ITO 20(3)4), MUMBAI V. CENTRAL RAILWAY EMPLOYEE CO-OP CREDIT SOCIETY LTD, MUMBAI

ITA 5217/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0875 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 10-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 142(1); 143(1); 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 5217 / M/ 20 1 7 ( ASSESSMENT YEAR : 201 4 - 1 5 ) ITO - 20(3)(4) ROOM NO.616, 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 12 . VS. THE CENTRAL RAILWAY EMPLOYEES CO OP CREDIT SOCIETY 65 - A, N.M. JOSHI MARG, NEAR BYCULLA RAILWAY STATION, BYCULLA WEST, MUMBAI - 400027. ./ ./ PAN/GIR NO. : AAATT3547K ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 07 . 0 3 .201 9 DATE OF PRONOUNCEMENT : 27. 03 . 201 9 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 16 . 0 5 .201 7 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 3 2 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2014 - 15 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION U/S 80P TO THE ASSESSEE EVEN THOUGH ASSESSEE CARRIES ON THE BANKING BUSINESS AND OTHER BUSINESS IN THE NAME OF THE CO - OPERATIVE CREDIT SOCIETY. ASSESSEE BY: SHRI J. D. MISTRY (AR) DEPARTMENT BY: SHRI AWUNGSHI GINMSON (DR) ITA. NO. 5217 /M/201 7 A.Y. 2014 - 15 2 2. ONTHE FACTS AND CIR CUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING DEDUCTION U/S 80P(2)(A)(I) WITHOUT CONSIDERING INSERTED 80P(4) AND SUB - CLAUSE (VIIA) TO SECTION 2(24) VIDE FINANCE ACT, 2006 W.E.F. 1.4.2007. 3.ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN FINDING THE DECISION OF THE SUPREME COURT IN THE CASE OF M/S. TOTGAR CO.OP SALES SOCIETY LTD. (322 ITR 285) WHEREIN INTEREST RECEIVED BY A CO - OPERATIVE SOCIETY FROM INVESTMENT OF SURP LUS FUNDS IS ASSESSABLE AS INCOME FROM OTHER SOURCES AND THUS NOT ELIGIBLE FOR DEDUCTION U/S 80P OF THE IT ACT, 1961. ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 13 . 09 .201 4 FOR THE A.Y. 201 4 - 15 DECLARING TOTAL I NCO ME TO THE TUNE OF RS. NIL AFTER CLAIMING THE DEDUCTION U/S 80P OF THE I.T. ACT, 1961. THEREAFTER, THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY . NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS AN AOP RUNNING A CO - OPERATIVE CREDIT SOCIETY AND DOING BANK ING BUSINESS FOR THEIR MEMBERS. THE SOCIETY WAS ALSO COLLECTING DEPOSITS FROM MEMBERS BY WAY OF FIXED DEPOSITS, SAVING DEPOSITS AND RECURRING DAILY DEP OSITS ETC. THE INCOME OF THE ASSESSEE UNDER THE YEAR OF ASSESSMENT WAS TO THE TUNE OF RS.35,04,13,487/ - . THE ASSESSEE CLAIMED THE DEDUCTION U/S 80P(2) OF THE I. T. ACT, 1961. CONSIDERING THIS FACT THAT THE ASSESSEE WAS DOING THE BANKING BUSINESS, THEREFORE, THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT WAS DENIED AND THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 35,04, 13, 490/ - FEELING AGGRIEVED, T HE ASSESSEE FI LED AN APPEAL ITA. NO. 5217 /M/201 7 A.Y. 2014 - 15 3 BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 & 3 4 . ALL THE ISSUES ARE INTER - CONNECTED WHICH ARE IN FACT CHALLENGED THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE IN VIEW OF THE PROVISIONS U/S 80P OF THE ACT. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE ASSESSEE WAS DOING THE BANKING BUSINESS, THEREFORE, THE ASSESSEE WAS NOT ENTITLED FOR DEDUCTI ON U/S 80P OF THE ACT AND IN SUPPORT OF THIS CONTENTION. THE LD. REPRESENTATIVE OF THE REVENUE HAS PLACED RELIANCE UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CITIZEN CO - OPERATIVE SOCIETY LTD. ACIT, CIRCLE 9(1), HYDRABAD (2017) 84 TAXMANN .COM 114 (SC). HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS REFUTED THE SAID CONTENTION AND ARGUED THAT THE ASSESSEE NOWHERE DOING THE BUSINESS BANKING, THEREFORE, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. BEFORE G OING FURTHER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 5. I HAVE PERUSED THE ASSESSMENT ORDER, WRITTEN SUBMISSION AND FACTS OF THE CASE. THE GROUNDS ARE DISPOSED OFF AS UNDER. 5.1 GROUND NO. 1 & 2: THESE GROUNDS OF APPEAL A RE AGAINST THE TREATING CO - OPERATIVE BANK U/S 80P(4) AND DISALLOWANCE U/ 80P(2)(A)(I) OF THE I.T. ACT. THE AO PROCEEDED TO ANALYZE THE PROVISIONS OF SEC. 80P, THE BANKING REGULATION ACT, MORE PARTICULARLY SEC 56(C)(CCV) AND A NUMBER COOPERATIVE SOCIETY. HE HAS HOWEVER NOT LED ANY FACT TO SHOW THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF BANKING. THE AO HAS EXAMINED PROVISION OF BANKING REGULATION ACT 1949 AND TRIED TO DEMONSTRATE HOW ITA. NO. 5217 /M/201 7 A.Y. 2014 - 15 4 THE APPELLANT IS A BANK. WHETHER THE APPELLANT SATISFIES THE CORE INGR EDIENTS OF BANKING BUSINESS OR NOT HAS NOT BEEN EXAMINED BY THE AO AT ALL. MERELY BECAUSE DEPOSITS HAE BEEN ACCEPTED AND LOAN ADVANCED, IT CANNOT BE HELD THAT THE APPELLANT IS IN THE BUSINESS OF BANKING IT IS CANNOT THE EASE OF THE AU THAT PUBLIC IN GENERA L COULD ALSO ACTIVITIES OF THE APPELLANT IN ACCEPTING DEPOSITS OR GRANTING LOANS. THE BYE PARTICIPATES IN THE LAWS OF THE APPELLANT DO NOT PERMIT IT TO OPEN THE FACILITIES OF ACCEPTING DEPOSITS AND GRANTING LOANS TO THE GENERAL PUBLIC. THESE ACTIVITIES ARE RESTRICTED TO ITS MEMBERS. IN FACT THE AG AS CLEARLY ACKNOWLEDGED THIS ACT A REPRODUCED SUPRA. THE AO HAS ALSO IGNORED THE FACT THAT LOAN/CREDIT FACILITIES TO GENERAL PUBLIC AS PER ITS BYE LAWS AND THAT ALL COOPERATIVE BANKS ARE MANDATORILY REQUIRED BY SE C 22 OF THE BANKING REGULATION ACT TO OBTAIN A BANKING LICENSE FROM THE RBI. THE BYE LAWS OF THE APPELLANT RESTRICT ITS ACTIVITIES AS BEING CONFINED TO MEMBERS. 5. ON APPRAISAL OF THE ABOVE SAID FINDING, WE NOTICED THAT THE CIT(A) HAS ALLOWED THE CLAIM O F THE ASSESSEE ON THE BASIS OF THIS FACT THAT THE ASSESSEE WAS NOT DOING THE BANKING BUSINESS AND THE SERVICE OF THE ASSESSEE WAS NOT BY THE PUBLIC AT LARGE. THE ASSESSEE WAS NOT BANKING LICENSE AS REQUIRED SECTION 22 OF THE ACT BANKING REGULATION ACT. THE ASSESSEE SO CIETY WAS PROVIDING THE FINANCE FACILITY TO ITS LIMITED MEMBERS. HOWEVER, ON APPRAISAL OF THE OBJECT OF THE ASSESSEE SOCIETY, WE NOTICED THAT THERE IS A PRO VISION OF NOMINAL MEMBER WHOSE LIABILITY LIMITED TO SUBSCRIBE THE SHARES OF THE SOCIETY. HOWEVER, THEY HAVE NOT RIGHT TO INTERFERE IN THE OBJECT , FUNCTION IN THE SOCIETY. NOTHING CAME INTO NOTICED THAT THE ASSESSEE WAS DONG THE BUSINESS IN PUBLIC AT LARGE. THERE IS A LOT OF DIFFERENCE BETWEEN COOPERATIV E BANK AND COOPERATIVE SOCIETY. THE LAW RELIED BY THE LD. REPRESENTATIVE OF THE REVENUE I.E. CITIZEN CO - OPERATIVE SOCIETY LTD. SPEAKS ABOUT THIS FACT THAT THE SOCIETY WAS IN THE BUSINESS OF CO - OPERATIVE BANK AND WAS ITA. NO. 5217 /M/201 7 A.Y. 2014 - 15 5 CARRYING ON BANKING BUSINESS FOR PUBLIC AT LARGE. THE FACTUAL POSITION IN THE SAID CASES IS QUITE DIFFERENT TO THE FACT OF THE PRESENT CASE. THE LD. CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY IN VIEW OF THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF QUEPEM URBAN CREDIT CO - OPERATIVE SOCIETY 3 77 ITR 272 (BOM). TAKING INTO ACCOUNT, ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS AP PELLATE STAGE. ACCORDINGLY, THESE I SSUE S ARE DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE . 6 . IN RESULT, APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED . ORDER P RONOUNCED IN THE OPEN COURT ON 2 7 . 03 .2019 . S D / - S D / - ( RAJESH KUMAR ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 2 7 . 03 .2019 V IJAY ITA. NO. 5217 /M/201 7 A.Y. 2014 - 15 6 / 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