RESERVE BANK STAFF CO OPERATIVE CREDIT SOCIETY LTD, MUMBAI V. ITO WD 12(3)(4), MUMBAI

ITA 3600/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0627 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . , , , BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL ME MBER . / ITA NO . 3600 / MUM./ 2013 ( / ASSESSMENT YEAR : 2009 10 ) RESERVE BANK STAFF CO OPERATIVE CREDIT SOCIETY LTD. , AMAR BUILDING, SIR P.M. ROAD FORT, MUMBAI 400 001 PAN AAAAR0178F .. / APPELLANT V/S INCOME TAX OFFICER WARD 12(3)(4), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT / REVENUE BY : SHRI LOVE KUMAR / ASSESSEE BY : S HRI DINAR PRAKASH DAPTARI A /W SHRI UDAY V. THAKURDESAI / DATE OF HEARING 03.03.2015 / DATE OF ORDER 27.05.2015 / ORDER , / PER SANJAY GARG , J UDICIAL MEMBER TH E PRESENT APPEAL PREFERRED BY THE ASSES SEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 1 ST FEBRUARY 2013 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) - 23 , MUMBAI, FOR THE ASSESSMENT YEAR 20 09 RESERVE BANK STAFF CO OPERATIVE CREDIT SOCIETY LTD. 2 10 . THE ASSESSEE, THROUGH ITS GROUNDS OF APPEAL, HAS AGITATED THE SUSTAINING OF THE ADDITIONS MADE BY THE ASSESSING OFFICER CONSEQUENT TO DENIAL OF ITS CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO OPERATIVE CREDIT SOCIETY OF THE EMPLOYEES OF RESERVE BANK OF INDIA. THE MAJOR ACTIVITY OF THE ASSESSEE IS IN THE NATURE OF OBTAINING CONTRIBUTIONS FROM ITS MEMBERS AND LENDING THE AMOUNT SO RECEIVED FROM SUCH CONTRIBUTION TO ITS MEMBERS ON INTEREST . THE INTEREST SO EARNED IS DISTRIBUTED AMONG THE MEMBERS. 3. T HE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD SHOWN TO HAVE RECEIVED INTEREST INCOME OF ` 18,38,500, FROM PERSONS OTHER THAN MEMBERS OF THE SOCIETY. HE ALSO OBSERVED THAT THE ASSESSEE HAD RECEIVED INSURANCE COMMISSION OF ` 2,81,211 AND LIC POLICY CHAR GES OF ` 92,900. HE, THEREFORE, OBSERVED THAT THE ASSESSEE COMPANY HAD BEEN PROVIDING CREDIT FACILITY TO NON MEMBERS AND THE INTEREST AND OTHER INCOME EARNED FROM NON MEMBERS WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P, AS THE SAME IS RESTRICTED TO TH E BUSINESS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE SOCIETY ONLY. IT WAS SUBMITTED BY THE ASSESSEE THAT THE IMPUGNED LOAN AMOUNT WAS GIVEN BY THE SOCIETY TO ITS EMPLOYEES WHICH WAS INCIDENTAL OR CONDUCIVE TO THE ATTAINMENT OF RESERVE BANK STAFF CO OPERATIVE CREDIT SOCIETY LTD. 3 OBJECTS OF THE SOC IETY. IT WAS ALSO SUBMITTED THAT THE LIC AGENCY WAS OBTAINED AND THE INSURANCE OF THE MEMBERS WAS DONE FOR THE PURPOSE OF SECURING THE LOAN AMOUNT. THE LIC COMMISSION AND THE POLICY CHARGES WERE ALSO INCIDENTAL TO THE BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS AND, HENCE, THE SAME WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P. THE ASSESSING OFFICER, HOWEVER, DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND REJECTED THE CLAIM OF DEDUCTION OF THE ASSESSEE IN RESPECT OF INTEREST INCOME EARNED FRO M NON MEMBERS AND ALSO INCOME FROM INSURANCE COMMISSION AND LIC POLICY CHARGES. 4. THE LEARNED CIT(A), THROUGH HIS DETAILED FINDING S , HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT IN RESPECT OF INTEREST, INSURANCE COMMISS ION AND LIC CHARGES RECEIVED FROM NON MEMBERS OF THE ASSESSEE SOCIETY. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE HAS COME IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY STRESSED THAT THE ACT OF GIVING LOAN TO THE STAFF MEMBERS OF THE SOCIETY WAS INCIDENTAL TO THE BUSINESS ACTIVITIES OF THE ASSESSEE OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. HE HAS FURTHER STRESSED THAT THE PROVISIONS OF SECTION 80P ARE OF WIDER IMPORT AS THE RELEVANT WORD USED IN RESPECT OF BU SINESS INCOME IS THE WORD ATTRIBUTABLE AND NOT THE WORD DERIVED FROM SUCH ACTIVITIES OF THE SOCIETY, AS ARE ENUMERATED IN SECTION 80P. RESERVE BANK STAFF CO OPERATIVE CREDIT SOCIETY LTD. 4 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, HAS RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. A S PER THE PROVISIONS OF SECTION 80P, WHERE AN ASSESSEE IS A CO OPERATIVE SOCIETY AND ITS GROSS TOTAL INCOME INCLUDES ANY INCOME FROM THE ACTIVITIES AS REFERRED TO IN THE SAID SECTION, THEN THE WHOLE OF SUCH INCOME ATTRIBUTABLE TO ANY OR MORE OF SUCH ACTIVI TIES, AS MENTIONED IN SUB SECTION (2) OF SECTION 80P OF THE ACT, SHALL BE DEDUCTED. WE ARE HERE CONCERNED WITH THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO OPERATIVE SOCIETY . T HE OTHER ACTIVITIE S MENTIONED IN THE RELEVANT SECTION ARE NOT CARRIED ON BY THE ASSESSEE SOCIETY. ADMITTEDLY, THE ASSESSEE IS NOT IN THE BUSINESS OF BANKING. THE OTHER ACTIVITY IS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. SUCH CREDIT FACILITY HAS BEEN RESTRICTED TO THE MEMBERS OF THE SOCIETY ONLY AND IT DOES NOT INCLUDE LENDING TO NON MEMBERS OR EVEN EMPLOYEES OR ST AFF MEMBERS. IN OUR VIEW, THE L E NDING OF AMOUNT ON INTEREST TO STAFF MEMBERS IS NOT, IN ANY WAY, CONNECTED OR ATTRIBUTABLE TO THE BUSINESS ACTIVITY OF LENDIN G OF LOAN TO THE MEMBERS OF THE SOCIETY. 7. THE OTHER ISSUE IS RELATING TO THE LIC COMMISSION AND POLICY CHARGES. IT IS THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE SOCIETY HAS BEEN DOING THE LIC POLICY OF ITS BORROWERS ONLY FOR THE SECURITY OF RESERVE BANK STAFF CO OPERATIVE CREDIT SOCIETY LTD. 5 LOAN AMO UNT. IT HAS NOT BEEN IN THE BUSINESS OF INSURANCE OF ANY OTHER PERSONS. 8. IN OUR VIEW, SO FAR AS ACTIVITY OF DOING THE INSURANCE OF ITS MEMBERS CREDITORS IS CONCERNED, THE SAME CAN BE SAFELY SAID TO BE CONNECTED TO THE BUSINESS ACTIVITY OF PROVIDING LOAN TO THE MEMBERS OF THE SOCIETY. MOREOVER, THE CONCEPT OF MUTUALITY WILL ALSO BE APPLI CABLE TO SUCH COMMISSION INCOME AND POLICY CHARGES, ETC. HOWEVER, THE COMMISSION INCOME AND POLICY CHARGES RECEIVED FROM NON MEMBERS THOUGH THE BORROWERS OF THE ASSESSEE SOCI ETY WILL NEITHER FALL WITHIN THE PURVIEW OF BUSINESS ACTIVITY OF PROVIDING CREDIT FACILITY TO ITS MEMBERS NOR THE SAME WOULD FALL WITHIN THE SCOPE OF MUTUALITY. HENCE, IN VIEW OF OUR ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNE D CIT(A) IN HOLDING THAT THE INTEREST INCOME , CO MMISSION INCOME AND POLICY CHARGES, ETC., RECEIVED FROM NON MEMBERS WILL NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P. 9. AT THIS STAGE, THE LEARNED A.R. FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE SOC IETY HAS INCURRED SOME EXPENDITURE IN THE COURSE OF EARNING INTEREST INCOME AND FROM DOING THE INSURANCE OF NON MEMBERS BORROWERS AND THAT THE EXPENDITURE SO INCURRED IS REQUIRED TO BE DEDUCTED AND ONLY THE NET INCOME IS LIABLE TO BE TAXED. WE FIND FORCE I N THIS CONTENTION OF THE ASSESSEE. ONLY THE NET INCOME FROM NON RESERVE BANK STAFF CO OPERATIVE CREDIT SOCIETY LTD. 6 MEMBERS IS REQUIRED TO BE TAX ED . THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO RE COMPUTE THE TAXABLE INCOME ACCORDINGLY. SUBJECT TO THE ABOVE OBSERVATIONS, THE APPEAL OF THE ASSESSEE IS DI SMISSED. 7. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 27.05.2015 SD/ - . . B.R. BASKARAN ACCOUNTANT MEMBER SD/ - SANJ AY GARG JUDICIAL MEMBER MUMBAI, DATED : 27 05 15 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE ; (2) THE REVENUE; (3) THE CIT(A ) ; (4) THE CIT, MUMBAI CITY CONCERNED ; (5) THE DR, ITAT, MUMBAI ; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASS ISTANT REGISTRAR ITAT, MUMBAI