Income tax Officer Ward 6(3), Nagpur V. Rashtra Sant Tukdoji Maharaj Urban Credit Co-op Society Ltd., Nagpur

ITA 398/NAG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93422 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: S S DANI

Judgement Text

1 ITA NO. 398/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 398/NAG/2013 ASSESSMENT YEAR : 2007 - 08 THE INCOME - TAX OFFICER, RASHTRA SANT TUKDOJI WARD - 6(5), NAGPUR. MAHARAJ URBAN V/S. CREDIT SOCIETY LTD., MEHANDIBAUG ROAD, NEW MANGALWARI, NAGPUR. PAN AAAAR4107J (APPELLANT) RESPONDENT. APPELLANT BY : SHRI NARENDRA KANE. RESPONDENT BY : SHRI S.S. DANI. DATE OF HEARING : 26 - 05 - 2015 DATE OF PRONOUNCEMENT : 30 TH JUNE, 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(APPEALS) - II, NAGPUR DATED 08 - 08 - 2013 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LEARNED CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY NOT A CO - OP. BANK FOR THE PURPOSE OF CLAIM OF DEDUCTION U/S 80(P)( 4) OF IT ACT, 1961. 2 ITA NO. 398/NAG/2013 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LEARNED CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80(P)(2)(A)(I) OF IT ACT, 1961. 3. AT THE OUTSET, IN THIS CASE, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE CATENA OF DECISIONS OF TRIBUNAL. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ISSUE HAS NOW BEEN ALSO DECIDED IN FAVOUR OF THE ASSESSEE BY THE HON BLE BOMBAY HIGH COURT DECISION. THE LEARNED D.R. COULD NOT CONTROVERT THIS SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE. 4. WE FIND THAT IT IS UNDISPUTED THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS . IT IS ALSO UNDISPUTED THAT THE ASSESSEE IS NOT A COOPERATIVE BANK. LEARNED CIT(APPEALS) HAS ALSO CONSIDERED ITATS DECISIONS ON THIS ISSUE AND HAS CONCLUDED AS UNDER : AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE, IT IS CLEAR THAT THE A.O. HAS FAILED TO APPRECIATE THE DISTINCTION BETWEEN CREDIT COOPERATIVE SOCIETY AND COOPERATIVE BANK. THE CREDIT COOPERATIVE SOCIETY IS IN THE NATURE OF CREDIT RESOURCE SOCIETY WHICH STRIVES TO OBTAIN CREDITS FOR ITS MEMBERS WITH THE OBJECTIVES OF FACILITATING CREDIT TO INDIVIDUALS WHILE COOPERATIVE BANKS ARE FULL - FLEDGED BANKING ORGANIZATION. IT IS ALSO NECESSARY TO NOTE THAT THE ASSESSEE COOPERATIVE CREDIT SOCIETIES IS UNDER THE PURVIEW OF MAHARASHTRA COOPERATIVE SOCIETY ACT AND CANNOT CONDUCT THE BUSINES S OF BANKING AS CLAIMED BY THE A.O. WITHOUT FULFILLING THE CONDITIONS OF THE REGISTRAR OF SOCIETIES AND THE RESERVE BANK OF INDIA. THEREFORE, THE ACTION OF THE A.O. IS NOT JUSTIFIED. THE PROVISIONS OF SECTION 80P(4) HAVE ONLY SOUGHT TO EXCLUDE THE COOP ERATIVE BANKS FROM AVAILING THE BENEFITS OF THE DEDUCTION. THE A.OS ACTION IS, THEREFORE, NOT BASED ON THE CORRECT LEGAL POSITION OF THE CASE. A.O. IS, THEREFORE, DIRECTED TO ALLOW THE DEDUCTION OF ` .12,02,173/ - U/S 80P OF THE I.T. ACT. 3 ITA NO. 398/NAG/2013 5. WE FIN D THAT THE LEARNED CIT(APPEALS) HAS TAKEN A CORRECT VIEW. IN SIMILAR SITUATION, THE ITAT BY A COMMON ORDER DATED 12 - 09 - 2014 HAS ALSO DECIDED A SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. WE FURTHER FIND THAT IDENTICAL ISSUES WERE CONSIDERED BY THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF QUEEN URBAN CO - OPERATIVE CREDIT SOCIETY LTD. V/S. ACIT IN TAX APPEALS NO. 22, 23 & 24 OF 2015 VIDE ORDER DATED 17 TH APRIL, 2015. THE HONBLE HIGH COURT HAD EXPOUNDED AS UNDER : THIS FACT OF ACCEPTING DEPOSITS FROM PEOPLE WHO ARE NOT MEMBERS HAD BEEN SO RECORDED BY THE CIT(A) IN HIS ORDER. BUT IT CANNOT BE CONCLUDED THAT THE APPELLANTS PRINCIPAL BUSINESS WAS OF ACCEPTING DEPOSITS FROM PUBLIC AND THEREFORE IT WAS IN BANKING BUSINESS. IN FACT, THE IMPUGNED ORDER E RRONEOUSLY RELIES UPON BYE - LAW 43 OF THE SOCIETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CONCLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. THUS IN THE PRESENT FACTS THE FINDING THAT THE APPELLANTS PRINCIPAL BUSINESS WAS OF BANKING WAS PERVE RSE AS IT WAS NOT SUPPORTED BY THE EVIDENCE ON RECORD. SO FAR AS THE ISSUE OF PRIMARY OBJECT OF THE ASSESSEE WAS CONCERNED THE IMPUGNED ORDER GIVES THE FINDING ON THAT BASIS TO DEPRIVE THE APPELLANT THE BENEFIT OF SECTION 80P. IN FACT AS PER THE BYE - LAWS OF THE APPELLANT SOCIETY THERE WAS NO PROHIBITION TO ADMITTING A SOCIETY TO ITS MEMBERSHIP AND ONE OF THREE CUMULATIVE CONDITIONS PRECEDENT TO BE A PRIMARY COOPERATIVE BANK WAS NOT SATISFIED. THIS WAS A MANDATORY CONDITION I.E. THE BYE LAW S MUST SPECIFICALLY PROHIBIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY TO ITS MEMBERSHIP. THE REVENUE HAS NOT BEEN ABLE TO SHOW ANY SUCH PROHIBITION IN THE BYE LAWS OF THE ASSESSEE. THUS EVEN THE AFORESAID QUALIFYING CONDITION (3) FOR BEING CONSIDERE D AS A PRIMARY COOPERATIVE BANK WAS NOT SATISFIED. THUS, THE THREE CONDITIONS AS PROVIDED UNDER SECTION 5(CVV) OF THE BANKING REGULATION ACT, 1949, ARE TO BE SATISFIED CUMULATIVELY AND EXCEPT CONDITION (2) THE OTHER TWO QUALIFYING CONDITIONS ARE NOT SATISFIED. ERGO, APPELLANT CANNOT BE CONSIDERED TO BE A CO - OPERATIVE BANK FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT. THUS, THE APPELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE UNDER SECTION 80P(2)(A)(I). THE CONTENTION OF THE REVENUE THA T THE APPELLANT IS NOT ENTITLED TO THE BENEFIT OF SECTION 90P(2)(A)(I) IN VIEW OF THE FACT THAT IT DEALS WITH NON - MEMBERS 4 ITA NO. 398/NAG/2013 CANNOT 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 CONCERNED THE BENEFIT OF SECTION 80P WOULD NOT BE AVAILABLE. IN THE ABOVE VIEW OF THE MATTER, AT THE TIME WHEN EFFECT HAS BEEN GIVEN TO THE ORDER OF THIS COURT, THE AUTHORITIES UNDER THE ACT WOULD RESTRICT THE BENEFIT OF DEDUCTION UNDER SECTION 80P OF THE ACT ONLY TO THE EXTENT THAT THE SAME WAS EARNED BY THE APPELLANT IN CAR RYING ON ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 6. WE FIND THAT IN THE PRESENT CASE THE ASSESSEE HAS CONTENDED BEFORE THE ASSESSING OFFICER THAT IT DEALS ONLY WITH ITS MEMBERS AND ACCEPTS DEPOSITS AND GIVES LOANS ONLY TO ITS MEMBERS . THIS HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. ACCORDINGLY IN THE BACKGROUND OF ABOVE DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(APPEALS). ACCORDINGLY, WE UPHOLD THE SAME. 7. IN THE RESULT, APPEAL OF THE REVE NUE IS DISMISSED. ORDER PRONOUNCED ON THIS 30 TH DAY OF JUNE, 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER. ACCOUNTANT MEMBER NAGPUR, DATED: 30 TH JUNE, 2015. 5 ITA NO. 398/NAG/2013 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE