ACIT 1(3), MUMBAI V. PATAN CO-OPERATIVE BANK LTD, MUMBAI

ITA 4575/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2194 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 05-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R BAIWAR
• Assessee Lawyers: REEPAL TRALSHAWALA
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C : MUMBAI BEFORE SHRI D. MANMOHAN, HONBLE VICE PRESIDENT AND SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA. NO. 4575/MUM/2009 ASSESSMENT YEAR 2005-2006 ACIT-1 (3) MUMBAI 400 020. VS. M/S. PATAN CO-OPERATIVE BANK LTD. MUMBAI 400 020 PAN AAAP-0887-B (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI A.R. BAIWAR (DR) FOR RESPONDENT : SHRI REEPAL TRALSHAWALA (AR) ORDER PER D. MANMOHAN, V.P. 1. IN THIS APPEAL BY THE REVENUE, IT WAS CONTENDED THAT INTEREST EARNED BY THE ASSESSEE FROM INVESTMENTS WITH BANKS, OTHER THAN CO- OPERATIVE BANKS, CANNOT BE TREATED AS INCOME EARNED FROM BANKING BUSINESS AND THEREFORE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN GRANTING EXEMPTION, UNDER SECTION 80P(2)(A)(I) OF THE I.T. A CT, 1961, OF SUCH INCOME. 2. WE HAVE HEARD LEARNED DR AS WELL AS THE LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE IN THIS REGARD. 3. UNDISPUTED FACTS ARE THAT THE ASSESSEE, A CO-OP ERATIVE BANK, WAS ENGAGED IN THE BUSINESS OF CARRYING ON BANKING ACTIVITIES AS DEFINED IN SECTION 5 (B) OF THE BANKING REGULATIONS ACT, 19 49. AS PER THE RESERVE BANK DIRECTIVES, A CO-OPERATIVE BANK CANNOT DEAL IN FOREIGN EXCHANGE AND CANNOT PROVIDE LETTER-OF-CREDIT FACILITY TO ITS CUSTOMERS. THEREFORE, IN ORDER TO SERVICE ITS CLIENTS ALL CO-OPERATIVE BANKS HAVE A TIE-UP WITH 2 NATINOALISED/PRIVATE BANKS THAT PROVIDE LETTER-OF-C REDIT FACILITIES OR DEAL IN FOREIGN EXCHANGE. AS PART OF ITS MAIN ACTIVITY O F PROVIDING LOAN AND OTHER RELATED SERVICE FACILITIES TO ITS MEMBERS AND CUSTOMERS THE ASSESSEE HAS TO PROVIDE LETTER-OF-CREDIT FACILITY ETC AND FO R THIS PURPOSE THE ASSESSEE-BANK WAS REQUIRED TO MAINTAIN CERTAIN AMOU NT OF MONEY AS MARGIN-MONEY. IN THE INSTANT CASE ASSESSEE ENTERED INTO AN ARRANGEMENT WITH ICICI BANK, DENA BANK AND BANK OF BARODA. ON S UCH MARGIN- MONEY THE ASSESSEE-BANK RECEIVED INTEREST AND THE S AME WAS SHOWN AS INCOME FROM BUSINESS SINCE PAST MANY YEARS AND AC CORDINGLY CLAIMED DEDUCTION UNDER SECTION 80P OF THE ACT ON SUCH INCO ME. THE ASSESSING OFFICER WAS OF THE OPINION THAT SUCH INCOME IS ASSE SSABLE TO TAX UNDER THE HEAD OTHER SOURCES. HOWEVER, ON AN APPEAL FIL ED BY THE ASSESSEE, THE LEARNED CIT(A) FOLLOWED THE DECISION OF THE APE X COURT IN THE CASE OF MEHSANA DISTRICT CO-OPERATIVE BANK LTD. 251 ITR 522 (S.C.) TO HOLD THAT THE IMPUGNED INCOME IS DIRECTLY CONNECTED TO THE MA IN ACTIVITY CARRIED ON BY THE ASSESSEE AND HENCE, IT QUALIFIES FOR DEDUCTI ON UNDER SECTION 80P(2)(A)(I) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), R EVENUE IS IN APPEAL BEFORE US. LEARNED DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER TO SUBMIT THAT THE IMPUGNED INCOME HAS TO B E TAXED UNDER THE HEAD OTHER SOURCES. HOWEVER, HE COULD NOT DISTING UISH THE CASE LAW REFERRED TO BY THE CIT(A). 5. ASSESSEE HAS ALSO RELIED UPON THE FOLLOWING DEC ISIONS TO CONTEND THAT UNDER THE IDENTICAL CIRCUMSTANCES INC OME RECEIVED BY A CO-OPERATIVE BANK WAS CONSIDERED AS INCOME FROM B ANKING ACTIVITY. BUT THESE CASE LAWS COULD NOT BE DISTINGUISHED BY T HE LEARNED DR. 3 I. CIT VS. KARNATAKA STATE CO-OPERATIVE APEX BANK 251 ITR 194 (SC) II. CIT VS. NAWANSHAHAR CENTRAL CO-OPERATIVE BANK LTD. 289 ITR 6 (S.C.) III. CIT VS. PUNJAB STATE CO-OPERATIVE BANK LTD. 304 ITR 113 (P&H) IV. CIT VS. SOLAPUR NAGARI AUDYOGIC SAHAKARI BANK LTD. 182 TAXMAN 231 (BOM.) 6. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND THEREFORE, UPHO LD THE ORDER PASSED BY THE LEARNED CIT(A). 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 2 0 TH DAY OF APRIL, 2010. SD/- SD/- (R.K.PANDA) ( D MANMOHAN ) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI : DATED: 20 TH APRIL, 2010 VBP/- 4 COPY FORWARDED TO: 1 ACIT-1(3), ROOM NO. 540/564, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, NEW MARINE LINES, MUMBAI - 400 020. 2 M/S. PATAN CO-OPERATIVE BANK LTD. RASIK NIWAS, 75 PATAN JAIN MANDAL MARG, MARINE DRIVE, MUMBAI 400 020 PAN AAAP-0887-B 3 CIT (A)-XXI, MITTAL COURT, B WING, R.NOS. 13 & 14, 3 RD FLOOR, NARIMAN POINT, MUMBAI 400 021. 4 CIT, CITY-I, MUMBAI. 5 DR C BENCH 6. GUARD FILE /TRUE COPY/ BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI