M/s. Pavamana Credit CO-operative Society Ltd, Bengaluru V. Income Tax officer, Ward-5(2)(4), Bengaluru

ITA 1810/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7643 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 28-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VENKATESH
• Assessee Lawyers: R E BALASUBRAMANYAM
• Keywords: Opportunity of being heard; Condonation of delay
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1 810 / BANG/201 8 ASSESSMENT YEAR : 20 14 - 15 M/S. PAVAMANA CREDIT CO- OPERATIVE SOCIETY LTD., NO. 51, SRIMAN MADHVA SANGHA BUILDING, 5 TH MAIN ROAD, CHAMARAJPET, BANGALORE 560 018. PAN: AAABP0320J VS. THE INCOME TAX OFFICER, WARD 5 (2) (4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI R.E. BALASUBRAMANYAM, CA RESPONDENT BY : SHRI S. VENKATESH, JCIT (DR) DATE OF HEARING : 0 4 .0 7 .2018 DATE OF PRONOUNCEMENT : 20 .0 7 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A) 5, BANGALORE DATED 27.09.2017 FOR ASSE SSMENT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE ASSESSEEARE AS UNDER. THE APPELLANT OBJECTS TO THE ORDER OF THE LD.CIT(A) ON THE FOLLOWING GROUNDS THAT: 1. THE IMPUGNED ORDER IS OPPOSED TO FACTS AND LAW I N SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT. 2. THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF T HE LD.AO DENYING THEDEDUCTION UNDER SECTION 80P OF THE INCOME TAX AC T AND IN DOING SO A) THE LD.CIT (A) HE FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS A CO OPERATIVE SOCIETY AND IS NOT AT ALL INVOLVED I N THE BANKING ACTIVITY.. B) THE LD.CIT(A) FAILED TO APPRECIATE THAT THE BUSI NESS OF THE APPELLANT CONSISTS ENTIRELY OF EXTENDING CREDIT FAC ILITIES ONLY TO ITS MEMBERS AND THE WHOLE OF THE INCOME EARNED THERE FR OM QUALIFIES FOR DEDUCTION U/S 80P OF THE INCOME TAX ACT. 3. THE APPELLANT PRAYS FOR LEAVE TO ADD, DELETE, MO DIFY OR INTRODUCE ADDITIONAL GROUNDS OF APPEAL AT ANY TIME BEFORE THE APPEAL IS DISPOSED ITA NO. 1810/BANG/2018 PAGE 2 OF 5 OFF. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D IN TIME TO TIME, IT IS REQUESTED THAT THE HON'BLE ITAT TO CANCEL THE ADDITION MADE BY THE ASSESSING OFFICER AND ALLOW DEDUCTION UNDER SEC TION 80P OF THE ACT. 3. THIS APPEAL IS FILED BY THE ASSESSEE AFTER A DEL AY OF 103 DAYS AND THE ASSESSEE HAS MOVED AN APPLICATION FOR CONDONATION OF DELAY A LONG WITH AN AFFIDAVIT. IN THIS APPLICATION, IT IS SUBMITTED THAT THE MATTER W AS DECIDED BY CIT(A) BY FOLLOWING THE JUDGEMENT OF HONBLE APEX COURT RENDE RED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT AS REPOR TED IN 397 ITR 1 AND THEREAFTER, THE BOARD MEMBERS OF THE SOCIETY WERE U NDER THE IMPRESSION THAT NO FURTHER REMEDY IS AVAILABLE SINCE CIT(A) HAS FOLLOW ED THE JUDGEMENT OF HONBLE APEX COURT. BUT LATER ON, IT WAS ADVISED BY THE TA X CONSULTANTS TO THE ASSESSEE THAT FACTS OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. WERE NOT IDENTICAL TO THE FACTS IN THE CASE OF THE ASSESSEE AND THEREFORE, THE ASSE SSEE SHOULD FILE THE APPEAL BEFORE THE TRIBUNAL AND BECAUSE OF THIS REASON, THE RE WAS DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL. CONSIDERING THESE FACT S, THE DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL IS CONDONED AND THE APPE AL IS ADMITTED. 4. REGARDING THE MERIT OF THE APPEAL, IT WAS SUBMIT TED BY LD. AR OF ASSESSEE THAT MAJOR REASON FOR WHICH THE AO DISALLOWED THE ASSESS EES CLAIM FOR DEDUCTION U/S. 80P IS THIS THAT AS PER THE AO, THE ASSESSEES PRIMARY OR PRINCIPAL BUSINESS IS TRANSACTING IN BANKING BUSINESS AND THE AO HELD THAT THE ASSESSEE IS A PRIMARY CO-OPERATIVE BANK AND NOT SECONDARY CO-OPER ATIVE CREDIT SOCIETY. HE PLACED RELIANCE ON THE JUDGMENT OF HON'BLE KARNATAK A HIGH COURT RENDERED IN THE CASE OF CIT VS. SRI BILURU GURUBASAPPA PATTINA SAHAKARI SANGHA NIYAMITA AS REPORTED IN 369 ITR 86, COPY AVAILABLE ON PAGES 43 TO 50 OF PAPER BOOK AND IN PARTICULAR, MY ATTENTION WAS DRAWN TO PARA 8 OF THIS JUDGMENT AVAILABLE ON PAGE NO. 49 OF PAPER BOOK AND IT WAS POINTED OUT TH AT IT IS HELD BY HON'BLE KARNATAKA HIGH COURT IN THIS CASE THAT AS THE ASSES SEE IS NOT A CO-OPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND A S IT DOES NOT POSSESS A LICENSE FROM THE RESERVE BANK OF INDIA TO CARRY ON BUSINESS, IT IS NOT A CO- OPERATIVE BANK. HE SUBMITTED THAT IN THE PRESENT C ASE ALSO, THE ASSESSEE IS NOT HOLDING ANY LICENSE FROM RESERVE BANK OF INDIA AND THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE IS A CO-OPERATIVE BANK. HE SUBMI TTED THAT THERE IS NO FINDING ITA NO. 1810/BANG/2018 PAGE 3 OF 5 ON THIS ASPECT AND THEREFORE, THE MATTER MAY BE RES TORED BACK TO THE FILE OF AO/CIT(A) TO DECIDE THE WHOLE ISSUE AFRESH. THE LD . DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, I REPRODUCE PARA 8 OF THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT CITED BY LD. AR OF ASSESSEE. THE SAME IS AS UNDER. 8. IN THE ASSESSMENT ORDER, THE ASSESSING AUTHORITY HAS CLEARLY STATED THAT THE ASSESSEE IS A CO- OPERATIVE SOCIETY AND HA S NOT OBTAINED ANY BANKING LICENSE. THE BUSINESS OF THE ASSESSEE IS TO PROVIDE CREDIT FACILITIES TO ITS MEMBERS. SINCE THE ASSESSEE CANNO T CARRY ON ANY BANKING BUSINESS, THE INTEREST ON INVESTMENT IS TAX ABLE AS INCOME FROM OTHER SOURCE. THEREFORE, THE AFORESAID FACTS, WHICH IS NOT IN DISPUTE CLEARLY ESTABLISHES THAT IT IS NOT A CO-OPERATIVE B ANK. IN FACT, THE REVISIONAL AUTHORITY ALSO IN ITS ORDER HAS CATEGORI CALLY STATED THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY, WHICH PROVIDES CREDIT FACILITIES. SECTION 80P OF THE ACT DEALS WITH THE D EDUCTION OF INCOME OF A SOCIETY. IN THE CASE OF ANY ASSESSEE BEING A CO-O PERATIVE SOCIETY, THE WHOLE OF THE AMOUNTS OF PROFITS AND GAINS OF BUSINE SS ATTRIBUTABLE TO ANY OF OTHER ACTIVITIES REFERRED TO SUB-SECTION (2) OF SECTION 80P SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE AS SESSEE. 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 APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVEL OPMENT BANK. (A) 'CO-OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL C REDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO TH EM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); (B) 'PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DE VELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFIN ED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LON G-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 BUSINESS, T HEN THE INCOME DERIVED FROM THE SAID BUSINESS CANNOT BE DEDUCTED I N COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE SAID INCOME IS LI ABLE FOR TAX. A CO- OPERATIVE BANK AS DEFINED UNDER THE BANKING REGULAT ION ACT INCLUDES THE PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMAR Y CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LEGISL ATURE DID NOT WANT TO DENY THE SAID BENEFITS TO A PRIMARY AGRICUL TURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DE VELOPMENT BANK. THEY DID NOT WANT TO EXTEND THE SAID BENEFIT TO A C O-OPERATIVE BANK WHICH IS EXCLUSIVELY CARRYING ON BANKING BUSINESS I .E. THE PURPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSESSEE IS NOT A CO- OPERATIVE ITA NO. 1810/BANG/2018 PAGE 4 OF 5 BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND A S IT DOES NOT POSSESS A LICENSE FROM RESERVE BANK OF INDIA TO CAR RY ON BUSINESS, IT IS NOT A CO-OPERATIVE BANK. IT IS A CO-OPERATIVE SOCIE TY WHICH ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO ITS MEM BERS WHICH IS COVERED UNDER SECTION 80P(2)(A)(I)I.E. CARRYING ON THE BUSINESS OF BANKING FOR PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. THE OBJECT OF THE AFORESAID AMENDMENT IS NOT TO EXCLUDE THE BENEFIT E XTENDED UNDER SECTION 80P(1) TO SUCH SOCIETY. THEREFORE, TH ERE WAS NO ERROR COMMITTED BY THE ASSESSING AUTHORITY. THE SAID ORDE R WAS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CON DITION PRECEDENT FOR 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 REV ENUE. 6. FROM THE ABOVE PARA REPRODUCED FROM THE JUDGEMEN T OF HON'BLE KARNATAKA HIGH COURT, IT IS SEEN THAT AS PER THE HON'BLE KARN ATAKA HIGH COURT, BENEFIT OF SECTION 80P IS NOT AVAILABLE TO A CO-OPERATIVE BANK WHICH IS EXCLUSIVELY CARRYING ON THE BANKING BUSINESS. IT IS ALSO NOTED BY HON'B LE KARNATAKA HIGH COURT THAT THE ASSESSEE IS NOT A CO- OPERATIVE BANK CARRYING O N EXCLUSIVELY BANKING BUSINESS AS IT DOES NOT POSSESS A LICENSE FROM RESE RVE BANK OF INDIA TO CARRY ON BUSINESS AND THEREFORE, IT IS NOT A CO-OPERATIVE BANK AND 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 CREDIT FACILITIES TO ITS MEMB ERS. THERE IS NO FINDING OF ANY OF THE AUTHORITIES BELOW ON THIS ASPECT AND THEREFO RE, I FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISIO N IN THE LIGHT OF THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT AFTER PROVIDING ADE QUATE OPPORTUNITY OF BEING HEARD TO ASSESSEE. I ORDER ACCORDINGLY. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 20 TH JULY, 2018. /MS/ ITA NO. 1810/BANG/2018 PAGE 5 OF 5 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.