUDE AN ASSESSEE FROM CLAIMING A DEDUCTION U/S. 80P(2)(A)(I) OF THE ITA NO.1218/BANG/2013 PAGE 4 OF 6 ACT. IN ANY CASE, WE FIND THAT THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT ( ITA NO.5006/2013 DATED 5.2.2014 ) IN RELATION TO A SIMILAR ISSUE, HAS HELD AT PARAGRAPHS 5 TO 8 OF ITS JUDGMENT AS FOLLOWS:- 5. THE TRIBUNAL HELD THAT AS THE ASSESSEE IS NOT A COOPERATIVE BANK, SECTION 80P(4) HAS NO APPLICATION. MOREOVER, THE POWER UNDER SECTION 263 OF THE ACT COULD BE INVOKED BY TH E REVISIONAL AUTHORITY ONLY, IF THE ORDER IS ERRONEOUS AND THERE BY IS PREJUDICIAL TO THE INTEREST OF REVENUE, IN THE INSTANT CASE AS THE ASSESSEE IS NOT A CO-OPERATIVE BANK I.E. THERE IS NO ERROR COMMITTE D BY THE ASSESSING AUTHORITY MUCH LESS, THE SAID ORDER WAS P REJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE, THE ORDER PA SSED BY THE REVISIONAL AUTHORITY WAS SET-ASIDE. 6. AGGRIEVED BY THE SAID ORDER, THE REVENUE HAS PR EFERRED THIS APPEAL. 7. THE ONLY SUBSTANTIAL QUESTION OF LAW WHICH ARIS ES FOR OUR CONSIDERATION IN THIS APPEAL IS:- IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, WHET HER THE REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER UNDER SECTION 263 OF THE ACT WITHOUT THE FOUNDATIONAL FAC T OF ASSESSEE BEING CO-OPERATIVE BANK WAS NOT THERE? 8. IN THE ASSESSMENT ORDER, THE ASSESSING AUTHORI TY HAS CLEARLY STATED THAT THE ASSESSEE IS A COOPERATIVE S OCIETY AND HAS NOT OBTAINED ANY BANKING LICENSE. THE BUSINESS OF T HE ASSESSEE IS TO PROVIDE CREDIT FACILITIES TO ITS MEMBERS. SINCE THE ASSESSEE CANNOT CARRY ON ANY BANKING BUSINESS, THE INTEREST ON INVESTMENT IS TAXABLE AS INCOME FROM OTHER SOURCE. THEREFORE T HE AFORESAID FACTS, WHICH IS NOT IN DISPUTE CLEARLY ESTABLISHES THAT IT IS NOT A CO-OPERATIVE BANK. INFACT, THE REVISIONAL AUTHORIT Y ALSO IN ITS ORDER HAS CATEGORICALLY STATED THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY, WHICH PROVIDES CREDIT FACILITIES. SECTION 80P OF THE ACT DEALS WITH THE DEDUCTION OF INCOME OF A SOCIETY. IN THE CASE OF ANY ASSESSEE BEING A CO-OPERATIVE SOCIETY, THE WHOL E OF THE AMOUNTS OF PROFITS AND GAINS OF BUSINESS ATTRIBUTAB LE TO ANY OF ITA NO.1218/BANG/2013 PAGE 5 OF 6 OTHER ACTIVITIES REFERRED TO SUB-SECTION (2) OF SEC TION 80P SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE. IN OTHER WORDS, THE SAID INCOME IS NOT TAXABLE. IT IS A BENE FIT GIVEN TO THE CO-OPERATIVE SOCIETY. SECTION 80P(4) WAS INTRODUCED BY FINANCE ACT, 2006 WITH EFFECT FROM 01.04.2007 EXCLUDING THE SAID BENEFIT TO A CO-OPERATIVE BANK. THE SAID PROVISION READS AS UNDER:- (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y IN RELATION TO ANY CA-OPERATIVE BANK OTHER THAN A PRIM ARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATI VE AGRICULTURAL AND RURAL DEVELOPMENT BANK. (A) COOPERATIVE BANK AND PRIMARY AGRICULTURAL C REDIT SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION 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-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. THEREFORE, THE INTENTION OF THE LEGISLATURE IS CLEA R, IF A CO- OPERATIVE BANK IS EXCLUSIVELY CARRYING ON BANKING B USINESS, THEN THE INCOME DERIVED FROM THE SAID BUSINESS CANNOT BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE SAI D INCOME IS LIABLE FOR TAX. A CO-OPERATIVE BANK AS DEFINED UNDE R THE BANKING REGULATION ACT INCLUDES THE PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVEL OPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEF ITS TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO -OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID N OT WANT TO EXTEND THE SAID BENEFIT TO A CO-OPERATIVE BANK WHIC H IS EXCLUSIVELY CARRYING ON BANKING BUSINESS I.E. THE P URPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSESSEE IS NOT A COOP ERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND AS IT DOES NOT POSSESS A LICENCE FROM RESERVE BANK OF INDIA TO CAR RY ON BUSINESS, IT IS NOT A CO-OPERATIVE BANK. IT IS A CO -OPERATIVE SOCIETY WHICH ALSO CARRIES ON THE BUSINESS OF LENDI NG MONEY TO ITS MEMBERS WHICH IS COVERED UNDER SECTION 80P(2)(A)(I) I.E. CARRYING ON THE BUSINESS OF BANKING FOR PROVIDING C REDIT FACILITIES ITA NO.1218/BANG/2013 PAGE 6 OF 6 TO ITS MEMBERS. THE OBJECT OF THE AFORESAID AMENDME NT IS NOT TO EXCLUDE THE BENEFIT EXTENDED UNDER SECTION 80P(1) T O SUCH SOCIETY. THEREFORE, THERE WAS NO ERROR COMMITTED BY THE ASSESSING AUTHORITY. THE SAID ORDER WAS NOT PREJUDI CIAL TO THE INTEREST OF THE REVENUE. THE CONDITION PRECEDENT FO R THE COMMISSIONER TO INVOKE THE POWER UNDER SECTION 263 IS THAT THE TWIN CONDITION SHOULD BE SATISFIED. THE ORDER SHOUL D BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6. THUS, THE ISSUE OF DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT IS DECIDED IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF SEPTEMBER , 2014 . SD/- SD/- ( N.V. VASUDEVAN ) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT ME MBER BANGALORE, DATED, THE 26 TH SEPTEMBER , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.