ITO, Bagalkot V. Merchants Credit Co-Op Society Ltd., Badami

ITA 656/BANG/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1440 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: S RAMASUBRAMANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI GEORGE GEORGE, K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.656(B)/2015 (ASSESSMENT YEAR : 2011-12) THE INCOME-TAX OFFICER WARD-1, BAGALKOT APPELLANT VS MERCHANTS CREDIT CO-OP.SOCIETY LTD. OLD BAZAR, AT/POST, KERUR TQ.BADAMI, DIST. BAGALKOT PAN NO.AAAAM0702C RESPONDENT REVENUE BY : DR. P.K.SRIHARI, ADDL.CIT ASSESSEE BY : SHRI S. RAMASUBRAMANIAN, CA DATE OF HEARING : 06-08-2015 DATE OF PRONOUNCEMENT : 12-08 -2015 O R D E R PER SHRI GEORGE GEORGE, K JM: THIS APPEAL AT THE INSTANCE OF REVENUE IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 02-02-2015. THE RELEVANT ASSESSMENT YE AR IS 2011-12. THE REVENUE IN ITS GROUNDS OF APPEAL HAS RAISED FOUR GR OUNDS. HOWEVER, ALL THE GROUNDS RELATE TO THE SOLITARY ISSUE WHETHER THE CI T(A) WAS JUSTIFIED IN GRANTING THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE IT ACT, 1961. ITA NO.656(BANG)2015 2 2. THE BRIEF FACTS IN RELATION TO THE ISSUE ARE AS FOLLOWS: THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTERED U NDER THE KARNATAKA STATE CO-OPERATIVE SOCIETIES ACT, 1959 AN D IS CARRYING ON BUSINESS OF CREDIT FACILITY TO ITS MEMBERS. THE RE TURN OF INCOME WAS FILED ON 30-09-2011 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION U/S 80P(2)(A)(I) AMOUNTING TO RS.23,05,234/-. THE ASSE SSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2) DATED 30-08-2013. THE SCRUTINY ASSESSMENT WAS COMPLETED VIDE ORDER DATED 30-08-2013, DENYING THE BENEFIT OF DEDUCTION U/S 80P(2)(I) OF THE ACT. THE AO DENIED DEDUCTION ON THE GROUND THAT THE ASSESSEE IS A CO-OPERATIVE B ANK AND HENCE NOT ENTITLED TO CLAIM DEDUCTION BY VIRTUE OF SEC.80P(4) OF THE IT ACT, 1961. 3. AGGRIEVED BY THE DENIAL OF DEDUCTION U/S 80P(2) ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CI T(A) FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT IN ITA NO.5006/2013 DATED 5.2.2014 AND THE JUDGMENT OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS JAFARI MOM IN VIKAS CO- OP. CREDIT SOCIETY LTD ITA NO.442,443 & 863 OF 2013 DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE. 4. REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 5. AT THE VERY OUTSET, LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ISSUE IN QUESTION IS COVERED BY THE JUDGMENT OF THE HONBLE ITA NO.656(BANG)2015 3 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT IN ITA N O.5006/2013 DATED 5.2.2014 AND ALSO IN THE CASE OF CIT VS JAFARI MOM IN VIKAS CO-OP. CREDIT SOCIETY LTD, ITA NO.442,443 & 863 OF 2013(SUPRA). 6. THE LEARNED DR WAS UNABLE TO CONTROVERT THE ABOV E SUBMISSIONS OF THE LEARNED AR. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE INSTANT CASE, THE CIT(A) HAD ALLOWE D THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT BY FOLLOWING THE JUDGME NT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT IN ITA N O.5006/2013 DATED 5.2.2014 AND THE JUDGMENT OF THE HONBLE GUJARAT HI GH COURT IN THE CASE OF CIT VS JAFARI MOM IN VIKAS CO-OP. CREDIT SOCIETY L TD, ITA NO.442,443 & 863 OF 2013(SUPRA). THE RELEVANT FINDING OF THE CI T(A) READS AS FOLLOWS: 8. NOW, AFTER THE GUJARAT HIGH COURT IN THE CASE OF CIT VS J AF A RI M OM IN VIKAS COOP CREDIT SOCIETY LTD ITA 442,443 & 863 O F 2013 D EC ID I N G THE ISSU E I N F AVOUR OF THE ASSES S E E, THE K ARNA T AKA HIGH COURT IN THE CASES OF CIT VS SRI SILURU GURU BA S A VA PAT T INA SA H AKA R SANGHA NIYAMITHA SAGALKOT ITA 5006/2013 DATED 5 TH F E B 2014, COM MI SSIONER OF IN COME T AX (A), MYSORE & OTHERS VS GENERAL INSURANCE EMPLOYEES COOPERATIVE CREDIT SOCIETY LTD ITA NO 273/2013 DAT ED 27.6.2014 AND KARNATAKA HIGH COURT DECISION IN THE CASE OF VASAVI MULTIPURPOSE SOUHARDA SAHAKARI NIYAMITA, ITA NO. ITA NO.656(BANG)2015 4 505/20 1 3 DATED 27/06/2014 HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 8.1 THE HON'BLE HIGH COURT OF KARNATAKA I N THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAM ITHA , SUPRA WHICH WAS FOLLOWED IN THE CASES OF GENERAL IN SURANCE EMPLOYEES COOPERATIVE CREDIT SOCIETY LTD, AND KA R NATAKA HIGH COURT DECISION IN THE CASE OF VASAVI MULTIPURPOSE S OUHARDA SAHAKARI NIYAMI T A, I TA NO. 505/2013 DATED 27/06/2014, SUPRA, HAS CLEARLY HELD THAT A CO-OPERATIVE SOCIETY R EG I STERED AS COOPERATIVE SOCIETY, PROVIDING CREDIT FACILITIES TO MEMBERS AND NOT REGISTERED WITH THE RBI CANNOT BE DENIED THE EX EMPTION UNDER SECTION 80P(2)(A)(I) OF THE LT. ACT . THE OPERATIVE PART OF THE JUDGEMENT READS AS FOLLOWS : ' T HEREFORE, THE INTENTION OF THE LEGISLATURE IS CLEAR . IF A CO-OPERATIVE BANK IS . EXCLUSIVELY CARRYING ON BANKING BUS I NESS , THEN, THE INCOME DERIVED FROM THE SAID BUSINESS CANNOT BE DEDUCTED IN COM PUTING THE TO TAL INCOME OF THE ASSESSEE . THE SAID INCOME IS LIABLE FOR TAX . A CO-OPERATIVE BANK AS DEFINED UNDER THE BANKING REGULATION ACT IN CLUDES THE PRIMARY AGRICULTURAL C R EDI T SOCIETY OR A PRIMARY CO- OP E RATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK . THE L EGISLATURE DID NOT WANT TO DENY THE S AID BENEFITS TO A PRIMARY AGRI C ULTURAL C R E D I T SO C IE TY O R A . PRIMARY CO-OPERATIVE AG RIC UL T URAL AND RURAL DEVELOPMENT BANK . THEY DID N O T WA N T T O EXTEND THE SAID BENEFIT TO A CO - OPERATIVE BANK WHICH I S EXCLUSIVELY CARRY I N G ON B ANKING BUSINESS I. E. THE PURPO R T OF THIS AMENDMENT. THEREFO R E , AS THE ASSESSE E IS N OT A C OOPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUS INESS AND AS I T D OE S N O T P OSSESS A LICENCE FROM RESERVE BANK OF ITA NO.656(BANG)2015 5 INDIA TO CARRY ON BUSINESS, IT IS NOT A CO - OPERAT IV E BANK . IT IS A CO-OPERATIVE SOC I ETY WHICH ALSO CARRIES ON THE BUSINESS OF LE N DI NG M ONEY TO ITS MEMBERS WHICH IS C OVERED UNDER SECTION 80P{2)(A}(I) I.E . CAR RY I N G ON THE BU S I NESS OF BANKING FOR PROVIDING CRE DIT FACILITIES TO ITS MEMBERS . T HE OBJECT O F TH E AFORE S A ID AMENDMENT IS NOT TO E X CLUDE THE BENEFIT EXTENDED UNDE R SECTI O N 80P(1) TO SU C H SOCIETY IN THE I N S TANT CASE, WHEN THE STATUS OF THE ASSESSEE IS A CO-OPERATIVE S OCIET Y A ND IS NOT A CO- OPERATIVE BANK, THE ORDER PASS E D BY THE ASSESSING AUTHOR I TY EXTENDING T HE BENEFIT OF EXE MPTION FROM PAYMENT OF TA X UNDER SECTION 80P(2)(A)(I) OF THE ACT IS COR R E CT . 8 . 2 THE FACT THAT THE APPELLANT IS A COOP ERATIVE SOCIETY R EGISTERED UNDER THE KARNATA K A CO OPERATIVE SOCIETIES ACT,1959 ENGAGED IN PROVIDING CRED I T F AC I LITIES TO ITS MEMBERS HAS BE E N CLEARLY MENT I ONED BY THE A . O IN PARA 3 OF HIS AFORESAID ASSE SSMENT ORDER. IT IS ALSO NO T THE C ASE OF THE A SSESSING OFFICER THAT THE ASSESSEE I S R E GISTERED WIT H THE RBI AS A BANK. IN ITS AFORE S AID SUBMISSIONS DATED 17/12/2014 T HE APPELL ANT H - AS CLEARLY STATED WITH THE HELP OF NECESSARY EVIDENCE AND AN AFFIDAVIT DATED 19-01-2015 TO THIS EFFECT THAT THE APPELLANT IS A CO-OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA CO O PERATIVE SOC I ETIES ACT, 19 5 9 ENGAGED IN PROVIDING CREDIT FACILITIES ONLY TO ITS MEMBERS AND IT DOES N OT POSSESS ANY BANKING L IC ENCE FROM THE RBI. IT IS THEREFORE , CLEAR THAT THE APPELLANT'S CASE I S S Q UA R ELY COVERED BY THE AFORESAID DECISIONS OF THE JURISDICTIONAL HIGH COURT OF KARNA TAKA I N T HE CASES OF SRI BILU R U GURUBASAVA PATTINA . SAHAKARI SANGHA NIVAMITHA, SUPRA WHICH WAS FOL L OWE D IN THE CASE OF GENERAL ITA NO.656(BANG)2015 6 INSURANCE EMPLOYEES COOPERATIVE CREDIT SOCIETY LTD A N D K AR N ATAKA HIGH COURT DECISION IN THE CASE OF VASAVI MULTIPURPOSE SOUHARDA SAHAKAR I NIYAMITA, I TA N O. 505/2013 DA T ED 27/06/2014 SUPRA. THEREFORE, IN VIEW OF THE FOREGOING DI SCUSSIO N A N D R ESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF THE JURISDICTIONAL HIGH COURT OF KARNA TAKA , IT IS HELD THAT THE A PPELLANT'S CASE IS NOT COVERED BY SECTION 80P(4) AS IT IS NOT A ' CO - OPERAT I VE B ANK ' AND THEREFORE , IT IS ENTITLED TO THE EXEMPTION U/S 80P(2)(A)(I) OF THE IT. ACT. 8. THE CIT(A) HAS FOLLOWED THE DICTUM FOLLOWED BY T HE JURISDICTIONAL HIGH COURT IN THE CASE CITED SUPRA AND THEREFORE, W E SEE NO REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE FIRST APPE LLATE AUTHORITY AND WE CONFIRM THE SAME. IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE12TH AUGUS T, 2015. SD/- SD/- (JASON P BOAZ) (GEORGE GEO RGE,K) ACCOUNTANT MEMBER JUDICIAL MEMBER D A T E D : 12-08-2015 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE