ASST CIT CIR 3, KALYAN V. KANCHANGAURI MAHILA SAHAKARI PATHPEDHI MARYADI, DOMBIVALI

ITA 369/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2097 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 25-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.369/MUM/2016 FOR A Y : 2012-13) ACIT, CC- 23 [NOW ACIT, CIRCLE-3, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W)-421301. VS. M/S. KANCHANGAURI MAHILA SAHAKARI PATHPEDHI MARYADIT, 1 ST FLOOR, RIDDHI SIDDHI COMPLEX, MALVIYA PATH, RAMNAGAR, DOMBIVILI(E), PAN : AABFK3740F (APPELLANT) (RESPONDENT) APPELLANT BY SHRI C.W. ANGOLKAR (DR) ASSESSEE BY SHRI V.G. GINDE & UDAY M. KARVE DATE OF HEARING 09.11.2016 DATE OF PRONOUNCEMENT 11 .11.2016 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH JUDICIAL MEMBER : 1. THIS APPEAL UNDER SECTION 253 OF INCOME TAX ACT(ACT ) IS DIRECTED BY REVENUE AGAINST THE ORDER OF COMMISSIONER( APPEALS) -1, MUM BAI DATED 21 ST OF OCTOBER 2015 FOR AY 2012 13. THOUGH THE REVENUE HAS RAIS ED AS MANY AS THREE GROUNDS OF APPEAL BUT AS PER OUR CONSIDERED OPINION THE EFFECTIVE GROUNDS OF APPEAL RAISED BY THE REVENUE IS WHETHER LD COMMISS IONER (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF RS. 4 838514/. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE A COO PERATIVE CREDIT SOCIETY FILED ITS RETURNS OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 28 SEPTEMBER 2012 DECLARING TOTAL INCOME AT RS. NILL. IN THE RETURN O F INCOME ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80P (2)(A)(I) BEING A COOPE RATIVE SOCIETY. THE CASE WAS SELECTED FOR SCRUTINY AND WHILE FRAMING ASSESSM ENT ORDER THE AO DISALLOWED THE CLAIM OF ASSESSEE IN ITS ORDER DATED 18 FEB 2015. ON APPEAL BY THE ASSESSEE BEFORE COMMISSIONER (APPEALS) THE DEDU CTION CLAIMED BY ASSESSEE WAS ALLOWED. THUS FURTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE REVENUE HAS FILED PRESENT APPEAL BEFO RE US. 3. WE HAVE HEARD LD AR OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD AND DR FOR THE REVENUE RELIED UPON T HE ORDER OF AO AND ARGUED ITA NO. 369/M/16 M/S. KANCHANGAURI MAHILA SAH AKARI PATHPEDHI MARYADIT 2 THAT THOUGH THE ASSESSEE IS A COOPERATIVE CREDIT SO CIETY BUT ITS ACTIVITIES ARE AKIN TO THE PRIMARY ACTIVITY OF ANY BANK LIKE CO-OP ERATIVE BANKS AND THE ASSESSING OFFICER RIGHTLY DISALLOWED THE DEDUCTION CLAIMED BY ASSESSEE. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSEE ARGUE D THAT COMMISSIONER (APPEALS) ALLOWED THE APPEAL ON THE BASIS OF DECISI ON OF JURISDICTIONAL HIGH COURT IN QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY L TD (2015) 58 TAXMAN.COM( BOMBAY). IT WAS FURTHER ARGUED THAT THI S CASE IS ALSO SQUARELY COVERED BY A NUMBER OF DECISION OF DIFFERENT HIGH C OURTS. THE LEARNED AR OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF MA DRAS HIGH COURT IN CIT VERSUS KALPADI CO-OPERATIVE TOWNSHIP LTD [2016] 74 TAXMAN.COM 226 (MADRAS). 4. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND FURTHER GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE COMMIS SIONER(APPEALS) RELIED ON THE DECISION OF QUEPEM URBAN CO-OPERATIVE CREDIT SO CIETY LTD(SUPRA) AND PASSED THE FOLLOWING ORDER; 9. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT TH E APPELLANT IS A COOPERATIVE SOCIETY AS THE SAME IS REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT. THE APPELLANT IS CLAIMING DEDUCTION OF INCOME EARNED ON PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS PROVI DED UNDER SECTION 80P(2)(A)(I) OF THE ACT. IT IS APPELLANT'S CASE THA T, IT IS NOT CARRYING ON THE BUSINESS OF THE BANKING. CONSEQUENTLY, NOT BEING A CO-OPERATIVE BANK THE PROVISIONS OF SECTION 80P(4) OF THE ACT WOULD NOT E XCLUDE THE APPELLANT FROM CLAIMING THE BENEFIT OF DEDUCTION UNDER SECTIO N 80P(2)(A)(I) OF THE ACT. HOWEVER IN TERMS OF SECTION 80P OF THE ACT THE MEANING OF THE WORDS COOPERATIVE BANK IS THE MEANING ASSIGNED TO IT IN C HAPTER V OF THE BANKING REGULATION ACT, 1949. A COOPERATIVE BANK IS DEFINED IN SECTION 5(CCI) OF BANKING REGULATION ACT TO MEAN A STATE COOPERATIVE BANK, A CENTRAL COOPERATIVE BANK AND A PRIMARY COOPERATIVE BANK. AD MITTEDLY, THE APPELLANT IS NOT A STATE COOPERATIVE BANK, A CENTRA L COOPERATIVE BANK. THUS WHAT HAS TO BE EXAMINED IS WHETHER THE APPELLANT IS A PRIMARY COOPERATIVE BANK AS DEFINED IN PARA V OF THE BANKING REGULATION ACT. SECTION 5(CCV) OF THE BANKING REGULATION ACT DEFINES A PRIMARY COOPER ATIVE BANK TO MEAN A COOPERATIVE SOCIETY WHICH CUMULATIVELY SATISFIES TH E FOLLOWING THREE CONDITIONS: (1) ITS PRINCIPAL BUSINESS OR PRIMARY OBJECT SHOULD BE BANKING BUSINESS OF BANKING; ITA NO. 369/M/16 M/S. KANCHANGAURI MAHILA SAH AKARI PATHPEDHI MARYADIT 3 (2) ITS PAID UP SHARE CAPITAL AND RESERVES SHOULD N OT BE LESS THAT RUPEES ONE LAKH. (3) ITS BYE-LAWS DO NOT PERMIT ADMISSION OF ANY OTH ER COOPERATIVE SOCIETY AS ITS MEMBER. IT IS ACCEPTED POSITION THAT CONDITION NO. (2) IS S ATISFIED AS THE SHARE CAPITAL IN AN EXCESS OF RUPEES ONE LAKH. IT HAS BEEN THE AP PELLANT'S CONTENTION THAT THE CONDITIONS NO. (1) AND (3) PROVIDED ABOVE ARE N OT SATISFIED. 10. THEREFORE THE ISSUE THAT ARISES FOR CONSIDERATI ON IS WHETHER THE APPELLANT SATISFIES CONDITION NO. (1) AND (3) ABOVE. THE IMPU GNED ORDER AFTER REFERRING TO THE DEFINITION OF 'BANKING BUSINESS' AS DEFINED IN SECTION 5B OF THE BANKING REGULATION ACT, HELD THAT THE PRINCIPAL BUS INESS OF THE APPELLANT IS BANKING. SECTION 5B OF THE BANKING REGULATION ACT D EFINES BANKING TO MEAN ACCEPTING OF DEPOSITS FOR THE PURPOSE OF LENDI NG OR INVESTMENT, OF DEPOSIT OF MONEY FROM THE PUBLIC REPAYABLE ON DEMAN D OR OTHERWISE. THE IMPUGNED ORDER JUXTAPOSES THE ABOVE DEFINITION WITH THE FINDING OF FACT THAT THE APPELLANT DID DEAL WITH NON MEMBERS IN A FEW CA SES BY SEEING DEPOSITS. THIS READ WITH BYE LAW 43 LEADS TO THE CONCLUSION T HAT IT IS CARRYING ON BANKING BUSINESS. THIS FACT OF ACCEPTING DEPOSITS FROM PEOPLE WHO ARE NOT MEMBERS HAS BEEN SO RECORDED BY THE CIT(A) IN HIS ORDER DATED 15 JUL Y, 2014. BEFORE THE TRIBUNAL ALSO THE APPELLANT DID NOT DISPUTE THE FAC T THAT IN A FEW CASES THEY HAVE DEALT WITH NON MEMBERS. HOWEVER SO FAR AS ACCE PTING DEPOSITS FROM NON MEMBERS IS CONCERNED IT IS SUBMITTED THAT THE B YE-LAW 43 ONLY PERMITS THE SOCIETY TO ACCEPT DEPOSITS FROM ITS MEMBERS. IT IS SUBMITTED THAT BYE LAWS 43 DOES NOT PERMIT RECEIPT OF DEPOSITS FROM PE RSONS OTHER THEN MEMBERS, THE WORD 'ANY PERSON' IS A GLOSS ADDED IN THE IMPUGNED ORDER AS IT IS NOT FOUND IN BYE LAW 43. IT IS UNDISPUTED THAT T HE TRANSACTIONS WITH NON MEMBERS ARE INSIGNIFICANT/MINISCULE. ON THE ABOVE B ASIS IT CANNOT BE CONCLUDED THAT THE APPELLANT'S PRINCIPAL BUSINESS I S OF ACCEPTING DEPOSITS FROM PUBLIC AND THEREFORE IT IS IN BANKING BUSINESS . IN FACT, THE IMPUGNED ORDER ERRONEOUSLY RELIES UPON BYE-LAW 43 OF THE SOC IETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CONCLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. HOWEVER, THE IMPUGNED ORDER RELIES UPON BYE -LAW 43 TO CONCLUDE THAT IT ENABLES THE APPELLANT TO RECEIVE DEPOSITS F ROM ANY PERSON IS NOT CORRECT. THUS IN THE PRESENT FACTS THE FINDING THAT THE APPELLANT'S PRINCIPAL BUSINESS IS OF BANKING IS PERVERSE AS IT IS NOT SUP PORTED BY THE EVIDENCE ON RECORD. SO FAR AS THE ISSUE OF PRIMARY OBJECT OF TH E APPELLANT IS CONCERNED THE IMPUGNED ORDER GIVES NO FINDING ON THAT BASIS TO DE PRIVE THE APPELLANT THE ITA NO. 369/M/16 M/S. KANCHANGAURI MAHILA SAH AKARI PATHPEDHI MARYADIT 4 BENEFIT OF SECTION 80P OF THE ACT. THE IMPUGNED ORD ER SETS OUT THE OBJECT CLAUSE OF THE APPELLANT, WHICH HAS 24 OBJECTS BUT T HEREAFTER DRAWS NO SEQUITER TO CONCLUDE THAT THE PRIMARY OBJECT IS BAN KING. CONSEQUENTLY THERE IS NO OCCASION TO DEAL WITH THE SAME AS THAT IS NOT THE BASIS ON WHICH THE IMPUGNED ORDER HOLDS THAT IT IS A PRIMARY COOPERATI VE BANK. 11. IN THE ABOVE VIEW, THE ALTERNATIVE CONTENTION O F THE APPELLANT THAT IT IS NOT IN THE BUSINESS OF BANKING AS THE SINE QUO NON TO CARRY ON BANKING BUSINESS IS A LICENCE TO BE ISSUED BY THE RESERVE B ANK OF INDIA, WHICH IT ADMITTEDLY DOES NOT HAVE, IS NOT BEING CONSIDERED. 12. SO FAR AS CONDITION NO.3 OF THE DEFINITION/MEAN ING OF PRIMARY COOPERATIVE BANK AS PROVIDED IN SECTION 5(CCV) OF THE BANKING R EGULATION ACT IS CONCERNED, THE SAME REQUIRES THE BYE LAWS OF SOCIET Y TO CONTAIN A PROHIBITION FROM ADMITTING ANY OTHER COOPERATIVE SO CIETY AS ITS MEMBER. IN FACT THE BYE-LAWS OF THE APPELLANT SOCIETY ORIGINAL LY IN BYE-LAW 9(D) CLEARLY PROVIDED THAT NO CO-OPERATIVE SOCIETY SHALL BE ADMI TTED TO THE MEMBERSHIP OF THE SOCIETY. THUS THERE WAS A BAR BUT THE SAME W AS AMENDED W.E.F 12 JANUARY, 2001 AS TO PERMIT A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE SOCIETY. THEREFORE FOR THE SUBJECT ASSESSMENT YEARS THERE IS NO PROHIBITION TO ADMITTING A SOCIETY TO ITS MEMBERSHIP AND ONE OF TH REE CUMULATIVE CONDITIONS PRECEDENT TO BE A PRIMARY COOPERATIVE BA NK IS NOT SATISFIED. HOWEVER THE IMPUGNED ORDER CONSTRUED THE AMENDED CL AUSE 9(D) OF THE APPELLANT'S BYE LAWS TO MEAN THAT IT ONLY PERMITS A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE APPELLANT AND NOT A CO-OPERAT IVE SOCIETY. ACCORDING TO THE IMPUGNED ORDER, A SOCIETY AND A CO-OPERATIVE SOCIETY ARE CLEARLY WORDS OF DIFFERENT AND DISTINCT SIGNIFICANCE AND TH E MEMBERSHIP IS ONLY OPEN TO SOCIETY AND NOT TO A CO-OPERATIVE SOCIETY. AS RI GHTLY POINTED OUT ON BEHALF OF THE APPELLANT THE WORD SOCIETY AS REFERRED TO BY E LAW 9(D) WOULD INCLUDE THE CO-OPERATIVE SOCIETY. THIS IS SO AS THE DEFINIT ION OF A SOCIETY UNDER THE CO-OPERATIVE ACT IS CO-OPERATIVE SOCIETY REGISTERED UNDER THE COOPERATIVE ACT. BESIDES THE QUALIFYING CONDITION 3 FOR BEING C ONSIDERED AS A PRIMARY COOPERATIVE BANK IS THAT THE BYE LAWS MUST NOT PERM IT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY. THIS IS A MANDATORY COND ITION I.E. THE BYE LAWS MUST SPECIFICALLY PROHIBIT ADMISSION OF ANY OTHER C OOPERATIVE SOCIETY TO ITS MEMBERSHIP. THE REVENUE HAS NOT BEEN ABLE TO SHOW A NY SUCH PROHIBITION IN THE BYE LAWS OF THE APPELLANT. THUS EVEN THE AFO RESAID QUALIFYING CONDITION (3) FOR BEING CONSIDERED AS A PRIMARY COO PERATIVE BANK IS NOT ITA NO. 369/M/16 M/S. KANCHANGAURI MAHILA SAH AKARI PATHPEDHI MARYADIT 5 SATISFIED. THUS, THE THREE CONDITIONS AS PROVIDED U NDER SECTION 5 (CVV) OF THE BANKING REGULATION ACT, 1949, ARE TO BE SATISFI ED CUMULATIVELY AND EXCEPT CONDITION (2) THE OTHER TWO QUALIFYING CONDI TIONS ARE NOT SATISFIED. ERGO, APPELLANT CANNOT BE CONSIDERED TO BE A CO-OPE RATIVE BANK FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT. THUS, THE AP PELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE UNDER SECTION 80P(2) (A)(I) OF THE ACT. 13. THE CONTENTION OF MS. DESSAI, LEARNED COUNSEL F OR THE REVENUE THAT THE APPELLANT IS NOT ENTITLED TO THE BENEFIT OF SECTION 80P(2)( A)(I) OF THE ACT IN VIEW OF THE FACT THAT IT DEALS WITH NON-MEMBERS CAN NOT BE UPHELD.' THIS FOR THE REASON THAT SECTION 80P(1) OF THE ACT RESTRICTS THE BENEFITS OF DEDUCTION OF INCOME OF CO-OPERATIVE SOCIETY TO THE EXTENT IT IS EARNED BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, TO THE EXTENT THE INCOME EARNED IS ATTRIBUTABLE TO DEALINGS WITH THE NON-MEMBERS ARE C ONCERNED THE BENEFIT OF SECTION 80P OF THE ACT WOULD NOT BE AVAILABLE. IN T HE ABOVE VIEW OF THE MATTER, AT THE TIME WHEN EFFECT HAS BEEN GIVEN TO T HE ORDER OF THIS COURT, THE AUTHORITIES UNDER ACT WOULD RESTRICT THE BENEFIT OF DEDUCTION UNDER SECTION 80P OF THE ACT ONLY TO THE EXTENT THAT THE SAME IS EARNED BY THE APPELLANT IN CARRYING ON ITS BUSINESS OF PROVIDING CREDIT FACILI TIES TO ITS MEMBERS. 14. ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW AS FRAMED IS ANSWERED IN THE NEGATIVE I. E. IN FAVOUR OF THE APPELLANT AND A GAINST THE RESPONDENT- REVENUE. 5. THE HONBLE MADRAS HIGH COURT IN CIT VERSUS KALPADI CO-OPERATIVE TOWNSHIP LTD(SUPRA) THE EXPRESSION BANKING HAS BEEN DEFINED IN THE F OLLOWING TERMS BY THE BANKING REGULATION ACT 1949. '(B) 'BANKING' MEANS THE ACCEPTING, FOR THE PURPOSE OR LENDING OR INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC, R EPAYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWABLE BY CHEQUE, DRAFT, ORDER OR OTHERWISE. THUS, BANKING MEANS ACCEPTING OF DEPOSITS OF MONEY FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERWISE AND WITHDRAWABLE B Y CHEQUE, DRAFT, ORDER OR OTHERWISE AND SUCH ACCEPTANCE OF MONEY IS INTEND ED FOR THE PURPOSE OF LENDING OR INVESTMENT BY ITSELF. THEREFORE, THE CRU CIAL EXPRESSION RELEVANT FOR MAKING ONE ANSWER THE DESCRIPTION OF BANKING IS THAT IT IS CAPABLE OF ACCEPTING MONEY FROM THE GENERAL PUBLIC BUT NOT NEC ESSARILY CONFINED TO ITS ITA NO. 369/M/16 M/S. KANCHANGAURI MAHILA SAH AKARI PATHPEDHI MARYADIT 6 MEMBERS. ANY SUCH ACTIVITY CARRIED ON BY AN BODY RE QUIRES, APART FROM LICENSING, TO ANSWER THE REGULATORY DOMAIN PRESCRIB ED UNDER THE 1949 ACT. EVEN A CO-OPERATIVE BANK WHICH CARRIES ON BANKING A CTIVITY REQUIRES TO BE REGULATED BY THE PROVISIONS OF THE 1949 ACT. SECTIO N 80P(4) THEREFORE IS CLEARLY ATTRACTIVE TO SUCH AN INSTITUTION. BUT NOT TO CREDIT SOCIETY. EVEN WHILE DEALING WITH A CO-OPERATIVE BANK SUB-SECTION (4) HA S TAKEN CARE TO ENSURE THAT THE PRIMARY AGRICULTURAL CREDIT SOCIETIES AND PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANKS ARE KEPT O UT OF THE PURVIEW OF THE SAID PROVISION. SUB-SECTION (4) OF SECTION 80P THEREFORE, IN ITS APPLICATION IS CONFINED ILL RELATION TO CO-OPERATIV E BANKS ONLY. IN THE INSTANT CASE THE ASSESSEE BEING A CO-OPERATIVE CREDIT SOCIE TY WHICH IN TURN IS PROVIDING FOR CERTAIN CREDIT FACILITIES TO ITS MEMB ERS ALONE BUT NOT TO THE GENERAL PUBLIC AT LARGE AND WHICH ALSO DOES NOT REC EIVE MONIES BY WAY OF DEPOSIT FROM THE GENERAL PUBLIC, IT DOES NOT ANSWER THE DESCRIPTION OF A CO- OPERATIVE BANK. CONSEQUENTLY, THE MAIN PROVISION CO NTAINED UNDER SUB- SECTION (I) OF SECTION 80P GETS ATTRACTED AND CONSS 9UENTLY THE ASSESSEE IS ENTITLED TO SEEK THE DEDUCTION WHICH HAS BEEN PROVI DED FOR UNDER SECTION 80P. 6. IN VIEW OF THE ABOVE DISCUSSION WE FIND THAT THE DE CISION OF HONBLE JURISDICTIONAL HIGH COURT IN QUEPEM URBAN CO-OPERAT IVE CREDIT SOCIETY LTD(SUPRA) AND FURTHER THE DECISION OF MADRAS HIGH COURT IN KALPADI CO- OPERATIVE TOWNSHIP LTD(SUPRA) IS SQUARELY APPLICAB LE UPON THE FACTS OF THE PRESENT CASE AND THE ASSESSEE WAS ENTITLED FOR THE DEDUCTIONS CLAIMED U/S 80P(2)((A) (I) OF THE ACT. THUS WE DO NOT FIND ANY ILLEGALITY ON INFIRMITY IN THE ORDER PASSED BY COMMISSIONER (APPEALS) HAS THE APPE AL FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 TH DAY OF NOVEMBER 2016. SD/- SD/- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 11/11/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. ITA NO. 369/M/16 M/S. KANCHANGAURI MAHILA SAH AKARI PATHPEDHI MARYADIT 7 BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/