ITO 22(3)(4), NAVI MUMBAI V. KULSWAMI CO OP CREDIT, SOCIETY LTD, NAVI MUMBAI

ITA 505/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5839 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERJA PRADHAN
• Assessee Lawyers: DR P DANIEL
• Keywords: Bad and doubtful debts
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NOS. 3223/MUM/2011 & 505/MUM/2012 ASSESSMENT YEARS: 2007-08 & 2008-09 ITO WD22(3)(4) 3 RD FLOOR, TOWER NO.6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI VS. M/S. KULSWAMI COOP. CREDIT SOCIETY LTD. F003/1, APMC CENTRAL FACILITY BLDG, SECTOR 19, TURBHE, NAVI MUMBAI (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :AAAAS 2059 L ASSESSEE BY : DR. P. DANIEL REVENUE BY : SMT. NEERJA PRADHAN DATE OF HEARING : 19.03.2014 DATE OF PRONOUNCEMENT : 28 .03.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF THE LD.CIT(A)-33, MUMBAI DATED 11.02.2011 AND 29 .11.2011 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. SINCE COMMO N ISSUES ARE INVOLVED IN BOTH THE APPEALS, THE SAME ARE HEARD TOGETHER AND DISPOS ED OFF BY THIS COMMON ORDER. 2. IN BOTH THE APPEALS, THE REVENUE HAS AGITATED TH E DECISION OF THE LD.CIT(A) IN DIRECTING THE AO TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P OF THE ACT. 3. BRIEFLY STATED, THE ASSESSEE, A CO-OPERATIVE CRE DIT SOCIETY, DURING THE A.Y. 2007-08 HAD SHOWN A GROSS TOTAL INCOME OF RS.39,92, 758/- AND CLAIMED DEDUCTION OF THE SAME U/S 36(1)(VIIA)(B) AND THEREBY DECLARED TH E TOTAL INCOME AT NIL. HOWEVER, IN THE ASSESSMENT FRAMED, THE AO NOTICED THAT THE A SSESSEE CALCULATED DEDUCTION U/S 36(1)(VIIA)(B) AT RS.89,35,166/- AND CLAIMED AT RS. 36,93,301/-. IN THE P&L A/C, THE ASSESSEE MADE A PROVISION OF RS.5,60,000/- FOR BAD AND DOUBTFUL DEBTS DURING THE PREVIOUS YEAR. ACCORDING TO THE AO, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS.5,60,000/- ONLY AND THEREBY DISALLOWED THE BALAN CE DEDUCTION OF RS.31,33,301/-. ITA NOS. 3223/MUM/2011 & 505/MUM/2012 M/S. KULSWAMI COOP. CREDIT SOCIETY LTD. ASSESSMENT YEARS: 2007-08 & 2008-09 2 THE AO MADE THE IMPUGNED DISALLOWANCE BY CONCLUDING THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSI NESS OF BANKING AND THUS IT IS ELIGIBLE ONLY FOR THE DEDUCTION U/S 36(1)(VIIA) OF THE ACT. DURING THE A.Y. 2008-09, THE ASSESSEE DECLARED ITS INCOME AT NIL AFTER CLA IMING DEDUCTION U/S 36(1)(VIIA) AND 36(1)(VII) AND 80P FOR WHOLE ITS PROFIT OF RS.74,05 ,134/-. HOWEVER, THE AO DISALLOWED THE DEDUCTION OF RS.68,95,773/- CLAIMED BY THE ASSE SSEE BY INVOKING SECTION 80P(4) THE ACT. ON APPEAL AGAINST THE SAID ORDERS OF THE A O, THE LD.CIT(A) HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 80P OF THE A CT. AGGRIEVED BY THE IMPUGNED ORDERS, THE REVENUE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ONLY ISSUE ARISING OU T OF BOTH THE APPEALS RELATE TO THE ALLOWABILITY OF THE EXEMPTION/DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P OF THE INCOME TAX ACT. THE ALLOWABILITY OF EXEMPTION OF TH E SAID INCOME DEPENDS ON WHETHER THE ASSESSEE/COOPERATIVE CREDIT SOCIETY IS A CO-OPERATIVE BANK OR NOT FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT SINCE ACCORDI NG TO THE SAID PROVISION, DEDUCTION UNDER SECTION 80P SHALL NOT BE AVAILABLE TO ANY CO-OPERATIVE BANK OTHER THAN PRIMARY AGRICULTURAL SOCIETY OR PRIMARY CO-OPE RATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. 4.1 IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE HAS BEEN FUNCTIONING AS A CO- OPERATIVE BANK AND BY VIRTUE OF SECTION 80P(4), THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF SECTION 80P AND ALSO THE ASSESSEE IS NOT COMING WITHIN THE PURVIEW OF PRIMARY AGRICULTURAL SOCIETY OR PRIMARY CO-OPERATIV E AGRICULTURAL AND RURAL DEVELOPMENT BANK. IT IS THE CASE OF THE ASSESSEE T HAT IT IS NOT A COOPERATIVE BANK BUT ONLY A COOPERATIVE SOCIETY TO WHICH CLAUSE (4) OF SECTION 80P IS NOT APPLICABLE. 4.2 IN THIS CONNECTION, IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS BROUGHT ON RECORD BEFORE THE LOWER AUTHORITIES, THE LETTER OF THE CBDT BEARING NO. F. NO. 133/06/2007-TPL DATED 09.05.2008 ADDRESSED TO THE D ELHI URBAN T&C SOCIETY LTD., STATING THAT FOR THE PURPOSES OF SUBSECTION 4 OF SE CTION 80P, COOPERATIVE BANK SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN PART V O F THE BANKING REGULATION ACT 1949, ACCORDING TO WHICH COOPERATIVE BANKS MEANS A STATE CO-OPERATIVE BANK, A ITA NOS. 3223/MUM/2011 & 505/MUM/2012 M/S. KULSWAMI COOP. CREDIT SOCIETY LTD. ASSESSMENT YEARS: 2007-08 & 2008-09 3 CENTRAL CO-OPERATIVE BANK AND PRIMARY CO-OPERATIVE BANK. THOUGH THE SAID CLARIFICATION IS GIVEN BY THE CBDT IN CONNECTION WI TH SOME OTHER ASSESSEE, THE CRUX OF THE MATTER PERTAINS TO THE CLARIFICATION OF CO- OPERATIVE BANK FOR THE PURPOSE OF SUBSECTION 4 OF SECTION 80P. IT IS OBSERVED THAT TH E SAID CLARIFICATION HAS ALSO BEEN RELIED BY THE TRIBUNAL IN MANY CASES. THEREFORE, C OOPERATIVE BANKS MENTIONED IN THE SAID SUBSECTION INDICATES ONLY THE STATE, CENTR AL AND PRIMARY CO-OPERATIVE BANKS ONLY. 4.3 MOREOVER, FOR COMMENCING A BANKING BUSINESS BY THE CO-OPERATIVE SOCIETY, DUE LICENSE HAS TO BE OBTAINED FROM THE RESERVE BAN K OF INDIA AND IN THE ASSESSEES CASE, THERE IS NO SUCH LICENSE OBTAINED FOR COMMENC ING ANY BANKING BUSINESS. THE MERE FACT THAT THE ASSESSEE HAS BEEN PROVIDING CRED IT FACILITIES TO ITS MEMBERS AND THEREBY EARNS INTEREST AND DIVIDEND CANNOT MAKE THE SOCIETY INTO A BANK FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT. IF THE INTEN TION OF THE LEGISLATURE WAS NOT TO GRANT DEDUCTION TO COOPERATIVE SOCIETIES CARRYING O N THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THEN THIS SECTION WOULD HAVE BEEN DELETED. THIS PROPOSITION IS SUPPORTED BY VARIOUS DECISIONS INCLUDING THE DEC ISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS COOPERATIVE CREDIT SOCIE TY LTD AND THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. [2012] 137 ITD 163. 4.4 IN ADDITION TO THE AFOREMENTIONED DISCUSSION, THE DISTINCTION BETWEEN COOPERATIVE SOCIETY REGISTERED UNDER THE BANKING RE GULATION ACT 1949 AND THE COOPERATIVE SOCIETY REGISTERED UNDER THE MAHARASHTR A STATE COOPERATIVE SOCIETIES ACT 1960 AS BROUGHT OUT BY THE LD.CIT(A) ON THE BASIS O F THE SUBMISSION OF THE ASSESSEE IS EXTRACTED HEREUNDER: SL CO-OPERATIVE SOCIETIES CO-OPERATIVE BANKS 1 THE CO-OPERATIVE CREDIT SOCIETIES ARE REGISTERED UNDER MAHARASHTRA STATE CO- OPERATIVE SOCIETIES ACT, 1960 AND GOVERNED, REGULATED, ADMINISTERED AND SUPERVISED BY THE REGISTRAR OF THE CO- OPERATIVE SOCIETIES, GOVERNMENT OF MAHARASHTRA. CO-OPERATIVE BANKS ARE REGISTERED UNDER MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960 AND ADMINISTERED BY REGISTRAR OF CO-OPERATIVE SOCIETIES, GOVT. OF MAHARASHTRA. CO-OPERATIVE BANKS ARE REGULATED AND SUPERVISED BY THE RESERVE BANK OF INDIA. PROVISIONS OF BANKING REGULATION ACT, 1949 WITH MODIFICATIONS SPECIFIED IN SECTION 56 OF THE BANKING REGULATION ACT, 1949 ARE APPLICABLE TO CO-OPERATIVE BANKS. SCHEDULE 1 TO SCHEDULE V ARE APPLICABLE TO CO- ITA NOS. 3223/MUM/2011 & 505/MUM/2012 M/S. KULSWAMI COOP. CREDIT SOCIETY LTD. ASSESSMENT YEARS: 2007-08 & 2008-09 4 OPERATIVE BANKS. 2 CO-OPERATIVE SOCIETIES ARE CLASSIFIED AS RESOURCE/THRIFTS SOCIETIES IN THE CERTIFICATE OF REGISTRATION ISSUED BY REGISTRAR OF CO- OPERATIVE SOCIETY. CO-OPERATIVE BANKS ARE CLASSIFIED AS CO-OPERATIVE BANK. 3 CO-OPERATIVE CREDIT SOCIETIES CAN ACCEPT DEPOSITS AND ADVANCE LOANS ONLY TO THE MEMBERS. HENCE THE BUSINESS ACTIVITIES ARE RESTRICTED TO MEMBERS AND HENCE IT CAN BE TERMED AS A MUTUAL ASSOCIATION/SELF HELP GROUP. CO-OPERATIVE BANKS CAN ACCEPT DEPOSITS FROM PUBLIC. HOWEVER, UNLIKE CO-OPERATIVE CREDIT SOCIETIES THEY CAN ADVANCE LOANS TO THE MEMBERS ONLY. 4 CO-OPERATIVE CREDIT SOCIETIES CANNOT ACCEPT DEPOSITS FROM PUBLIC. CO-OPERATIVE CAN ACCEPT DEPOSITS FROM PUBLIC. 5 THE PROVISIONS OF BANKING REGULATION ACT 1949 ARE NOT APPLICABLE TO THE CO-OPERATIVE CREDIT SOCIETIES. THE PROVISIONS OF BANKING REGULATION ACT 1949 ARE APPLICABLE TO THE CO-OPERATIVE BANK. 6 THE CO-OPERATIVE CREDIT SOCIETIES DO NOT REQUIRED LICENSE FROM RESERVE BANK OF INDIA TO CARRY ON ITS BUSINESS. THE CO-OPERATIVE BANKS ARE REQUIRED TO OBTAIN LICENSE FROM RESERVE BANK OF INDIA TO CARRY ON ITS BUSINESS. 7 THE CO-OPERATIVE CREDIT SOCIETIES DO NOT HAVE CHEQUE FACILITIES, CLEARING FACILITIES AND THEY CANNOT ISSUE DEMAND DRAFTS, PAY ORDERS ETC. THE CO-OPERATIVE HAVE CHEQUE FACILITIES, CLEARING FACILITIES AND THEY ISSUE DEMAND DRAFTS, ASSESSMENT YEAR ORDER, BANK GUARANTEES ETC. 8 CO-OPERATIVE CREDIT SOCIETIES CANNOT USE WORK BANK/BANKERS IN THEIR NAME CO-OPERATIVE BANKS ARE MANDATORILY REQUIRED TO USE WORLD BANK/BANKERS IN THEIR NAME. 9 RESERVE BANK OF INDIA HAS NO STATUTORY POWER OF CONTROL AND SUPERVISION OF CO- OPERATIVE SOCIETIES. RESERVE BANK OF INDIA HAS VESTED WITH STATUTORY POWERS OF CONTROL AND SUPERVISION OF CO- OPERATIVE BANKS. THE ABOVE DISTINCTION MAKES IT VERY CLEAR THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT. 4.5 AS REGARDS THE CLAIM OF THE REVENUE THAT FOR TH E ASSESSMENT YEAR 2007-08, THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION OF THE S ECTION 80P OF THE ACT IN THE RETURN OF INCOME BUT CLAIMED THE SAME ONLY DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS AND HENCE THE CLAIM OF THE ASSESSEE IS NOT ADMISSIBLE IN VIEW OF THE FINDINGS OF THE HONBLE APEX COURT IN THE CASE OF GOETZE INDIA LTD . [284 ITR 323 (SC) (2006)], IT IS PERTINENT TO MENTION THAT THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF THE CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS P. LTD. [(2012) 349 ITR 336 (BOM)] HAS HELD THAT THE APPELLATE AUTHORITIES HAVE THE POWER TO CONSIDER THE CLAIM NOT MADE IN RETURN OF INCOME. THE HOBLE BOMBAY HIG H COURT WHILE DECIDING SO, HAS CONSIDERED THE JUDGMENT OF THE HONBLE APEX COURT I N THE CASE OF GOETZE INDIA LTD. (SUPRA). IN VIEW OF THAT MATTER, THE LD.CIT(A) GIVI NG RELIEF TO THE ASSESSEE AT THE APPELLATE STAGE ON THE CLAIM OF DEDUCTION NOT MADE IN THE RETURN OF INCOME IS JUSTIFIED. ITA NOS. 3223/MUM/2011 & 505/MUM/2012 M/S. KULSWAMI COOP. CREDIT SOCIETY LTD. ASSESSMENT YEARS: 2007-08 & 2008-09 5 4.6 CONSIDERING THE ENTIRE FACTS AND POSITION OF LA W, WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT(A) IS JUSTIFIED IN DIRECTIN G THE AO TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P OF THE ACT ON THE R EASON THAT THE ASSESSEE, A CO- OPERATIVE CREDIT SOCIETY IS NOT A BANK FOR THE PURP OSES OF SECTION 80P(4) OF THE ACT. THUS THE ORDERS OF THE LD.CIT(A) DATED 11.02.2011 A ND 29.11.2011 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY A RE UPHELD. 5. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 8 TH DAY OF MARCH, 2014. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 28.03.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR A BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.