ITO, Bangalore V. M/s Vasavi Credit Co-Op Society Ltd., Bangalore

ITA 423/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63848 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 26-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: K KOTRESH
• Keywords: Gift
• Section: 143(3); 56

Judgement Text

PAGE 1 OF 8 ITA NO.423 /BANG/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.423/BANG/2012 (ASST. YEAR 2008-09) THE INCOME TAX OFFICER, WARD-9(4), BANGALORE. VS M/S VASAVI CREDIT CO-OP SOCIETY LTD., SRI KANNIKA PARAMESHWARI TEMPLE COMPLEX, 8 TH CROSS, MALLESWARAM, BANGALORE-560 003. PA NO. AAAJV 0152 C (APPELLANT) (RESPONDENT) DATE OF HEARING : 12.12.2012 DATE OF PRONOUNCEMENT : 14.12.2012 APPELLANT BY : SMT. SUSAN THOMAS JOSE, JCIT RESPONDENT BY : SHRI K KOTRESH, C.A. OR DER PER GEORGE GEORGE K : THIS APPEAL AT THE INSTANCE OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-V, BENGALURU DATED 12.01.2012. THE RELEVANT ASSESSMENT YEAR IS 2008-09. 2. THE REVENUE HAS RAISED SIX GROUNDS OF APPEAL. ALL THE GROUNDS RELATE TO THE SOLITARY ISSUE, WHETHER THE CIT(A) IS JUSTIFIED IN GRANTING DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- PAGE 2 OF 8 ITA NO.423 /BANG/2012 2 THE ASSESSEE IS A CREDIT COOPERATIVE SOCIETY PROVI DING CREDIT FACILITIES TO ITS MEMBERS. FOR THE ASSESSMENT YEAR 2008-09, RETURN OF INCOME WAS FILED ON 7/10/2008 DECLARING NIL INCOME AFTER CLAIMING EXEMPTION UNDER SECTION 80P OF THE INCOME TAX ACT, 1961. THE SCRUTINY ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT VIDE ORDER DATED 22/12/2010 DETERMINING THE TOTAL INCOME AT RS.61,03 ,934/-. IN THE SCRUTINY ASSESSMENT COMPLETED, THE ASSESSING OFFICER MADE TH E FOLLOWING ADDITIONS:- A) INADMISSIBLE EXPENSES - RS.4,66,472/- B) THE CLAIM OF THE APPELLANT FOR DEDUCTION OF ITS ENT IRE INCOME UNDER SECTION 80P(2)(A)(I) WAS REJECTED AND THE INC OME DECLARED BY THE APPELLANT IN THE RETURN OF INCOME FI LED ON 7/10/2008 AMOUNTING TO RS.56,37,462/- HAS BEEN BROU GHT TO TAX. 4. AGGRIEVED BY THE DENIAL OF DEDUCTION UNDER SECTI ON 80P(2)(A)(I) OF THE ACT, THE ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE CIT(A), AFTER EXAMINING THE ASSESSEES CLAI M FOR DEDUCTION OF ITS INCOME UNDER SECTION 80P(2)(A)(I) OF THE ACT , HELD THAT THE ASSESSEE IS A COOPERATIVE CREDIT SOCIETY AND NOT A COOPERATIVE B ANK AND THEREFORE, IS ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IT WAS HELD THAT THERE WAS A CLEAR DISTINCTION BETWEEN COOPERATIVE B ANK AND COOPERATIVE CREDIT SOCIETY AND THE PROVISIONS OF SECTION 80P(4) ARE APPLICABLE ONLY TO THE COOPERATIVE BANKS AND NOT TO COOPERATIVE CREDIT SOC IETY LIKE THAT OF THE ASSESSEE. THEREFORE, IT WAS CONCLUDED THAT THE ASS ESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. T HE CIT(A) ALSO PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE PAGE 3 OF 8 ITA NO.423 /BANG/2012 3 IMMEDIATELY PRECEDING ASSESSMENT YEAR IN ITA NO.46/BA NG/2011 DATED 29.12.2011. THE RELEVANT FINDING OF THE CIT(A) REA DS AS FOLLOWS:- 4. BEFORE ME THE A.R. OF THE APPELLANT ARGUED THAT THE APPELLANT IS NOT A COOPERATIVE BANK AND ONLY A C REDIT COOPERATIVE SOCIETY. EXPLANATION TO SECTION 80P(4) CLEARLY MENTIONED THAT FOR THE PURPOSE OF THAT SUB- SECTION COOPERATIVE BANK SHALL HAVE THE MEANING ASS IGNED IN PART-V OF THE BANKING REGULATION ACT 1949. AFTE R CAREFULLY CONSIDERING THE SUBMISSIONS MADE BY THE A.R . OF THE APPELLANT, I FOUND THAT THE APPELLANT IS NOT A BANK BUT ONLY A CREDIT CO-OPERATIVE SOCIETY. UNDER SECTION 56 IN PART-V OF THE BANKING REGULATION ACT 1949, THE DEFI NITION OF COOPERATIVE BANK AND COOPERATIVE CREDIT SOCIETY A RE GIVEN AS UNDER:- (CC-I) : CO-OPERATIVE BANK MEANS A STATE CO-OPERAT IVE BANK, A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO- OPERATIVE BANK. (CC-II) : CO-OPERATIVE CREDIT SOCIETY MEANS A CO- OPERATIVE SOCIETY, THE PRIMARY OBJECT OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS AND INCLUDES A CO-OPERATIVE LAND MORTGAGE BANK. 4.1 FROM THESE DEFINITIONS IT IS CLEAR THAT A COOPERATIVE BANK IS DIFFERENT FROM A COOPERATIVE CR EDIT SOCIETY AND THE PROVISIONS OF SECTION 80P(4) ARE APPLICABLE TO COOPERATIVE BANKS ONLY. THE APPELLANT IS INVOLVED IN PROVIDING CREDIT FACILITIES TO ITS MEMB ERS AND NOT TO THE GENERAL PUBLIC. THEREFORE THE APPELLANT IS NOT A COOPERATIVE BANK AND ONLY A COOPERATIVE CREDIT SOC IETY AND THE APPELLANT IS ENTITLED TO DEDUCTION PROVIDED UNDER SECTION 80P(2)(A)(I) OF THE IT ACT 1961 ON ITS ENTI RE INCOME OF RS.61,03,934/- AS DETERMINED BY THE ASSESS ING OFFICER. PAGE 4 OF 8 ITA NO.423 /BANG/2012 4 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 7. THE LEARNED DR SUBMITTED THAT THE MAIN BUSINESS OF THE ASSESSEE WAS CARRYING ON BANKING BUSINESS/LENDING TO ITS MEMBERS, WHICH IS IN THE NATURE OF BANKING TRANSACTION AND COMES WITH IN THE PURVIEW OF SECTION 80P(2)(A)(I) OF THE ACT (INSERTED IN FINANCE ACT 20 06 W.E.F. 1/4/2007). SHE BROUGHT TO OUR NOTICE THE DEFINITION OF PRIMARY COOP ERATIVE BANK UNDER SECTION 56(CCV) OF THE BANKING REGULATION ACT, 1949 AND CONTENDED THAT A COOPERATIVE SOCIETY LIKE THAT OF THE ASSESSEE IS NOT A PRIMARY AGRICULTURAL CREDIT SOCIETY AND THEREFORE, SECTION 80P(4) HAS APP LICATION TO THE FACTS OF THE CASE. 8. THE LEARNED AR ON THE OTHER HAND SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S BANGALORE COMMERCIAL TR ANSPORT CREDIT COOPERATIVE SOCIETY LTD. IN ITA NO.1069/BANG/2010 DA TED 8/4/2011. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE DEFINITION OF COOPERATIVE BANK AND COOPERATIVE CREDIT SOCIETY IN THE BANKING REGULATION ACT, 1949 (SECTION 56) RE AD AS FOLLOWS:- (CC-I) : CO-OPERATIVE BANK MEANS A STATE CO-OPERAT IVE BANK, A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO- OPERATIVE BANK. (CC-II) : CO-OPERATIVE CREDIT SOCIETY MEANS A CO- OPERATIVE SOCIETY, THE PRIMARY OBJECT OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS AND INCLUDES A CO-OPERATIVE LAND MORTGAGE BANK. PAGE 5 OF 8 ITA NO.423 /BANG/2012 5 9.1 FROM THE ABOVE DEFINITION, IT IS CLEAR THAT A COOPERATIVE BANK IS DIFFERENT FROM A COOPERATIVE CREDIT SOCIETY AND THE PROVISIONS OF SECTION 80P(4) IS APPLICABLE ONLY TO COOPERATIVE BANKS. THE ASSESSEE ADMITTEDLY IS INVOLVED IN PROVIDING CREDIT FACILITIES TO ITS MEMB ERS AND NOT TO THE GENERAL PUBLIC AND THEREFORE, AS RIGHTLY POINTED OUT BY THE C IT(A), THE ASSESSEE IS NOT A COOPERATIVE BANK AND ONLY IS A COOPERATIVE CRE DIT SOCIETY AND DEDUCTION PROVIDED UNDER SECTION 80P(2)(A)(I) OF THE ACT CANN OT BE DENIED TO THE ASSESSEE. 9.2 MOREOVER, WE FIND THAT AN IDENTICAL ISSUE WAS C ONSIDERED BY THE TRIBUNAL IN THE CASE OF M/S BANGALORE COMMERCIAL TR ANSPORT CREDIT COOPERATIVE SOCIETY LTD. IN ITA NO.1069/BANG/2010 DA TED 8/4/2011. THE RELEVANT FINDING OF THE TRIBUNAL IN THE ABOVE MENTI ONED CASE READ AS FOLLOWS:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE WAS D ENIED THE DEDUCTION U/S 80-P(2)(A)(I) OF THE ACT FOR THE REASON OF INTRODUCTION OF SUB SECTION 4 TO SECTION 80P. S ECTION 80P(4) READS AS FOLLOWS:- (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y IN RELATION TO ANY COOPERATIVE BANK OTHER THAN A PRIMAR Y AGRICULTURAL CREDIT SOCIETY OR A PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. EXPLANATION: FOR THE PURPOSES OF THIS SUB-SECTION, (A) CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); PAGE 6 OF 8 ITA NO.423 /BANG/2012 6 (B) PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 9.1 THE ABOVE SUB-SECTION 4 OF SECTION 80P PROVIDES THAT DEDUCTION UNDER THE SAID SECTION SHAL L NOT BE AVAILABLE TO ANY COOPERATIVE BANK OTHER THAN A PR IMARY AGRICULTURAL CREDIT SOCIETY OR RURAL DEVELOPMENT BAN K. FOR THE PURPOSE OF THE SAID SUB SECTION, COOPERATIV E BANK SHALL HAVE THE MEANING ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949. IN PART V OF THE BAN KING REGULATION ACT, COOPERATIVE BANK MEANS A STATE COOPERATIVE BANK, A CENTRAL COOPERATIVE BANK AND A PRIMATE COOPERATIVE BANK. 9.2 FROM THE ABOVE SECTION, IT IS CLEAR THAT THE PROVISIONS OF SECTION 80P(4) HAS GOT ITS APPLICATIO N ONLY TO COOPERATIVE BANKS. SECTION 80P(4) DOES NOT DEFINE THE WORD COOPERATIVE SOCIETY. THE EXISTING SUB-SECTIO N 80P(2)(A)(I) SHALL BE APPLICABLE TO A COOPERATIVE S OCIETY CARRYING ON CREDIT FACILITY TO ITS MEMBERS. THIS VI EW IS CLARIFIED BY CENTRAL BOARD OF DIRECT TAX VIDE ITS CLARIFICATION NO.133/06/2007-TPL DATED 9 TH MAY, 2007. THE DIFFERENCE BETWEEN A COOPERATIVE BANK AND A COOPERATIVE SOCIETY ARE AS FOLLOWS:- NATURE COOPERATIVE SOCIETY REGISTERED UNDER BANKING REGULATION ACT, 1949 COOPERATIVE SOCIETY REGISTERED UNDER KARNATAKA COOPERATIVE SOCIETY ACT, 1959. REGISTRA -TION UNDER THE BANKING REGULATION ACT, 1949 AND COOPERATIVE SOCIETIES ACT, 1959. COOPERATIVE SOCIETIES ACT, 1959. NATURE OF BUSINESS 1. AS DEFINED IN SECTION 6 OF BANKING REGULATION ACT. 2. CAN OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, OVERDRAFT ACCOUNT, CASH CREDIT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFTS (DD), PAY 1. AS PER THE BYE LAWS OF THE COOPERATIVE SOCIETY. 2. SOCIETY CANNOT OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFTS, PAY ORDERS, GIFT CHEQUES, PAGE 7 OF 8 ITA NO.423 /BANG/2012 7 ORDERS, GIFT CHEQUES, LOCKERS, BANK GUARANTEES ETC. 3. COOPERATIVE BANKS CAN ACT AS CLEARING AGENT FOR CHEQUES, DDS, PAY ORDERS AND OTHER FORMS. 4. BANKS ARE BOUND TO FOLLOW THE RULES, REGULATIONS AND DIRECTIONS ISSUED BY RESERVE BANK OF INDIA (RBI). LOCKERS, BANK GUARANTEES ETC. 3. SOCIETY CANNOT ACT AS CLEARING AGENT, FOR CHEQUES, DDS, PAY ORDERS AND OTHER FORMS. 4. SOCIETY ARE BOUND BY RULES AND REGULATIONS AS SPECIFIED BY IN THE COOPERATIVE SOCIETIES ACT. FILING OF RETURNS COOPERATIVE BANKS HAVE TO SUBMIT ANNUAL RETURN TO RBI EVERY YEAR. SOCIETY HAS TO SUBMIT THE ANNUAL RETURN TO REGISTRAR OF SOCIETIES. INSPEC- TION RBI HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. REGISTRAR HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. PART V PART V OF THE BANKING REGULATION ACT IS APPLIC ABLE TO COOPERATIVE BANKS. PART V OF THE BANKING REGULATION ACT IS NOT APPLICABLE TO COOPERATIVE BANKS. USE OF WORDS THE WORD BANK, BANKER, BANKING CAN BE USED BY A COOPERATIVE BANK. THE WORD BANK, BANKER, BANKING CANNOT BE USED BY A COOPERATIVE SOCIETY. 9.3 IF THE INTENTION OF THE LEGISLATURE WAS NOT TO GRANT DEDUCTION U/S 80P(2)(A)(I) TO COOPERATIVE SOC IETIES CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILIT IES TO ITS MEMBERS, THEN THIS SECTION WOULD HAVE BEEN DELE TED. THE NEW PROVISO TO SECTION 80P(4) WHICH IS BROUGHT INTO STATUTE IS APPLICABLE ONLY TO COOPERATIVE BANKS AND NOT TO CREDIT COOPERATIVE SOCIETIES. THE INTENTION OF THE LEGISLATURE OF BRINGING IN COOPERATIVE BANKS INTO T HE TAXATION STRUCTURE WAS MAINLY TO BRING IN PAR WITH COMMERCIAL BANKS. SINCE THE ASSESSEE IS A COOPERAT IVE SOCIETY AND NOT A COOPERATIVE BANK, THE PROVISIONS O F SECTION 80P(4) WILL NOT HAVE APPLICATION IN THE ASS ESSEES CASE AND THEREFORE, IT IS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. HENCE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS CORRECT AND IN ACCORDANC E WITH LAW AND NO INTERFERENCE IS CALLED FOR. 9.3 SINCE THE FACTS OF THIS CASE ARE IDENTICAL TO THE FACTS OF THE CASE CONSIDERED BY THE TRIBUNAL IN THE CASE OF M/S B ANGALORE COMMERCIAL TRANSPORT CREDIT COOPERATIVE SOCIETY LTD. (SUPRA), W E FOLLOW THE COORDINATE BENCH ORDER OF THE TRIBUNAL AND HOLD THAT THE CIT(A ) IS JUSTIFIED IN PAGE 8 OF 8 ITA NO.423 /BANG/2012 8 DIRECTING THE ASSESSING OFFICER TO GRANT DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DAY OF DECEMBER, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.