ITO 17(2)(1), MUMBAI V. JANSASGAR KAMGAR SAHAKARI PATPEDHI LTD., MUMBAI

ITA 4994/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1341 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 04-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWAPAN KUMAR BEPARI
• Assessee Lawyers: V G GINDE
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4994/MUM/2016 ASSESSMENT YEAR: 2012-13 ITO 17(2)(1) VS. M/S. JANSASGAR KAMGAR SAHAKARI 1 ST FLOOR, AAYAKAR BHAVAN, PATPEDHI LTD. AAYAKAR BHAVAN, M.K. ROAD, AKHIL MAHARASHTRA MATH ADI, 143, MUMBAI 400020 1 ST FLOOR, KAZI SAYYAD STREET, MATHADI CHOWK, MASJID BUNDER, MUMBAI 400003 PAN NO. AAAAJ6747J (APPELLANT) (RESPONDENT) REVENUE BY : MR. SWAPAN KUMAR BEPARI, DR ASSESSEE BY: MR. V.G. GINDE, AR DATE OF HEARING : 19/0 1/2017 DATE OF PRONOUNCEMENT: 11/04/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2012-13. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 28, MUMBAI AND ARISES OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER:- I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ALLOW DEDUCTIONS U/S 80P(2 )(A)(I) OF THE ACT TO THE ASSESSEE IN RESPECT OF INTEREST INCOME OF RS. 4 1,38,991/- AND U/S 80P(2)(D) OF THE ACT IN RESPECT OF DIVIDEND INCOME OF RS. 1,38,720/- DERIVED BY THE ASSESSEE FROM ITS SHAREHOLDING IN OTHE R CO-OPERATIVE SOCIETIES, DESPITE THE FACT THAT THE ASSESSEE CARRIE S ON BANKING AND OTHER BUSINESS ACTIVITIES IN THE NAME OF THE CREDIT CO-OPE RATIVE SOCIETY. ITA NO. 4994/MUM/2016 2 II. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE ABOVEMENTIONED DEDUCTIONS WI THOUT CONSIDERING INSERTION OF SEC. 80P(4) AND SUB-CLAUSE ( VIIA) TO SECTION 2(24) VIDE FINANCE ACT, 2006 W.E.F. 01.04.2007. III. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE FACTS THAT THE ASS ESSEE FALLS UNDER THE CATEGORY OF PRIMARY CO-OPERATIVE BANK AS PER DE FINITION IN PART V OF THE BANKING REGULATION ACT, 1949. IV. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE LEARNED CIT(A) FOR CONCEDING THE RELIEF TO THE ASSESSEE, HAS ERRED IN RELYING UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CAS E OF QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY, 58 TAXMANN.COM 113, WI THOUT APPRECIATING THE FACT THAT THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE REVENUE, AND THE HONBLE APEX COURT HAS GRANTED SLP IN THE SAID CA SE TO THE DEPARTMENT AS REPORTED IN 63 TAXMANN.COM 300. V. THE APPELLANT PRAYS THAT THE ORDER OF THE A.O. SHOUL D BE RESTORED AND ORDER OF THE CIT(A) SHOULD BE SET ASIDE. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I .E. M/S. JANSAGAR KAMGAR SAHAKARI PATPEDHI MARYADIT (JKSPM) FILED ITS RETURN OF INCOME FOR THE A.Y. 2012-13 ON 17.09.2012 DECLARING TOTAL INCOME OF RS. NIL. THE ASSESSING OFFICER (AO) FOUND THAT JKSP M, A CO-OPERATIVE CREDIT SOCIETY IS REGISTERED UNDER MAHARASHTRA MATH ADI KAMGARS AS MEMBERS PROVIDING FINANCIAL SERVICE SECTOR, BANKING BUSINESS, PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND SHOW ING INCOME UNDER THE HEAD PROFITS / GAINS FROM BUSINESS AND PROFESSI ON. THE ISSUE BEFORE THE A.O. WAS THE CLAIM MADE BY THE ASSESSEE U/S 80P OF THE ACT. THE AO OBSERVED IN THE PROFIT & LOSS ACCOUNT FOR THE IMPUGNED ASSESSMENT YEAR, THE MAJOR RECEIPT OF RS. 1,21,31,2 16/- BY WAY OF INTEREST ON LOANS AND ADVANCES TO MEMBERS ON THE INCOME SIDE. AS PER THE AO, IT DEMONSTRATES THAT THE ONLY ACTIVITY BEING CARRIED OUT BY JKSPM IS ACCEPTING DEPOSITS AND EXTENDING LOAN FACI LITIES. THE AO FOUND THAT THE SAME IS SUPPORTED BY CLAUSE (A), (B) AND (D) OF THE ITA NO. 4994/MUM/2016 3 OBJECTS OF THE ASSESSEES BYE LAWS. THE AO FURTHER FOUND THAT THE JKSPM HAS BEEN MAINTAINING A RUNNING ACCOUNT WITH M UMBAI DISTRICT CENTRAL CO-OPERATIVE BANK UTILISING CASH CREDIT FA CILITIES. BESIDES TAKING A TERM LOAN, IT HAS ALSO MADE INVESTMENTS IN SHARES AND FD WITH MUMBAI DISTRICT CENTRAL CO-OPERATIVE BANK WHIC H MAY BE REQUIRED FOR AVAILING LOAN FACILITY ETC. IN REPLY, THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT IT DOES NOT REQUIRE A BANKING LICENSE TO DO THE BANKING BUSINESS WITH THE MEMBERS OF THE SOC IETY AND CANNOT USE CHEQUE / CLEARING FACILITY WHICH ARE AVAILABLE. THE AO WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND BROUGHT TO TAX GROSS TOTAL INCOME OF RS. 41,38,991/- AND DIVIDEND INCOME OF RS. 1,38,720/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEES SOCIETY FILED AN APPEAL BEFORE THE LEARNED CIT(A). WE FIND THAT THE LEARNED CIT(A) RELYING ON THE DECISION IN THE CASE OF (I) QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY LTD. VS. ACIT (2015) 58 TAXMAN.COM 133 (BOM), (II) CIT VS. SRI BILURU GURUBASAVE PATTINI SAHAKARI SANGHA N IYAMITHA BAGALKOT (2015) TAXMANN.COM 280 (KAR), (III) CIT VS. JAFARI MOMIN VIKSSA CO- OPERATIVE CREDIT SOCIETY LTD. (2014) 49 TAXMANN.COM 571 (GUJ), (IV) TASHOMANDIR SAHAKARI PATPEDI LTD. VS. ITO (ITA NO. 3477/MUM/2014) HELD THE ASSESSEE CO-OPERATIVE SOCIE TY AS NOT A CO- OPERATIVE BANK AND THUS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). THE LEARNED CIT(A) FURTHER HELD THE DIVIDEND INCOME OF RS. 1,38,720/- RECEIVED BY THE ASSESSEE CO-OPERATIVE SOCIETY FROM ITS SHAREHOLDINGS IN OTHER CO-OPERATIVE SOCIETIES AS ELIGIBLE FOR DED UCTION U/S 80P(2)(D). IN VIEW OF THE ABOVE, THE LEARNED CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE. ITA NO. 4994/MUM/2016 4 5. BEFORE US, THE LEARNED DR RELIES ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSESSEE REL IES ON THE ORDER OF THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT A SIMILAR ISSUE AR OSE BEFORE THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY (SUPRA) . IN THE ABOVE CASE, THE ASSESSEE WAS A CO- OPERATIVE SOCIETY REGISTERED UNDER THE GOA CO-OPERA TIVE SOCIETIES ACT AND IT WAS ENGAGED IN PROVIDING CREDIT FACILITIES T O ITS MEMBERS. THE INCOME SO EARNED FROM THE SAID ACTIVITY, WAS CLAIME D AS DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE AO DISALLOWED THE ASSESSEES CLAIM ON THE GROUND THAT THE ASSESSEE WAS A PRIMARY CO-OPERA TIVE BANK AND, THEREFORE, HIT BY THE PROVISIONS OF SECTION 80P(4) WHICH EXCLUDED THE BENEFIT OF SECTION 80P. HOWEVER, THE COMMISSIONER ( APPEALS) ALLOWED THE ASSESSEES CLAIM HOLDING THAT IT WAS NOT A COOP ERATIVE BANK BUT A COOPERATIVE CREDIT SOCIETY. THE TRIBUNAL RESTORED T HE AOS ORDER. ON APPEAL, THE HON'BLE BOMBAY HIGH COURT HELD THAT ON FACTS, THE ASSESSEE WAS NOT A COOPERATIVE BANK RATHER IT WAS A COOPERATIVE SOCIETY AND, THEREFORE, ITS CLAIM FOR DEDUCTION WAS TO BE ALLOWED. HOWEVER, THE HON'BLE HIGH COURT HELD FURTHER : .....SECTION 80P(1) OF THE ACT RESTRICTS THE BENEF ITS OF DEDUCTION OF INCOME OF COOPERATIVE SOCIETY TO THE EXTENT IT IS EARNED BY PR OVIDING CREDIT FACILITY TO ITS MEMBERS. THEREFORE, TO THE EXTENT THE INCOME EARNED IS ATTRIBUTABLE TO DEALINGS WITH THE NON-MEMBERS ARE CONCERNED, THE BENE FIT 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 THE ORDER OF THIS COUR T, THE AUTHORITIES UNDER ACT WOULD RESTRICT THE BENEFIT OF DEDUCTION U/S 80P OF THE ACT ONLY TO THE EXTENT THAT THE SAME IS EARNED BY THE APPELLANT IN CARRYIN G ON ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 6.1 THE FACTS BEING SIMILAR, WE FOLLOW THE JUDGEMEN T OF THE HON'BLE JURISDICTIONAL HIGH COURT AND HOLD THAT THE ASSESSEE IS ITA NO. 4994/MUM/2016 5 ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE U/S 80P OF THE ACT. HOWEVER, AS HELD IN THE ABOVE JUDGEMENT TO THE EXTE NT THE INCOME EARNED IS ATTRIBUTABLE TO DEALINGS WITH NON-MEMBERS ARE CONCERNED THE BENEFIT OF SECTION 80P OF THE ACT WOU LD NOT BE AVAILABLE TO THE ASSESSEE. IN VIEW OF THE ABOVE, TH E AO IS DIRECTED TO VERIFY THE SAME AND PASS A CONSEQUENTIAL ORDER, IF ANY. THE ASSESSEE IS DIRECTED TO FILE THE RELEVANT DETAILS B EFORE THE AO. NEEDLESS TO SAY, THE AO IS DIRECTED TO GIVE REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/14/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI: DATED: 11/04/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI