I.T.O. Ward -3, Akola V. SANT AMARDA URBAN CREDIT CO OP. SOCIETY LTD, WASHIM

ITA 255/NAG/2015

• Counselvise Citation: [2014] 117 COUNSELVISE.COM (IT) 8875 (ITAT-NAGPUR)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 14-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K BARAL
• Assessee Lawyers: B M AGRAWAL
• Keywords: Set aside
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE S HRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 255 / NAG/2015 ASSESSMENT Y EAR: 2012 - 13 THE INCOME TAX OFFICER - WARD - 3, AAYAKAR BHAVAN, MURTIZAPUR ROAD, AKOLA - 444001 VS. M/ S SANT AMARDAS URBAN CREDIT CO - OP. SOCIETY LTD., GUJARI CHOWK, RISOD, DISTRICT - WASHIM - 444506 PAN : AACAS8170J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI R.K. BARAL (SR. D R) ASSESSEE BY : SHRI B.M. AGRAWAL (CA ) DATE OF HEARING: 09 /05 /201 8 DATE OF PRONOUNCEMENT: 15 / 06 /201 8 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 19.06.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - I , NAGPU R, WHEREBY THE LD. CIT (A ) HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A CREDIT COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM ITS MEMBERS AND PROVIDING CREDIT FACILITIES TO THEM, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING NIL INCOME AFTER CLAIMING DEDUCTION UNDER CHAPTER VIA OF THE ACT , AMOUNTING TO RS. 21,62,379/ - . THE RETURN WAS PROCESSED U/S 143 (1). SINCE, THE CASE WAS SELECTED FOR SCRUTINY, THE AO ISSUED NOTICE U/S 143 (2) OF THE ACT AND IN RESPONSE TO THE SAID NOTICE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND S UBMITTED THE DETAILS CALLED FOR BY THE AO. IT WAS NOTICED THAT THE ASSESSEE SOCIETY HAD RECEIVED AN AMOUNT OF RS. 2 ITA NO. 255 / NAG /2015 ASSESSMENT YEAR: 201 2 - 1 3 54,92,441/ - TOWARDS INTEREST ON BANK DEPOSITS AND HAD CLAIMED DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE AO AFTER HEARING THE CONTENTIONS OF T HE ASSESSEE, INTER ALIA MADE ADDITION OF RS. 54,92,441/ - ON ACCOUNT OF INTEREST ON BANK DEPOSITS HOLDING THAT THE INTEREST EARNED ON SURPLUS FUNDS INVESTED IN BANK DEPOSITS AND GOVERNMENT SECURITIES COMES UNDER THE HEAD INCOME FROM OTHER SOURCES AND DET ERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 55,40,355/ - . THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE DECIDED THE SAID ISSUE IN FAVOUR OF THE ASSESSEE. AGAINST THE SAID ORDER, THE REVENUE I S IN APPEAL BEFORE THE TRIBUNAL. 3. THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD.CIT (A) ON THE FOLLOWING EFFECTIVE GROUND : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN DELETING THE ADDITIO N OF RS. 54,92,441/ - MADE BY THE ASSESSING OFFICER BY TREATING THE INTEREST INCOME EARNED BY THE ASSESSEE ON INVESTMENTS AS INCOME FROM OTHER SOURCES U/S 56 OF THE I.T. ACT, 1961. 4. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT NAGPUR IN ASSESSEES OWN CASE ITA NO. 528/NAG/2014 FOR THE ASSESSMENT YEAR 2010 - 11 . THE LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE ORDER PASSED BY THE LD. CIT(A ) IS IN ACCORDANCE WITH THE DECISION OF THE ITAT , THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS LIABLE TO BE SET ASIDE . 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) DID NOT CONTROVERT THE FACT THAT THE IDENTICAL ISSUE HA S BEEN DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11. THE LD. DR, HOWEVER, RELIED ON THE FINDINGS OF THE AR. 3 ITA NO. 255 / NAG /2015 ASSESSMENT YEAR: 201 2 - 1 3 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE RAISED BY THE DEPARTMENT IS THAT WHETHER THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 54,92,441/ - MADE BY THE ASSESSING OFFICER BY TREATING THE INTEREST INCOME EARNED BY THE ASSESSEE ON INVESTMENT AS INCOME FROM OTHER SOURCES U/S 56 OF THE ACT. THE L D. CIT (A) HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE RELYING ON THE DECISIONS OF ITAT BENCH, NAGPUR IN THE CASE OF M/S GOPALKRISHNA URBAN CREDIT COOPERATIVE SOCIETY MARYADIT, NAGPUR, ITA NO. 68/NAG/ 2012 FOR THE A.Y. 2008 - 09. THE RELEVANT PARAS OF THE ORDER READ AS UNDER: - 7.0 THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE ITAT, NAGPUR IN THE CASE OF EIGHT APPELLANTS VIDE A COMMON CONSOLIDATED ORDER DATED 1 ST FEBRUARY, 2013 IN ITA NO. 68/NA G/2012/2008 - 09 M/S GOPALAKRISHN A URBAN CREDIT CO - OPERATIVE SOCIETY MARYADIT, NAGPUR (ONE OF THE APPELLANT). 7.1 THE HONBLE ITAT, NAGPUR BENCH, NAGPUR, HAS GIVEN THE FOLLOWING DECISION: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. WE ARE OF T HE OPINION THAT ORDERS OF THE FAAS DO NOT SUFFER FROM ANY LEGAL INFIRMITY. AFTER ANALYZING THE VARIOUS PROVISIONS OF THE ACTS AND THE CIRCULARS (ISSUED BY THE RBI AND CBDT) THEY HAVE HELD THAT ASSESSEE WERE NOT A CO - OPERATIVE BANKS AS ENVISAGED BY THE AOS IN THEIR ASSESSMENT ORDERS. IN OUR CONSIDERED OPINION, ASSESSEE CO - OPERATIVE SOCIETIES CANNOT BE DEPRIVED OF THE BENEFITS OF DEDUCTIONS AVAILABLE AS PER THE PROVISIONS OF SECTION 80P(20)(A) OF THE ACT BY INVOKING THE PROVISIONS OF SECTION 80P(4) OF THE ACT , AS DONE BY THE AOS. WE FULLY AGREE WITH THE FAAS THAT THE APPELLANTS ARE CREDIT CO - OPERATIVE SOCIETIES AND NOT CO - OPERATIVE BANKS AND THEREFORE THEY ARE ENTITLED TO CLAIM DEDUCTION AVAILABLE UNDER CHAPTER VIA OF THE ACT. AS POINTED OUT BY THE ARS OF THE ASSESSEE, WE HAVE PASSED SIMILAR ORDER IN 4 ITA NO. 255 / NAG /2015 ASSESSMENT YEAR: 201 2 - 1 3 THE CASE OF MEDICAL COLLEGE HOSPITAL EMPLOYEES CREDIT CO - OP. SOCIETY LTD., (SUPRA). FOLLOWING OUR OWN SAID ORDER, WE DECIDE THE ALL THE GROUNDS OF APPEALS AGAINST THE AOS. 8.0 ON CAREFUL EXAMINATION OF FACTS AND AFTER CONSIDERING THE RELEVANT PROVISIONS OF BANKING REGULATION ACT, MAHARASHTRA CO - OPERATIVE SOCIETY ACT, CIRCULAR ISSUED BY THE RBI AND THE EXPLANATORY NOTES ON PROVISIONS RELATING TO FINANCE ACT, 2006 (CIRCULAR NO. 14/2006), IT IS SEEN THAT THE APPELLAN T IS A CO - OPERATIVE SOCIETY, AND NOT A CO - OPERATIVE BANK. TO ARRIVE AT THE CONCLUSION AFORESAID, THE FOLLOWING FACTS ARE RELEVANT AND DECISIVE IN THE ISSUE: I. ASSESSEE DID NOT OBTAIN LICENSE FROM THE RESERVE BANK OF INDIA U/S 22 TO FUNCTION AS A BANK. II. A SSESSEE HAD NO POWER TO ISSUE CHEQUE FACILITIES TO MEMBERS WHICH WAS THE MOST COMMON CHARACTERISTICS OF THE BANK. III. ASSESSEE SOCIETY HAD TO COMPLY WITH THE RULES FRAMED FOR CO - OPERATIVE SOCIETIES UNDER THE MAHARASHTRA CO - OPERATIVE SOCIETIES RULES. IV. AS PER THE BANKING REGULATION (CO - OPERATIVE SOCIETIES) RULES, 1966, CO - OPERATIVE BANK WERE SUBJECT TO RESERVE BANK REGULATIONS AND HAD TO SUBMIT VARIOUS RETURNS EVERY MONTH PRESCRIBED UNDER SUCH RULES. THE MANNER OF PUBLICATION OF ACCOUNTS AND BALANCE SHEE T WAS ALSO PRESCRIBED. AOS HAD NOT POINTED OUT THAT ASSESSEE WERE UNDER ANY OBLIGATION TO ADHERE TO THESE REGULATIONS. HE FURTHER HELD THAT AOS HAD FAILED TO APPRECIATE THE DISTINCTION BETWEEN CREDIT CO - OPERATIVE SOCIETIES AND CO - OPERATIVE BANKS, THAT CRED IT CO - OPERATIVE SOCIETIES WERE IN THE NATURE OF CREDIT RESOURCE SOCIETY WHICH STRIVED TO OBTAIN CREDITS FOR ITS MEMBERS WITH THE OBJECTIVES OF FACILITATING CREDIT TO INDIVIDUALS WHILE CO - OPERATIVE BANKS WERE FULL - FLEDGED BANKING ORGANIZATIONS, THAT THE ASS ESSEE CO - OPERATIVE CREDIT SOCIETIES WERE UNDER THE PURVIEW OF MAHARASHTRA CO - OPERATIVE SOCIETY ACT AND COULD NOT CONDUCT THE BUSINESS OF BANKING AS CLAIMED BY THE AO WITHOUT FULFILLING THE CONDITIONS OF THE REGISTRAR OF SOCIETIES AND THE RESERVE BANK OF IN DIA, THAT THE ACTION OF THE AO WAS NOT JUSTIFIED, THAT PROVISIONS OF SECTION 80P(4) HAD ONLY SOUGHT TO 5 ITA NO. 255 / NAG /2015 ASSESSMENT YEAR: 201 2 - 1 3 EXCLUDE THE CO - OPERATIVE BANKS FROM AVAILING THE BENEFITS OF THE DEDUCTION. 9.0 THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT, NAG PUR, THE APPEAL IS ALLOWED. 7. THE LD. CIT(A) HAS DECIDED THE SOLE GROUND OF THE REVENUES APPEAL BY FOLLOWING THE DECISION OF THE ITAT BENCH NAGPUR REFERRED ABOVE. WE FURTHER NOTICE THAT THE COORDINATE BENCH OF THE ITAT HAS DECIDED THE IDENTICAL ISSUE I N FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE ITA NO. 528/NAG/2014 FOR THE A.Y. 2010 - 11 BY RELYING ON THE DECISION OF THE COORDINATE BENCH RENDERED IN THE CASE OF CHHATTISGARH URBAN SAHAKARI SANTHA MARYADIT VS. ITO IN ITA NO. 371/NAG/2012 DATED 27.05.201 5. 8. SINCE, THE FINDINGS OF THE LD. CIT (A) ARE IN ACCORDANCE WITH THE DECISIONS OF THE COORDINATE BENCH IN THE CASES DISCUSSED ABOVE AND THE DECISION IN THE ASSESSEES OWN CASE FOR THE A.Y. 2010 - 11 (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH T HE DECISIONS OF THE LD. CIT (A). WE THEREFORE UPHOLD THE FINDINGS OF THE LD. CIT (A) AND DISMISS THE SOLE GROUND OF APPEAL OF REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR A SSESSMENT YEAR 2011 - 2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE , 2018 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 15 / 0 6 /201 8 ALINDRA, PS 6 ITA NO. 255 / NAG /2015 ASSESSMENT YEAR: 201 2 - 1 3 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CIT 5. DR, ITAT, NAGPUR 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PS/PS ) ITAT, NAGPUR