Janakhandi Taluka Shree Parshwanath Alpasan Kyatar Pattina Sahakari Sangha Niyamitha , Bagalkot V. Income Tax Officer Ward-2 , Bagalkot

ITA 3083/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8671 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 16-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: ASHOK G. MUDNUR
• Keywords: Opportunity of being heard; Co-operative Credit Society
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI A.K.GARODIA, ACCOUNANT MEMBER ITA NO. 3083 (BANG) 2018 (ASSESSMENT YEAR : 2015 16) M/S. JAMAKHANDI TALUKA SHREE PARSHWANATH ALPASANKYATAR PATTIN SAHAKAR SANGH NIYAMIT, APPE LLANT NEAR MURGOD PETROL, JAMKHANDI, DIST. BAGALKOT 587301 PAN. AACAJ0614L VS THE ITO, WARD 2, BAGALKOT. RESPONDENT ASSESSEE BY : SHRI ASHOK G. MUDNUR, C. A. REVENUE BY : SMT. PADMAMEENAKSHI, JCIT (DR) DATE OF HEARING : 03-12-2018 DATE OF PRONOUNCEMENT : 21-12-2018 O R D E R PER A. K. GARODIA, A.M.: THIS APPEAL IS FILED BY THE ASSESSEE AND IT IS DIR ECTED AGAINST THE ORDER OF CIT (A) BELGAUM DATED 24.08.2018 FOR A. Y. 2015 16. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ,BELGAUM HAS ERRED IN UPHOLDING THE LEARNED ASSESSING OFFICER OR DER DISALLOWING THE APPELLANT'S CLAIM U/S 80P(2)(A)(I) OF THE INCOM E TAX ACT 1961 WHICH IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , BELGAUM HAS ERRED IN APPLYING CITIZEN COOP SOCIETY LTD, HYDERAB AD (SC) CASE WHICH FACTS ARE DIFFERENT THAN THAT OF THE APPELLAN T WHEREIN THERE ARE NO LOANS TO GENERAL PUBLIC BUT ONLY TO MEMBERS ELIG IBLE UNDER THE STATE ACT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN BRINGING NEW DIMENSION TO THE MEANING OF 'MEMBER' B Y DRAWING DISTINCTION BETWEEN GENERAL MEMBERS, ASSOCIATE MEMB ERS AND NOMINAL MEMBERS WHICH THE INCOME TAX ACT ,1961 DOES NOT. THE APPELLANTS DRAW SUPPORT FROM THE JALAGAON DISTRICT CENTRAL COOPERATIVE BANK LTD & ANR VS UNION OF INDIA & ORS (2004) 265 ITR 423 (BORN) ITA NO. 3083(BANG)2018 2 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ,BELGAUM HAS ERRED IN UPHOLDING THE LEARNED ASSESSING OFFICER OR DER WHEREIN THEY HAVE EQUATED NOMINAL MEMBERS AND ASSOCIATE MEMBERS AS NON- MEMBERS AND HENCE VIOLATION OF KARNATAKA COOPERATIV E SOCIETY ACT, 1959 AND THEREBY NOT ELIGIBLE TO DEDUCTION U/S 80P( 2) APPLYING CITIZEN COOP SOCIETY LTD HYDERABAD VS ACIT,9(1) HYDERABAD ( SC ) CASE. 5. THE APPELLANTS CRAVES LEAVE TO ADD/ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF FINAL HEARING. 3. LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE AO AND CIT (A) HAD APPLIED THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CITIZEN CO-OPERATIVE SOCIETY LIMITED VS. ACIT, 397 ITR 1 WITHOUT COMPARING THE FACTS OF THAT CASE WITH THE FACTS OF THE PRESENT CASE. HE ALSO SUBMITTED THAT THERE IS A THE KARNATAKA CO OPERAT IVE SOCIETIES (AMENDMENT) ACT, 2014 EFFECTIVE FROM 06.09.2014 AND HE POINTED OUT THAT AS PER THIS, SECTION 18 OF THE KARNATAKA CO OPERA TIVE SOCIETIES, 1959 WAS AMENDED AND THIS SECTION DEALS WITH NOMINAL & A SSOCIATE MEMBERS. HE ALSO SUBMITTED THAT AS PER THIS AMENDMENT, THERE IS A CAP OF 15% FOR ASSOCIATE MEMBERS AND FOE EXCESS OF SUCH MEMBERS, I T IS PRESCRIBED THAT EITHER THOSE ASSOCIATE MEMBERS SHOULD BE MADE REGUL AR MEMBERS OR SHALL BE REMOVED WITHIN 6 MONTHS. HE ALSO SUBMITTED THAT THE AMENDED PROVISIONS OF SECTION 18 OF THE KARNATAKA CO OPER ATIVE SOCIETIES, 1959 CAN BE GIVEN EFFECT TO IN NEXT YEAR ONLY. LEARNED D R OF THE REVENUE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND P LACED RELIANCE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CITIZEN CO- OPERATIVE SOCIETY LIMITED VS. ACIT (SUPRA). 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND I FI ND THAT PARA 25 OF THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CITIZEN CO- OPERATIVE SOCIETY LIMITED VS. ACIT (SUPRA) IS RELEV ANT AND THEREFORE, THE SAME IS REPRODUCED HEREIN BELOW:- 25. SO FAR SO GOOD. HOWEVER, IT IS SIGNIFICANT TO P OINT OUT THAT THE MAIN REASON FOR DISENTITLING THE APPELLANT FROM GETTING THE DEDUCTION PROVIDED UNDER SECTION 80P OF TH E ACT IS NOT SUB-SECTION (4) THEREOF. WHAT HAS BEEN NOTIC ED BY THE ASSESSING OFFICER, AFTER DISCUSSING IN DETAIL THE AC TIVITIES OF THE APPELLANT, IS THAT THE ACTIVITIES OF THE APPELL ANT ARE IN VIOLATIONS OF THE PROVISIONS OF THE MACSA UNDER WHI CH IT IS FORMED. IT IS POINTED OUT BY THE ASSESSING OFFICER TH AT THE ASSESSEE IS CATERING TO TWO DISTINCT CATEGORIES OF PEOPLE. THE FIRST CATEGORY IS THAT OF RESIDENT MEMBERS OR ORD INARY MEMBERS. THERE MAY NOT BE ANY DIFFICULTY AS FAR AS THI S CATEGORY IS CONCERNED. HOWEVER, THE ASSESSEE HAD CARV ED OUT ANOTHER CATEGORY OF NOMINAL MEMBERS. THESE ARE ITA NO. 3083(BANG)2018 3 THOSE MEMBERS WHO ARE MAKING DEPOSITS WITH THE ASSESS EE FOR THE PURPOSE OF OBTAINING LOANS, ETC. AND, IN FA CT, THEY ARE NOT MEMBERS IN REAL SENSE. MOST OF THE BUSINESS OF TH E APPELLANT WAS WITH THIS SECOND CATEGORY OF PERSONS W HO HAVE BEEN GIVING DEPOSITS WHICH ARE KEPT IN FIXED DEP OSITS WITH A MOTIVE TO EARN MAXIMUM RETURNS. A PORTION OF THESE DEPOSITS IS UTILISED TO ADVANCE GOLD LOANS, ETC. TO THE MEMBERS OF THE FIRST CATEGORY. IT IS FOUND, AS A MAT TER OF FACT, THAT HE DEPOSITORS AND BORROWERS ARE QUIET DISTI NCT. IN REALITY, SUCH ACTIVITY OF THE APPELLANT IS THAT OF FINANCE BUSINESS AND CANNOT BE TERMED AS CO-OPERATIVE SOCIETY. IT IS ALSO FOUND THAT THE APPELLANT IS ENGAGED IN THE ACTI VITY OF GRANTING LOANS TO GENERAL PUBLIC AS WELL. ALL THIS IS DONE WITHOUT ANY APPROVAL FROM THE REGISTRAR OF THE SOCI ETIES. WITH INDULGENCE IN SUCH KIND OF ACTIVITY BY THE APPE LLANT, IT IS REMARKED BY THE ASSESSING OFFICER THAT THE ACTIVI TY OF THE APPELLANT IS IN VIOLATION OF THE CO-OPERATIVE SOCIE TIES ACT. MOREOVER, IT IS A CO-OPERATIVE CREDIT SOCIETY WHICH IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF T HE ACT. 5. IT IS SEEN THAT IN THAT CASE, IT WAS NOTED THAT THE ASSESSEE IS IN FINANCE BUSINESS BECAUSE IT WAS FOUND IN THAT CASE THAT THE DEPOSITORS AND BORROWERS ARE QUITE DISTINCT AND LOAN IS ALSO GRANT ED TO GENERAL PUBLIC. IN THE PRESENT CASE, THESE ASPECTS OF FACTS ARE NOT EX AMINED AND COMMENTED UPON BY ANY OF THE LOWER AUTHORITIES. HENCE, I FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE AO FOR A FRESH DECISION AFTER EX AMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THIS JUDGMENT BY WAY O F A SPEAKING AND REASONED ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. I ALSO HOLD THAT THE AMENDED PROVISIONS O F SECTION 18 THE KARNATAKA CO OPERATIVE SOCIETIES, 1959 SHOULD ALS O BE KEPT IN MIND WHILE DECIDING THE ISSUE AFRESH BECAUSE THE PERIOD OF SIX MONTHS FROM THE DATE OF AMENDMENT HAS ALSO EXPIRED ON 05.03.2015 I. E. BEFORE 31.03.2015 AND IT HAS TO BE SEEN THAT WHETHER THE ASSESSEE HAS COMPLIED WITH SUCH AMENDMENT BY THAT DATE I.E. 05.03.2015. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (A.K. GARODIA) ACCOUNTANT MEMBER BANGALORE D A T E D : 21.12.2018 /MS/ ITA NO. 3083(BANG)2018 4 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGAL ORE.