M/s Pavamana Credit Co-operative Society Limited , Bangalore V. Income Tax Officer Ward-5(2)(4), Bangalore

ITA 3402/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7168 (ITAT-BANGALORE)
• Duration Of Justice: 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 24-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect; Set aside
• Section: 80P; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO . 340 2/ BANG/201 8 ASSESSMENT YEAR : 20 1 5 - 1 6 M/S. PAVAMANA CREDIT CO- OPERATIVE SOCIETY LTD., NO. 51, SRIRAM MADHVA SANGHA BUILDING, 5 TH MAIN ROAD, CHAMRAJPET, BANGALORE 560 018. PAN: AAABP0320J VS. THE INCOME TAX OFFICER, WARD 5 (2) (4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI R.E. BALASUBRAMANYAM, CA RESPONDENT BY : SHRI A. RAMESH KUMAR, JCIT (DR) DATE OF HEARING : 1 6 .01.2019 DATE OF PRONOUNCEMENT : 18 . 01 .201 9 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT (A)-5, BANGALORE DATED 28.09.2018 FOR ASSESSMEN T YEAR 2015-16. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. THE APPELLANT OBJECTS TO THE ORDER OF THE LD.CIT (A ) ON THE GROUNDS: GROUNDS RAISED TAX EFFECT IN INR 1. THAT THE IMPUGNED ORDER IS OPPOSED TO FACTS AND LAW IN SO FAR AS IT IS PRE-JUDICIAL TO THE INTERESTS OF THE APPELLANT. GENERAL GROUND 2. THAT THE LD.CIT(A) ERRED IN CONFIRMING THE ORDER OF THE LD.AO DENYING THE DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT AND IN DOING SO HE FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS A CO OPERATIVE SOCIETY WITHOUT A BANKING LICENSE AND IS NOT AT ALL INVOLVED IN THE BANKING ACTIVITY AND IS AS SUCH ELIGIBLE FOR DEDUCTION UNDER 80P(2). 7,76,489 3. THAT THE LD. CIT(A) MISDIRECTED HIMSELF IN APPLYING THE RATIO OF CITIZEN CO-OPERATIVE SOCIETY LTD. HYDERABAD VS. ACIT HYDERABAD (SC) INASMUCH AS THE APPELLANT IS ENGAGED IN THE BUSINESS OF EXTENDING CREDIT SOLELY TO ITS SAME AS ABOVE ITA NO. 3402/BANG/2018 PAGE 2 OF 5 MEMBERS. 4. THAT THE LD.CIT(A) ERRED IN DENYING THE DEDUCTION UNDER SECTION 80P(2) OF THE INCOME TAX ACT IN RESPECT OF INTEREST INCOME RECEIVED FROM VARIOUS BANK AND IN DOING SO A) THE LD.CIT (A) FAILED TO APPRECIATE THAT THE INTEREST INCOME FROM OTHER BANKS ARE ATTRIBUTABLE TO PROFITS AND GAINS OF THE BUSINESS OF EXTENDING CREDIT FACILITIES TO APPELLANT'S MEMBERS. B) THE LD.CIT(A) ERRED IN APPLYING THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF TOTAGARS CO-OPERATIVE SOCIETY AND FAILED TO APPRECIATE THAT THE BUSINESS OF THE APPELLANT CONSISTS ENTIRELY OF EXTENDING CREDIT FACILITIES ONLY TO ITS MEMBERS AND THE INTEREST INCOME FROM VARIOUS BANKS AROSE ONLY ON ACCOUNT OF KEEPING THE SURPLUS FUNDS FOR THE TIME BEING IN ANTICIPATION OF LENDING THE SAME TO THE MEMBERS AS THERE WERE NO READY BORROWERS FOR THE SAID AMOUNT. SAME AS ABOVE 5. WITHOUT PREJUDICE TO GROUND NO.4 AND AS AN ALTERNATE PLEA THE APPELLANT FURTHER SUBMITS THAT THE INCOME EARNED IS ENTITLED FOR DEDUCTION U/S 80P (2) (D) OF THE ACT INASMUCH AS THE CO- OPERATIVE BANKS ARE ALSO CO-OPERATIVE SOCIETIES AS PER SECTION 2(B1) OF KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959. THE APPELLANT PRAYS FOR LEAVE TO ADD, DELETE, MODIF Y AND/OR ADDUCE ADDITIONAL GROUND AT ANY TIME BEFORE THE APPEAL IS DISPOSED OFF. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D OR REMOVED IN TIME TO TIME, IT IS REQUESTED THAT THE HON'BLE ITAT MAY BE PLEASED TO EXAMINE THE CASE IN THE LIGHT OF JUSTICE AND GRANT THE RELIEF SOUGHT FOR. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT IN T HE PRESENT APPEAL, THE DECISION IS REQUIRED ON TWO ASPECTS. HE SUBMITTED THAT THE FIRST ASPECT IS THIS AS TO WHETHER THE ASSESSEE IS A CO-OPERATIVE B ANK OR NOT. HE SUBMITTED THAT THE AUTHORITIES BELOW HAS FOLLOWED THE JUDGMEN T OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SO CIETY LTD. VS. ACIT AS REPORTED IN 397 ITR 1 AND HELD THAT THE ASSESSEE IS A CO-OPERATIVE BANK AND THEREFORE, NOT ELIGIBLE FOR DEDUCTION U/S. 80P. HE SUBMITTED THAT AS PER THIS JUDGMENT OF HONBLE APEX COURT, IF THE ASSESSEE IS NOT HOLDING ANY LICENSE FROM RBI TO DO BANKING BUSINESS, THEN THE ASSESSEE CANNOT BE CONSIDERED ITA NO. 3402/BANG/2018 PAGE 3 OF 5 AS CO-OPERATIVE BANK. AT THIS JUNCTURE, THE BENCH POINTED OUT THAT AS PER THE SAME JUDGMENT OF HONBLE APEX COURT, IN PARA 24, IT WAS HELD THAT IN THAT CASE, THE ASSESSEE HAS FILED CERTIFICATE FROM RESER VE BANK OF INDIA REGARDING THE NATURE OF BUSINESS OF THE ASSESSEE AN D IN THE SAME CASE, THE RBI HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE A SSESSEE DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. THE BENCH POINTED OUT THAT IN THE PRESENT CASE ALSO, THE ASSESSEE HAS TO OBTAIN A CERTIFICATE FROM RBI REGARDING HIS NATURE OF BUSINESS. IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT IF THE MATTER IS RESTORED BACK TO THE FILE OF AO THEN THE ASSESSEE WILL OBTAIN AND SUBMIT CERTIFICATE FROM RBI WITHIN REASONABLE TIME. 4. THEREAFTER HE SUBMITTED THAT THE SECOND ISSUE TO BE DECIDED IS WHETHER THE DEDUCTION IS ALLOWABLE IN RESPECT OF INTEREST FROM BANK. HE SUBMITTED THAT ON THIS ISSUE, ALTHOUGH THE JUDGMENT OF HON'BLE KAR NATAKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGA RS CO-OPERATIVE SALE SOCIETY LTD. AS REPORTED IN 395 ITR 611 (KARN) IS A GAINST THE ASSESSEE BUT ANOTHER JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RE NDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. V S. ITO AS REPORTED IN 230 TAXMAN 309 IS IN FAVOUR OF THE ASSESSEE AND IN THE FACTS OF PRESENT CASE, THIS JUDGMENT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) IS APPLICABLE. AT THIS JUNCTURE ALSO, THE BENCH POINTED OUT THAT THE FACTS OF PRESENT CASE HA S TO BE EXAMINED IN THE LIGHT OF THESE TWO JUDGMENTS AND IF IT IS FOUND THA T THE FACTS OF THE PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE PCIT AN D ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) THEN THE ISS UE SHOULD BE DECIDED AGAINST THE ASSESSEE AND IF IT IS FOUND THAT THE FA CTS OF THE PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF TUMKUR MERCHA NTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) THEN ONLY THE ISSU E CAN BE DECIDED IN FAVOUR OF THE ASSESSEE AND SINCE THERE IS NO FINDIN G OF ANY OF THE AUTHORITIES BELOW ON THIS ASPECT, THIS ISSUE ALSO HAS TO GO BAC K TO THE FILE OF AO FOR FRESH DECISION AFTER EXAMINING THE FACTS OF PRESENT CASE IN THE LIGHT OF THESE TWO JUDGMENTS OF HON'BLE KARNATAKA HIGH COURT. IN REPLY, LD. AR OF ASSESSEE ALSO AGREED TO THIS PROPOSITION PUT FORWAR D BY THE BENCH. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES B ELOW. ITA NO. 3402/BANG/2018 PAGE 4 OF 5 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND IN V IEW OF ABOVE DISCUSSION, I SET ASIDE THE ORDER OF CIT (A) AND RESTORE THE MATT ER BACK TO THE FILE OF AO FOR FRESH DECISION ON TWO ASPECTS. FIRST ASPECT TO BE DECIDED BY HIM IS THIS AS TO WHETHER THE ASSESSEE IS A CO-OPERATIVE BANK O R NOT. FOR DECIDING THIS ASPECT OF THE MATTER, THE ASSESSEE IS DIRECTED TO O BTAIN CERTIFICATE FROM RBI REGARDING THE NATURE OF BUSINESS OF ASSESSEE SOCIET Y WITHIN REASONABLE TIME AND IF IT IS CERTIFIED BY RBI THAT THE ASSESSEES B USINESS IS NOT THAT OF A CO- OPERATIVE BANK THEN IT CANNOT BE SAID THAT THE ASSE SSEE IS A CO-OPERATIVE BANK. IF IT IS FOUND THAT ASSESSEE IS A CO-OPERATI VE BANK THEN ASSESSEE CANNOT BE ALLOWED ANY DEDUCTION U/S. 80P BUT IF IT IS FOUND THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK THEN IN RESPECT OF DEDUC TION U/S. 80P FOR INTEREST INCOME FROM BANK, THE FACTS OF THE PRESENT CASE HAS TO BE EXAMINED IN THE LIGHT OF THESE TWO JUDGMENTS OF HON'BLE KARNATAKA H IGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERAT IVE SALE SOCIETY LTD. (SUPRA) AND TUMKUR MERCHANTS SOUHARDA CREDIT COOPER ATIVE LTD. VS. ITO (SUPRA) AND IF IT IS FOUND THAT THE FACTS OF PRESEN T 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 DECI DED AGAINST THE ASSESSEE AND IF IT IS FOUND THAT THE FACTS OF PRESENT CASE A RE IN LINE WITH THE FACTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIV E LTD. VS. ITO (SUPRA), THEN THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LI GHT OF ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS 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 18 TH JANUARY, 2019. /MS/ ITA NO. 3402/BANG/2018 PAGE 5 OF 5 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.