Minority Credit Co-Op Society, V. ITO, Bagalkot

ITA 68/BANG/2014

• Counselvise Citation: 6821114 RSA 2014
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 15-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR J
• Assessee Lawyers: ARIF ALI
• Keywords: Question of law
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 68 / BANG/20 14 (ASSESSMENT YEAR: 20 1 0 - 11 ) NATIONAL MINORITY CREDIT CO - OPERATIVE SOCIETY LTD., MAIN BAZAR, BADAMI. APPELLANT PAN:AAAJN0652R VS. INCOME - TAX OFFICER, WARD 1, BAGALKOT. RESPONDENT APPELLANT BY: SHRI ARIF ALI, ADVOCATE. RESPONDENT BY: SHRI P.DHIVAHAR, JCIT(DR). DATE OF HEARING : 07/01/2015. DATE O F PRONOUNCEMENT: 07 /01/2015. O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), BELGAUM DT.19/11/2013 FOR THE ASSESSMENT YEAR 2010 - 11. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT (A) IN DISALLOWING THE CLAIM OF THE ASSESSEE U/S 80P(2)(A)(I) OF THE INCOME - TAX ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT'] BY HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION IN VIEW OF SEC.80P(4) OF THE ACT. ITA NO . 68 /BANG/20 1 4 NATIONAL MINORITY CREDIT CO - OPERATIVE SOCIETY PAGE 2 OF 4 2 . AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA IN ITA NO .5006/2013 DATED 05/02/2014 WHEREIN IT HAS BEEN HELD THAT THE CO - OPERATIVE SOCIETY, THOUGH CARRYING ON BANKING BUSINESS, BUT HAS NOT OBTAINED ANY LICENCE FROM THE RESERVE BANK OF INDIA, IS NOT COVERED BY THE PROVISIONS OF SEC.80P(4) OF THE ACT. THE RELEVANT PORTION OF THE JUDGMENT O F THE HON BLE HIGH COURT IS REPRODUCED HEREUNDER: 5. THE TRIBUNAL HELD THAT AS THE ASSESSEE IS NOT A COOPERATIVE BANK, SECTION 80P(4) HAS NO APPLICATION. MOREOVER, THE POWER UNDER SECTION 263 OF THE ACT COULD BE INVOKED BY THE REVISIONAL AUTHORITY ONL Y, IF THE ORDER IS ERRONEOUS AND THEREBY IS PREJUDICIAL TO THE INTEREST OF REVENUE, IN THE INSTANT CASE AS THE ASSESSEE IS NOT A CO - OPERATIVE BANK I.E. THERE IS NO ERROR COMMITTED BY THE ASSESSING AUTHORITY MUCH LESS, THE SAID ORDER WAS PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE, THE ORDER PASSED BY THE REVISIONAL AUTHORITY WAS SET - ASIDE. 6. AGGRIEVED BY THE SAID ORDER, THE REVENUE HAS PREFERRED THIS APPEAL. 7. THE ONLY SUBSTANTIAL QUESTION OF LAW WHICH ARISES FOR OUR CONSIDERATION IN THI S APPEAL IS: - IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, WHETHER THE REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER UNDER SECTION 263 OF THE ACT WITHOUT THE FOUNDATIONAL FACT OF ASSESSEE BEING CO - OPERATIVE BANK WAS NOT THERE? 8. IN THE ASSESSMENT ORDER, THE ASSESSING AUTHORITY HAS CLEARLY STATED THAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND HAS NOT OBTAINED ANY BANKING LICENSE. THE BUSINESS OF THE ASSESSEE IS TO PROVIDE CREDIT FACILITIES TO ITS MEMBERS. SINCE THE ASSESSEE CANNOT CAR RY ON ANY BANKING BUSINESS, THE INTEREST ON INVESTMENT IS TAXABLE AS INCOME FROM OTHER SOURCE. THEREFORE THE AFORESAID FACTS, WHICH IS NOT IN DISPUTE CLEARLY ESTABLISHES THAT IT IS NOT A CO - OPERATIVE BANK. IN FACT, THE REVISIONAL AUTHORITY ALSO IN ITS ORDE R HAS ITA NO . 68 /BANG/20 1 4 NATIONAL MINORITY CREDIT CO - OPERATIVE SOCIETY PAGE 3 OF 4 CATEGORICALLY STATED THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY, WHICH PROVIDES CREDIT FACILITIES. SECTION 80P OF THE ACT DEALS WITH THE DEDUCTION OF INCOME OF A SOCIETY. IN THE CASE OF ANY ASSESSEE BEING A CO - OPERATIVE SOCIETY, THE WHOLE OF THE AMO UNTS OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY OF OTHER ACTIVITIES REFERRED TO SUB - SECTION (2) OF SECTION 80P SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. IN OTHER WORDS, THE SAID INCOME IS NOT TAXABLE. IT IS A BENEFIT GIVEN TO THE CO - OPERATIVE SOCIETY. SECTION 80P(4) WAS INTRODUCED BY FINANCE ACT, 2006 WITH EFFECT FROM 01.04.2007 EXCLUDING THE SAID BENEFIT TO A CO - OPERATIVE BANK. THE SAID PROVISION READS AS UNDER: - (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELAT ION TO ANY CA - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. (A) COOPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949); (B) PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG - TER M CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. THEREFORE, THE INTENTION OF THE LEGISLATURE IS CLEAR, IF A COOPERATIVE BANK IS EXCLUSIVELY CARRYING ON BANKING BUSINESS, THEN THE INCOME DERIVED FROM THE SAID BUSINESS CANNOT BE DEDUCTED IN COMP UTING THE TOTAL INCOME OF THE ASSESSEE. THE SAID INCOME IS LIABLE FOR TAX. A CO - OPERATIVE BANK AS DEFINED UNDER THE BANKING REGULATION ACT INCLUDES THE PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEFITS TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID NOT WANT TO EXTEND THE SAID BENEFIT TO A CO - OPERATIVE BANK WHICH IS EXCLUSIVELY CARR YING ON BANKING BUSINESS I.E. THE PURPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSESSEE IS NOT A COOPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND AS IT DOES NOT POSSESS A LICENSE FROM RESERVE BANK OF INDIA TO CARRY ON BUSINESS, IT IS NOT A CO - OPERATIVE BANK. IT IS A CO - OPERATIVE SOCIETY WHICH ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO ITS MEMBERS WHICH IS COVERED UNDER ITA NO . 68 /BANG/20 1 4 NATIONAL MINORITY CREDIT CO - OPERATIVE SOCIETY PAGE 4 OF 4 SECTION 80P(2)(A)(I) I.E. CARRYING ON THE BUSINESS OF BANKING FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE OBJECT OF THE AFORESAID AMENDMENT IS NOT TO EXCLUDE THE BENEFIT EXTENDED UNDER SECTION 80P(1) TO SUCH SOCIETY. THEREFORE, THERE WAS NO ERROR COMMITTED BY THE ASSESSING AUTHORITY. THE SAID ORDER WAS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CONDITION PR ECEDENT FOR THE COMMISSIONER TO INVOKE THE POWER UNDER SECTION 263 IS THAT THE TWIN CONDITION SHOULD BE SATISFIED. THE ORDER SHOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS ALSO HEARD. SINCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT FOR GRANT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. 3. IN THE RESULT, THE ASSE SSEE S APPEAL IS ALLOWED. PRON OUNCED IN THE OPEN COURT ON 07 TH OF JANUARY 201 5 . SD/ - SD/ - (JASON P BOAZ ) ( SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL ME MBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL, BANGALORE