M/s. Millennium Credit Co-operative Society Limited, Bengaluru V. Income Tax Officer, Ward-5(2)(3), Bengaluru

ITA 2606/BANG/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9814 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 04-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N SIDDAPPAJI CIT HEARD ON PR

Judgement Text

ITA.2606 & 2607/BANG/2017 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'B', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NOS.2606 & 2607/BANG/2017 (ASSESSMENT YEARS : 2013-14 & 2014-15) M/S. MILLENNIUM CREDIT COOPERATIVE SOCIETY LTD, NO.81, GANDHI BAZAAR MAIN ROAD, BASAVANAGUDI, BENGALURU 560 004 .. APPELLANT PAN : AABAT7601E V. INCOME-TAX OFFICER, WARD -5 (2)(3), BENGALURU .. RESPONDENT ASSESSEE BY : SHRI. RAVISHANKAR, ADVOCATE REVENUE BY : SHRI. R. N. SIDDAPPAJI, ADDL. CIT HEARD ON : 27.11.2018 PRONOUNCED ON : 13.12.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGAINS T THE ORDERS OF THE CIT (A) -5, DT.16.08.2017 AND 19.08.2017, FO R THE ASSESSMENT YEARS 2013-14 AND 2014-15 RESPECTIVELY. ITA.2606 & 2607/BANG/2017 PAGE - 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS FOR A Y 2013-14 : ITA.2606 & 2607/BANG/2017 PAGE - 3 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS FOR A Y 2014-15 : ITA.2606 & 2607/BANG/2017 PAGE - 4 02. THE ASSESSING OFFICER HAS CONCLUDED THAT THE AS SESSEE IS A COOPERATIVE BANK FALLING U/S.80P(2)(D) OF THE ACT, IN PARA 6 AND 7 OF THE ORDER, AS UNDER : 6. THE ASSESSEE FULFILS ALL THE CRITERIA LAID DOWN IN SECTION 5(CCI) AND IS CONSEQUENTLY A PRIMARY CO-OPERATIVE BANK REF ERRED TO IN SECTION 5(CCI) OF THE BANKING REGULATION ACT, 1949, REFERRED TO IN EXPLANATION BELOW SUB-SECTION (4) OF SECTION 80P. H ENCE, THE PROVISIONS OF SECTION 80P(4) ARE ATTRACTED AS PER W HICH THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING A DEDUCTION U NDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961. 7. AS PER THE DETAILS FURNISHED BY THE ASSESSEE, IT HA S EARNED NET INTEREST INCOME OF RS 17,65,921 FROM DEPOSITS IN BA NKS. THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF THE T OTGARS CO- OPERATIVE SALE SOCIETY LTD V/S INCOME TAX OFFICER I N APPEAL NO. 1622 OF 2010 DECIDED ON 8TH FEBRUARY 2010 HAS HELD THAT THE INTEREST EARNED BY CO-OPERATIVE SOCIETY ON SURPLUS FUNDS INVESTED IN SHORT TERM DEPOSITS WITH BANKS AND IN G OVT. SECURITIES ARE NOT ELIGIBLE FOR DEDUCTION U/S 80P. THE WORDS 'THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINES S' IN SECTION 80P(2)(A) EMPHASIZES THAT THE INCOME IN RES PECT OF WHICH DEDUCTION IS SOUGHT MUST CONSTITUTE THE OPERA TIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO TH E SOCIETY. IN VIEW OF THE ABOVE DISCUSSION, THE CLAIM ON THIS INT EREST INCOME IS ALSO TO BE DISALLOWED AS PER THE PROVISIONS OF SECT ION 80P(2)(D). ITA.2606 & 2607/BANG/2017 PAGE - 5 THE ASSESSEE BEING AGGRIEVED, FILED APPEALS BEFORE THE CIT (A) FOR THE TWO ASSESSMENT YEARS. 03. ON APPEAL, THE ASSESSEE SUBMITTED BEFORE THE CI T (A) THAT THE ASSESSEE IS NOT A COOPERATIVE BANK, BUT A COOPERATI VE SOCIETY, THAT WAS DOING THE BUSINESS OF LENDING CREDIT TO ITS MEM BERS ONLY. HOWEVER, THE CIT (A) RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN CITIZEN COOPERATIVE SOCIETY V. ACI T,[397 ITR 1] HAS DENIED THE CLAIM OF THE ASSESSEE ON THE FOLLOWI NG TWO FOLDS : I) THAT THE ASSESSEE IS LENDING FUNDS TO ITS NON-ME MBERS ; II) THE ACTIVITIES OF ITS BUSINESS FALLS WITHIN THE REALM OF COOPERATIVE BANK, THEREFORE THE ASSESSEE IS NOT ENTITLED TO THE BENEF IT OF SECTION 80P. BEING FURTHER AGGRIEVED, THE ASSESSEE FILED APPEALS BEFORE THIS TRIBUNAL. 04. BEFORE US, THE LD. AR SUBMITTED THAT THE ASSESS EE IS NOT HAVING THE BANKING LICENCE AND THEREFORE IS ENTITLE D TO THE BENEFIT OF SECTION 80P AS PER PARA 24 OF THE JUDGMENT OF THE H ONBLE SUPREME COURT IN CITIZEN COOPERATIVE SOCIETY (SUPRA), WHICH READS AS UNDER : 24) UNDOUBTEDLY, IF ONE HAS TO GO BY THE AFORESAID DEFINITION OF CO-OPERATIVE BANK, THE APPELLANT DOES NOT GET COV ERED THEREBY. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT IN ORD ER TO DO THE BUSINESS OF A CO-OPERATIVE BANK, IT IS IMPERATIVE T O HAVE A LICENCE FROM THE RESERVE BANK OF INDIA, WHICH THE A PPELLANT DOES NOT POSSESS. NOT ONLY THIS, AS NOTICED ABOVE, THE RESERVE BANK OF INDIA HAS ITSELF CLARIFIED THAT THE BUSINES S OF THE APPELLANT DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. THE ITA.2606 & 2607/BANG/2017 PAGE - 6 APPELLANT, THEREFORE, WOULD NOT COME WITHIN THE MIS CHIEF OF SUB- SECTION (4) OF SECTION 80P. 05. ON THE OTHER HAND THE LD. DR RELIES ON PARA 24 AND SUBMITTED THAT THE ACTIVITY OF THE ASSESSEE FALLS WITHIN THE FOUR CORNERS OF BANKING. IF THE ASSESSEE DOES NOT HAVE THE BANKING LICENCE, BUT STILL THE CORE ACTIVITY OF THE ASSESSEE WOULD CONTINUE TO BE THAT OF BANKING ACTIVITY. 06. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. AS PER PARA 24 OF THE HONBLE SUPREME C OURT IN CITIZEN COOPERATIVE SOCIETY (SUPRA), WHICH IS REPRODUCED SU PRA, IT IS INCUMBENT UPON ANY SOCIETY / BANK TO HAVE THE LICEN CE FROM RBI FOR THE PURPOSES OF DOING THE BUSINESS OF BANKING. IN THE CASE BEFORE THE HONBLE SUPREME COURT, THE ASSESSEE HAD OBTAINE D A CERTIFICATE FROM THE RBI CLARIFYING THAT THE ASSESSEES BUSINES S DOES NOT FALL UNDER THE CATEGORY OF COOPERATIVE BANK. IN OUR VIE W, IT WILL BE EQUITABLE IN THE INTEREST OF JUSTICE IF THE MATTER IS REMANDED BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE A CTIVITIES OF THE ASSESSEE AND FURTHER THE ASSESSEE IS DIRECTED TO FU RNISH THE CERTIFICATE / CIRCULAR FROM THE RBI TO THE EFFECT THAT THE ACTI VITY / BUSINESS FUNCTIONS OF THE ASSESSEE DO NOT ATTRACT THE BANKIN G REGULATIONS ACT AND HENCE DO NOT REQUIRE ANY LICENCE FROM RBI. NEE DLESS TO SAY IF THE ASSESSEE FURNISHES THE CERTIFICATE FROM THE RBI CLARIFYING THAT THE ACTIVITY OF THE ASSESSEE DO NOT FALL UNDER THE ACTI VITY OF COOPERATIVE BANK THEN THE AO SHALL ALLOW THE CLAIM OF DEDUCTION U/S.80P(4) OF THE ACT. ITA.2606 & 2607/BANG/2017 PAGE - 7 07. WITH RESPECT TO THE SECOND DISPUTE WHETHER THE ASSESSEE IS A COOPERATIVE SOCIETY OR NOT, IN MANY CASES, THE TRIB UNAL HAS HELD THAT THE STAND OF THE REVENUE THAT A SOUHARDA IS A COOPE RATIVE BUT NOT A CO OPERATIVE SOCIETY UNDER THE ACT AND HENCE, NOT E LIGIBLE FOR DEDUCTION U/S.80P. IN A RECENT ORDER IN THE MATTE R OF M/S. UDAYA SOUHARDA CREDIT CO OPERATIVE SOCIETY LTD [ITA NO.2831/BANG/2017, DT.17.08.2018, IT WAS NOTED THAT KARNATAKA STATE HAS NOTIFIED KARNATAKA CO OPERATIVE SOCIETI ES ACT, 1959 AS WELL AS THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 A ND BOTH ACTS ARE IN FORCE. THEREFORE, CONVERSION FROM ONE INTO ANOTHER IS POSSIBLE. THEREAFTER THE TRIBUNAL HELD THAT THE DE DUCTION U/S.80P CAN ONLY BE APPLIED TO A COOPERATIVE SOCIETY REGIST ERED UNDER THE KARNATAKA CO- OPERATIVE SOCIETIES ACT, 1959 AND THE REAFTER THE MATTER WAS RESTORED BACK TO THE AO FOR FRESH DECISI ON AFTER MAKING NECESSARY ENQUIRY AND INVESTIGATION. IN THE PRESENT CASE, THE FACTS ARE IDENTICAL AND ON E MORE PLEA WAS RAISED PERTAINING TO MUTUALITY. 08 IN VIEW OF THE ABOVE WE ALSO RESTORE THE MATTER BACK TO THE FILE OF THE AO TO EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN UDAYA SOUHARDA CRED IT CO OPERATIVE SOCIETY LTD (SUPRA) AS WELL AS ALSO IN THE LIGHT OF THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT IN THE MATTER OF CITIZEN COOPERATIVE SOCIETY LTD (SUPRA) PERTAINING TO THIS ISSUE . ITA.2606 & 2607/BANG/2017 PAGE - 8 08. IN THE LIGHT OF ABOVE OBSERVATION / DIRECTION I N PARA 6 AND 8, APPEALS OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DAY OF DECEMBER, 2018. SD/- SD/- (A. K. GARODIA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 13.12.2018 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE.