The Income Tax Officer, Ward-2(3), Panaji., Panaji V. The Vividha Urban Co-op. Credit Society Ltd., Goa

ITA 16/PAN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2117 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK RATKAL LD
• Keywords: Question of law
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI NARENDRA S. SAINI, HON'BLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 16 /P AN /201 6 : (A SST .Y R : 201 0 - 1 1 ) INCOME TAX OFFICER, WARD - 2(3), PANAJI - GOA . ( APPELLANT) VS. THE VIVIDHA URBAN CO - OPERATIVE CREDIT SOCIETY LTD., NAVELIM, BICHOLIM - GOA PAN : AA AAV2508F (RESPONDENT) ITA NO. 17/PAN/2016 : (ASST.YR :2009 - 10) INCOME TAX OFFICER, WARD - 2(3), PANAJI - GOA . ( APPELLANT) AND VS. THE SBI EMPLOYEES CO - OPERATIVE CREDIT SOCIETY LTD., MEZANINE FLOOR, SBI HOUSE, M.G. ROAD, PANAJI. PAN : AA GFD1842D. (RESPONDENT) ITA NO. 18/PAN/2016 : (ASST.YR :2010 - 11) INCOME TAX OFFICER, WARD - 2(4), PANAJI - GOA. ( APPELLANT) VS. M/S MES STAFF CO - OPERATIVE CREDIT SOCIETY LTD., T - 67, MES BLDG., VARANPURI, CWE (NORTH) BAINA, VASCO, GOA . PAN : AAA JM0334K. (RESPONDENT) A PPELLANT BY : SHRI ABHISHEK RATKAL, LD. DR. R ESPONDENT BY : SHRI CHINMAY S. KAMAT, C.A. SHRI UMESH SONURLEKAR, CHAIRMAN. 2 ITA NO S . 16,17&18 /P AN /201 6 (A SST .Y RS : 201 0 - 1 1,2009 - 10 & 2010 - 11 ) DATE OF HEARING : 19/ 0 4 /201 6 . DATE OF PRONOUNCEMENT : 19 /0 4 /201 6. O R D E R PER GEORGE MATHAN, J.M : TH E S E ARE THREE APPEAL S FILED BY TH E REVENUE AGAINST THE SEPARATE ORDER S OF L D. CIT(A), PANAJI - 1, IN ITA NO.156 / PNJ /13 - 14 , DATED 27.11.2015, ITA NO.486/PNJ/11 - 12 DATED 23.11.2015 AND ITA NO.165/MRG/12 - 13 DATED 23.11.2015 FOR THE ASSESSMENT YEARS 201 0 - 1 1 , 2009 - 10 & 2010 - 11 RESPECTIVELY . 2. SHRI ABHISHEK RATKAL, L D. DR REPRESENTED ON BEHALF OF THE REVENUE. SHRI CHINMAY S. KAMAT, C.A., REPRESENTED ON BEHALF OF THE ASSESSEES IN ITA NOS. 16 & 17/PAN/2016 AND SHRI UMESH SONUR LEKAR, CHAIRMAN REPRESENTED ON BEHALF OF THE ASSESSEE IN ITA NO.18/PAN/2016. 3. THE MAIN ISSUE INVOLVED IN THESE APPEALS 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. 4 . THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME AFTE R CLAIMING DEDUCTION UNDER SEC. 80P(2)(A)(I) OF THE ACT FOR 56,21,130 / - FOR THE ASSESSMENT YEAR 2010 - 11, 13,30,340/ - FOR THE ASSESSMENT YEAR 2009 - 10 AND 7,81,730/ - FOR THE ASSESSMENT YEAR 2010 - 11 . IT WAS CLAIMED THAT THE SOCIETY IS ENTITLED TO DEDUCTION UNDER SEC. 80P(2)(A)(I) AS IT WAS A COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. HOWEVER, THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SEC. 80P(2)(A)(I) WAS REJECTED BY TH E ASSESSING OFFICER IN THE ORDER PASSED 3 ITA NO S . 16,17&18 /P AN /201 6 (A SST .Y RS : 201 0 - 1 1,2009 - 10 & 2010 - 11 ) 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). 5. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED TH E CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: - 5.1 . I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE AO HAS EQUATED THE APPELLANT CO - OPERATIVE SOCIETY WITH PRIMARY COOPERATIVE BANK AND HAS DENIED DEDUCTION U/S.80P( 2). ON THIS ISSUE, THE HONBLE HIGH COURT HAS DECIDED AS UNDER: THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE APPELLANT IS A CO - OPERATIVE SOCIETY AS THE SAME IS REGISTERED UNDER THE CO - OPERATIVE ACT. THE APPELLANT IS CLAIMING DEDUCTION OF INCOME EARN ED ON PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS PROVIDED UNDER SECTION 80P(2)(A)(I) OF THE ACT. IT IS APPELLANTS CASE THAT, IT IS NOT CARRYING ON THE BUSINESS OF THE BANKING. CONSEQUENTLY, NOT BEING A CO - OPERATIVE BANK THE PROVISIONS OF SECTION 80P(4) OF THE ACT WOULD NOT EXCLUDE THE APPELLANT FROM CLAIMING THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER IN TERMS OF SECTION 80P OF THE ACT THE MEANING OF THE WORDS COOPERATIVE BANK IS THE MEANING ASSIGNED TO IT IN CHAPTER V OF THE BANKING REGULATION ACT, 1949. A COOPERATIVE BANK IS DEFINED IN SECTION 5(CCI) OF BANKING REGULATION ACT TO MEAN A STATE COOPERATIVE BANK - , A CENTRAL COOPERATIVE BANK AND A PRIMARY COOPERATIVE BANK. ADMITTEDLY, THE APPELLANT IS NOT A STATE COOPERATIVE BANK , A CENTRAL COOPERATIVE BANK THUS WHAT HAS TO BE EXAMINED IS WHETHER THE APPELLANT IS A PRIMARY COOPERATIVE BANK AS DEFINED IN PARA V OF THE BANKING REGULATION ACT. SECTION 5(CCV) OF THE BANKING REGULATION ACT DEFINES A PRIMARY COOPERATIVE BANK TO MEAN A C OOPERATIVE SOCIETY WHICH CUMULATIVELY SATISFIES THE FOLLOWING THREE CONDITIONS: 1) ITS PRINCIPAL BUSINESS OR PRIMARY OBJECT SHOULD BE BANKING BUSINESS OF BANKING, 2) ITS PAID UP SHARE CAPITAL AND RESERVES SHOULD NOT BE LESS THAT RUPEES ONE LAKH. 3) ITS BYE - LAWS DO NOT PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY AS ITS MEMBER. 4 ITA NO S . 16,17&18 /P AN /201 6 (A SST .Y RS : 201 0 - 1 1,2009 - 10 & 2010 - 11 ) IT IS ACCEPTED POSITION THAT CONDITION NO. (2) IS SATISFIED AS THE SHARE CAPITAL IN AN EXCESS OF RUPEES ONE LAKH IT HAS BEEN THE APPELLANTS CONTENTION THAT THE CONDITIONS NO (1) AND (3) PROVIDED ABOVE ARE NOT SATISFIED. THEREFORE THE ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE APPELLANT SATISFIES CONDITION NO (1) AND (3) ABOVE THE IMPUGNED ORDER AFTER REFERRING TO THE DEFINITION OF BANKING BUSINESS AS DEFINED IN SEC TION 5B OF THE BANKING REGULATION ACT, HELD THAT THE PRINCIPAL BUSINESS OF THE APPELLANT IS BANKING SECTION 5B OF THE BANKING REGULATION ACT DEFINES BANKING TO MEAN ACCEPTING OF DEPOSITS FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSIT OF MONEY FROM TH E PUBLIC REPAYABLE ON DEMAND OR OTHERWISE. THE IMPUGNED ORDER JUXTAPOSES THE ABOVE DEFINITION WITH THE FINDING OF FACT THAT THE APEL1ANT DID DEAL WITH NON MEMBERS IN A FEW CASES BY SEEING DEPOSITS. THIS READ WITH BYE LAW 43 LEADS TO THE CONCLUSION THAT IT IS CARRYING ON BANKING BUSINESS. THIS FACT OF ACCEPTING DEPOSITS FROM PEOPLE WHO ARE NOT MEMBERS HAS BEEN SO RECORDED BY THE CIT(A) IN HIS ORDER DATED 15 JULY, 2014. BEFORE THE TRIBUNAL ALSO THE APPELLANT DID NOT DISPUTE THE FACT THAT IN A FEW CASES THEY H AVE DEALT WITH NON MEMBERS. HOWEVER SO FAR AS ACCEPTING DEPOSITS FROM NON MEMBERS IS CONCERNED IT IS SUBMITTED THAT THE BYE - LAW 43 ONLY PERMITS THE SOCIETY TO ACCEPT DEPOSITS FROM ITS MEMBERS. IT IS SUBMITTED THAT BYE .LAWS 43 DOES NOT PERMIT RECEIPT OF D EPOSITS FROM PERSONS OTHER THEN MEMBERS, THE WORD ANY PERSON IS A GLOSS ADDED IN THE IMPUGNED ORDER AS IT IS NOT FOUND IN BYE LAW 43. IT IS UNDISPUTED THAT THE TRANSACTIONS WITH NON MEMBERS ARE INSIGNIFICANT/MINISCULE. ON THE ABOVE BASIS IT CANNOT BE CON CLUDED THAT THE APPELLANTS, PRINCIPAL BUSINESS IS OF ACCEPTING DEPOSITS FROM PUBLIC AND THEREFORE IT IS IN BANKING BUSINESS. IN FACT, THE IMPUGNED ORDER ERRONEOUSLY RELIES UPON BYE - LAW 43 OF THE SOCIETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CON CLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. HOWEVER, THE IMPUGNED ORDER RELIES UPON BYE - LAW 43 TO CONCLUDE THAT IT ENABLES THE APPELLANT TO RECEIVE DEPOSITS FROM ANY PERSON IS NOT CORRECT. THUS IN THE PRESENT FACTS THE FINDINGS THAT THE APPELLANTS PRI NCIPAL BUSINESS IS OF BANKING IS PERVERSE, AS IT IS NOT SUPPORTED BY THE EVIDENCE ON RECORD. SO FAR AS THE ISSUE OF PRIMARY OBJECT OF THE APPELLANT IS CONCERNED THE IMPUGNED ORDER GIVES NO FINDING ON THAT BASIS TO DEPRIVE THE APPELLANT THE BENEFIT OF SECTI ON 80P OF THE ACT THE IMPUGNED ORDER SETS OUT THE OBJECT CLAUSE OF THE APPELLANT, WHICH HAS 24 OBJECTS BUT THEREAFTER DRAWS NO SEQUITER TO CONCLUDE 5 ITA NO S . 16,17&18 /P AN /201 6 (A SST .Y RS : 201 0 - 1 1,2009 - 10 & 2010 - 11 ) THAT THE PRIMARY OBJECT IS BANKING. CONSEQUENTLY THERE IS NO OCCASION TO DEAL WITH THE SAME AS THAT IS NOT T HE BASIS ON WHICH THE IMPUGNED ORDER HOLDS THAT IT IS A PRIMARY COOPERATIVE BANK. IN THE ABOVE VIEW, THE ALTERNATIVE CONTENTION OF THE APPELLANT THAT IT IS NOT IN THE BUSINESS OF BANKING AS THE SINE QUO NON TO CARRY ON BANKING BUSINESS IS A LICENCE TO BE ISSUED BY THE RESERVE BANK OF INDIA, WHICH IT ADMITTEDLY DOES NOT HAVE, IS NOT BEING CONSIDERED. SO FAR AS CONDITION NO.3 OF THE DEFINITION/MEANING OF PRIMARY COOPERATIVE BANK AS PROVIDED IN SECTION 5(CCV) OF THE BANKING REGULATION ACT IS CONCERNED, THE S AME REQUIRES THE BYE LAWS OF SOCIETY TO CONTAIN A PROHIBITION FROM ADMITTING ANY OTHER COOPERATIVE SOCIETY AS ITS MEMBER. IN FACT THE BYE - LAWS OF THE APPELLANT SOCIETY ORIGINALLY IN BYE - LAW 9(B) CLEARLY PROVIDED THAT NO CO - OPERATIVE SOCIETY SHALL BE ADMITT ED TO THE MEMBERSHIP OF THE SOCIETY. THUS THERE WAS A BAR BUT THE SAME WAS AMENDED W.E.F. 12 TH JANUARY, 2001 AS TO PERMIT A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE SOCIETY. THEREFORE FOR THE SUBJECT ASSESSMENT YEARS THERE IS NO PROHIBITION TO ADMI TTING A SOCIETY TO ITS MEMBERSHIP AND ONE OF THREE CUMULATIVE CONDITIONS PRECEDENT TO BE A PRIMARY COOPERATIVE BANK IS NOT SATISFIED. HOWEVER THE IMPUGNED ORDER CONSTRUED THE AMENDED CLAUSE 9(D) OF THE APPELLANTS BYE LAWS TO MEAN THAT IT ONLY PERMITS A SO CIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE APPELLANT AND NOT A CO - OPERATIVE SOCIETY. ACCORDING TO THE IMPUGNED ORDER, A SOCIETY AND A CO - OPERATIVE SOCIETY ARE CLEARLY WORDS OF DIFFERENT HAND DISTINCT SIGNIFICANCE AND THE MEMBERSHIP IS ONLY OPEN TO SOCIE TY AND NOT TO A CO - OPERATIVE SOCIETY. AS RIGHTLY POINTED OUT ON BEHALF OF THE APPELLANT THE WORD SOCIETY AS REFERRED TO BYE LAW 9(D) WOULD INCLUDE THE CO - OPERATIVE SOCIETY. THIS IS SO AS THE DEFINITION OF A SOCIETY UNDER THE CO - OPERATIVE ACT IS CO - OPERATIV E REGISTERED UNDER THE CO - OPERATIVE ACT. BESIDES THE QUALIFYING CONDITION 3 FOR BEING CONSIDERED AS A PRIMARY COOPERATIVE BANK IS THAT THE BYE LAWS MUST NOT PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY THIS IS A MANDATORY CONDITION I.E. THE BYE LAWS M UST SPECIFICALLY PROHIBIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY TO ITS MEMBERSHIP. THE REVENUE HAS NOT BEEN ABLE TO SHOW ANY SUCH PROHIBITION IN THE BYE LAWS OF THE APPELLANT. THUS EVEN THE AFORESAID QUALIFYING CONDITION (3) FOR BEING CONSIDERED AS A PRIMARY COOPERATIVE BANK IS NOT SATISFIED. THUS, THE THREE CONDITIONS AS PROVIDED UNDER SECTION 5 (CVV) OF THE BANKING REGULATION ACT, 1949, ARE TO BE SATISFIED CUMULATIVELY AND 6 ITA NO S . 16,17&18 /P AN /201 6 (A SST .Y RS : 201 0 - 1 1,2009 - 10 & 2010 - 11 ) EXCEPT CONDITION (2) THE OTHER TWO QUALIFYING CONDITIONS ARE NOT SATISFIED. ER GO, APPELLANT CANNOT BE CONSIDERED TO BE A CO - OPERATIVE BANK FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT. THUS, THE APPELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE CONTENTION OF MS. DESSAI, LEARNED COUNSEL FOR THE REVENUE THAT THE APPELLANT IS NOT ENTITLED TO THE BENEFIT OF SECTION 80P (2)(A)(I) OF THE ACT IN VIEW OF THE FACT THAT IT DEALS WITH NON - MEMBER CANNOT BE UPHELD. THIS FOR THE REASON THAT SECTION 80P(1) OF THE ACT RESTRICTS THE BENEFITS OF D EDUCTION OF INCOME OF CO - OPERATIVE SOCIETY TO THE EXTENT IT IS EARNED BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, TO THE EXTENT THE INCOME EARNED IS ATTRIBUTABLE TO DEALINGS WITH THE NON - MEMBERS ARE CONCERNED THE BENEFIT OF SECTION 80P OF THE ACT WOULD NOT BE AVAILABLE. IN THE ABOVE VIEW OF THE MATTER, AT THE TIME WHEN EFFECT HAS BEEN GIVEN TO ORDER OF THIS COURT, THE AUTHORITIES UNDER ACT WOULD RESTRICT THE BENEFIT OF DEDUCTION UNDER SECTION 80P OF THE ACT ONLY TO THE EXTENT THAT THE SAME IS EARNED BY THE APPELLANT IN CARRYING ON ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW AS FRAMED IS ANSWERED IN THE NEGATIVE I.E.IN FAVOUR OF THE APPELLANT AND AGAINST THE RESPONDENT - REVENUE. IN VIE W OF THE DECISION OF THE HONBLE HIGH COURT AND SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL , THE AO IS DIRECTED TO ALLOW THE DEDUCTION U/S.80P TO THE APPELLANT. THE APPEAL IS ALLOWED. 6 . THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ABOVE QUOTED ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE CLAI M OF DEDUCTION UNDER SEC. 80P(2)(A)(I) OF THE ACT AFTER FOLLOWING 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. NO CONT RARY DECISION COULD BE CITED BY THE DEPARTMENTAL REPRESENTATIVE. WE, THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDERS OF THE COMMISSIONER OF 7 ITA NO S . 16,17&18 /P AN /201 6 (A SST .Y RS : 201 0 - 1 1,2009 - 10 & 2010 - 11 ) INCOME TAX (APPEALS), WHICH ARE HEREBY CONFIRMED AND THIS GROUND OF APPEAL OF TH E REVENUE IS DISMISSED. 7. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.04.2016. SD/ - (NARENDRA S. SAINI) ACCOUNTANT MEMBER SD/ - (GEORGE MATHAN) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 19 /0 4 /201 6 *A * COPY TO : (1) APPELLANT (2) RESPONDENT S (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, PANAJI BENCH, PANAJI, GOA.