Income Tax Officer Ward-3(4), Hubli V. BSNL Employees co-operative Credit Society Ltd , Hubli

ITA 372/BANG/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7152 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 20-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRINANDINI DAS
• Keywords: Opportunity of being heard; Benefit of exemption
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORESHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AN D SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO. 3 7 2 /BANG/201 7 ASSESSMENT YEAR : 20 1 2 - 1 3 THE INCOME TAX OFFICER, WARD 3 (4), HUBLI. VS. M/S. BSNL EMPLOYEES CO-OPERATIVE CREDIT SOCIETY LTD., NEAR DESAI CROSS, PINTO ROAD, HUBLI. PAN: AAAAT7546B APPELLANT RESPONDENT ASSESSEE BY : SHRI RAVISHANKAR, ADVOCATE RE VENUE BY : SMT. SRINANDINI DAS, JCIT (DR) DATE OF HEARING : 1 9 . 0 9 .2018 DATE OF PRONOUNCEMENT : 28 . 0 9 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), HUBLI DATED 30.11.2016 FOR ASSESSMENT Y EAR 2012-13. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER. I) WHETHER LD. CIT (A) WAS CORRECT IN HOLDING THAT THE PROVISION OF SEC 80 (P) OF THE IT ACT IS APPLICABLE TO CO- OPERA TIVE BANKS AND NOT TO CREDIT CO-OPERATIVE SOCIETIES, WHICH ARE ENGAGED IN BUSINESS OF BANKING INCLUDING PROVIDING CREDIT FACILITIES TO TH EIR MEMBERS? II) WHETHER ID. CIT (A) WAS CORRECT IN HOLDING THAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND NOT A CO OPERATIVE BANK IN TERMS OF SECTION 80P (4) OF THE INCOME TAX ACT WITHOUT CONSIDERING T HE MEANING OF CO- OPERATIVE BANK AS ENVISAGED UNDER PART V OF BANKING REGULATION ACT, 1949 WHERE IN IT IS DEFINED THAT CO-OPERATIVE BANK INCLUDES PRIMARY CO-OPERATIVE BANK, WHICH FURTHER DEFINED AS CO-OPER ATIVE SOCIETY WITH THE PRIMARY OBJECTIVE OF TRANSACTIONS OF BANKING BU SINESS? III) WHETHER ON THE FACT AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (A) WAS JUSTIFIED IN LAW IN HOLDIN G THAT THE ASSESSEE - ITA NO.372/BANG/2017 PAGE 2 OF 5 SOCIETY IS ENTITLED TO DEDUCTION UNDER SECTION 80P( 2)(A)(I) OF THE INCOME-TAX ACT EVEN WHEN THE ASSESSEE- SOCIETY IS M AINLY INVOLVED IN EXTENDING CREDIT FACILITIES TO ITS MEMBERS WHICH IS IN THE NATURE OF BANK TRANSACTION , TREATED ON PAR WITH THE NEW CLAU SE INTRODUCED IN THE DEFINITION OF INCOME IN SECTION 2(24)(VII) OF T HE ACT AND COME UNDER THE PURVIEW OF SECTION 80P (4) W.E.F. 01/04/2 007? 3. THE LD. DR OF REVENUE SUPPORTED THE ASSESSMENT O RDER. SHE ALSO SUBMITTED THAT THERE IS NO FINDING OF LD. CIT (A) ON THE FACT UAL ASPECT AS TO WHETHER THE ASSESSEE IS A CO-OPERATIVE BANK OR NOT AND HE HAS A LLOWED RELIEF TO THE ASSESSEE ON THE BASIS OF SOME JUDICIAL PRONOUNCEMEN TS WITHOUT ANY FINDING ON FACTUAL ASPECT AND THEREFORE, THE ORDER OF CIT (A) SHOULD BE REVERSED AND THAT OF AO SHOULD BE RESTORED. 4. AS AGAINST THIS, THE LD. AR OF ASSESSEE SUPPORTE D THE ORDER OF CIT(A). HE ALSO PLACED RELIANCE ON A JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT AS R EPORTED IN 397 ITR 1. OUR ATTENTION WAS DRAWN TO PARA NO. 24 OF THIS JUDGEMEN T AND IT WAS POINTED OUT THAT AS PER THIS PARA OF THIS JUDGEMENT OF HONBLE APEX COURT, IT WAS HELD THAT IN ORDER TO DO THE BUSINESS OF A CO-OPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENSE FROM THE RESERVE BANK OF INDIA AND SINCE TH E ASSESSEE IN THAT CASE DID NOT POSSESS THE SAME, IT WAS HELD THAT THE ASSESSEE COULD NOT COME WITHIN THE MISCHIEF OF SUB-SECTION (4) OF SECTION 80P. HE SUB MITTED THAT IN THE PRESENT CASE ALSO, THE ASSESSEE DOES NOT POSSESS THE REQUIR ED LICENSE FROM RBI AND THEREFORE, THE ASSESSEE CANNOT BE TREATED AS A CO-O PERATIVE BANK AND IN THIS VIEW OF THE MATTER, THE ORDER OF CIT (A) SHOULD BE CONFIRMED. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF BELGAUM MERCHANTS CO-OP CREDIT SOCIETY LTD. VS. CIT AS REPORTED IN [2016] 236 TAXMAN 351 AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PARA 10 OF THIS JUDGEMENT. RELIANCE WAS ALSO PLACED BY HIM ON A TR IBUNAL ORDER RENDERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 IN ITA NO. 657/BANG/2015 DATED 14.08.2015. HE SUBMITTED A COPY OF THIS TRIB UNAL ORDER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE AO HAS HELD THAT THE ASSESSEE IS A CO-OPERATIVE BANK AND THEREFORE, SUB-SECTION (4) OF SECTION 80P IS APPLICABLE AND THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P OF IT ACT. AGAINST THIS FACTUAL FINDING OF AO IN THE ASS ESSMENT ORDER, LD. CIT (A) HAS NOTED IN PARA NO. 7 OF HIS ORDER THAT THE ASSESSEE HAS RELIED UPON 7 JUDICIAL ITA NO.372/BANG/2017 PAGE 3 OF 5 PRONOUNCEMENTS. THEREAFTER HE HAS REFERRED TO ONE MORE TRIBUNAL ORDER RENDERED IN THE CASE OF ACIT VS. BANGALORE COMMERCI AL TRANSPORT CREDIT CO- OPERATIVE SOCIETY LTD. IN ITA NO. 1069/BANG/2010 AN D IT IS NOTED BY HIM THAT IN THIS CASE, THE TRIBUNAL HAS HELD THAT SECTION 80P(4 ) IS APPLICABLE ONLY TO CO- OPERATIVE BANKS AND NOT TO CREDIT CO-OPERATIVE SOCI ETIES. THEREAFTER THE CIT(A) HAS REFERRED TO A JUDGMENT OF HON'BLE KARNATAKA HIG H COURT RENDERED IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAK ARI SANGHA NIYAMITA BAGALKOT IN ITA NO. 5006/2013 DATED 05.02.2014 AND IT IS NOTED BY HIM THAT AS PER THIS JUDGMENT, IT WAS HELD THAT THE STATUS OF T HE ASSESSEE IS A CO-OPERATIVE SOCIETY AND NOT A CO-OPERATIVE BANK AND HENCE, THE ORDER PASSED BY THE AO EXTENDING THE BENEFIT OF EXEMPTION FROM PAYMENT OF TAX U/S. 80P(2)(A)(I) OF THE ACT IS CORRECT AND SUCH AN ORDER IS NOT ERRONEOUS A ND THEREFORE, JURISDICTION U/S. 263 OF IT ACT CANNOT BE INVOKED. THEREAFTER, THE C IT (A) HAS ALSO REFERRED TO ONE TRIBUNAL ORDER RENDERED IN THE CASE OF ITO VS. YESHWANTPUR CREDIT CO- OPERATIVE SOCIETY LTD. AND IT IS NOTED BY HIM THAT IT IS HELD BY TRIBUNAL IN THIS CASE THAT ASSESSEE IS A CO-OPERATIVE SOCIETY AND NO T A CO-OPERATIVE BANK AND THE PROVISIONS OF SECTION 80P (4) WILL NOT HAVE ANY APPLICATION IN ASSESSEES CASE AND THEREFORE, IT IS ENTITLED TO DEDUCTION U/S . 80P (2) (A) (I) OF IT ACT. THEREAFTER IN PARA 8 OF HIS ORDER, THE CIT(A) HAS N OTED THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 AND THEREAFTER, IN PARA 9, HE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITHOUT ANY FINDING ON FACTUAL ASPECT AS TO WHETHER IN THE PRESENT YEAR, T HE ASSESSEE IS A CO-OPERATIVE BANK OR NOT. WHEN WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12, WE FIND THAT IN THIS YEAR, THIS JUDGMENT IS DATED 14.08.2015 I.E. BEFORE THE J UDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERAT IVE SOCIETY LTD. VS. ACIT (SUPRA) WHICH IS DATED 08.08.2017 AND ALSO BEFORE T HE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF BELGAU M MERCHANTS CO-OP CREDIT SOCIETY LTD. VS. CIT (SUPRA) WHICH IS DATED 21.09.2 015. AS PER THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE C ITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA), IT WAS HELD THAT IN ORDER TO DO THE BUSINESS OF A CO- OPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENSE FROM THE RESERVE BANK OF INDIA. HENCE FOR DECIDING THIS ISSUE IN THE PRESEN T CASE AS TO WHETHER THE ITA NO.372/BANG/2017 PAGE 4 OF 5 ASSESSEE IS A CO-OPERATIVE BANK OR NOT, IT HAS TO B E SEEN AS TO WHETHER THE PRESENT ASSESSEE POSSESSES ANY LICENSE FROM RESERVE BANK OF INDIA OR NOT IN THE PRESENT YEAR. SINCE THE ORDERS OF AUTHORITIES BELOW ARE SILENT ON THIS FACTUAL ASPECT, WE FEEL IT PROPER THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF CIT(A) FOR FRESH DECISION AFTER EXAMINING THIS FACTUAL ASPECT AND IF IT IS FOUND THAT THE ASSESSEE IS NOT POSSESSING ANY LICENSE FROM RBI TO DO THE BANKING BUSINESS THEN THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA) WILL BE APPLICABLE AND IT SHOULD BE HELD THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK A ND HENCE ELIGIBLE FOR DEDUCTION U/S. 80P. WE WOULD ALSO LIKE TO OBSERVE THAT IN THE PRESENT CASE, THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUC TION U/S. 80P ON THIS BASIS THAT THE ASSESSEE IS A CO-OPERATIVE BANK AND THEREF ORE, NOT ELIGIBLE FOR DEDUCTION U/S. 80P OF IT ACT. BUT EVEN IF IT IS FO UND THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK BECAUSE THE PRESENT ASSESSEE IS N OT POSSESSING ANY LICENSE FROM RBI THEN ALSO IT HAS TO BE HELD THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80P BUT WHETHER SUCH DEDUCTION IS ACTUALLY ALLOWABL E TO ASSESSEE OR NOT, THE ISSUE HAS TO BE EXAMINED ON THE MERIT OF THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80P BECAUSE THE SAME WERE NOT EXAMIN ED BY ANY OF THE AUTHORITIES BELOW. IN THIS REGARD, WE WOULD LIKE T O OBSERVE THAT IF ANY PART OR FULL AMOUNT OF ASSESSEES CLAIM FOR DEDUCTION U/S. 80P O F IT ACT IS REGARDING THE EARNING OF INTEREST INCOME FROM COMMERCIAL BANKS TH EN THE FACTS OF PRESENT CASE HAS TO BE EXAMINED IN THE LIGHT OF TWO JUDGMEN TS OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309 AND IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOC IETY AS REPORTED IN 395 ITR 611 (KARN). IN THE CASE OF TUMKUR MERCHANTS SO UHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA), THE ISSUE IS DECI DED IN FAVOUR OF THE ASSESSEE BECAUSE IN THAT CASE, IT WAS FOUND THAT THE AMOUNT INVESTED IN BANK WAS OUT OF ASSESSEES OWN FUNDS AND NOT OUT OF ITS LIABILITY. BUT IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUP RA), THE ISSUE WAS DECIDED AGAINST THE ASSESSEE BECAUSE IN THAT CASE, IT WAS F OUND THAT THE AMOUNT INVESTED IN BANK FOR EARNING INTEREST INCOME WAS OU T OF ASSESSEES LIABILITY AND NOT OUT OF ASSESSEES OWN FUNDS. HENCE EVEN AFTER HOLDING THAT THE ASSESSEE ITA NO.372/BANG/2017 PAGE 5 OF 5 IS ELIGIBLE FOR DEDUCTION U/S. 80P, ACTUAL ALLOWABI LITY FOR THIS DEDUCTION SHOULD BE EXAMINED IN THE LIGHT OF THE FACTS OF THE PRESENT C ASE AND IN THE LIGHT OF THESE TWO JUDGMENTS OF HON'BLE KARNATAKA HIGH COURT RENDE RED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. V S. ITO (SUPRA) AND PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA). THE LD. CIT(A) SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 28 TH SEPTEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.