Sri Laxmi Venkatesh Credit Co-operative Society Ltd , Udupi V. Income Tax Officer Ward-1 , Udupi

ITA 396/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8230 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-11-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 09-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAHESH R UPPIN
• Keywords: Opportunity of being heard
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO . 396 / BANG/201 8 ASSESSMENT YEAR : 201 3 - 14 M/S. SRI LAXMI VENKATESH CREDIT CO-OPERATIVE SOCIETY LTD., SUNANDA DEVDAS TOWER, P.P.C. ROAD, UDUPI 576 101. PAN: AAAJL0987F VS. THE INCOME TAX OFFICER, WARD 1, UDUPI. APPELLANT RESPONDENT APPELLANT BY : SHRI MAHESH R. UPPIN, ADVOCATE RESPONDENT BY : SHRI R.N. SIDDAPPAJI, ADDL. CIT (DR) DATE OF HEARING : 27 . 1 1 .2018 DATE OF PRONOUNCEMENT : 31 . 1 2 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT (A)-10, BANGALORE DATED 21.12.2017 FOR ASSE SSMENT YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE AS PER CONCIS E GROUNDS OF APPEAL ARE AS UNDER. THE APPELLANT ABOVE NAMED BEGS TO SUBMIT AS FOLLOWS IN ADDITION TO THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARIN G : 1. THE ASSESSING OFFICER AS WELL AS THE APPELLATE A UTHORITY FAILED TO CONSIDER THAT THE PETITIONER IN APPEAL IS A CO-OPER ATIVE SOCIETY ENGAGED EXCLUSIVELY IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND FURTHER THEY HAVE GROSSLY ERRED IN HOLDING THAT THE APPELLANT IS A PRIMARY CO-OPERATIVE BANK AND THUS MAKING AN ADDITI ON TO THE RETURNED INCOME OF THE APPELLANT TO THE TUNE OF RS. 24,44,970/- AND DEMANDING TAX OF RS. 7,71,930/- WHICH OTHERWISE QUA LIFIES FOR FULL DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. 2. THE 1 ST APPELLATE AUTHORITY IS NOT A FACT FINDING AUTHORIT Y AND UNFORTUNATELY INSTEAD OF DECIDING THE APPEAL ON MER ITS, IT PROCEEDED TO RECORD SPECULATIVE AND IMAGINARY FACTS AS ATTRIBUTA BLE TO THE ACTIVITIES OF THE APPELLANT UNDER PARA 5.4 OF ANNEXURE - D ORD ER AND DISMISSED APPEAL RELYING ON THE DECISION OF THE HON'BLE APEX COURT IN THE CITIZEN COOPERATIVE SOCIETY LTD - CIVIL APPEAL NO. 10245 OF 2017. THE APPELLANT SUBMITS THAT THE FINDINGS OF APPELLATE AU THORITY IS OPPOSED ITA NO. 396/BANG/2018 PAGE 2 OF 4 TO THE JUDGMENT OF HON'BLE HIGH COURT OF KARNATAKA IN ITA NO. 100043 & 100045/ 2014 - SRI CHANDRAPRABHU URBAN CRE DIT CO- OPERATIVE SOCIETY LTD. NIPPANI VS. INCOME TAX OFFIC ER, WARD-1, NIPANI. 3. THE APPELLANT SUBMITS, IT IS DOING ITS BUSINESS EXCLUSIVELY WITH ITS MEMBERS WELL WITHIN THE FRAMEWORK OF ITS APPROVED B YE-LAWS AND THE PROVISIONS OF KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959 / RULES FRAMED THEREUNDER. 4. THE APPELLANT SUBMITS THAT THE IMPUGNED ORDERS P ASSED BY THE AUTHORITIES BELOW ARE ILLEGAL AND ARE LIABLE TO BE SET ASIDE IN VIEW OF THE GOOD NUMBER OF ORDERS PASSED BY THIS HON'BLE TR IBUNAL IN SIMILAR CASES INVOLVING SIMILAR MATTER AND ALSO THE JUDGMEN T OF THE HON'BLE HIGH COURT OF KARNATAKA IN ITA: 5006/2013 - THE COM MISSIONER OF INCOME TAX VS. SRI BILUR GURUBASAVA PATTINA SAHAKAR A SANGHA NIYAMITHA, BAGALKOT. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ISSUE WAS DECIDED AGAINST THE ASSESSEE ON THIS BASIS THAT THE ASSESSEE IS A C O-OPERATIVE BANK AND RELIANCE HAS BEEN PLACED ON A JUDGMENT OF HONBLE A PEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. V S. ACIT AS REPORTED IN 397 ITR 1. HE SUBMITTED THAT THE FACTS OF PRESENT CASE ARE DIFFERENT AND THEREFORE, IN THE FACTS OF PRESENT CASE, IT CANNOT BE SAID THAT THE ASSESSEE IS A CO-OPERATIVE BANK. AT THIS JUNCTURE, THE BENCH P OINTED OUT THAT AS PER PARA NO. 24 OF THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT (SUP RA), IT WAS NOTED 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. BUT IN THA T CASE, THE RBI HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE ASSESSEE DOES NO T AMOUNT TO THAT OF A CO- OPERATIVE BANK. THE BENCH POINTED OUT THAT IN THE PRESENT CASE ALSO, IF THE ASSESSEE PRODUCES A CERTIFICATE FROM RBI ON SIMILAR LINE, IT CAN BE ACCEPTED THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK. IN R EPLY, IT WAS SUBMITTED BY THE LD. AR OF ASSESSEE THAT IF THE MATTER IS RESTOR ED BACK TO THE FILE OF AO / CIT (A), THE ASSESSEE WILL OBTAIN SUCH CERTIFICATE FROM RBI REGARDING THE NATURE OF BUSINESS. THE LD. DR OF REVENUE SUPPORTE D THE ORDER OF CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FOR R EADY REFERENCE, WE FIRST REPRODUCE PARAS 24 AND 25 OF THIS JUDGMENT OF HONB LE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD . VS. ACIT (SUPRA). ITA NO. 396/BANG/2018 PAGE 3 OF 4 24) UNDOUBTEDLY, IF ONE HAS TO GO BY THE AFORESAID DEFINITION OF CO-OPERATIVE BANK, THE APPELLANT DOES NOT GET COV ERED THEREBY. IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT IN ORDER TO DO THE BUSINESS OF A CO-OPERATIVE BANK, IT IS IMPERATIVE T O HAVE A LICENSE FROM THE RESERVE BANK OF INDIA, WHICH THE APPELLANT DOES NOT POSSESS. NOT ONLY THIS, AS NOTICED ABOVE, THE RESER VE BANK OF INDIA HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE APPEL LANT DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. THE APPELLAN T, THEREFORE, WOULD NOT COME WITHIN THE MISCHIEF OF SUB-SECTION ( 4) OF SECTION 80P. 25) SO FAR SO GOOD. HOWEVER, IT IS SIGNIFICANT TO P OINT OUT THAT THE MAIN REASON FOR DISENTITLING THE APPELLANT FROM GET TING THE DEDUCTION PROVIDED UNDER SECTION 80P OF THE ACT IS NOT SUB-SECTION (4) THEREOF. WHAT HAS BEEN NOTICED BY THE ASSESSING OFFICER, AFTER DISCUSSING IN DETAIL THE ACTIVITIES OF THE APPELLAN T, IS THAT THE ACTIVITIES OF THE APPELLANT ARE IN VIOLATIONS OF TH E PROVISIONS OF THE MACSA UNDER WHICH IT IS FORMED. IT IS POINTED OUT B Y THE ASSESSING OFFICER THAT THE ASSESSEE IS CATERING TO TWO DISTIN CT CATEGORIES OF PEOPLE. THE FIRST CATEGORY IS THAT OF RESIDENT MEMB ERS OR ORDINARY MEMBERS. THERE MAY NOT BE ANY DIFFICULTY AS FAR AS THIS CATEGORY IS CONCERNED. HOWEVER, THE ASSESSEE HAD CARVED OUT ANO THER CATEGORY OF NOMINAL MEMBERS. THESE ARE THOSE MEMBERS WHO A RE MAKING DEPOSITS WITH THE ASSESSEE FOR THE PURPOSE OF OBTAI NING LOANS, ETC. AND, IN FACT, THEY ARE NOT MEMBERS IN REAL SENSE. M OST OF THE BUSINESS OF THE APPELLANT WAS WITH THIS SECOND CATE GORY OF PERSONS WHO HAVE BEEN GIVING DEPOSITS WHICH ARE KEPT IN FIX ED DEPOSITS WITH A MOTIVE TO EARN MAXIMUM RETURNS. A PORTION OF THESE DEPOSITS IS UTILISED TO ADVANCE GOLD LOANS, ETC. TO THE MEMB ERS OF THE FIRST CATEGORY. IT IS FOUND, AS A MATTER OF FACT, THAT HE DEPOSITORS AND BORROWERS ARE QUIET DISTINCT. IN REALITY, SUCH ACTI VITY OF THE APPELLANT IS THAT OF FINANCE BUSINESS AND CANNOT BE TERMED AS CO- OPERATIVE SOCIETY. IT IS ALSO FOUND THAT THE APPELL ANT IS ENGAGED IN THE ACTIVITY OF GRANTING LOANS TO GENERAL PUBLIC AS WELL. ALL THIS IS DONE WITHOUT ANY APPROVAL FROM THE REGISTRAR OF THE SOCIETIES. WITH INDULGENCE IN SUCH KIND OF ACTIVITY BY THE APPELLAN T, IT IS REMARKED BY THE ASSESSING OFFICER THAT THE ACTIVITY OF THE A PPELLANT IS IN VIOLATION OF THE CO-OPERATIVE SOCIETIES ACT. MOREOV ER, IT IS A CO- OPERATIVE CREDIT SOCIETY WHICH IS NOT ENTITLED TO D EDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 5. FROM THE ABOVE PARAS REPRODUCED FROM THIS JUDGME NT, IT COMES OUT THAT IN ORDER TO DETERMINE THE NATURE OF BUSINESS AS TO WHE THER THE SAME IS OF A CO- OPERATIVE BANK OR NOT, CERTIFICATE FROM RBI ABOUT T HE NATURE OF BUSINESS OF THE ASSESSEE IS MOST IMPORTANT AND HENCE, WE FEEL I T PROPER TO RESTORE BACK THE MATTER TO THE FILE OF AO FOR FRESH DECISION AFT ER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE TO PRODUCE SUCH CERTIFI CATE FROM RBI REGARDING ITA NO. 396/BANG/2018 PAGE 4 OF 4 THE NATURE OF BUSINESS OF THE ASSESSEE IN REASONABL E TIME. THIS IS ALSO IMPORTANT THAT IN PARA 25 OF ITS JUDGMENT, IT IS NO TED BY HONBLE APEX COURT THAT THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF GR ANTING LOANS TO GENERAL PUBLIC AS WELL. THIS WAS ALSO NOTED IN THE SAME PA RA THAT MOST OF THE BUSINESS OF THE ASSESSEE WAS WITH THE SECOND CATEGO RY OF PERSONS WHO WERE NOTED TO BE NOMINAL MEMBERS AND FROM THEM, THE ASSESSEE WAS GETTING DEPOSITS WHICH WERE KEPT IN FIXED DEPOSITS WITH A MOTIVE TO EARN MAXIMUM RETURNS AND A PORTION OF THESE DEPOSITS WAS UTILIZED TO ADVANCE GOLD LOANS ETC. TO MEMBERS OF THE FIRST CATEGORY I. E. ORDINARY MEMBERS. HENCE, EVEN IF IT IS FOUND THAT ASSESSEE IS NOT A C O-OPERATIVE BANK, THEN ALSO, THIS FACTUAL ASPECT OF THE PRESENT CASE SHOUL D BE COMPARED AND THEREAFTER FINAL DECISION SHOULD BE MADE. NEEDLESS TO SAY, ADEQUATE OPPORTUNITY OF BEING HEARD SHOULD BE PROVIDED TO TH E ASSESSEE. 6. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT (A) A ND RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION IN THE LIGHT O F ABOVE DISCUSSION. 7. 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/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBE R BANGALORE, DATED, THE 31 ST DECEMBER, 2018. /MS/ 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.