Income Tax Officer Ward-6(2)(2), Bangalore V. M/s Manjunatheshwara Credit co-operative Society Ltd, Bangalore

ITA 2720/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5558 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 18-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHAITANYA V MUDRABETTU
• Keywords: Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 2720 /BANG/201 7 ASSESSMENT YEAR : 20 14 - 15 THE INCOME TAX OFFICER, WARD 6 (2)(2), BANGALORE. VS. M/S. MANJUNATHESHWARA CREDIT CO-OP. SOCIETY LTD., NO. 20, 3 RD MAIN, 2 ND BLOCK, RING ROAD, NANDINI LAYOUT, BANGALORE 560 096. PAN: AAKAS 1721M APPELLANT RESPONDENT ASSESSEE BY : SHRI CHAITANYA V. MUDRABETTU, ADVOCATE REVENUE BY : SHRI SUNIL KUMAR AGARWAL, JCIT (DR) DATE OF HEARING : 22 . 0 2 .201 8 DATE OF PRONOUNCEMENT : 23 . 0 2.201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER; THIS APPEAL IS FILED BY THE REVENUE WHICH IS DIRECT ED AGAINST THE ORDER OF LD. CIT(A) 6, BANGALORE DATED 24.07.2017 FOR ASSESSME NT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER. 1. THE ORDER OF THE CIT (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEDUCT ION U/S 80P(2)(A)(I) MADE BY THE AO, WITHOUT APPRECIATING T HE FACT THAT THE ASSESSEE SOCIETY WAS CARRYING ON BUSINESS OF BANKIN G NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN PLACING RELIANCE UPON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF SHRI BILURUG URUBASAVA PATINA SAHAKARI SANGHA NIYAMITHA WITHOUT APPRECIATING THE FACT THAT THE SLP FILED BY THE DEPARTMENT BEFORE THE HON'BLE APEX COU RT IS STILL PENDING ITA NO. 2720/BANG/2017 PAGE 2 OF 4 JUDGMENT. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A), IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEA RING OF THE APPEAL. 3. THE LD. DR OF REVENUE SUPPORTED THE ASSESSMENT O RDER WHEREAS THE LD. AR OF ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SU BMITTED COPY OF A JUDGMENT OF HON'BLE KARNATAKA HIGH COURT, DHARWAD B ENCH DATED 06.01.2016 RENDERED IN THE CASE OF CIT VS. BILURU GURUBASAV SA HAKARI PATTINA SANGH NIYAMITHIN ITA NO. 100029/2015. AT THIS JUNCTURE, A SPECIFIC QUERY WAS RAISED BY THE BENCH ASKING THE LD. DR OF REVENUE TO POINT OUT ANY DIFFERENCE IN FACTS IN THE PRESENT CASE AND IN THOSE CASES WHERE HON'BLE K ARNATAKA HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WHICH A RE FOLLOWED BY CIT(A) AND WHICH IS CITED BEFORE US BY LD. AR OF ASSESSEE. IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT AGAINST THESE JUDGMENTS OF HON' BLE KARNATAKA HIGH COURT, THE MATTER IS PENDING AT HONBLE APEX COURT. THIS QUERY WAS ALSO RAISED BY THE BENCH AS TO WHETHER OPERATION OF THESE JUDGMENTS HA D BEEN STAYED BY HONBLE APEX COURT. IN REPLY, THE LD. DR OF REVENUE SUBMIT TED THAT THERE IS NO STAY GRANTED BY HONBLE APEX COURT. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT THE ISSUE IN DISPUTE WAS DECIDED BY CIT(A) AS PER PARA NOS. 6 TO 11 AND THER EFORE, THESE PARAS FROM THE ORDER OF CIT(A) ARE REPRODUCED HEREINBELOW FOR THE SAKE OF READY REFERENCE. 6. THE GROUNDS OF APPEAL, APPELLANT'S STATEMENT OF FACTS, AO'S OBSERVATIONS AND LEGAL POSITION HAVE BEEN DULY CONS IDERED WHILE DISPOSING THE APPEAL. THE SOLITARY ISSUE TO BE ADJU DICATED IN THE APPEAL CONCERNS DENIAL OF EXEMPTION U/S 80P OF THE ACT. 7. IN THIS CONTEXT, IT IS NOTED THAT IN THE CASE OF SRI BILURUGURUBASAVAPATTINASAHAKARI SANGHA NIYAMITHA BA GALKOT, IN ITA NO. 5006/2013 DATED 05/02/2014, THE HONBLE JUR ISDICTIONAL HIGH COURT OF KARNATAKA HAD HELD AS FOLLOWS:- ITA NO. 2720/BANG/2017 PAGE 3 OF 4 IF A CO-OPERATIVE BANK IS EXCLUSIVELY CARRYING ON B ANKING BUSINESS, THEN THE INCOME DERIVED FROM THE SAID BUSINESS CANN OT BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE SAI D INCOME IS LIABLE FOR TAX. A CO-OPERATIVE BANK AS DEFINED UNDER THE B ANKING REGULATION ACT INCLUDES THE PRIMARY AGRICULTURAL CREDIT SOCIET Y OR A PRIMARY CO- OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEFITS 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-OPERATIVE BANK WHICH IS EXCLUSIVELY CARRYING ON BANKING BUSIN ESS I.E. THE PURPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSESS EE IS NOT A CO- OPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSI NESS AND IF IT DOES NOT POSSESS A LICENCE FROM RESERVE BANK OF INDIA TO CARRY ON BUSINESS, THEN IT IS NOT A CO-OPERATIVE BANK. IT IS A CO-OPER ATIVE SOCIETY WHICH ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO IT S 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. THE OBJECT OF THE AFORESAID AMENDMENT IS NOT TO EXCLUDE THE BENEFIT E XTENDED UNDER SECTION 80P(1) TO SUCH SOCIETY ..THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS AN SWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. IT IS ALSO NOTED THAT THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF M/S BANGALORE COMMERCIAL TRANSPORT CREDIT C O-OPERATIVE SOCIETY LIMITED IN ITA NO 599/2013 DATED 27/06/2014 ON THE QUESTION RAISED BY REVENUE WHETHER SUB SECTION (4) OF SECTIO N 80P OF THE ACT WOULD APPLY TO ONLY CO-OPERATIVE BANKS AND NOT TO C REDIT CO-OPERATIVE SOCIETIES, DISMISSED THE APPEAL OF REVENUE BY RELYI NG ON ITS EARLIER DECISION IN THE CASE OF SRI BILURUGURUBASAVAPATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT, IN ITA NO. 5006/2013 DATED 05/0 2/2014 WHICH HAS BEEN CITED IN PARA 7 SUPRA. 9. IT IS FURTHER NOTED THAT THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF SHRI LAXMICREDIT SOUHARD SAHAKARI LTD (2016 ) 65 TAXMANN.COM 96 (KARNATAKA) IN IT APPEAL NO 100127 O F 2014 DATED 21/09/2015 HELD THAT WHERE ASSESSEE, A CO-OPERATIVE SOCIETY, DID NOT SATISFY ALL THREE BASIC CONDITIONS MENTIONED IN SEC TION 5(CVV) OF BANKING REGULATION ACT, TO BECOME PRIMARY CO-OPERAT IVE BANK, IT COULD NOT BE HELD AS A CO-OPERATIVE BANK UNDER SECT ION 80P(4) SO AS TO DENY DEDUCTION UNDER SECTION 80P. 10. IT IS SEEN THAT FACTS IN THE INSTANT APPEAL ARE SIMILAR TO FACTS IN THE CASES OF M/S SRI BILURUGURUBASAVAPATTINASAHAKARI SA NGHA NIYAMITHA BAGALKOT IN ITA NO. 5006/2013 DATED 05/02/2014, M/S BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LI MITED IN ITA NO 599/2013 DATED 27/06/2014 AND IN THE CASE OF SHRI L AXMI CREDIT SOUHARD SAHAKARI LTD (2016) 65 TAXMANN.COM 96 (KARN ATAKA) IN IT APPEAL NO 100127 OF 2014 DATED 21/09/2015. ITA NO. 2720/BANG/2017 PAGE 4 OF 4 11. THEREFORE IN THE LIGHT OF THE AFORESAID DECISIO NS OF HONBLE JURISDICTIONAL HIGH COURT OF KARNATAKA WHICH ARE AP PLICABLE IN THE INSTANT APPEAL, AND IN VIEW OF THE FACT THAT THE DE CISIONS ARE BINDING, AND FURTHERMORE SINCE JUDICIAL DISCIPLINE REQUIRES THAT WISDOM OF HIGHER AUTHORITIES PREVAIL, THE AO IS DIRECTED TO R ECOMPUTE DEDUCTION ALLOWABLE TO APPELLANT BY FOLLOWING ABOVE JUDICIAL DECISIONS. THE GROUNDS ARE THEREFORE ALLOWED. 5. IN THE ABOVE PARAS REPRODUCED FROM THE ORDER OF CIT(A), IT IS SEEN THAT THE CIT(A) HAS FOLLOWED VARIOUS JUDGEMENTS OF HON'BLE K ARNATAKA HIGH COURT AND THIS IS NOT THE CASE OF THE REVENUE THAT THE OPERAT ION OF THESE JUDGMENTS IS STAYED BY HONBLE APEX COURT AND THIS IS ALSO NOT T HE CASE OF THE REVENUE THAT THERE IS ANY DIFFERENCE IN THE FACTS OF THE PRESENT CASE AND THESE CASES AND THEREFORE, THESE JUDGMENTS ARE APPLICABLE IN THE PR ESENT CASE. UNDER THIS FACTUAL AND LEGAL POSITION, I FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND HENCE, I DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 23 RD FEBRUARY, 2018. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.