ITO 20(3)(1), MUMBAI V. RAHUL URBAN CO OP CREDIT SOCIETY LTD, MUMBAI

ITA 300/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1868 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2016
• Appeal Filed By: Department
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-01-2016
• Court: TRIBUNAL
• Assessee Lawyers: CULLA W MUMBAI PAN AAAJRG

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER I.T.A. NO.300/M/2016 (ASSESSMENT YEAR: 2011 - 2012) I.T.A. NO.301/M/2016 (ASSESSMENT YEAR: 2012 - 2013) ITO 20(3)(1), R.NO.622, 6 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI 400 012. / VS. M/S. RAHUL URBAN CO - OP CREDIT SOCIETY, 619/9, LAXMI BUILDING, N.M. JOSHI MARG, BYCULLA (W), MUMBAI 40 027. ./ PAN : AAAJR0097G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI AKHILENDRA YADAV, DR / RESPONDENT BY : SHRI RAJENDRA KADREKAR / DATE OF HEARING : 08.11.2016 / DATE OF PRONOUNCEMENT : 1 8.11.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THESE APPEALS ARE FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2011 - 2012 AND 2012 - 2013. CONSIDERING THE CONNECTIVITY OF THE APPEALS AS WELL AS THE COMMONALITY OF THE ISSUES RAISED THEREIN, BOTH THESE APPEALS ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OFF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. SINCE, THE GROUNDS RAISED BY THE REVENUE IN BOTH THE YEARS ARE IDENTICAL, THEREFORE, FOR THE SAKE OF REFERENCE AND FOR ADJUDICATION PURPOSE, THE GROUNDS RAISED IN THE APPEAL FOR THE AY 2011 - 12 ARE EXTRACTED AS UNDER: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT INTEREST EARNED FROM SURPLUS FUND PARKED IN FDS WITH OTHER COOPERATIVE BANKS WAS ENTITLED TO CLAIM EXEMPTION / DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF SUCH INCOME. 2. ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN HOLDING THAT SUCH INCOME ATTRIBUTABLE TO THE ACTIVITY OF BANKING THUS 2 WOULD BE ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT SUCH INCOME COULD NOT BE SAID TO ATTRIBUTABLE TO THE ACTIVITY OF TH E SOCIETY, THEREFORE, WOULD NOT FALL WITHIN THE MEANING AND EXPRESSION PROFITS AND GAINS OF BUSINESS. 3. IN THIS APPEAL, THE ONLY ISSUE RAISED BY THE REVENUE RELATES TO THE ALLOWABILITY OF RELIEF U/S 80P OF THE ACT IN RESPECT OF THE INCOME OF THE ASSE SSEE WHEN THE ASSESSEE IS A CREDIT COOPERATIVE SOCIETY. IN THE ASSESSMENT, AO TREATED THE SAME AS A CREDIT COOPERATIVE BANK. DURING THE FIRST APPELLATE PROCEEDINGS, CIT (A) EXAMINED THE FACTS RELEVANT TO THE DEFINITION OF CREDIT COOPERATIVE SOCIETY AS WELL AS THE APPLICABLE CITATIONS AND CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT A BANK AND THEREFORE, THE PROVISIONS OF SECTION 80P(4) WILL NOT APPLY TO THE ASSESSEE - CREDIT COOPERATIVE SOCIETY. THE CONTENTS OF PARA 5.3 OF THE CIT (A)S ORDER AR E RELEVANT IN THIS REGARD. AGGRIEVED WITH THE SAME, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE PRESENT APPEAL. 4. DURING THE PROCEEDINGS BEFORE US, LD DR FOR THE REVENUE SUBMITTED THAT THE ORDER OF THE CIT (A) SHOULD BE REVERSED. BY MENTIONING THE FACT THAT LENDING AND BORROWING ACTIVITIES BETWEEN THE MEMBERS OF THE SOCIETY AND THE ASSESSEE CONSTITUTES BANKING ACTIVITIES. 5. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND THE CONTENTS OF PARA 5.3 OF T HE IMPUGNED ORDER. FURTHER, LD COUNSEL ALSO RELIED ON THE CITATIONS RELIED UPON BY THE CIT (A)S VIDE PARA 7 OF HIS ORDER. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PRARA 5.3 OF THE IMPUGNED ORDER IS EXTRACTED AS UNDER: 7. FROM THE FACTS OF T HE INSTANT CASE, IT IS QUITE CLEAR THAT THE APPELLANT HAS LIMITED ITSELF TO THE MEMBERS. THE APPELLANT HAS NOT PROVIDED BANKING FACILITIES EITHER TO GENERAL PUBLIC AT LARGE OR EVEN TO THE MEMBERS OF THE SOCIETY. EVEN THE BYE LAWS OF THE APPELLANT DOES NOT PROVIDE FOR THE BANKING ACTIVITIES. THEREFORE, THE FACTS OF THIS CASE ARE NOT IDENTICAL WI TH ANY OF THE CASE LAWS RELIED UPON BY THE AO. ON THE OTHER HAND, T HE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE DECISIONS QUOTED BY THE APPELLANT OF THE HONBLE HIGH COURTS OF GUJARAT & BOMBAY, THE ITAT MUMBAI & PUNE WHERE THE ACTIVITIES OF THE ASSE SSEE WERE LIMITED TO THE MEMBERS OF A SPECIFIC GROUP AND THE AREA OF OPERATIONS WAS ALSO LIMITED TO THE ACCEPTANCE OF DEPOSITS OF MEMBERS AND PROVIDING CREDIT FACILITIES TO ONLY MEMBERS, WHICH HAVE BEEN HELD AS NOT FALLING UNDER BANKING ACTIVITIES AS DEFIN ED IN THE BANKING REGULATION ACT. I ALSO FIND THAT THE CASE OF APPELLANT IS COVERED IN HIS FAVOUR IN HIS OWN CASE FOR THE EARLIER AYS BY MY PREDECESSOR CIT (A). THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF VARIOUS HIGH COURTS & TRIBUNALS A S CITED BY THE APPELLANT AS WELL AS THE DECISION OF THE CIT (A) IN THE APPELLANTS OWN CASE, I HOLD THAT, THE APPELLANT CANNOT BE HELD AS A COOPERATIVE BANK, HENCE DEDUCTION CLAIMED U/S 80P(2)(A)(I) & 80P(2)(D) CANNOT BE DENIED TO IT. I FIND 3 THAT THE AO IN THE PRESENT AY HAS NOWHERE LED ANY FACTS TO SHOW THAT BANKING FACILITIES SUCH AS CHEQUE BOOKS, DRAFTS HAVE BEEN PROVIDED. NEITHER IS IT THE CASE OF AO THAT FACILITIES HAVE BEEN PROVIDED TO MEMBERS OF THE GENERAL PUBLIC WITHOUT RESTRICTING ONLY TO ITS OWN MEMBERS. ON FACTS, THEREFORE THE AO HAS NOT DEMONSTRATED AS TO HOW THE APPELLANT QUALIFIES TO BE A BANK. IN THESE CIRCUMSTANCES, I HOLD THAT THE APPELLANT IS A COOPERATIVE SOCIETY AND NOT A COOPERATIVE BANK AND IS THEREFORE, ELIGIBLE FOR DEDUCTION U/S 8 0 - P(2)(A)(I) & 80P(2)(D). AO IS ACCORDINGLY, DIRECTED TO ALLOW THE DEDUCTION CLAIMED BY THE APPELLANT. GROUND 1 IS ALLOWED IN FAVOUR OF THE APPELLANT . 6. FURTHER, WE HAVE ALSO PERUSED THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF QUEPEM U RBAN COOPERATIVE CREDIT SOCIETY LTD VS. ACIT [2015] 377 ITR 272 (BOM) , WHICH WAS RELIED UPON BY THE LD COUNSEL FOR THE ASSESSEE FOR THE PROPOSITION THAT SUCH LENDING ACTIVITIES DO NOT CONSTITUTE BANKING ACTIVITIES AS THE SAME ARE TRANSACTED BETWEEN THE COO PERATIVE SOCIETY AND THE MEMBERS OF THE SOCIETY . SINCE, NO PUBLIC IS INVOLVED THE DEFINITION OF BANKING DOES NOT COVER SUCH ACTIVITIES. AS SUCH, THERE IS NO RESERVE BANK OF INDIAS APPROVAL FOR CONDUCTING SUCH BANKING ACTIVITIES IN THIS CASE. HE ALSO RELIED ON THE DEFINITION OF BANKING AND READ OUT FROM THE CONTENTS OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 AND THE SAME READS AS UNDER: - SEC. 5(B) 'BANKING' MEANS THE ACCEPTING, FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC , REPAYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWAL BY CHEQUE, DRAFT, OR OTHERWISE; 7. FROM THE ABOVE, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE MEMBERS OF THE CREDIT COOPERATIVE SOCIETY DO NOT CONSTITUTE PUBLIC AND THERE IS NO DEPOSIT ING, WITHDRAWAL BY CHEQUE OR DRAFT ETC. AFTER CONSIDERING THE SAID JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF QUEPEM URBAN COOPRATIVE CREDIT SOCIETY (SUPRA), WE ARE OF THE OPINION THAT DECISION OF THE CIT (A) IS FAIR AND REASONABLE A ND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, ISSUE RAISED IN THE REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 1 8 T H NOVEMBER, 2016. S D / - S D / - ( PAWAN SINGH ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 18.11 .2016 . . ./ OKK , SR. PS 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI