Assistant Commissioner of Income Tax, Circle - 2 (1), Panaji., Panaji V. Shree Kalika Urban Co-op. Credit Society Limited , Mapusa

ITA 367/PAN/2017

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8550 (ITAT-PANAJI)
• Duration Of Justice: 3 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 18-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 143(3); 40(a)(ia); 80P; 194A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI – VIRTUAL COURT BEFORE SHRI INTURI RAMA RAO, AM AND SHRI S. S. VISWANETHRA RAVI, JM आयकर अपील सं. / ITA No.367/PAN/2017 िनधाᭅरण वषᭅ / Assessment Year : 2014-15 ACIT, Circle-2(1), Panaji. .......अपीलाथᱮ / Appellant बनाम / V/s. Shree Kalika Urban Co-op. Credit Society Ltd., Block No.6, Om Chambers, Feira Baiya, Near Laxminarayan Temple, Mapusa Bardes, Goa. PAN : AACAS1697Q ......ᮧ᭜यथᱮ / Respondent Revenue by : Shri Sourabh Nayak Assessee by : Shri R. K. Pikale सुनवाई कᳱ तारीख / Date of Hearing : 09.11.2021 घोषणा कᳱ तारीख / Date of Pronouncement : 15.11.2021 आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals)-2, Panaji (‘CIT(A)’ for short) dated 20.09.2017 for the assessment year 2014-15. 2. The Revenue raised the following grounds of appeal :- “1. The order of the Ld. CIT (A) is opposed to law and facts of the case. 2. The Ld. CIT(A) has erred in deleting addition on account of disallowance of deduction in respect of income of co-operative society u/s. 80P(2)(a)(i), 80P(2)(c)(ii), 80P(2)(d) and 40(a)(ia) on the ground that the assessee is a co- operative society, accepts deposits only from its members and can lend money only to its members and it cannot issue cheque books, when the assessee accepts deposits and grants loans to its members on which it makes profit and gain by way of charging interest, thus providing credit facility is akin to banking business as per section 2(24)(viia) and Part-V of the Banking Regulation Act, 1949, hence the assessee is not eligible for deduction u/s. 80P. 2 ITA No.367/PAN/2017 3. The Ld. CIT (A) has erred in stating that the assessee co-op credit society cannot be equated with banks and entitled for deduction u/s. 80P(2) when the assessee is a “Primary Co-operative Bank” as per section 80P read with section 2(24)(viia) of I. T. Act 1961 and also fulfills all three requirements as given in section 5(ccv) of the Banking Regulation Act, 1949 to qualify as Primary Co-operative Bank. 4. Appellant craves leave to amend or alter any of the grounds of appeal or add to the same, if deemed necessary.” 3. Briefly, the facts of the case are that the respondent-assessee is a cooperative society engaged in the business of accepting deposits and lending money to its members. The return of income for the assessment year 2014-15 was filed on 16.09.2014 declaring total income of Rs.60,242/- after claiming deduction u/s 80P(2) of the Income Tax Act, 1961 (‘the Act’). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2, Margao, Goa (‘the Assessing Officer’) vide order dated 23.11.2016 passed u/s 143(3) of the Act at a total income of Rs.4,37,14,442/- after making disallowance u/s 80P(2)(i)(a) of the Act amounting to Rs.2,46,89,152/- and disallowance of interest paid to the members for non-deduction of TDS u/s 40(a)(ia) of the Act of Rs.1,89,65,048/-. While doing so, the Assessing Officer denied the claim of deduction u/s 80P(2)(i)(a) of the Act on the ground that the respondent-assessee society is not a cooperative society but a cooperative bank placing reliance on the provisions of section 80P(4) of the Act. Similarly, the Assessing Officer was of the opinion that as the respondent-assessee society is a cooperative bank the provisions of section 194A of the Act are held to be applicable in respect of interest paid to the members on the deposits. 4. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order held that the respondent-assessee is not a cooperative bank but a cooperative society and, accordingly, allowed the claim 3 ITA No.367/PAN/2017 of deduction u/s 80P(2)(a)(i), section 80P(2)(c)(ii) and section 80P(2)(d) of the Act. As regards to the disallowance of interest paid to the members for non- deduction of TDS u/s 40(a)(ia) of the Act taking into consideration that the respondent-assessee society is not a cooperative bank held that the provisions of section 194A of the Act have no application. Accordingly, he directed the Assessing Officer to delete the addition of Rs.1,89,65,048/-. 5. Being aggrieved by the above decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 6. The ld. Sr. DR submits that when the respondent-assessee cooperative society lends money to its members and charges interest, hence, income by way of interest charges is nothing but providing credit facilities akin to banking business and, therefore, the respondent-assessee society is not entitled for deduction u/s 80P(2)(i)(a) of the Act. Similarly, he submits that once the respondent-assessee society is treated as a cooperative bank, the provisions of section 194A of the Act are clearly attracted and consequentially for non- compliance of the provisions of section 194A of the Act, the interest paid to members can be disallowed u/s 40(a)(ia) of the Act. Thus, the ld. Sr. DR submitted that the order passed by the ld. CIT(A) be reversed. 7. On the other hand, ld. Counsel for the respondent-assessee society submits that it is a purely cooperative credit society and was granted any bank licence to carry out any banking business. It is submitted that the respondent- assessee society cannot be treated as cooperative bank. 4 ITA No.367/PAN/2017 8. We heard the rival submissions and perused the material on record. The first ground of appeal raised by the Revenue challenges the decision of the ld. CIT(A) allowing the deduction u/s 80P(2) of the Act. The Assessing Officer was of the view that the respondent-assessee society is a cooperative bank and, therefore, relying on the provisions of sub-section (4) of section 80P of the Act, denied the deduction u/s 80P of the Act. Therefore, the question which requires to be examined is whether the respondent-assessee society is cooperative bank or not?. Admittedly, the respondent-assessee society is formed for the purpose of accepting deposits from members and lending it to its members and does not have licence from Reserve Bank of India to carry out the business of cooperative bank. The Hon’ble Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. & ors. vs. CIT, 431 ITR 01 (SC) held that the income-tax authorities cannot go behind the registration granted under the Cooperative Societies Registration Act. In the absence of banking licence from RBI, a cooperative society cannot be termed as cooperative bank. Applying the ratio of the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. (supra), we are of the considered opinion that in the facts of the present case the respondent-assessee society is only a members of cooperative society not cooperative bank and not hit by the provisions of sub-section (4) of section 80P of the Act and, therefore, the respondent-assessee society is clearly entitled for the deduction u/s 80P(2) of the Act. The decision of the ld. CIT(A) though cryptic has to be upheld in view of the fact that the decision of the ld. CIT(A) is in conformity with the ratio of the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. (supra). Having held that the respondent-assessee society is not a cooperative bank then the question of denying the claim for 5 ITA No.367/PAN/2017 deduction u/s 80P(2)(i)(a) does not arise. Accordingly, this ground of appeal no.1 filed by the Revenue stands dismissed. 9. The ground of appeal nos.2 and 3 raised by the Revenue are general in nature and also the provisions of section 194A of the Act have no application since the respondent-assessee society is not held to be a cooperative bank and the question of consequential disallowance u/s 40(a)(ia) does not arise. Thus, the ground of appeal nos.2 and 3 are dismissed. 10. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced on this 15 th day of November, 2021. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) ᭠याियक सद᭭य/JUDICIAL MEMBER लेखा सद᭭य/ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 15 th November, 2021. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-2, Panaji. 4. The Pr. CIT, Panaji. 5. DR, ITAT, Panaji. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.