The Income Tax Officer, Ward-2(3), Panaji., Panaji V. The Marcela Urban Co-op. Credit Society Ltd., Goa

ITA 423/PAN/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3010 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 10-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH M UTAGAR
• Keywords: Question of law
• Section: 143(3); 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO S . 4 20 & 421 /PNJ/201 5 (ASST. YEAR S : 20 11 - 12 & 20 12 - 1 3 ) ITO, WARD - 2 ( 3 ) , PANAJI . VS. THE BICHOLIM MERCHANTS URBAN CO OPERATIVE CREDIT SOCIETY LTD. , FIRST FLOOR, SAH A YOG BUILDING , NEAR FISH MARKET, BICHOLIM , MAPUSA - GOA . PAN NO. AABAT 1545 K (APPELLANT) (RESPONDENT) ITA NO S . 422 & 423 /PNJ/201 5 (ASST. YEAR S : 2011 - 12 & 20 12 - 1 3 ) ITO, WARD - 2(3), PANAJI. VS. THE MARCELA URBAN COOPERATIVE CREDIT SOCIETY LTD., JANVIKAS BUILDING, MARCELA - GOA. PAN NO. AAAJT 1319 H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI CHINMAY KAMAT - CA . SHRI HIRAKANT NAIK - SECRETARY DEPARTMENT BY : SHRI RAMESH M UTAGAR - D R DATE OF HEARING : 10 / 0 2 /201 6 . DATE OF PRONOUNCEMENT : 10 / 0 2 /201 6 . O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER TH E S E ARE THE APPEAL S FILED BY THE REVENUE AGAINST THE SEPARATE ORDER S PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI - 1 IN ITA NO S .134/PNJ/14 - 15 & 135/PNJ/14 - 15 , 31/PNJ/14 - 15 & 207/PNJ/14 - 15, E A CH, DATED 28 /0 8 /201 5 . 2 ITA NO S . 4 20 - 4 2 4 /PNJ/201 5 2. THE MAIN ISSUE INVOLVED IN TH E S E APPEAL S IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING DEDUCTION TO THE ASSESSEE UNDER SEC. 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961. 3 . THE FACTS OF THE CASE , IN BRIEF, ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME AFTER CLAIMING DEDUCTION UNDER SEC. 80P(2)(A)(I) OF THE ACT FOR 23,1 3 , 547 / - . IT WAS CLAIMED THAT THE SOCIETY IS ENTITLED TO DEDUCTION UNDER SEC. 80P(2)(A)(I) AS IT WAS A COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS. HOWEVER, THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SEC. 80P(2)(A)(I) WAS REJECTED BY THE ASSESSING OFFICER IN THE ORDER PASSED UNDER SEC. 143(3) OF THE ACT ON THE GROUND THAT THE ASSESSEE WAS A COOPERATIVE BANK, AND HENCE, NOT ENTITLED TO CLAIM DEDUCTION BY VIRTUE OF SEC. 80P(4). 4. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) AL LOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER: - 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE AO HAS EQUATED THE APPELLANT CO - OPERATIVE SOCIETY WITH PRIMARY COOPERATIVE BANK AND HAS DENIED DEDUCTION U/S.80P(2). ON THIS ISSUE, THE HONBLE HIGH COURT HAS DECIDED AS U NDER: THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE APPELLANT IS A CO - OPERATIVE SOCIETY AS THE SAME IS REGISTERED UNDER THE CO - OPERATIVE ACT. THE APPELLANT IS CLAIMING DEDUCTION OF INCOME EARNED ON PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS PROVID ED UNDER SECTION 80P(2)(A)(I) OF THE ACT. IT IS APPELLANTS CASE THAT, 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 EXCLUDE THE APPELLANT FROM CLAIMING THE BENEFIT OF DEDUCTION UNDER SECTION C 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 CHAPTER V OF THE BANKING REGULATION ACT, 1949. A COOPERATIVE BANK IS DEF INED IN SECTION 5(CCI) OF BANKING REGULATION ACT TO MEAN A STATE COOPERATIVE BANK - , A CENTRAL COOPERATIVE BANK AND A PRIMA R Y COOPERATIVE BANK. ADMITTEDLY, THE APPELLANT IS NOT A STATE COOPERATIVE BANK, A CENTRAL COOPERATIVE BANK THUS WHAT HAS TO BE E X AMINED IS WHETHER THE APPELLANT IS A 3 ITA NO S . 4 20 - 4 2 4 /PNJ/201 5 PRIMARY COOPERATIVE BANK AS DEFINED IN PARA V OF THE BANKING REGULATION ACT. SECTION 5(CCV) OF THE BANKING REGULATION ACT DEFINES A PRIMARY COOPERATIVE BANK TO MEAN A COOPERATIVE SOCIETY WHICH CUMULATIVELY SATISFIES THE FOLLOWING THREE CONDITIONS: 1) ITS PRINCIPAL BUSINESS OR PRIMARY OBJE C T SHOULD BE BANKING BUSINESS OF BANKING , 2) ITS PAID UP SHARE CAPITAL AND RESERVES SHOULD NOT BE LESS THAT RUPEES ONE LAKH . 3) ITS BYE - LAWS DO NOT PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY AS ITS MEMBER. IT IS ACCEPTED POSITION THAT CONDITION NO. (2) IS SATISFIED AS THE SHARE CAPITAL IN AN EXCESS OF RUPEES ONE LAKH IT HAS BEEN THE APPELLANTS CON TENTION THAT THE CONDITIONS NO (1) AND (3 ) PROVIDED ABOVE ARE NOT SATISFIED. THEREFORE THE ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE APPELLANT SATISFIES CONDITION NO (1) AND (3) ABOVE THE IMPUGNED ORDER AFTER REFERRING TO THE DEFINITION OF BANKING BUSINESS AS DEFINED IN SECTION 5B O F THE BANKING REGU LATION ACT, HELD TH AT THE PRINCIPAL BUSINESS OF THE APPELLANT IS BANKING SECTION 5B OF THE BANKING REGULATION ACT DEFINES BANKING TO MEAN ACCEPTING OF DEPO S ITS FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSIT OF MONEY FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERWISE. THE IMPUGNED ORDER JUXTAPOSES THE ABOVE DEFINITION WITH THE FINDING OF FACT THAT THE APEL1ANT DID DEAL WITH NON MEMBERS IN A FEW CASES BY SEEING DEPOSITS. THIS READ WITH BYE LAW 43 LEADS TO THE CONCLUSION THAT 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 JULY, 2014. BEFORE THE TRIBUNAL ALSO THE APPELLANT DID NOT DISPUTE THE FACT THAT IN A FEW CASES THEY HAVE DEALT WITH NON MEMBERS. HOWEVER SO FAR AS ACCEPTING DEPOSITS FROM NON MEMBERS IS CONCERNED IT IS SUBMITTED THAT THE BYE - 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 PERSONS OTHER THEN MEMBERS, THE W ORD ANY PERSON IS A GLOSS ADDED IN THE IMPUGNED ORDER AS IT IS NOT FOUND IN BYE LAW 43. IT IS UNDISPUTED THAT THE TRANSACTIONS WITH NON MEMBERS ARE INSIGNIFICANT/MINISCULE. ON THE ABOVE BASIS IT CANNOT BE CONCLUDED THAT THE APPELLANTS, PRINCIPAL BUSINES S IS OF ACCEPTING DEPOSITS FROM PUBLIC AND THEREF O RE IT IS IN BANKING BUSINESS. IN FACT, THE IMPUGNED ORDER ERRONEOUSLY R ELIES UPON BYE - LAW 43 OF THE SOCIETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CONCLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. HOWEVER, 4 ITA NO S . 4 20 - 4 2 4 /PNJ/201 5 THE IMPUGNED ORDER RELIES UPON BYE - LAW 43 TO CONCLUDE THAT IT ENABLES THE APPELLANT TO RECEIVE DEPOSITS FROM A NY PERSON IS NOT CORRECT. THUS IN THE PRESENT FACTS THE FINDINGS THAT THE APPELLANTS PRINCIPAL BUSINESS IS OF BANKIN G IS PERVERSE, AS IT IS NOT SUPPORTED BY THE EVIDENCE ON RECORD . SO FAR AS THE ISSUE OF PRIMARY OBJECT OF THE APPELLANT IS CONCERNED THE IM PUGNED ORDER GIVES NO FINDING ON THAT BASIS TO DEPRIVE THE APPELLANT THE BENEFIT OF SECTION 80P OF THE ACT THE IMPUGNED ORDER SETS OUT THE OBJECT CLAUSE OF THE APPELLANT, WH I CH HAS 24 OBJECTS BUT THEREAFTER DRAWS NO SEQUITER TO CONCLUDE THAT THE PRIMARY OB JECT IS BANKING. CONSEQUENTLY THERE IS NO OCCASION TO DEAL WITH TH E SAME AS THAT IS NOT THE BASIS ON WHICH THE IMPUGNED ORDER HOLDS THAT IT IS A PRIMARY COOPERATIVE BANK. IN THE ABOVE VIEW, THE ALTERNATIVE CONTENTION OF 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 BANK OF INDIA, WHICH IT ADMITTEDLY DOES NOT HAVE, IS NOT BEING CONSIDERED. SO FAR AS CONDITION NO.3 OF THE DEFINITION/MEANING OF PRIMARY COOPERA TIVE BANK AS PROVIDED IN SECTION 5(CCV) OF THE BANKING REGULATION ACT IS CONCERNED, THE SAME REQUIRES THE BYE LAWS OF SOCIETY TO CONTAIN A PROHIBITION FROM ADMITTING ANY OTHER COOPERATIVE SOCIETY AS ITS MEMBER. I N FACT THE BYE - LAWS OF THE APPELLANT SO C I E TY O R IGINALLY IN BYE - LAW 9(B) CLEARLY PROVIDED THAT NO CO - OPERATIVE SOCIETY SHALL BE ADMITTED TO THE MEMBERSHIP OF THE SOCIETY. THUS THERE WAS A BAR BUT THE SAME WAS 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 THREE CUMULATIVE CONDITIONS PRECEDENT TO BE A PRIMARY COOPERATIVE BANK IS NOT SATISFIED. HOWEVER THE IMPUGNED ORDER CONSTRUE D THE AMENDED CLAUSE 9(D) OF THE APPELLANTS BYE LAWS TO MEAN THAT IT ONLY PERMITS A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE APPELLANT AND NOT A CO - OPERATIVE SOCIETY. ACCORDING TO THE IMPUGNED ORDER, A SOCIETY AND A CO - OPERATIVE SOCIETY ARE CLEARLY WORDS OF DIFFERENT HAND DISTINCT SIGNIFICANCE AND THE MEMBERSHIP IS ONLY OPEN TO SOCIETY AND N O T TO A CO - O PERATIVE SOCIETY. AS RIGHTLY POINTED OUT ON BEHALF OF THE APPELLANT THE WORD SOCIETY AS REFERRED TO BYE LAW 9(D) WOULD INCLUDE THE CO - OPE RATIVE SOCIETY. THIS IS SO AS THE DEFINITION OF A SOCIETY UNDER THE CO - OPERATIVE ACT IS CO - OPERATIVE REGISTERED UNDER THE CO - OPERATIVE ACT. BESIDES THE QUALIFYING CONDITION 3 FOR BEING CONSIDERED AS A PRIMARY COOPERATI V E BANK IS THAT THE BYE LAWS MUST NOT 5 ITA NO S . 4 20 - 4 2 4 /PNJ/201 5 PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY THIS IS A MANDATORY CONDITION I. E . THE BYE LAWS 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 APPELLANT. THUS EVEN THE AFORESAID QUALIFYING CONDITION (3) FOR BEING CONSIDERED AS A PRIMARY COOPERATIVE BANK IS NOT SATISFIED. THUS, THE THREE CONDITIONS AS PROVIDED UNDER SECTION 5 (CVV) OF THE BANKING REGULATION ACT, 1949, ARE TO BE SATISF IED 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 PURPOS E S OF SECTION 80P(4) OF THE ACT. THUS, THE APPELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE CONTENTION OF MS. DESSAI, LEARNED COUNSEL FOR 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 - MEMBER 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 INC OME EARNED IS ATTRIBUTABLE TO DEALINGS WITH THE NON - MEMBERS ARE CONCERNED THE BENEFIT OF SECTION 80P OF THE ACT WOULD NOT BE AVAILABLE. IN THE ABOVE VIEW OF THE MATTER, AT THE TIME WHEN EFFECT HAS BEEN GIVEN TO ORDER OF THIS COURT, THE AUTHORITIES UNDER AC T 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 FACILITIES TO ITS MEMBERS. ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW AS FR AMED IS ANSWERED IN THE NEGATIVE I.E.IN FAVOUR OF THE APPELLANT AND AGAINST THE RESPONDENT - REVENUE. IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT, THE AO IS DIRECTED TO ALLOW THE DEDUCTION U/S.80P TO THE APPELLANT. THE APPEAL IS ALLOWED. 5. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER S OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ABOVE QUOTED ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE CLAIM OF DEDUCTION UNDER SEC. 80P(2)(A)(I) OF THE ACT IN LINE WITH THE DECISION OF THE HONBLE BOMBAY HIGH COURT AT PANAJI IN THE CASE OF THE QUEPEM URB AN COOPERATIVE CREDIT SOCIETY LTD. VS. ACIT . NO CONTRARY DECISION COULD BE CITED BY THE DEPARTMENTAL REPRESENTATIVE. WE, THEREFORE, DO 6 ITA NO S . 4 20 - 4 2 4 /PNJ/201 5 NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), W HICH IS HEREBY CONFIRMED AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 6. IN ITA NOS. 420 & 421/PNJ/2015, THE GRIEVANCE OF THE REVENUE IN GROUND NO.4 IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE UNDER SEC. 40(A)(IA) READ WITH SEC. 19 4 A OF THE ACT OF 9,64,552/ - IN THE ASSESSMENT YEAR 2011 - 12 AND 13,10,555/ - IN THE ASSESSMENT YEAR 2012 - 13 , WHEN IT HAS BEEN CLEARLY ESTABLISHED THAT THE ASSESSEE SATISFIES ALL THE CONDITIONS OF A C OOPERATIVE B ANK AS PER SEC. 5(CCV) OF PART - V OF THE BANKING REGULATION ACT, 1949 . 7. WE FIND THAT THIS GROUND OF APPEAL DOES NOT ARISE OUT OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN BOTH THE YEARS UNDER CONSIDERATION HENCE, THE SAME IS DISMISSED. 8. IN ITA NOS. 422 & 423 /PNJ/2015, THE GROUND NO. 4 OF THE APPEALS IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE ADDITION MADE UNDER SEC. 40(A)(IA) OF THE ACT. 9 . WE HAVE HEARD RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE OR DERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS PAID INTEREST IN EXCESS OF 10,000/ - WITHOUT MAKING TDS AND, THEREFORE, HE MADE DISALLOWANCE OF 3,12,173 / - IN ASSESSMENT YEAR 2011 - 12 AND 3,97,838/ - IN ASSESSMENT YEAR 2012 - 13 BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA). 10 . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE MADE UNDER SEC. 40(A)(IA) OF THE ACT BY OBSERVING THAT THE ASSESSEE - SOCIETY IS NOT HELD TO BE A BANK, THEREFORE, TDS PROVISIONS ARE 7 ITA NO S . 4 20 - 4 2 4 /PNJ/201 5 NOT APPLICABLE TO THE ASSESSEE - SOCIETY. HENCE , HE DELETED THE ADDITION MADE UNDER SEC. 40(A)(IA) OF THE ACT. 11. THE DEPARTMENTAL REPRESENTATIVE DURING THE COURSE OF HEARING DID NOT MAKE ANY SUBMISSIONS ON THE ABOVE GROUND OF APPEAL TAKEN BY THE REVENUE. HENCE, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 12 . IN THE RESULT, ALL THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 10 TH DAY OF FEBRUARY , 201 6 AT GOA . S D / - S D / - (N.S.SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 0 TH FEBRUARY , 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE 1) THE BICHOLIM MERCHANTS URBAN CO - OP CREDIT SOCIETY LTD . 2) THE MARCELA URBAN COOPERATIVE CREDIT SOCIETY LTD. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI