JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYADIT,MANOR, PALGHAR V. ACIT - PALGHAR CIRCLE, PALGHAR

ITA 6511/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3319 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 14-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.KAVITHA
• Assessee Lawyers: RAJENDRA V. KADREKAR
• Keywords: Co-operative Credit Society; Set aside
• Section: 12; 80P; 9(1); 9(1); 9(1); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BENCH M UMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.6511/MUM/2018 ( ASSESSMENT YEAR: 2015-16 ) JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYADIT, MANOR BHARAT RATNA DR. BABASAHEB AMBEDKAR CHOWK AT-POST-MANOR, TAL.DIST.-PALGHAR-410 403 VS. ACIT,PALGHAR CIRCLE AAYKAR BHAWAN, BIDCO ROAD, PALGHAR(W) TAL.-DIST.PALGHAR-401 404 PAN/GIR NO. AA BAJ0 077G ( APPELLANT ) .. RESPONDENT ) REVENUE BY MS. R.KAVITHA, DR ASSESSEE BY SHRI RAJENDRA V. KADREKAR, AR DATE OF HEARING 20 /02 /2020 DATE OF PRONOUNCEME NT 04/ 03 /20 20 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, THA NE, DATED 01/08/2018 AND IT PERTAINS TO THE A.Y 2015-16. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD, ASST LD. COMMISSIONER OF INCOME TAX, PALGHAR, HAS E RRED IN DISALLOWING BONAFIDE CLAIM OF DEDUCTION U/S. 80P OF THE INCOME TAX ACT, 1961 AND THE LD- COMMISSIONER OF INCOME TAX, THANE HAS ALSO ERRE D IN UPHELDING THE DISALLOWANCE OF DEDUCTION U/S. 80P OF THE ACT MADE BY THE ASSESSING OFFICER. 2. THE ASSESSING OFFICER AND THE COMMISSIONER OF IN COME TAX [APPEALS)-3, THANE HAS FAILED TO FOLLOW THE DOCTRIN E OF PRECEDENTS. THE JURISDICTIONAL BOMBAY HIGH COURT JUDGEMENT IN THE C ASE OF QUEPEM CO- ITA NO.6511/MUM/2018 JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYAD IT, MANOR 2 OPERATIVE CREDIT SOCIETY LTD. HAVING SIMILAR FACTS ON WHICH THE APPELLANT HAS RELIED UPON IS TOTALLY DISREGARDED. 3. THE LD. ASSESSING OFFICER HAS DISALLOWED THE C LAIM OF DEDUCTION U/S 80P OF THE INCOME TAX ACT, 1961 TO THE APPELLANT - SOCIETY SOCIETY OF ITS INCOME DERIVED FROM THE ACTIVITY OF PROVIDING CREDI T FACILITIES TO ITS MEMBERS BY RELYING ON THE APEX COURT JUDGEMENT IN T HE CASE OF THE CITIZEN CO OPERATIVE SOCIETY LIMITED VS. ACIT 9(1) HYDERBAD, THOUGH, THE FACTS OF THE SAID CASE ARC DI FFERENT THAN THE APPELLANT SOCIETY. 4. THE LD, ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THE APPELLANT IS A CO-OPERATIVE CREDIT SOCIETY ENGAGED IN THE BUSINESS OF ACCEPTANCE OF DEPOSITS AND PROVIDING CREDIT FACILITIES TO ITS MEM BERS BUT FAILED TO ALLOW DEDUCTION U/S. 80P OF THE ACT, 5. THAT THE LD, COMMISSIONER OF INCOME TAX (APPEA LS) -3, THANE HAS WHILE SUSTAINING THE DISALLOWANCE OF DEDUCTION MADE BY THE ASSESSING OFFICER HAS WRONGLY ASSUMED THAT THE LOANS ARE LIKE LY TO THE ADVANCE TO THE NOMINAL MEMBERS WITHOUT ANY COGENT EVIDENCE ON HIS RECORD. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A CO- OPERATIVE CREDIT SOCIETY REGISTERED UNDER MAHARASHT RA CO-OPERATIVE SOCIETIES ACT, 1960 AND CLASSIFIED AS RESOURCE SOC IETY U/S 12 OF THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960. T HE OBJECT OF THE SOCIETY LAID DOWN IN THE BY-LAWS OF THE SOCIETY INT ER ALIA ARE TO INCULCATE THE HABIT OF THRIFT, SELF-HELP AND CO-OPE RATION AMONG THE MEMBERS AND TO UP-LIFT THE SOCIO-ECONOMIC STANDARD OF ITS MEMBERS AMONGST OTHERS. THE ASSESSEE HAS FILED ITS RETURN O F INCOME FOR THE AY 2015-16, DECLARING NIL TOTAL INCOME AFTER CLAI MING DEDUCTION 80P(2)(A)(I) OF THE I.T.ACT, 1961. THE CASE WAS SE LECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E LD. AO HAS DENIED DEDUCTION CLAMED U/S 80P(2) OF THE ACT, ON T HE GROUND THAT THE ACTIVITIES OF THE SOCIETY ARE AKIN TO A CO-OPER ATIVE BANK, BECAUSE IT IS ACCEPTING DEPOSITS AND ADVANCING LOANS TO NO MINAL MEMBERS IN ADDITIONS TO MEMBERS OF THE SOCIETY IN CONTRAVENT ION OF THE PRINCIPLES OF MUTUALITY AS ENVISAGED IN THE CO-OPER ATIVE ACT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD .CIT(A), THE ITA NO.6511/MUM/2018 JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYAD IT, MANOR 3 LD.CIT(A) FOR THE DETAILS RECORDED IN HIS APPELLATE ORDER AND ALSO BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF THE CITIZEN CO-OPERATIVE CREDIT SOCIETY LIMITED VS ACIT IN CIVIL APPEAL NO.10245 OF 2017, UPHELD ADDITIONS MADE BY THE LD. AO TOWARDS DISALLOWANCES OF DEDUCTION CLAIMED U/S 80P(2) OF TH E I.T.ACT, 18961, ON THE GROUND THAT THE ASSESSEE HAS ADMITTED NOMIN AL MEMBERS AND THE PURPOSE OF ADMISSION OF NOMINAL MEMBERS IS NOT CLEAR FROM THE ACTIVITIES CARRIED OUT BY THE ASSESSEE. THEREFO RE, IT IS VERY CLEAR THAT THE ACTIVITIES OF THE SOCIETY ARE AKIN TO A CO -OPERATIVE BANK AND HENCE, IT IS NOT ENTITLED FOR DEDUCTION U/S 80P(2) OF THE ACT. AGGRIEVED BY THE LD.CIT(A) ORDER, THE ASSESSEE IS I N APPEAL BEFORE US. 4. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING THE FINDINGS OF THE LD.AO IN DEN YING THE BENEFIT OF DEDUCTION U/S 80P(2) OF THE I.T.ACT, 1961, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS A CREDIT CO-OPERATIVE SOC IETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. THE LD. AR, FURTHER SUBMITTED THAT ALTHOUGH, IT HAS ADMITTED NO MINAL MEMBERS, BUT THE PERCENTAGE OF SUCH NOMINAL MEMBER IS HARDLY 2% OF THE TOTAL MEMBERS AND THE DEPOSITS ACCEPTED FROM THEM IS EVE N LESS THAN 2% OF THE TOTAL DEPOSITS OF THE SOCIETY. FURTHER, I T HAS NOT ADVANCED ANY LOANS TO NOMINAL MEMBERS. THEREFORE, THERE IS N O REASON FOR THE LD.AO TO DENY THE BENEFIT OF DEDUCTION CLAIMED U/S 80P(2) OF THE I.T.ACT, 1961. IN THIS REGARD, HE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT , IN THE CASE OF QUEPEM URBAN CO -OPERATIVE SOCIETY LTD. VS CIT IN ITA NO.22 TO 24 OF 2015. ITA NO.6511/MUM/2018 JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYAD IT, MANOR 4 5. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE LD.CIT(A) SUBMITTED THAT THE LD.CIT(A) HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT THE PRINCIPLES OF MUTUALITY IS B RAKED, WHEN THE ASSESEE HAS ADMITTED NOMINAL MEMBERS AND TRANSACTED BUSINESS WITH THEM AND HENCE, IT IS NOT ENTITLED FOR DEDUCTI ON U/S 80P(2) OF THE ACT, 1961. THEREFORE, THERE IS NO REASON TO INTERFE RE WITH THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. ADMITTEDLY, THE ASSESSEE IS A CREDIT CO-OPERATIVE S OCIETY REGISTERED UNDER MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960 AND CLASSIFIED AS RESOURCE SOCIETY U/S 12 OF THE MAHARASHTRA CO -OPERATIVE SOCIETY ACT, 1960. THE OBJECTS OF THE SOCIETY LAID DOWN IN THE BY- LAWS INTER-ALIA INCLUDES THE HABIT OF THRIFT AND S ELF HELP AND CO- OPERATION AMONG THE MEMBERS AND TO UP-LIFT THE SOCI O-ECONOMIC STANDARDS OF ITS MEMBERS AMONGST OTHERS. FURTHER, T HE SOCIETY IS GOVERNED BY THE GUIDELINES, RULES AND REGULATIONS O F RBI AND AS PER WHICH, IT HAS ADMITTED NOMINAL MEMBERS WITH A VIEW TO FINANCIAL LITERACY AND FINANCIAL INCLUSION. THE PERCENTAGE OF NOMINAL MEMBERS AND THEIR BUSINESS, WHEN COMPARED TO TOTAL NUMBER O F MEMBERS AND THE BUSINESS OF THE SOCIETY IS HARDLY LESS THAN 2% OF TOTAL DEPOSITS ACCEPTED FROM THE MEMBERS. FURTHER, THE ASSESSEE CL AIMS THAT IT HAS NOT ADVANCED ANY LOANS TO NOMINAL MEMBERS. THEREFOR E, WE ARE OF THE CONSIDERED VIEW THAT WHEN, THE MAIN OBJECTS OF THE SOCIETY IS TO DEVELOP THE HABIT OF THRIFT, SELF-HELP AND COOPERA TION AMONG THE MEMBERS AND TO UPLIFT THE SOCIO-ECONOMIC STANDARD AND IN THIS PROCESS, IT HAS ADMITTED FEW NOMINAL MEMBERS IN ACC ORDANCE WITH RULES AND REGULATIONS MADE APPLICABLE TO SOCIETIES BY THE RBI AND ITA NO.6511/MUM/2018 JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYAD IT, MANOR 5 ALSO, THE TOTAL BUSINESS WITH NOMINAL MEMBERS IS IN SIGNIFICANT, THE LD. AO WAS INCORRECT IN DENYING THE BENEFIT OF DEDU CTION CLAIMED U/S 80P(2) OF THE I.T.ACT, 1961, IN RESPECT OF PROFIT D ERIVED FROM ITS ACTIVITIES. FURTHER, ALTHOUGH THE LD. AO, AS WELL T HE LD.CIT(A) HAVE RELIED UPON BY THE DECISION OF HONBLE SUPREME COUR T, IN THE CASE OF CITIZEN CREDIT CO-OPERATIVE SOCIETY LIMITED VS ACIT (SUPRA), BUT, FACTS OF THE PRESENT CASE ARE ENTIRELY DIFFERENT FR OM THE FACTS OF CITIZEN CREDIT CO-OPERATIVE SOCIETY LTD. CASE, BECA USE IN THE CASE BEFORE THE HONBLE SUPREME COURT, THE ASSESSEE HAS DONE SUBSTANTIAL BUSINESS WITH NOMINAL MEMBERS BY ACCEPT ING DEPOSITS AND ADVANCING LOANS TO THEM. UNDER THOSE FACTS, THE HONBLE SUPREME COURT, CAME TO THE CONCLUSION THAT THE ASSE SSEES ACTIVITIES ARE AKIN TO CO-OPERATIVE BANKS AND HENCE , IT IS NOT ENTITLED FOR DEDUCTION U/S 80P(2) OF THE I.T.ACT, 1961. IN T HIS CASE, ON PERUSAL OF FACTS, IT IS VERY CLEAR THAT ALTHOUGH, THE ASSES SEE HAS ADMITTED NOMINAL MEMBERS, BUT THE TOTAL NUMBER OF NOMINAL ME MBERS AND THE BUSINESS WITH THEM IS HARDLY LESS THAN 2%, WHICH IS VERY INSIGNIFICANT, WHEN COMPARED TO TOTAL BUSINESS OF T HE SOCIETY. FURTHER, THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT, IN THE CASE OF QUEPEM URBAN CO-OPERATIVE SOCIETY LTD. (SUPRA), WHERE THE HONBLE HIGH COURT HELD THAT IN VIEW OF THE VERY INSIGNIFICANT T RANSACTIONS OF NOMINAL MEMBERS, IT CANNOT BE CONCLUDED THAT THE AS SESSE PRINCIPLE BUSINESS IS ACCEPTING DEPOSITS FROM THE PUBLIC AND THEREFORE, IT IS IN THE BANKING BUSINESS. 7. IN THIS VIEW OF THE MATTER AND BY FOLLOWING THE RATIOS OF THE CASE LAWS DISCUSSED HEREINABOVE, WE ARE OF THE CONSIDERE D VIEW THAT THE PREDOMINANT OBJECTS OF THE ASSESSEE IS TO EXTEND CR EDIT FACILITY TO ITS ITA NO.6511/MUM/2018 JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYAD IT, MANOR 6 MEMBERS AND IN THE PROCESS, IT HAS ADMITTED FEW NOM INAL MEMBERS IN ACCORDANCE WITH RULES AND REGULATIONS ISSUED BY THE RBI APPLICABLE TO CREDIT CO-OPERATIVE SOCIETIES AND ACC ORDINGLY, IT CANNOT BE SAID THAT THE ACTIVITIES OF THE ASSESEE ARE AKIN TO A CO-OPERATIVE BANK, WHICH IS CARRIED OUT BANKING BUSINESS TO ITS MEMBERS, AS WELL AS TO PUBLIC. BUT, THE FACTS WITH REGARD TO THE PER CENTAGE OF NOMINAL MEMBERS AND THE TOTAL AMOUNT OF BUSINESS CARRIED O UT WITH THEM IS NOT EMANATING FROM THE ORDERS OF LOWER AUTHORITIES . THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE RE-EXAMINED BY THE LD. AO, IN LIGHT OF OUR DISCUSSIONS GIVEN HE REINABOVE AND ALSO, IN LIGHT OF THE RATION OF THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF QUEPEM URBAN CO-OPERATIVE SOCIETY LTD. TO ASCERTAIN THE FACT WITH REGARD TO THE AMOUNT OF BUSINESS CARRIED OUT WITH NOMINAL MEMBERS. THEREFORE, WE SET ASIDE THE ISSUE TO THE F ILE OF THE LD. AO, FOR THE LIMITED PURPOSE OF VERIFICATION OF FACTS WI TH REGARD TO THE CLAIM OF THE ASSESSEE THAT THE NUMBER OF NOMINAL MEMBERS AND TOTAL BUSINESS WITH THEM IS HARDLY 2%, WHICH IS INSIGNIFI CANT, WHEN COMPARED TO TOTAL NUMBER OF MEMBERS AND BUSINESS WI TH THEM. IF THE LD. AO FINDS THAT THE TOTAL NUMBER OF NOMINAL M EMBERS AND THEIR BUSINESS IS INSIGNIFICANT, THEN THE LD. AO IS DIREC TED TO ALLOW THE BENEFIT OF DEDUCTION CLAIMED U/S 80P(2)(D) OF THE I .T.ACT, 1961. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSE. ITA NO.6511/MUM/2018 JANTA GRAMIN BIGAR SHETI SAHAKARI PATSANSTHA MARYAD IT, MANOR 7 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04 /03/ 2020 SD/- (VIKAS AWASTHY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER AC COUNTANT MEMBER MUMBAI ; DATED 04/03/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//