ITO, Bagalkot V. Shri. Siddeshwar Souhardha Sahakari Niyamit, Bagalkot

ITA 1346/BANG/2013

• Counselvise Citation: 134621114 RSA 2013
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 19-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SHANKAR PRASAD K JT
• Keywords: Question of law
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NOS.1346 & 1347/BANG/2013 ASSESSMENT YEARS : 2009-10 & 2010-11 THE INCOME TAX OFFICER, WARD 1, BAGALKOT. VS. SREE SIDDESHWAR SOUHARDHA SAHAKARI NIYAMIT, NEAR BUS STAND, BILAGI. BAGALKOT DISTRICT. PAN : AACAS 9345R APPELLANT RESPONDENT APPELLANT BY : DR. SHANKAR PRASAD K., JT. CIT(DR) RESPONDENT BY : NONE DATE OF HEARING : 11.09.2014 DATE OF PRONOUNCEMENT : 19.09.2014 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE APPEALS FILED BY THE REVENUE ARE AGAINST T HE ORDERS DATED 15.7.2013 OF THE CIT(APPEALS), BELGAUM, WHEREIN THE LD. CIT(APPEALS) HELD THAT THE ASSESSEE WAS ELIGIBLE FOR CLAIMING DEDUCTI ON 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. THE GRIEVANCE RAISED BY THE REVENUE IS THAT THE ASSESSEE FALLS WITHIN THE DEFINITION OF CO-OPERATIVE BANK UNDER THE BANKI NG REGULATION ACT, 1949 AND THEREFORE IT CANNOT BE ALLOWED DEDUCTION U/S. 8 0P(2)(A)(I), IN VIEW OF THE PROHIBITION CONTAIN IN SECTION 80P(4) OF THE ACT. 3. THE ASSESSING OFFICER HAD DENIED THE CLAIM OF T HE ASSESSEE 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. THE ASSESSEES APPEAL BEFORE THE CIT(APPEALS) WA S SUCCESSFUL. ACCORDING TO THE LD. CIT(APPEALS), THE ASSESSEES B YE LAWS HAD A CLAUSE WHEREIN IT WAS MENTIONED THAT ANY INDIVIDUAL OR CO- OPERATIVE SOCIETY FRAMED AS PER LAW PRESENTLY EXISTING COULD BECOME A MEMBER . AS PER THE LD. CIT(A), DEFINITION OF CO-OPERATIVE SOCIETY U/S. 2(C ) OF THE KARNATAKA SOCIETIES ACT, 1959 CLEARLY STATED THAT A CO-OPERAT IVE SOCIETY MEANT A SOCIETY REGISTERED OR DEEMED TO BE REGISTERED UNDER THE SAID ACT. RELYING ON THE DECISION OF THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. BULDANA URBAN CO-OPERATIVE CREDIT SOCIETY LTD. (ITA NOS.151 TO 153(NAG) OF 2012 DATED 23.11.2012 , THE LD. CIT(A) HELD THAT THE ASSESSEE CANNOT BE CONSIDERED AS A CO-OPERATIVE BAN K AND THEREFORE DEDUCTION CLAIMED U/S. 80P(2)(A)(I) COULD NOT BE DE NIED TO IT. ITA NO.1346 & 1347/BANG/2013 PAGE 3 OF 6 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 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. NOBODY APPEARED FOR THE ASSESSEE. 7. WE HAVE PERUSED THE IMPUGNED ORDERS AND HEARD TH E CONTENTIONS OF THE LD. DR. THE LD. CIT(APPEALS) HAS GIVEN A CLEAR FINDING THAT MEMBERSHIP TO THE ASSESSEE WAS OPEN TO A CO-OPERATIVE SOCIETY. HENCE, ACCORDING TO HIM, THE THREE CONDITIONS REQUIRED TO BE SATISFIED CUMULATIVELY FOR BECOMING A PRIMARY CO-OPERATIVE BANK WAS NOT SATISFIED. NOT HING WAS PRODUCED BEFORE BY THE LD. DR TO REBUT THIS FINDING. IN ANY CASE, THE ISSUE STANDS COVERED BY THE DECISION OF HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAM ITHA 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. ITA NO.1346 & 1347/BANG/2013 PAGE 4 OF 6 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 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); ITA NO.1346 & 1347/BANG/2013 PAGE 5 OF 6 (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 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. 8. ACCORDINGLY, WE ARE OF THE OPINION THAT THERE IS NO MERIT IN THESE APPEALS. ITA NO.1346 & 1347/BANG/2013 PAGE 6 OF 6 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF SEPTEMBER , 2014 . SD/- SD/- ( N.V. VASUDEVAN ) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT ME MBER BANGALORE, DATED, THE 19 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.