Gubbi Credit Co-operative Society Ltd., Bangalore V. Income Tax Officer Ward-5(2)(5), Bangalore

ITA 2528/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4308 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 05-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAWANSHI
• Keywords: Opportunity of being heard; Set aside
• Section: 143(3); 80P; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC - A BENCH : BANGALORE BEFORE SHRI JASON P BOAZ , ACCOUNTANT MEMBER ITA NO. 2528 /BANG/201 8 ASSESSMENT YEAR : 20 1 5 - 1 6 M/S. GUBBI CREDIT CO-OPERATIVE SOCIETY LTD., 21/718, VIDYA PEETA CIRCLE, ASHOK NAGAR, BENGAURU 560 050. PAN : AABAG 6733 C VS. INCOME TAX OFFICER, WARD 5(2)(5), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI. RAVI SHANKAR, ADVOCATE REVENUE BY : SHRI. VIKAS SURYAWANSHI, ADDL. CIT DATE OF HEARING : 01 . 10 .201 8 DATE OF PRONOUNCEMENT : 31 . 10 .201 8 O R D E R PER JASON P BOAZ, ACCOUNTANT MEMBER THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-5, BENGALURU DATED 27.06.2018. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UNDER: 2.1 THE ASSESSEE FILED ITS RETURN FOR ASSESSMENT YEAR 2015-16 ON 31.03.2017 DECLARING TOTAL INCOME AT NIL, AFTER CLAIMING DEDUCTION OF RS.13,05,650/- UNDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASSESSEES CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSING OFFICER (AO) REJECTED THE CLAIMS ITA NO. 2528/BANG/2018 PAGE 2 OF 6 AND SUBMISSIONS OF THE ASSESSEE THAT IT WAS A CO-OPERATIVE SOCIETY AND ELIGIBLE TO CLAIM DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT INTEREST EARNED ON CREDIT FACILITIES AFFORDED TO MEMBERS AND FROM OTHERS I.E., ON FIXED DEPOSITS (RFD) AND SAVINGS BANKS ACCOUNT. THE AO HELD THE ASSESSEE TO BE A CO-OPERATIVE BANK BY VIRTUE OF THE INSERTION OF SECTION 80P(4) OF THE ACT AND THEREFORE NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80P OF THE ACT. THE ASSESSMENT WAS ACCORDINGLY COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 20.12.2017, WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.13,05,650/-. ON APPEAL, THE CIT(A)-5, BENGALURU DISMISSED THE ASSESSEES APPEAL VIDE THE IMPUGNED ORDER DATED 27.06.2018. 3.1 AGGRIEVED BY THE ORDER OF CIT(A)-5, BENGALURU DATED 27.06.2018 FOR ASSESSMENT YEAR 2015-16, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS: 1. THE CONCERNED ASSESSING OFFICER IS WRONG IN CONTENDING THAT APPELLANT IS A CO- OPERATIVE BANK AND NOT A CO-OPERATIVE SOCIETY. 2. THE ASSESSING OFFICER IS WRONG IN CONTENDING THAT THE PRINCIPAL BUSINESS OF APPELLANT IS BANKING BUSINESS HENCE IT IS PRIMARY CO-OPERATIVE BANK AND NOT PRIMARY COOPERATIVE CREDIT SOCIETY. 3. THE ASSESSING OFFICER IS WRONG IN CONTENDING THAT THE NATURE OF ACTIVITY OF THE ASSESSE THOUGH REGISTERED AS A CREDIT CO-OPERATIVE SOCIETY IS THAT OF BANKING INSTITUTION NOT WITHSTANDING THE FACT THAT RECEIPT OF AND LENDING MONEY IS LIMITED TO MEMBERS. 4. THE ASSESSING OFFICER IS WRONG IN CONTENDING THAT CLAUSE VII A IN SEC 2(24) OF THE ACT WAS INSERTED BY FINANCE ACT 2006 WHICH PROVIDES THAT PROFIT AND GAINS OF ANY BUSINESS (INCLUDING PROVIDING CREDIT FACILITY) CARRIED BY THE CO- OPERATIVE SOCIETY WITH ITS MEMBERS WAS ALSO INCOME. 5. THE ASSESSING OFFICER IS WRONG IN CONTENDING THAT THE BENEFIT OF SEC 80P IS RESTRICTED ONLY TO PRIMARY AGRICULTURAL CREDIT SOCIETY AND RURAL DEVELOPMENT BANKS. 6. THE ASSESSING OFFICER IS WRONG IN NOT CONSIDERING THE JUDICIAL PRONOUNCEMENT DELIVERED BY KARNATAKA HIGH COURT IN THE CASE OF THE COMMISSIONER OF INCOME TAX VS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT AND COMMISSIONER OF INCOME TAX VS BANGALORE CREDIT CO-OPERATIVE SOCIETY LIMITED ITA NO. 2528/BANG/2018 PAGE 3 OF 6 WHEREIN IT HAS BEEN HELD THAT IF THE ASSESSE IS NOT A COOPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND IF DOES NOT POSSESS A LICENSE FROM THE RESERVE BANK OF INDIA THEN IT IS NOT A COOPERATIVE BANK AND ELIGIBLE FOR DEDUCTION U/S 80P. 7. THE ASSESSING OFFICER FAILED TO UNDERSTAND THE FACT THAT THE APPELLANT IS AND ITS ACTIVITIES ARE REGULATED BY REGISTRAR OF SOCIETY KARNATAKA AND NOT BY RESERVE BANK OF INDIA UNDER BANKING REGULATION LAWS. 8. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 3.2 THE LEARNED AR FOR THE ASSESSEE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED. THE LEARNED AR SUBMITTED THAT THE PRIMARY ISSUE RAISED IN THIS APPEAL WAS IN RESPECT OF THE FINDING OF THE AO, AND UPHELD BY THE CIT(A) THAT THE ASSESSEE IS A CO-OPERATIVE BANK AND NOT A CO-OPERATIVE SOCIETY, WHICH IT IS CONTENDED IS FACTUALLY ERRONEOUS SINCE THE ASSESSEE DID NOT POSSESS A BANKING LICENSE ISSUED BY THE R.B.I., THE REGULATOR OF BANKING IN INDIA. IN THESE CIRCUMSTANCES, THE LEARNED AR SUBMITS THAT IT IS EVIDENT THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK AND THEREFORE THE ASSESSEE BEING A CO- OPERATIVE SOCIETY AS CLAIMED, WOULD NOT BE HIT BY THE MISCHIEF OF THE PROVISIONS OF SECTION 80P(4) OF THE ACT AND HENCE AS SUCH, WOULD BE ENTITLED TO BE ALLOWED ITS CLAIM FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE AR CONTENDED THAT THE AUTHORITIES BELOW HAVE FAILED TO RENDER ANY FINDING AS TO WHETHER THE ASSESSEE HELD A LICENCE FROM RBI TO CONDUCT THE BUSINESS OF BANKING/MONEY LENDING AND HENCE THIS MATTER REQUIRES TO BE REMANDED TO FILE OF THE AO FOR ASCERTAINING WHETHER THE ASSESSEE DID POSSESS A BANKING LICENCE FROM RBI, AS HELD BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BENGALURU (2014) 369 ITR 86 (KARNATAKA). 3.3. THE LEARNED DR FOR REVENUE CONTENDED THAT REVENUE HAS NOT ACCEPTED THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BANGALORE (SUPRA) AND THAT THE SLP ITA NO. 2528/BANG/2018 PAGE 4 OF 6 PREFERRED BY REVENUE HAS BEEN ADMITTED BY THE HONBLE APEX COURT, ON THE VERY SAME ISSUE. 3.4 IN REJOINDER, THE LEARNED AR SUBMITTED THAT THE ABOVE ISSUE; IN SO FAR AS TO WHETHER A CO-OPERATIVE SOCIETY WAS A CO-OPERATIVE BANK HAS ALREADY BEEN SETTLED BY THE HONBLE APEX COURT IN THE CASE OF M/S. CITIZENS CO-OPERATIVE SOCIETY LTD., VS. ACIT, REPORTED IN (2017) 397 ITR 1 (SC). 3.5.1 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL DECISIONS CITED. THE PRIMARY ISSUES FOR CONSIDERATION IS WHETHER THE ASSESSEE IS A CO-OPERATIVE SOCIETY, ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT AS CLAIMED BY ASSESSEE, OR WHETHER THE ASSESSEE IS A CO-OPERATIVE BANK AS CONTENDED BY THE AUTHORITIES BELOW AND THUS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. 3.5.2 THE CRUCIAL FINDING OF FACT AS TO WHETHER THE ASSESSEE WAS A CO-OPERATIVE BANK AND HELD A BANKING LICENCE ISSUED BY RBI, AS LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF M/S. CITIZENS CO-OPERATIVE SOCIETY LTD., (SUPRA) HAS NOT BEEN EXAMINED AND RENDERED BY THE AUTHORITIES BELOW. IN THIS REGARD, THE HONBLE APEX COURT AT PARA 24 OF ITS ORDER (SUPRA) HAS HELD AS UNDER: 24) UNDOUBTEDLY, IF ONE HAS TO GO BY THE AFORESAID DEFINITION OF CO- OPERATIVE BANK, THE APPELLANT DOES NOT GET COVERED THEREBY. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT IN ORDER TO DO THE BUSINESS OF A CO- OPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENCE FROM THE RESERVE BANK OF INDIA, WHICH THE APPELLANT DOES NOT POSSESS. NOT ONLY THIS, AS NOTICED ABOVE, THE RESERVE BANK OF INDIA HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE APPELLANT DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. THE APPELLANT, THEREFORE, WOULD NOT COME WITHIN THE MISCHIEF OF SUB-SECTION (4) OF SECTION 80P. ITA NO. 2528/BANG/2018 PAGE 5 OF 6 3.5.3 IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND JUDICIAL PRONOUNCEMENT OF HONBLE APEX COURT (SUPRA) AS DISCUSSED ABOVE, THE IMPUGNED ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE MATTER REMANDED TO THE FILE OF THE AO FOR EXAMINING/ASCERTAINING AS TO WHETHER THE ASSESSEE IN THE CASE ON HAND HAS OBTAINED A LICENCE FROM THE RBI TO CONDUCT BANKING BUSINESS. IF THE ASSESSEE IS FOUND TO BE POSSESSING A LICENCE FROM THE RBI TO CONDUCT BANKING BUSINESS, IT WILL BE HIT BY THE MISCHIEF OF SUB-SECTION (4) OF SECTION 80P OF THE ACT AND THUS WOULD NOT BE ELIGIBLE TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT AS CLAIMED. NEEDLESS TO ADD THE AO SHALL AFFORD THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE DETAILS/SUBMISSIONS REQUIRED WHICH SHALL BE DULY CONSIDERED BEFORE DECIDING THE ISSUE IN THE LIGHT OF THE OBSERVATIONS ABOVE AND THE AFORESAID DECISION OF THE HONBLE APEX COURT (SUPRA). 4. IN VIEW OF THE ABOVE, THE GROUNDS RAISED ON MERITS, BECOME ACADEMIC AND ARE NOT ADJUDICATED. 5. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2015-16 IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2018. SD/- SD/- BANGALORE. DATED: 31 ST OCTOBER, 2018. /NS/* ( G. MANJUNATHA ) ( JASON P BOAZ ) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ITA NO. 2528/BANG/2018 PAGE 6 OF 6 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.