National Aeronautical Laboratory Employees Co-operative Housing Society Limited , Bangalore V. Income Tax Officer Ward-4(2)(2), Bangalore

ITA 3314/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6123 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 13-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMESH KUMAR
• Section: 234B; 80P; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO S . 3314 & 3315 /BANG/201 8 ASSESSMENT YEARS : 2014 - 15 & 2015 - 16 M/S. NATIONAL AERONAUTICAL LABORATORY EMPLOYEES CO- OPERATIVE HOUSING SOCIETY LTD., NAL CAMPUS, OLD AIRPORT ROAD, KODIHALLI, BANGALORE 560 017. PAN: AACAN3679H VS. THE INCOME TAX OFFICER, WARD 4 (2) (2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SMT. SUMAN LUNKAR, CA RESPONDENT BY : SHRI A. RAMESH KUMAR, JCIT (DR) DATE OF HEARING : 14 .01.2019 DATE OF PRONOUNCEMENT : 25 . 01 .201 9 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A)-4, BANGALORE BOTH DAT ED 28.09.2018 FOR ASSESSMENT YEARS 2014-15 AND 2015-16. BOTH THESE A PPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMEN T YEAR 2014-15 IN ITA NO. 3314/BANG/2018 ARE AS UNDER. 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PASSI NG THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. THE ORD ERS AS PASSED BEING BAD IN LAW AND ARE LIABLE TO BE QUASHED. 2. THE LEARNED ASSESSING OFFICER HAD ERRED IN DENYI NG THE DEDUCTION ITA NOS. 3314 & 3315/BANG/2018 PAGE 2 OF 6 CLAIMED U/S 80P(2)(A)(I) OF THE ACT ON THE GROUND T HAT THE APPELLANT IS A CO- OPERATIVE BANK, THEREBY COVERED IN TERMS OF S ECTION 80P(4) OF THE ACT AND THE LEARNED CIT(A) HAS ERRED IN CONFIRM ING THE SAME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW APPLICABLE, THE APPELLANT IS A CO-OPERATIVE SOCIETY AND NOT A CO-OP ERATIVE BANK HENCE THE PROVISIONS OF SECTION 80P (4) OF THE ACT IS NOT APPLICABLE TO THE FACTS OF THE APPELLANT. THE ACTION OF AUTHORITIES B EING WHOLLY ERRONEOUS BOTH ON FACTS AND LAW IS TO BE NEGATED. 3. IN ANY CASE, THE AUTHORITIES BELOW HAVE ERRED IN NOT APPRECIATING THAT IN THE ABSENCE OF ANY BANKING LICENSE FROM RBI , THE APPELLANT CANNOT BE TERMED AS CO-OPERATIVE BANK. THEREFORE TH E PROVISIONS OF SECTION 80P (4) OF THE ACT ARE NOT APPLICABLE AT AL L. 4. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT: I) THE APPELLANT HAS VIOLATED THE PRINCIPLES OF MUT UALITY BY INVESTING IN DEPOSITS IN BANKS WHICH ARE NOT THE MEMBERS OF THE APPELLANT. II) THE INTEREST EARNED FROM THE ABOVE BANKS ARE AS SESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HE AD BUSINESS III) THE DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IS A VAILABLE ONLY TO INCOME FROM BUSINESS AND NOT TO INCOME FROM OTHER S OURCES. IV) INTEREST ACCRUED FROM SURPLUS DEPOSITS IN BANKS /SOCIETIES IS LIABLE FOR TAXATION. THE ABOVE CONCLUSIONS DRAWN ARE CONTR ARY TO FACTS AND THE LAW APPLICABLE IS TO BE DISREGARDED. 5. IN ANY CASE, THE LEARNED CIT(A) HAS ERRED IN NOT GIVING ANY FINDING WITH RESPECT TO ALLOWABILITY OF DEDUCTION U/S 80P(2 )(A)(I) OF THE ACT WITH RESPECT TO INTEREST EARNED FROM MEMBERS. 6. THE APPELLANT DENIES LIABILITY TO PAY INTEREST U /S 234A AND 234B OF THE ACT. THE INTEREST HAVING BEEN LEVIED ERRONEOUSL Y IS TO BE DELETED. 7. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT ORDER PASSED BY AO AND CIT(A) TO BE QUASHED OR AT LEAST THE DENIAL OF DEDUCTION U/S 80P (2)(A)(I) OF THE ACT BE GRANTED AND THE RETURN FILED BY THE APPELLANT BE ACCEPTED AND INTEREST LEVIED BE ALSO DELETED. 3. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMEN T YEAR 2015-16 IN ITA NO. 3315/BANG/2018 ARE AS UNDER. 1. THE LEARNED ASSESSING OFFICER HAD ERRED IN PASSI NG THE ORDER IN THE MANNER PASSED BY HIM AND THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE SAME. THE ORD ERS AS PASSED BEING BAD IN LAW AND ARE LIABLE TO BE QUASHED. ITA NOS. 3314 & 3315/BANG/2018 PAGE 3 OF 6 2. THE LEARNED ASSESSING OFFICER HAD ERRED IN DENYI NG THE DEDUCTION CLAIMED U/S 80P(2)(A)(I) OF THE ACT ON THE GROUND T HAT THE APPELLANT IS A CO- OPERATIVE BANK, THEREBY COVERED IN TERMS OF S ECTION 80P(4) OF THE ACT AND THE LEARNED CIT(A) HAS ERRED IN CONFIRM ING THE SAME. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE LAW APPLICABLE, THE APPELLANT IS A CO-OPERATIVE SOCIETY AND NOT A CO-OP ERATIVE BANK HENCE THE PROVISIONS OF SECTION 80P (4) OF THE ACT IS NOT APPLICABLE TO THE FACTS OF THE APPELLANT. THE ACTION OF AUTHORITIES B EING WHOLLY ERRONEOUS BOTH ON FACTS AND LAW IS TO BE NEGATED. 3. IN ANY CASE, THE AUTHORITIES BELOW HAVE ERRED IN NOT APPRECIATING THAT IN THE ABSENCE OF ANY BANKING LICENSE FROM RBI , THE APPELLANT CANNOT BE TERMED AS CO-OPERATIVE BANK. THEREFORE TH E PROVISIONS OF SECTION 80P (4) OF THE ACT ARE NOT APPLICABLE AT AL L. 4. THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT: I) THE APPELLANT HAS VIOLATED THE PRINCIPLES OF MUT UALITY BY INVESTING IN DEPOSITS IN BANKS WHICH ARE NOT THE MEMBERS OF THE APPELLANT. II) THE INTEREST EARNED FROM THE ABOVE BANKS ARE AS SESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT UNDER THE HE AD BUSINESS III) THE DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IS A VAILABLE ONLY TO INCOME FROM BUSINESS AND NOT TO INCOME FROM OTHER S OURCES. IV) INTEREST ACCRUED FROM SURPLUS DEPOSITS IN BANKS /SOCIETIES IS LIABLE FOR TAXATION. THE ABOVE CONCLUSIONS DRAWN ARE CONTR ARY TO FACTS AND THE LAW APPLICABLE IS TO BE DISREGARDED. 5. IN ANY CASE, THE LEARNED CIT(A) HAS ERRED IN NOT GIVING ANY FINDING WITH RESPECT TO ALLOWABILITY OF DEDUCTION U/S 80P(2 )(A)(I) OF THE ACT WITH RESPECT TAR INTEREST EARNED FROM MEMBERS. 6. THE APPELLANT DENIES LIABILITY TO PAY INTEREST U /S 234A AND 234B OF THE ACT. THE INTEREST HAVING BEEN LEVIED ERRONEOUSL Y IS TO BE DELETED. 7. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING, IT IS REQUESTED THAT ORDER PASSED BY AO AND CIT(A) TO BE QUASHED OR AT LEAST THE DENIAL OF DEDUCTION U/S 80P (2)(A)(I) OF THE ACT BE GRANTED AND THE RETURN FILED BY THE APPELLANT BE ACCEPTED AND INTEREST LEVIED BE ALSO DELETED. 4. IN COURSE OF HEARING OF THESE APPEALS, IT WAS SU BMITTED BY LD. AR OF ASSESSEE THAT THERE ARE TWO DISPUTES IN THE PRESENT CASE. S HE SUBMITTED THAT THE FIRST DISPUTE IS WHETHER THE ASSESSEE IS A CO-OPERATIVE B ANK OR NOT. SHE SUBMITTED ITA NOS. 3314 & 3315/BANG/2018 PAGE 4 OF 6 THAT THE ASSESSEE IS NOT HOLDING ANY LICENSE FROM R BI AND THEREFORE, THE ASSESSEE CANNOT BE CONSIDERED AS A CO-OPERATIVE BAN K. AT THIS JUNCTURE, THE BENCH POINTED OUT THAT AS PER RECENT JUDGEMENT OF H ONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SO CIETY LTD. VS. ACIT AS REPORTED IN 397 ITR 1, IT WAS HELD AS PER PARA 24 O F THIS JUDGEMENT THAT IT IS A MATTER OF COMMON KNOWLEDGE THAT IN ORDER TO DO THE BUSINESS OF A CO-OPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENSE FROM THE R ESERVE BANK OF INDIA AND IF THE ASSESSEE DOES NOT POSSESS THE SAME, IT CANNOT B E SAID THAT THE ASSESSEE IS A CO-OPERATIVE BANK BUT AT THE SAME TIME, THIS I S ALSO NOTED BY HONBLE APEX COURT IN SAME PARA OF THIS JUDGMENT THAT IN THAT C ASE, THE RESERVE BANK OF INDIA HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE ASSESSEE DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. THE BENCH OBSERVED TH AT IN THE PRESENT CASE ALSO, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO F OR FRESH DECISION AND THE ASSESSEE HAS TO OBTAIN AND FURNISH THE CERTIFICATE FROM RBI REGARDING THE NATURE OF ITS BUSINESS. IF THE RBI CERTIFIES THAT THE BUS INESS OF ASSESSEE IS NOT A CO- OPERATIVE BANK THEN ONLY, IT CAN BE ACCEPTED THAT T HE ASSESSEE IS NOT A COOPERATIVE BANK. IN REPLY, SHE SUBMITTED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION AND IF THIS IS DONE THEN ASSESSEE WILL OBTAIN REQUIRED CERTIFICATE FROM RBI AND SUBMIT THE SAME B EFORE THE AO WITHIN REASONABLE TIME. 5. THEREAFTER SHE SUBMITTED THAT THE SECOND DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION U/S. 80P(2)(A)(I) OF IT ACT IN RESPECT OF INTEREST INCOME FROM BANKS. SHE SUBMITTED THAT THIS ISSUE WAS DECIDED AGAINST T HE ASSESSEE BY FOLLOWING THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDE RED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY LTD. AS REPORTED IN 395 ITR 611 (KARN). BUT ANOTHER JUDGEMENT OF HON'BLE K ARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA C REDIT COOPERATIVE LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309 IS IN FAVOUR OF THE ASSESSEE. SHE SUBMITTED THAT IN THE FACTS OF PRESENT CASE, THIS J UDGMENT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD . VS. ITO (SUPRA) IS APPLICABLE. AT THIS JUNCTURE ALSO, IT WAS POINTED OUT BY THE BENCH THAT IN BOTH THESE CASES, THE ISSUE WAS DECIDED BY HON'BLE KARNA TAKA HIGH COURT IN THE LIGHT OF FACTS OF THOSE TWO CASES. THE BENCH POINT ED OUT THAT IN THE CASE OF ITA NOS. 3314 & 3315/BANG/2018 PAGE 5 OF 6 PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOC IETY LTD. (SUPRA), IT WAS FOUND THAT THE MONEY DEPOSITED IN BANK WAS OUT OF A SSESSEES LIABILITY AND NOT OUT OF ASSESSEES OWN FUNDS AND UNDER THESE FACTS, THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. BUT IN THE CASE OF TUMKUR ME RCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA), IT WAS FOUND THAT THE MONEY DEPOSITED IN BANK WAS OUT OF ASSESSEES OWN FUNDS AND NOT OUT OF LIAB ILITY OF THE ASSESSEE AND UNDER THESE FACTS, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE BENCH OBSERVED THAT ON THIS ASPECT ALSO, THE MATTER MAY B E RESTORED BACK TO THE FILE OF AO FOR FRESH DECISION AFTER EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THESE TWO JUDGEMENTS OF HON'BLE KARNATAKA HIGH COUR T. IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT IF THE MATTER IS RESTORED BACK TO THE FILE OF AO, THE ASSESSEE WILL ESTABLISH THAT THE FACTS IN T HE PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA). AS AGAINST THIS, THE LD. DR OF RE VENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW ON BOTH ISSUES. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN V IEW OF ABOVE DISCUSSION, I SET ASIDE THE ORDER OF CIT (A) IN BOTH YEARS AND RESTOR E THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION WITH THE DIRECTION THAT THE A SSESSEE SHOULD OBTAIN A CERTIFICATE FROM RBI WITHIN REASONABLE TIME REGARDI NG THE NATURE OF ASSESSEES BUSINESS AND IF THE RBI CERTIFIES THAT THE NATURE O F BUSINESS OF THE ASSESSEE IS NOT THAT OF A CO-OPERATIVE BANK THEN THIS SHOULD BE ACCEPTED AND THE FIRST ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. 7. REGARDING THE SECOND ISSUE I.E. ALLOWABILITY OF DEDUCTION U/S. 80P(2)(A)(I) OF IT ACT IN RESPECT OF INTEREST INCOME FROM BANKS, THE A O IS DIRECTED TO EXAMINE THE FACTS OF PRESENT CASE IN THE LIGHT OF THESE TWO JUD GEMENTS OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO- OPERATIVE SALE SOCIETY LTD. (SUPRA) AND TUMKUR MERC HANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) AND IF IT IS FOUND THAT THE FACTS OF PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO- OPERATIVE SALE SOCIETY LTD. (SUPRA) THEN THE ISSUE SHOULD BE DECIDED AGAINST THE ASSESSEE. BUT IF IT IS FOUND THAT THE FACTS OF PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CRED IT COOPERATIVE LTD. VS. ITA NOS. 3314 & 3315/BANG/2018 PAGE 6 OF 6 ITO (SUPRA) THEN THE ISSUE SHOULD BE DECIDED IN FAV OUR OF THE ASSESSEE. I WANT TO MAKE IT CLEAR THAT THIS IS THE OBLIGATION OF THE ASSESSEE TO BRING ON RECORD THE NECESSARY FACTS OF THE PRESENT CASE TO ENABLE THE A O TO MAKE THIS COMPARISON AND DECIDE THIS ISSUE. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 25 TH JANUARY, 2019. /MS/ 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, BANGALORE.