The Assistant Commissioner of Income Tax, Circle-2 (1), Panaji., Panaji V. Shree Kalika Urban Co-op Credit Society Ltd., Goa

ITA 47/PAN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2044 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-07-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 29-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANAND SHANKAR MARATHE
• Assessee Lawyers: R K PIKALE
• Keywords: Question of law
• Section: 143(3)

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 7 /P A N/201 6 (ASST. YEAR : 20 12 - 1 3 ) AC IT, CIRCLE - 2( 1 ), PANAJI GOA. VS. SHREE KALIKA URBAN COOPERATIVE CREDIT SOCIETY LTD., SHOP NO.3, RITURAJ PLAZA, KENI WADA, MAPUSA - GOA. PAN NO. AACAS 1697 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.K. PIKALE - CA. DEPARTMENT BY : SHRI ANAND SHANKAR MARATHE - DR DATE OF HEARING : 21 /0 7 /201 6 . DATE OF PRONOUNCEMENT : 2 1 /0 7 /201 6 . O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), PANAJI - 1 IN ITA NOS. 445 / CIT(A) PNJ - 1 /14 - 15, DATED 30 / 11 /201 5. 2. THE MAIN ISSUE INVOLVED IN THIS APPEAL 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 DECLARING TOTAL INCOME OF 96,310/ - AFTER CLAIMING DEDUCTION UNDER SEC. 80P(2)(A)(I) OF THE ACT OF 1 ,40,67, 291 / - . IT WAS CLAIMED THAT THE SOCIETY IS ENTITLED TO DEDUCTION UNDER SEC. 80P(2)(A)(I) 2 ITA NO. 4 7 /P A N/201 6 AS IT WAS A COOPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING OR PROVIDING 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) ALLOWED 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 DE NIED DEDUCTION U/S.80P(2). ON THIS ISSUE, THE HONBLE HIGH COURT HAS DECIDED AS UNDER: 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 PROVIDED 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 80P(2)(A)(I) OF THE ACT. HOWEVER IN TERMS OF SECTION 80P OF THE ACT THE MEANING OF THE WORDS COOPERATIVE BAN K IS THE MEANING ASSIGNED TO IT IN CHAPTER V OF THE BANKING REGULATION ACT, 1949. A COOPERATIVE BANK IS DEFINED 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. ADMITT EDLY, 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 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 ITA NO. 4 7 /P A N/201 6 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 H AS 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 THAT 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 PURP OSE 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. T HIS 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 APPE LLANT 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 WORD 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 INS IGNIFICANT/MINISCULE. ON THE ABOVE BASIS IT CANNOT BE CONCLUDED THAT THE APPELLANTS, PRINCIPAL BUSINESS 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 SOC IETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CONCLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. HOWEVER, THE IMPUGNED ORDER RELIES UPON BYE - LAW 43 TO CONCLUDE THAT IT ENABLES THE APPELLANT TO RECEIVE DEPOSITS FROM ANY PERSON IS NOT CORRECT. THUS I N 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 IMPUGNED 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, 4 ITA NO. 4 7 /P A N/201 6 WH I CH HAS 24 OBJECTS BUT THEREAFTER DRAWS NO SEQUITER TO CONCLUDE THAT THE PRIMARY OBJECT 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 AB OVE 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 CONSIDE RED. SO FAR AS CONDITION NO.3 OF THE DEFINITION/MEANING OF PRIMARY COOPERATIVE 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 COOPE RATIVE 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. 1 2 TH 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 P RIMARY COOPERATIVE BANK IS NOT SATISFIED. HOWEVER THE IMPUGNED ORDER CONSTRUED 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. ACCO RDING 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 OT TO A CO - O PERATIVE SOCIETY. AS RIGHTLY POINTED OUT ON BEHALF OF THE AP PELLANT THE WORD SOCIETY AS REFERRED TO BYE LAW 9(D) WOULD INCLUDE THE CO - OPERATIVE 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 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 MEMB ERSHIP. 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 PROVIDE D UNDER SECTION 5 (CVV) OF THE BANKING 5 ITA NO. 4 7 /P A N/201 6 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 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 PROV IDING 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 OF THE ACT WOULD NOT BE AVAILABLE. IN THE ABOVE VIEW OF THE MATTER, AT THE TIME WHE N EFFECT HAS BEEN GIVEN TO ORDER OF THIS COURT, THE AUTHORITIES UNDER ACT 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 FACIL ITIES TO ITS MEMBERS. ACCORDINGLY, THE SUBSTANTIAL QUESTION OF LAW AS FRAMED 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 AND SINCE THE FACTS AND CIRCUMSTA NCES ARE IDENTICAL, THE AO IS DIRECTED TO ALLOW THE DEDUCTION U/S.80P TO THE APPELLANT. TH IS GROUND OF APPEAL IS ALLOWED. 5. THE DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ABOVE QUOTED ORDER 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 AFTER FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT AT PANAJI IN THE CASE OF M/S. THE QUEPEM URBAN COOPERATIVE CREDIT SOCIETY LTD. VS. ACIT IN TAX APPEALS NO. 22 - 24/2015 DATED 17/04/2015 . NO CONTRA RY DECISION COULD BE CITED BY THE DEPARTMENTAL REPRESENTATIVE. WE, THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WHICH IS HEREBY CONFIRMED AND THIS GROUND OF APPEAL OF THE RE VENUE IS DISMISSED. 6 ITA NO. 4 7 /P A N/201 6 6. THE ANOTHER GRIEVANCE OF THE REVENUE IN GROUND NO. 3 IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE UNDER SEC. 40(A)(IA) READ WITH SEC. 194A OF THE ACT OF 96,38,099 / - IN THE ASSESSMENT YEAR 2012 - 1 3 , WHEN IT HAS BEEN CLEARLY ESTABLISHED THAT THE ASSESSEE SATISFIES ALL THE CONDITIONS OF A COOPERATIVE BANK AS PER SEC. 5(CCV) OF PART - V OF THE BANKING REGULATION ACT, 1949. 7. AT THE TIME OF HEARING, IT IS FAIRLY AGREED BY BOTH THE PARTIES THAT THIS ISSUE WAS ALSO SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF GOA STATE COOPERATIVE HOUSING FINANCE & FEDERATION LTD . WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE IS NOT BEING TREATED AS A BANK AND CONSEQUE NTLY , THE PROVISIONS OF SECTION 40(A)(IA) DOES NOT APPLY. 8 . WE HAVE CONSIDERED THE SUBMISSIONS . AS WE HAVE ALREADY HELD TH A T THE ASSESSEE IS NOT A BANK WHILE DECIDING THE ISSUE OF ALLOWAB ILITY OF DEDUCTION UNDER SECTION 80P( 2), THE PROVISIONS OF SECTION 40(A)(IA) WOULD NOT APPLY INSOFAR AS NO TDS IS L I ABLE TO BE MADE BY THE ASSESSEE. 9 . IN THE RESULT, APPEAL OF THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON THURSDAY , THE 2 1 ST DAY OF JULY , 201 6 AT GOA. S D / - S D / - (N.S.SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 1 ST JULY, 201 6 . VR/ - 7 ITA NO. 4 7 /P A N/201 6 COPY TO: 1 . THE ASSESSEE 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