The Income Tax Officer, Ward-1, Sirsi., Sirsi V. M/s Vyavasaya Seva Sahakari Bank Ltd. Katur., Sirsi

ITA 124/PAN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1238 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 08-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIRAJ Y V
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 12 4 /P A N/201 6 (ASST. YEAR : 20 1 0 - 1 1 ) IT O , WARD - 1 , SIRSI . VS. M/S. VYAVASAYA SEVA SAHAKARI BANK LTD., KATUR, MUNDGOD. (APPELLANT) PAN NO. AABHT 1956 M (RESPONDENT) ASSESSEE BY : NONE. DEPARTMENT BY : SHRI RAVIRAJ Y. V. - D R DATE OF HEARING : 2 1 / 0 9 /201 6 . DATE OF PRONOUNCEMENT : 21 / 0 9 /201 6 . O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER TH I S IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , HUBLI IN ITA NO. 92/CIT(A)/HBL/2013 - 14 , DATED 2 9 /0 2 /201 6 FOR THE ASSESSMENT YEAR 201 1 - 1 2. 2. THE SOLE ISSUE INVOLVED IN TH IS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING DEDUCTION TO THE ASSESSEE UNDER SEC. 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME AT NIL AFTER CLAIMING DEDUCTION UNDER SEC. 80P OF THE ACT . IT WAS CLAIMED THAT THE SOCIETY IS ENTITLED TO DEDUCTION UNDER SEC. 80P AS IT WAS A COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. HOWEVER, THE CL AIM OF THE 2 ITA NO. 124 /PAN/2016 ASSESSEE FOR DEDUCTION UNDER SEC. 80P WAS REJECTED BY THE ASSESSING OFFICER IN THE ORDER PASSED UNDER SEC. 143(3) OF THE ACT ON THE GROUND THAT THE ASSESSEE WAS A COOPERATIVE BANK, AND HENCE, NOT ENTITLED TO CLAIM DEDUCTION BY VIRTUE OF SEC. 80P (4). 4. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) AL LOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: - I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE AND ALSO THE ASSESSMENT ORDER OF THE AC. THE DECISION QUOTED BY THE ASSESSEE THAT O F HONORABLE HIGH COURT OF KARNATAKA IN THE CASE OF TUMKUR MERCHANTS SOUHARDHA CREDIT COOPERATIVE SOCIETY, THE A P HIGH COURTS DECISION IN THE CASE OF CIT VS. A . P . STATE COOPERATIVE BANK LTD., ARE ALL IN FAVOUR OF THE ASSESSEE, WHEREAS THE AC RELIED MORE ON SUPREME COURTS DECISION IN THE CASE OF TOTGARS CO - OPERATIVE SOCIETY. THIS CANT BE ACCEPTED BECAUSE THE FACTS ARE DIFFERENT IN THIS CASE. THE KARNATA KA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDHA CREDIT CO - OPERATIVE SOCIETY HAS NOT ONLY ANALYZED THE FACTS OF TOTGARS CO - OPERATIVE SALE SOCIETY BUT ALSO HAS SAID AS TO HOW THE DECISIONS OF THE ANDHRA PRADESH HIGH COURT REFERRED TO ABOVE AND ALSO T HAT OF THE SUPREME COURTS DECISION IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO., ARE APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. IN THIS CASE THE ASSESSEE IS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND MAINLY ENGAGED IN TRADING ACTIVITIES FOR ITS MEMBERS LIKE PURCHASE AND SALE OF RATION GOODS, FERTILIZERS, KIRANA ITEMS, PESTICIDES, AGRICULTURAL IMPLEMENTS, ETC., AND ALSO PROVIDES CRED IT FACILITIES TO ITS MEMBERS. THE ASSESSEE HAS MADE INVESTMENTS IN OTHER COOPERATIVE BANKS AND HAS RECEIVED INTEREST AND DIVIDEND INCOME AS DETAILED BELOW: 1 . INTEREST ON DEPOSITS FROM KANARA DISTRICT CENTRAL COOPERATIVE BANK LTD RS.2,30,711/ - 2 . DIVIDEND AN D INTEREST INCOME FROM OTHER COOPERATIVE SOCIETIES RS. 16,596/ - RS.2,47,307/ - THEREFORE WHETHER THIS INTEREST AND DIVIDEND INCOME EARNED IS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS THE QUESTION THAT REQUIRES TO BE DECIDED OR WHETHER THE INTEREST AND DIVIDEND EARNED ON DEPOSITS KEPT WITH OTHER BANKS IS DEDUCTIBLE ULS.80P(2)(D). 3 ITA NO. 124 /PAN/2016 SECTION 80P(2)(D) STATES THAT: I NTEREST OR DIVIDEND IN RESPECT OF ANY INCOME, BY WAY OF DEPOSIT WITH ANY CO - OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO - OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME IS ELIGIBLE FOR DEDUCTION . AS PER SECTION 2(19) OF THE ACT, A CO - OPERATIVE SOCIETY MEANS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE CO - OPERATIVE SOCIETIES ACT, 1912, OR UNDER ANY LAW FOR THE TIME BEING IN FORCE IN ANY STATE FOR THE REGISTRATION OF CO - OPERATIVE SOCIETIES. THE PROVISIONS OF THE IT ACT, 1961, EITHER IN SECTION 2(19) OR U/S.80P, DO NOT MAKE ANY DISCRIMINATION BETWEEN CO - OPERATIVE SOCIETIES CARRYING ON BANKING BUSINESS AND OTHER CO - OPERATIVE SOCIETIES. CO - OPERATIVE BANKS ARE PRIMARILY CO - OPERATIVE SOCIETIES BY CONSTITUTION AND BANKS BY THE NATURE OF BUSINESS. IN THE CASE OF MENASI SEEMEYA GROUP GRAMAGALA SEVA SAHAKARI SANGHA NIYAMITA, IN ITA NO.609 AND 601(BNG/2014 DATED 06/02/2015) IT WAS HELD THAT THE RESTRICTIVE INTERPRETATION GIVEN TO CO - OPERATIVE SOCIETY U/S.80P(2)(D) WAS NOT WARRANTED. THE ITAT, BANGALORE BENCH, IN THIS CASE, THROUGH A DETAILED REASONING, CAME TO THE CONCLUSION THAT THE INTEREST AND DIVIDEND EARNED BY THE ASSESSEE FROM CO - OPERATIVE BANK WAS ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT. IN CONCLUSION IT IS HELD THAT THE INTEREST INCOME AND DIVIDEND EARNED ON DEPOSITS AND INVESTMENTS MADE WITH OTHER COOPERATIVE BANKS/SOCIETY ARE FULLY DEDUCTIBLE UNDER SECTION 80P(2)(D) FROM THE INCOME LIABLE TO TAX . 5. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COU LD NOT POINT OUT ANY SPECIFIC ERROR IN THE ABOVE QUOTED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE CLAIM OF DEDUCTION UNDER SEC. 80P(2)(A)(I) OF THE ACT AFTER FOLLOWING THE PRINCIPLES LAID D OWN IN THE DECISION OF THE HONBLE BOMBAY HIGH COURT AT PANAJI IN THE CASE OF M/S. THE QUEPEM URBAN COOPERATIVE CREDIT SOCIETY LTD. VS. ACIT IN TAX APPEALS NO. 22 - 24/2015 DATED 17/04/2015 , AS ALSO THE DECISION OF THE HONBLE KARNA TA KA HIGH COURT IN THE CASE O F TUMKUR MERCHANTS SOUHARD A CREDIT COOPERATIVE LTD. IN ITA NO. 307/2014, DATED 28/10/2014 . NO CONTRARY DECISION COULD BE CITED BY THE DEPARTMENTAL REPRESENTATIVE. WE, THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE 4 ITA NO. 124 /PAN/2016 REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), W HICH IS HEREBY CONFIRMED AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 6 . IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 2 1 TH DAY OF SEPTEMBER , 201 6 AT GOA . S D / - S D / - (N.S.SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 1 TH SEPTEMBER, 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE M/S. VYAVASAYA SEVA SAHAKARI BANK LTD., KATUR, MUNDGOD. 2 . THE REVENUE. ITO, WARD - 1, SIRSI. 3 . THE PR. CIT , HUBLI. 4 . THE CIT(A) , HUBLI 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI .