THE ITO Ward-2(1), Indore V. M/s. Gujrat Mercantile Credit Co-operative Society Ltd., Indore

ITA 262/IND/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5688 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Assessee Lawyers: ARPIT GOUR
• Keywords: Question of law

Judgement Text

ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIB UNAL, INDORE BENCH, INDORE BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER .../ I.T.A. NOS. 262 & 263/IND/2016 / ASSESSMENT YEARS 2007-08 & 2008-09 INCOME TAX OFFICER 2(1) INDORE :: / APPELLANT VS. M/S GUJARAT MERCANTILE CREDIT CO-OPERATIVE SOCIETY LTD. INDORE PAN AAACG 4145M :: / RESPONDENT ! ' # $ / REVENUE BY SHRI LALCHAND CIT DR %& ' # $ / ASSESSEE BY SHRI ANIL KAMAL GARG & SHRI ARPIT GOUR ' ( ' &) DATE OF HEARING 21.3.2017 *+,- ' &) DATE OF PRONOUNCEMENT 2 2 .3.2017 / O R D E R PER SHRI C.M. GARG, JM THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAINS T DIFFERENT ORDERS OF THE LEARNED CIT(A)II, INDORE, DATED 30.1 1.2015 IN FIRST ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 2 APPEAL NOS. IT-142/13-14/97 & IT-142/13-14/96 FOR T HE ASSESSMENT YEARS 2007-08 AND 2008-09, RESPECTIVELY. 2. IN BOTH THESE APPEALS, THE REVENUE HAS TAKEN A C OMMON GROUND TO THE EFFECT THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE SOCIETY IS ENTITLED TO DEDUCTION U/S 80P(2 )(A)(I) EVEN THOUGH THE ASSESSEE IS NEITHER A PRIMARY AGRICULTURAL CRED IT SOCIETY NOR A PRIMARY CO-OPERATIVE AGRICULTURE AND RURAL DEVELOPM ENT BANK AS SPECIFIED IN SECTION 80P(4) INSERTED W.E.F. 01.04.2 007. 3. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES. WE FIND THAT THE ISSUE INVOLVED IN THESE APPEALS HA S BEEN DEALT WITH AND DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 31.7.2015 IN ITA NO. 363/IND/2013 WHEREIN THE HON'BLE TRIBUNAL HAS OBSERVED AS UNDER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ON THE FACTS OF THIS CASE, WHICH IS ADMITTED FACTS THAT THE ASSESSEE IS A COOPERATIVE SOCIETY REGISTERED U/S 5( 4) OF THE MADHYA PRADESH SWAYAT SAHKARITA ADHINIYAM, 1999. TH E ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 3 ASSESSEE SOCIETY IS ASSESSED TO INCOME TAX SINCE IN CEPTION AND ALL ITS RETURN HAS BEEN ACCEPTED BY THE INCOME TAX DEPARTMENT AS A COOPERATIVE SOCIETY ONLY. THE ASSESSEE SOCIETY HAS BEEN GRANTED DEDUCTION U/S 80P2(A)(I) SINCE INCEPTION UP TO ASSESSMENT YEAR 2006-07. THE MAIN OBJECT OF THE ASS ESSEE SOCIETY IS TO DEVELOP THE HABITS OF SAVINGS AMONGST MEMBER AND TO MAKE AND MANAGE SECURED INVESTMENT OF FUNDS AND TO PROVIDE FUNDS TO ITS MEMBERS ON REASONABLE RATES OF INTEREST. WE FIND THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND IT WAS GRANTED BENEFIT OF DEDUCTION U/S 80P2(A)(I) OF THE INCOME-TAX ACT, 1961. WE FIND THAT AFTER THE AMENDMENT IN SECT ION 80P(4), THE DEDUCTION TO THE COOPERATIVE SOCIETY WAS NOT GR ANTED. THE ISSUE IS WHETHER THE SOCIETY IS COOPERATIVE CARRYIN G OUT THE BUSINESS OF BANKING AND IF IT IS A CO-OPERATIVE SOC IETY, THEN THEY ARE ENTITLED FOR DEDUCTION U/S 80P(4) OF THE ACT. W E ALSO FIND SUPPORT FROM THE DECISION OF HON'BLE BOMBAY HIGH CO URT IN THE CASE OF QUEPEM URBAN CO-OP. CREDIT SOCIETY LIMITED VS. ACIT, IN TAX APPEALS NO. 22, 23 & 24 OF 2015, WHEREIN HON'BL E HIGH COURT HAS HELD AS UNDER ;- ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 4 THIS FACT OF ACCEPTING DEPOSITS FROM PEOPLE WHO AR E NOT MEMBERS HAD BEEN SO RECORDED BY THE CIT(A) IN HIS O RDER. BUT IT CANNOT BE CONCLUDED THAT THE APPELLANT'S PRI NCIPAL BUSINESS WAS OF ACCEPTING DEPOSITS FROM PUBLIC AND THEREFORE IT WAS IN BANKING BUSINESS. IN FACT, THE IMPUGNED ORDER ERRONEOUSLY RELIES UPON BYE-LAW 43 OF THE SOC IETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CO NCLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. THUS IN T HE PRESENT FACTS THE FINDING THAT THE APPELLANT'S PRINCIPAL BU SINESS WAS OF BANKING WAS PERVERSE AS IT WAS NOT SUPPORTED BY THE EVIDENCE ON RECORD. SO FAR AS THE ISSUE OF PRIM ARY OBJECT OF THE ASSESSEE WAS CONCERNED THE IMPUGNED O RDER GIVES NO FINDING ON THAT BASIS TO DEPRIVE THE APPEL LANT THE BENEFIT OF SECTION 80P. (PARA 11) IN FACT AS PER THE BYE-LAWS OF THE APPELLANT SOCIET Y THERE WAS NO PROHIBITION TO ADMITTING A SOCIETY TO ITS MEMBERSHIP AND ONE OF THREE CUMULATIVE CONDITIONS PRECEDENT TO BE A PRIMARY COOPERATIVE BANK WAS NOT ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 5 SATISFIED. THIS WAS A MANDATORY CONDITION I.E. THE BYE LAWS MUST SPECIFICALLY PROHIBIT ADMISSION OF ARTY O THER COOPERATIVE SOCIETY TO ITS MEMBERSHIP. THE REVENUE HAS NOT BEEN ABLE TO SHOW ANY SUCH PROHIBITION IN THE B YE LAWS OF THE ASSESSEE. THUS EVEN THE AFORESAID QUALIFYING CONDITION (3) FOR BEING CONSIDERED AS A PRIMARY COO PERATIVE BANK WAS NOT SATISFIED. THUS, THE THREE CONDITIONS AS PROVIDED UNDER SECTION 5(CW) OF THE BANKING REGULAT ION ACT, 1949, ARE TO BE SATISFIED CUMULATIVELY AND EXC EPT CONDITION (2) THE OTHER TWO QUALIFYING CONDITIONS A RE NOT SATISFIED. ERGO, APPELLANT CANNOT BE CONSIDERED TO BE A CO- OPERATIVE BANK FOR THE PURPOSES OF SECTION 80P(4) O F THE ACT. THUS, THE APPELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE UNDER SECTION 80P(2)(A)(I). (PARA 12) THE CONTENTION OF THE REVENUE THAT THE APPELLANT IS NOT ENTITLED TO THE BENEFIT OF SECTION 80P(2)(A)(I) IN VIEW OF THE FACT THAT IT DEALS WITH NON-MEMBERS CANNOT BE UPHEL D. THIS FOR THE REASON THAT SECTION 80P(1) OF THE ACT RESTR ICTS THE ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 6 BENEFITS OF DEDUCTION OF INCOME OF CO-OPERATIVE SOC IETY TO THE EXTENT IT IS EARNED BY PROVIDING CREDIT FACILIT IES TO ITS MEMBERS. THEREFORE, TO THE EXTENT THE INCOME EARNED IS ATTRIBUTABLE TO DEALINGS WITH THE NONMEMBERS ARE CONCERNED THE BENEFIT OF SECTION 80P WOULD NOT BE AVAILABLE. IN THE ABOVE VIEW OF THE MATTER, AT THE TIME WHEN EFFECT HAS BEEN GIVEN TO THE ORDER OF THIS COU RT, THE AUTHORITIES UNDER ACT WOULD RESTRICT THE BENEFIT OF DEDUCTION UNDER SECTION 80P OF THE ACT ONLY TO THE EXTENT THAT THE SAME WAS EARNED BY THE APPELLANT IN CARRYI NG ON ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. (PARA 13) ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW AS FRA MED WAS ANSWERED IN THE NEGATIVE I.E. IN FAVOUR OF THE APPELLANT AND AGAINST THE RESPONDENT-REVENUE. APPEA LS ALLOWED IN ABOVE TERMS. (PARA 14,15) 7. SIMILARLY, WE ALSO GET SUPPORT FROM THE DECISIO N OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S. YE SHWANTHPUR ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 7 CREDIT CO-OPERATIVE SOCIETY LIMITED, IN I.T.A.NO.23 7/2012 , WHEREIN IT IS HELD AS UNDER :- IF A CO-OPERATIVE BANK IS EXCLUSIVELY CARRYING BAN KING BUSINESS, THEN THE INCOME DERIVED FROM THE SAID BUS INESS CANNOT BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE SAID INCOME IS LIABLE FOR TAX. A CO-O PERATIVE BANK AS DEFINED UNDER THE BANKING REGULATION ACT INCLUDES THE PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL RURAL DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEF IT TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID NOT WANT TO EXTEND THE SAID BENEFIT TO A CO-OPE RATIVE BANK WHICH IS EXCLUSIVELY CARRYING ON BANKING BUSIN ESS I.E., THE PURPORT OF THE AMENDMENT. IF THE ASSESSEE IS NOT A CO-OPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND IF IT DOES NOT POSSESS A LICENSE FROM THE RESERVE BANK OF INDIA TO CARRY ON BUSINESS, THEN IT IS NOT A CO-OPERATIVE BANK. IT IS A CO-OPERATIVE SOCIETY W HICH ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 8 ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO IT S MEMBERS WHICH IS COVERED U/S 80P2(A)(I) I.E. CARRYI NG ON THE BUSINESS OF BANKING FOR PROVIDING CREDIT FACILI TIES TO ITS MEMBERS. THE OBJECT OF THE AFORESAID AMENDMENT IS NOT TO EXCLUDE THE BENEFIT EXTENDED U/S 80P(I) TO T HE SOCIETY. DECIDED IN FAVOUR OF ASSESSEE. 8. WE, RESPECTFULLY FOLLOWING THE DECISION O F HON'BLE BOMBAY HIGH COURT AND HON'BLE KARNATAKA HIGH COURT, ALLOW THE APPEAL OF THE ASSESSEE. WE REVERSE THE FINDING OF THE LD. CIT(A) AND WE HOLD THAT THE ASSESSEE SOCIETY IS ELIGIBLE TO CLAIM DEDUCTION U/S 80P2(A)(I) OF THE INCOME-TAX ACT, 1961. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED ON THESE GROUNDS. 4. SINCE THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ISSUE INVOLVED IN THESE APPEALS ARE EXACTLY IDENTIC AL TO THAT DECIDED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN ITA N O. 363/IND/2013 ORDER DATED 31.7.2015 (SUPRA), THEREFO RE, FOLLOWING THE REASONINGS GIVEN THEREIN, WE HOLD THAT THE LEAR NED CIT(A) WAS FULLY JUSTIFIED IN HOLDING THAT THE ASSESSEE SOCIET Y IS ENTITLED TO ITO VS. M/S GUJRAT MERCANTILE CREDIT CO.OP.SOCIETY- ITA NOS. 262 & 263/IND/2016 9 DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. WE, THEREFOR E, UPHOLD THE FINDINGS OF THE LEARNED CIT(A) IN THIS REGARD BY DI SMISSING THE COMMON GROUND OF APPEAL RAISED BY THE REVENUE IN TH ESE APPEALS. 5. IN THE RESULT, THE APPEALS OF THE REVENUE STAND DISMISSED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 22 ND MARCH, 2017. SD/- SD/- $) ! ! (O.P.MEENA) (C.M. GARG) ACCOUNTANT MEMBER J UDICIAL MEMBER MARCH 22 ND 2017. DN/