ITO, V. M/s Udaya Souharda Credit Co-Op Society Ltd.,

ITA 1308/BANG/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80696 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR PANDA
• Assessee Lawyers: S RAJESWARI
• Keywords: Question of law
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1308/BANG/2013 ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER, WARD 4(2), BANGALORE. VS. M/S. UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD., NO.372, 2 ND FLOOR, 9 TH MAIN, HANUMANTHANAGAR, BANGALORE 560 019. PAN : AAAAU 0472H APPELLANT RESPONDENT APPELLANT BY : SHRI BIJOY KUMAR PANDA, ADDL. CIT(DR) RESPONDENT BY : MS. S. RAJESWARI, C.A. DATE OF HEARING : 18.09.2014 DATE OF PRONOUNCEMENT : 26.09.2014 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 5.6.2013 OF THE CIT(APPEALS)-II, BANGALORE, WHEREIN THE LD. CIT(APPEALS) HELD THAT THE ASSESSEE WAS ELIGIBLE FOR CLAIMING DEDUCTION U/ S. 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 [THE ACT]. ITA NO.1346 & 1347/BANG/2013 PAGE 2 OF 6 2. GRIEVANCE RAISED BY THE REVENUE IS THAT THE ASSE SSEE FALLS WITHIN THE DEFINITION OF CO-OPERATIVE BANK UNDER THE BANKING R EGULATION ACT, 1949 AND THEREFORE IT CANNOT BE ALLOWED DEDUCTION U/S. 80P(2 )(A)(I), IN VIEW OF THE PROHIBITION CONTAIN IN SECTION 80P(4) OF THE ACT. 3. ASSESSING OFFICER HAD DENIED THE CLAIM OF THE A SSESSEE U/S. 80P(2)(A)(I) FOR THE REASON THAT THE ASSESSEE WAS A CO-OPERATIVE BANK FALLING WITHIN THE DEFINITION OF BANKING REGULATION ACT, 1949. THE AO HAD APPLIED SECTION 80P(4) OF THE ACT. THE AO NOTED TH AT THE ASSESSEES BYE LAWS DID NOT CONTAIN A CLAUSE WHICH ALLOWED ADMISSI ON OF ANY CO-OPERATIVE SOCIETY AS A MEMBER. 4. ASSESSEES APPEAL BEFORE THE CIT(APPEALS) WAS SU CCESSFUL. FOLLOWING THE DECISION OF THE BANGALORE BENCH OF TH E TRIBUNAL IN THE CASE OF ACIT V. BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OP ERATIVE SOCIETY LTD., ITA NO.1069/BANG/2010 DATED 8.4.2011 AND THE DECISION OF PANAJI BENCH OF THE TRIBUNAL, IN THE CASE OF DCIT V. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. & ANR. IN IT A NOS. 1 TO 3/PNJ/2012 DATED 30.3.2012 , THE LD. CIT(APPEALS) HELD THAT INCOME EARNED BY THE ASSESSEE FROM ITS ACT OF LENDING MONEY OUT O F DEPOSITS RECEIVED FROM PUBLIC OR ITS MEMBERS SHALL BE ELIGIBLE FOR EXEMPTI ON U/S. 80P(2)(A)(I) OF THE ACT. 5. NOW BEFORE US, THE LD. DR SUBMITTED THAT THE ASS ESSEE WAS A CO- OPERATIVE BANK AS DEFINED UNDER BANKING REGULATION ACT, 1949. ACCORDING ITA NO.1346 & 1347/BANG/2013 PAGE 3 OF 6 TO HIM, THE ASSESSEE SATISFIED THE CONDITIONS FOR B ECOMING A PRIMARY CO- OPERATIVE BANK AS DEFINED IN SECTION 5(CCV) OF THE BANKING REGULATION ACT, 1949. 6. WE HAVE PERUSED THE IMPUGNED ORDERS AND HEARD TH E RIVAL CONTENTIONS. WE FIND THAT MEMBERSHIP TO THE ASSESSE E SOCIETY WAS OPEN TO A CO-OPERATIVE SOCIETY. HENCE, THE THREE CONDITION S REQUIRED TO BE SATISFIED CUMULATIVELY FOR BECOMING A PRIMARY CO-OPERATIVE BA NK WAS NOT SATISFIED. NOTHING WAS PRODUCED BEFORE BY THE LD. DR TO THE CO NTRARY. IN ANY CASE, THE ISSUE STANDS COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT ( ITA NO.5006/2013 DATED 5.2.2014). THE RELEVANT PARAGRAPHS 5 TO 8 OF THE JUDGMENT IS REPRODUCED HER EIN:- 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 ITA NO.1346 & 1347/BANG/2013 PAGE 4 OF 6 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 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 ITA NO.1346 & 1347/BANG/2013 PAGE 5 OF 6 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 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. 7. ACCORDINGLY, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THE APPEAL. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . 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/ ITA NO.1346 & 1347/BANG/2013 PAGE 6 OF 6 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.