ITO 26(2)(1), MUMBAI V. LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIT, MUMBAI

ITA 6843/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9040 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 22-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN DR
• Assessee Lawyers: DEVENDRA JAINAR
• Section: 80P

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , .., , BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.6843/MUM/2016 ASSESSMENT YEAR: 2012-13 ITO-26(2)(1) ROOM NO.709, 7 TH FLOOR PRATYAKSHKAR BHAVAN BKC, BANDRA (E) MUMBAI-400 051 / VS. LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIT GATE NO.1, SAKI VIHAR ROAD POWAI, MUMBAI-400 072 ( # / REVENUE) ( $%& ' /ASSESSEE) P.A. NO.AAABL0014H $%& ' / ASSESSEE BY SHRI DEVENDRA JAIN-AR # / REVENUE BY SHRI V. JUSTIN-DR ( #)*' + / DATE OF HEARING : 06/11/2018 * ' + / DATE OF PRONOUNCEMENT 07/12/2018 / O R D E R PER JOGINDER SINGH (VICE PRESIDENT) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 31/08/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI, HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION OF ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 2 RS.1,62,04,155/- UNDER SECTION 80P(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT), EVEN THOUGH THE SAME IS COVERED UNDER SECTION 80P(4) R.W.S. 2(24)(VIIA), BEING INCO ME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 2. DURING HEARING, AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE CLAIMED THAT THE IMPUGNED ISSUE IS COV ERED BY THE DECISION FROM THE TRIBUNAL IN THE CASE OF INCOM E TAX OFFICER VS SIEMENS EMPLOYEES CO-OPERATIVE SOCIETY L TD. (ITA NO.2934/MUM/2017), ORDER DATED 14/08/2018 AND A DECISION FROM HON'BLE APEX COURT IN CITIZEN CO-OPER ATIVE SOCIETY LTD. (2017) 84 TAXMANN.COM 114 (SUPREME COU RT). THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY LD. DR. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER DATED 14/08/2018:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-33, MUM BAI DATED 24.02.2017 AND PERTAINS TO THE ASSESSMENT YEAR 2013 -14. ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 3 2. THE GROUNDS OF APPEAL READ AS UNDER: 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S. 80P(2)(A)(I) WITHOUT APPRECIATION THE ACTION OF THE A. O.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE HAS FULF ILLED ALL THREE CONDITIONS AS LAID DOWN U/S 56(C)(CCV) OF PART V OF BANKING REGULATION ACT, 1949 AND ON CONJOINT READING OF BANKING REGULA TION ACT AND INCOME-TAX ACT, IT IS EVIDENT THAT THE ASSESSEE IS ACTING LIKE A CO- OPERATIVE BANK AND THEREFORE, HIT BY THE PROVISIONS OF SECTION 80P(4) OF THE ACT HENCE THE ASSESSEE IS NOT ELIGIBLE FOR THE DEDUCTION U/S 80P(2)(A)(I) OF THE ACT.' 3. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN IGNORING THE DEFINITION GIVEN IN THE SUB-C LAUSE(CCI) AND (CCII) OF CLAUSE (C) OF SECTION 5 OF BANKING REGULATION ACT, AND AS PER DEFINITION, THE ASSESSEE HAS TO BE TREATED AS CO-OPERATIVE BANK BY VIRTUE OF THE ACTIVITIES OF THE ASSESSEE AND THEREFORE, ATTRACTS THE PROVISIONS OF SECTION 80P(2)(A)(I) R.W.S. 80P(4) AND THUS, THE ASSESSEE I S NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT R.W.S. 80P(4) OF THE ACT.' 4. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE FACTS ARE DIFFERENT IN T HIS CASE THAN THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY LTD. VS. ACIT DAT ED 17.04.2015 (2015) 58 TAXMANN.COM 113 (BOMBAY) AND THE LD. CIT(A) ALSO ERRED IN APPRECIATING THE FACT THAT THE ASSESSEE FULFILLS TH E CONDITIONS AS LAID DOWN U/S 56(C)(CCV) OF THE PART V OF BANKING REGULA TION ACT, 1949 AND COVERED UNDER PURVIEW OF CO-OPERATIVE BANK.' 5. 'THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED.' 3. IT CAN BE ADUMBRATED FROM THE ABOVE GROUNDS OF A PPEAL THAT THE REVENUES GRIEVANCE IS THAT THE ASSESSEE IS A C O-OPERATIVE CREDIT SOCIETY SHOULD BE TREATED AS CO-OPERATIVE BA NK INASMUCH AS IT IS ACTING AS A CO-OPERATIVE BANK. HENCE, PROVISI ON OF SECTION 80P(4) ARE ATTRACTED AND HENCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). 4. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE. IN OUR CONSIDER ED OPINION, THE ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 4 ISSUES RAISED CAN BE ADJUDICATED BY HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSING THE RECORDS. 5. UPON HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSING THE RECORDS WE ARE OF THE CONCERNED OPINIO N THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF QUEPEM URBAN CO- OPERATIVE CREDIT SOCIETY LTD. VS. ACIT [2015] 58 TAXMANN.COM 113 (BOM). THE HONBLE BOMBAY HIGH COURT HAS HELD AS UN DER: [HEAD NOTES] SECTION 80P PROVIDES DEDUCTION IN SUPPORT OF INCOME OF CO-OPERATIVE SOCIETIES. SUB- SECTION (1) ALLOWS DEDUCTION TO CO-OPERATIVE SOCIETY TO T HE EXTENT ITS GROSS INCOME INCLUDES ANY INCOME REFERRED TO IN SUB- SECTION (2) IN COMPUTING ITS TOTAL INCOME. SUB- SECTION (2) REFERS TO VARIOUS INCOMES TO WHICH THE DEDUCTION UNDER SUB- SECTION (1) IS AVAILABLE. IN THIS CASE, THE COURT I S CONCERNED WITH CLAUSE (A)(I) OF SUB- SECTION (2), WHICH REFERS TO A CO- OPERATIVE SOCIETY ENGAGED IN CARRYING ON BANKING BUSINESS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THUS THE DEDUCTION IS AVAILABLE ON EITHER OF THE TWO ACTIVITIES I.E ., BANKING BUSINESS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE COURT IS NOT CONCERNED WITH THE OTHER SUB-CLAUSES OF SUB- SECTION (2) OR SUB- SECTION (3) OF SECTION 80P(4) FOR THE PURPOSES OF THIS CASE. SUB- SECTION (4) PROVIDES THAT SECTION 80P WILL NOT APPLY IN RELATION TO A CO-OPER ATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY AGRI CULTURAL AND RURAL DEVELOPMENT BANK. BEFORE THE INSTANT COUR T, THE APPELLANT IS NOT CLAIMING TO BE A PRIMARY AGRIC ULTURAL CREDIT SOCIETY OR PRIMARY AGRICULTURAL AND RURAL DEVELOPMEN T BANK BUT IT CLAIMS TO BE ENGAGED IN PROVIDING CREDIT FACILITIES AND NOT A BANKING SOCIE TY. THUS, NOT HIT BY SUB SECTION (4) OF SECTION 80P. [P ARA 8] THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE APPELLANT IS A COOPERATIVE SOCIETY AS THE SAME IS REGISTERED UNDER THE CO- OPERATIVE SOCIETIES ACT. THE APPELLANT IS CLAIMING DEDUCTION OF INCOME EARNED ON PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS PROVI DED ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 5 UNDER SECTION 80P(2)(A)(I). IT IS APPELLANT'S CASE THAT, IT IS NOT CARRYING ON THE BUSINESS OF TH E BANKING. CONSEQUENTLY, NOT BEING A CO- OPERATIVE BANK THE PROVISIONS OF SECTION 80P(4) WOULD NOT EXCLUDE THE APPELLANT FROM CLAIMING THE BENEFIT OF DEDUCTION UN DER SECTION 80P(2)(A)(I). HOWEVER IN TERMS OF SECTION 8 0P THE MEANING OF THE WORDS CO-OPERATIVE BANK IS THE MEANING ASSIGNED TO IT IN CHAPTER V OF THE BANKING REGULATI ON ACT, 1949. A CO- OPERATIVE BANK IS DEFINED IN SECTION 5(CCI) OF BANKING REGULATION ACT TO MEAN A STATE CO - OPERATIVE BANK, A CENTRAL CO- OPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK. ADMITTEDLY, THE APPELLANT IS NOT A STATE CO-OPERATIVE BANK, A CENTRAL CO- OPERATIVE BANK. THUS WHAT HAS TO BE EXAMINED IS WHETHER THE APPELLANT IS A PRIMARY CO- OPERATIVE BANK AS DEFINED IN PARA V OF THE BANKING REGULATION ACT. SECTION 5(CCV ) OF THE BANKING REGULATION ACT DEFINES A PRIMARY CO- OPERATIVE BANK TO MEAN A CO- OPERATIVE SOCIETY WHICH CUMULATIVELY SATISFIES ITS THREE CONDITIONS: (1) ITS PRINCIPAL BUSINESS OR PRIMARY OBJECT SHOULD BE BANKING BUSINESS OF BANKING; (2) ITS PAID UP SHARE CAPITAL AND RESERVES SHOULD NOT BE LESS THAN RUPEES ONE LAKH. (3) ITS BYE-LAWS DO NOT PERMIT ADMISSION OF ANY OTHER C O- OPERATIVE SOCIETY AS ITS MEMBER. IT IS ACCEPTED POSITION THAT CONDITION NO. (2) IS S ATISFIED AS THE SHARE CAPITAL IN AN EXCESS OF RUPEES ONE LAKH. IT HAS BEEN THE APPELLANT'S CONTENTION THAT THE CONDIT IONS NO. (1) AND (3) PROVIDED ABOVE ARE NOT SATISFIED. [ PARA 9] THEREFORE THE ISSUE THAT ARISES FOR CONSIDERATION I S WHETHER THE APPELLANT SATISFIES CONDITION NO. (1) A ND (3) ABOVE. THE IMPUGNED ORDER AFTER REFERRING TO THE DEFINITION OF 'BANKING BUSINESS' AS DEFINED IN SECT ION 5B OF THE BANKING REGULATION ACT, HELD THAT THE PRINCI PAL BUSINESS OF THE APPELLANT IS BANKING. SECTION 5B OF THE BANKING REGULATION ACT DEFINES BANKING TO MEAN ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 6 AC CEPTING OF DEPOSITS FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSIT OF MONEY FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERWISE. THE IMPUGNED ORDE R JUXTAPOSES THE ABOVE DEFINITION WITH THE FINDING OF FACT THAT THE APPELLANT DID DEAL WITH NON-MEMBERS IN A FEW CASES BY SEEING DEPOSITS. THIS READ WITH BYE- LAW 43 LEADS TO THE CONCLUSION THAT IT IS CARRYING ON BANKING BU SINESS. THIS FACT OF ACCEPTING DEPOSITS FROM PEOPLE WHO ARE NOT MEMBERS HAS BEEN SO RECORDED BY THE COMMISSIONER (APPEALS) IN HIS ORDER DATED 15-7- 2014. BEFORE THE TRIBUNAL ALSO THE APPELLANT DID NOT DISPUTE THE FAC T THAT IN A FEW CASES THEY HAVE DEALT WITH NON- MEMBERS. HOWEVER SO FAR AS ACCEPTING DEPOSITS FROM NON- MEMBERS IS CONCERNED IT IS SUBMITTED THAT THE BYE- LAW 43 ONLY PERMITS THE SOCIET Y TO ACCEPT DEPOSITS FROM ITS MEMBERS. IT IS SUBMITTED THAT BYE LAWS 43 DOES NOT PERMIT RE CEIPT OF DEPOSITS FROM PERSONS OTHER THAN MEMBERS, THE WO RD 'ANY PERSON' IS A GLOSS ADDED IN THE IMPUGNED ORDER AS IT IS NOT FOUND IN BYE-LAW 43. IT IS UNDISPUTED THA T THE TRANSACTIONS WITH NON MEMBERS WERE INSIGNIFICANT/MINISCULE. ON THE ABOVE BASIS IT CANN OT BE CONCLUDED THAT THE APPELLANT'S PRINCIPAL BUSINESS I S OF ACCEPTING DEPOSITS FROM PUBLIC AND, THEREFORE, IT I S IN BANKING BUSINESS. IN FACT, THE IMPUGNED ORDER ERRONEOUSLY RELIES UPON BY- LAW43 OF THE SOCIETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CONCLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. HOWEVER, THE IMPUGNED ORDER RELIES UPON BYE- LAW 43 TO CONCLUDE THAT IT ENABLES THE APPELLANT TO RECEIVE DEPO SITS FROM ANY PERSON IS NOT CORRECT. THUS IN THE PRESENT FACTS TH E FINDING THAT THE APPELLANT'S PRINCIPAL BUSINESS IS OF BANKING IS PERVERSE AS IT IS NOT SUPPORTED BY THE EVIDENCE ON RECORD. SO FAR AS THE ISSUE OF PRIMARY OBJECT OF THE APPELLANT IS CONCERN ED THE IMPUGNED ORDER GIVES NO FINDING ON THAT BASIS TO DEPRIVE THE APPELLANT T HE BENEFIT OF SECTION 80P. CONSEQUENTLY THERE IS NO OCCASION TO DEAL WITH THE SAME AS THAT IS NOT THE B ASIS ON WHICH THE IMPUGNED ORDER HOLDS THAT IT IS A PRIMARY CO- OPERATIVE BANK. [PARA 10] ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 7 SO FAR AS CONDITION NO. 3 OF THE DEFINITION/MEANING OF PRIMARY CO- OPERATIVE BANK AS PROVIDED IN SECTION 5(CCV) OF THE BANKING REGULATION ACT IS CONCERNED, THE SAM E REQUIRES THE BYE- LAWS OF SOCIETY TO CONTAIN A PROHIBITION FROM ADMITTING ANY OTHER CO- OPERATIVE SOCIETY AS ITS MEMBER. IN FACT THE BYE- LAWS OF THE APPELLANT SOCIETY ORIGINALLY IN BYE-LAW 9(D) CLEARLY PROVIDED THAT NO CO- OPERATIVE SOCIETY SHALL BE ADMITTED TO THE MEMBERSH IP OF THE SOCIETY. THUS THERE WAS A BAR BUT THE SAME W AS AMENDED WITH EFFECT FROM 12-1- 2001 AS TO PERMIT A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE SOC IETY. THEREFORE FOR THE SUBJECT ASSESSMENT YEARS THERE IS NO PROHIBITION TO ADMITTING A SOCIETY TO ITS MEMBERSHI P AND ONE OF THREE CUMULATIVE CONDITIONS PR ECEDENT TO BE A PRIMARY CO- OPERATIVE BANK IS NOT SATISFIED. HOWEVER THE IMPUGNED ORDER CONSTRUED THE AMENDED CLAUSE 9(D) OF THE APPELLANT'S BYE- LAWS TO MEAN THAT IT ONLY PERMITS A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE APPELLANT AND NOT A CO-OPERA TIVE SOCIETY. ACCORDING TO THE IMPUGNED ORDER, A SOCIETY AND A CO- OPERATIVE SOCIETY ARE CLEARLY WORDS OF DIFFERENT AND DISTINCT SIGNIFI CANCE AND THE MEMBERSHIP IS ONLY OPEN TO SOCIETY AND NOT TO CO- OPERATIVE SOCIETY. AS RIGHTLY POINTED OUT ON BEHALF OF THE APPELLANT THE WORD SOCIETY AS REFERRED TO BYE- LAW 9(D) WOULD INCLUDE THE CO- OPERATIVE SOCIETY. THIS IS SO AS THE DEFINITION OF A SOCIETY UNDER THE CO- OPERATIVE ACT IS CO-OPERATIVE SOCIETY REGISTERED UNDER THE CO- OPERATIVE ACT. BESIDES THE QUALIFYING CONDI TION 3 FOR BEING CONSIDERED AS A PRIMARY COOPERATIVE BANK IS THAT TH E BYE LAWS MUST NOT PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY. THIS IS A MANDATORY CONDITION I.E . THE BYE- LAWS MUST SPECIFICALLY PROHIBIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIET Y TO ITS MEMBERSHIP. THE REVENUE HAS NOT BEEN ABLE TO SHOW ANY SUCH PROHIBIT ION IN THE BYE- LAWS OF THE APPELLANT. THUS EVEN THE AFORESAID QUALIFYING CONDITION (3) FOR BEING CONSIDERED AS A PRIMARY CO- OPERATIVE BANK IS NOT SATISFIED. THUS, THE THREE CONDITI ONS AS PROVIDED UNDER SECTION 5(CVV) OF THE BANKING REGULATION ACT, 1949, ARE TO BE SATISFIED CUMULATIVELY AND EXCEPT CONDITION (2) THE OTHER TWO QUALIFYING CONDITIONS ARE NOT SATISFIED. ERGO, APPE LLANT ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 8 CANNOT BE CONSIDERED TO BE A CO-OPERATIVE BANK FOR TH E PURPOSES OF SECTION 80P(4). THUS, THE APPELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE UNDE R SECTION 80P(2)(A)(I). [PARA 12] THE CONTENTION OF THE REVENUE THAT THE APPELLANT IS NOT ENTITLED TO THE BENEFIT OF SECTION 80P(2)(A) IN VIE W OF THE FACT THAT IT DEALS WITH NON- MEMBERS CANNOT BE UPHELD. THIS FOR THE REASON THAT SECTION 80P(1) RESTRICTS T HE BENEFITS OF DEDUCTION OF INCOME OF CO- OPERATIVE SOCIETY TO THE EXTENT IT IS EARNED BY PROVIDING CREDIT FACI LITIES TO ITS MEMBERS. THEREFORE, TO THE EXTENT THE INCOME EARNED IS ATTRIBUTABLE TO DEALINGS WITH THE NON- MEMBERS ARE CONCERNED THE BENEFIT OF SECTION 80P WOULD NOT BE AVAILABLE. IN THE ABOVE VIEW OF THE MATTER, AT THE TIME WHEN EFFECT HAS BEEN GIVEN TO THE ORDER OF THIS COU RT, THE AUTHORITI ES UNDER ACT WOULD RESTRICT THE BENEFIT OF DEDUCTION UNDER SECTION 80P ONLY TO THE EXTENT THAT THE SAME IS EARNED BY THE APPELLANT IN CARRYING ON ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. [PARA 13] THEREFORE, APPEAL IS HELD IN FAVOUR OF ASSESSE E AND AGAINST REVENUE 6. FURTHER, WE FIND THAT THIS ISSUE NOW IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION HONBLE APEX COURT IN CIVIL APPEAL NO. 10245 OF 2017 IN THE CASE OF THE CITIZEN CO- OPERATIVE SOCEITY LTD. VS. ACIT VIDE ORDER DATED 08.08.2017. THE HONBLE APEX COURT IN THIS CASE HAS EXPOUNDED THAT IF ONE HAS TO GO BY THE DEFINITION OF CO-OPERATIVE BANK, THE ASSE SSEE DOES NOT GET COVERED THEREBY. THAT IT IS ALSO A MATTER OF CO MMON KNOWLEDGE THAT IN ORDER TO DO THE BUSINESS OF A CO- OPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENSE FROM THE R ESERVE BANK OF INDIA WHICH THE ASSESSEE DOES NOT POSSESS. IN THE P RESENT CASE, BEFORE ME ALSO THE ASSESSEE CO-OPERATIVE SOCIETY IS NOT LICENSED FROM THE RESERVE BANK OF INDIA TO ACT AS CO-OPERATI VE BANK. HENCE, AS PER THE RATIO EMANATING FROM THE AFORE-SA ID HONBLE APEX COURT JUDGMENT, THE ASSESSEE IS NOT AFFECTED B Y THE PROVISIONS OF SECTION 80P(4). ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 9 SINCE THE FACTS ARE IDENTICAL WE FOLLOW THE ABOVE R EFERRED DECISIONS AND UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INC OME TAX (APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASS ESSEE. 7. IN THE RESULT, THE REVENUES APPEAL STANDS DISMI SSED. 2.2. WE FIND THAT IN THE AFORESAID ORDER, THE TRIB UNAL HAS DULY CONSIDERED VARIOUS DECISIONS INCLUDING FRO M HON'BLE JURISDICTIONAL HIGH COURT IN QUEPEM URBAN CO-OPERAT IVE CREDIT SOCIETY LTD. VS ACIT (2015) 58 TAXMANN.COM 1 13 (BOM.), WHEREIN THE HON'BLE HIGH COURT HELD AS UNDE R:-(HEAD NOTES) SECTION 80P PROVIDES DEDUCTION IN SUPPORT OF INCOME OF CO-OPERATIVE SOCIETIES. SUB- SECTION (1) ALLOWS DEDUCTION TO CO- OPERATIVE SOCIETY TO THE EXTENT ITS GROSS INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2) IN COMPUTING ITS TOTAL INCOME. SUB- SECTION (2) REFERS TO VARIOUS INCOMES TO WHICH THE DEDUCTION UNDER SUB- SECTION (1) IS AVAILABLE. IN THIS CASE, THE COURT IS CONCERNED WIT H CLAUSE (A)(I) OF SUB-SECTION (2), WHICH REFERS TO A CO- OPERATIVE SOCIETY ENGAGED I N CARRYING ON BANKING BUSINESS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THUS THE DEDUCTION IS AVAILABLE ON EITHER OF THE TWO ACTIVITIES I.E ., BANKING BUSINESS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE COU RT IS NOT CONCERNED WITH THE OTHER SUB- CLAUSES OF SUB-SECTION (2) OR SUB- SECTION (3) OF SECTION 80P(4) FOR THE PURPOSES OF THIS CASE. SUB- SECTION (4) PROVIDES THAT SECTION 80P WILL NOT APPLY IN RELATIO N TO A CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY AGRICUL TURAL AND RURAL DEVELOPMENT BANK. BEFORE THE INSTANT ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 10 COURT, THE APPELLANT IS NOT CLAIMING TO BE A PRIMAR Y AGRICULTURAL CREDIT SOCIETY OR PRIMARY AGRICULTURAL AND RURAL DEVELOPMENT BANK BUT IT CLAIMS TO BE ENGAGED IN PROVIDING CREDIT FACILITIES AND NOT A BA NKING SOCIETY. THUS, NOT HIT BY SUB SECTION (4) OF SECTION 80P. [PARA 8] THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE APPELLANT IS A COOPERATIVE SOCIETY AS THE SAME IS REGISTERED UNDER THE CO- OPERATIVE SOCIETIES ACT. THE APPELLANT IS CLAIMING DEDU CTION OF INCOME EARNED ON PROVIDING CREDIT FACILITIES TO ITS MEMBER S AS PROVIDED UNDER SECTION 80P(2)(A)(I). IT IS APPELLANT'S CASE THAT, IT IS NOT CARRYING ON THE BUSINESS OF THE BANKING. CONSEQUENTLY, NOT BEING A CO-OPERATIVE BANK THE PROVISIONS OF SECTI ON 80P(4) WOULD NOT EXCLUDE THE APPELLANT FROM CLAIMING THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I). HOWEVER IN TERMS OF SECTION 80P THE MEANING OF THE WORDS CO- OPERATIVE BANK IS THE MEANING ASSIGNED TO IT IN CHAPTER V OF THE BANKING REGULATION ACT, 1949. A CO- OPERATIVE BANK IS DEFINED IN SECTION 5(CCI) OF BANKING REGULATION ACT TO MEAN A STATE CO- OPERATIVE BANK, A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO- OPERATIVE BANK. ADMITTEDLY, THE APPELLANT IS NOT A STATE CO-OPERATIVE BANK, A CENTRAL CO-OPER ATIVE BANK. THUS WHAT HAS TO BE EXAMINED IS WHETHER THE APPELLANT IS A PRIMARY CO- OPERATIVE BANK AS DEFINED IN PARA V OF THE BANKING REGULATION ACT. SECTION 5(CCV) OF THE BANKING REGULATION ACT DEFINES A PRIMARY CO-OPERATIVE BANK TO MEAN A CO- OPERATIVE SOC IETY WHICH CUMULATIVELY SATISFIES ITS THREE CONDITIONS: (1) ITS PRINCIPAL BUSINESS OR PRIMARY OBJECT SHOULD BE BANKING BUSINESS OF BANKING; (2) ITS PAID UP SHARE CAPITAL AND RESERVES SHOULD NOT BE LESS THAN RUPEES ONE LAKH. (3) ITS BYE - LAWS DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS ITS MEMBER. IT IS ACCEPTED POSITION THAT CONDITION NO. (2) IS ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 11 SATISFIED AS THE SHARE CAPITAL IN AN EXCESS OF RUPEES ONE LAKH. IT HAS BEEN THE APPELLANT'S CONTENTION THAT THE CONDITIONS NO. (1) AND (3) PROVIDED ABOVE ARE NOT SATISFIED. [PARA 9] THEREFORE THE ISSUE THAT ARISES FOR CONSIDERATION I S WHETHER THE APPELLANT SATISFIES CONDITION NO. (1) AND (3) ABOVE. THE IMPUGNED ORDER AFTER REFERRING TO THE DEFINITION OF 'BANKING BUSINESS' AS DEF INED IN SECTION 5B OF THE BANKING REGULATION ACT, HELD THAT THE PRINCIPAL BUSINESS OF THE APPELLANT IS BANKING. SECTION 5B OF THE BANKING REGULATION ACT DEFINES BANKING TO MEAN ACCEPTING OF DEPOSITS FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSIT OF M ONEY FROM THE PUBLIC REPAYABLE ON DEMAND OR OTHERWISE. THE IMPUGNED ORDER JUXTAPOSES THE ABOVE DEFINITION WITH THE FINDING OF FACT THAT THE APPELLANT DID DEAL WITH NON- MEMBERS IN A FEW CASES BY SEEING DEPOSITS. THIS READ WITH BYE- LAW 43 LEADS TO THE CONCLU SION THAT IT IS CARRYING ON BANKING BUSINESS. THIS FACT OF ACCEPTING DEPOSITS FROM PEOPLE WHO ARE NOT MEMBERS HAS BEEN SO RECORDED BY THE COMMISSIONER (APPEALS) IN HIS ORDER DATED 15-7- 2014. BEFORE THE TRIBUNAL ALSO THE APPELLANT DID NOT DISPUTE THE FACT T HAT IN A FEW CASES THEY HAVE DEALT WITH NON- MEMBERS. HOWEVER SO FAR AS ACCEPTING DEPOSITS FROM NON- MEMBERS IS CONCERNED IT IS SUBMITTED THAT THE BYE- LAW 43 ONLY PERMITS THE SOCIETY TO ACCEPT DEPOSITS FROM ITS MEMBERS. IT IS SUBMITTED THAT BYE LAWS 43 DOES NOT PERMIT RECEIPT OF DEPOSITS FROM PERSONS OTHER THAN MEMBERS, THE WORD 'ANY PERSON' IS A GLOSS ADDED IN THE IMPUGNED ORDER AS IT IS NOT FOUND IN BYE- LAW 43. IT IS UNDISPUTED THAT THE TRANSACTIONS WITH NON MEMBERS WERE INSIGNIFICANT/MINISCULE. ON THE ABOV E BASIS IT CANNOT BE CONCLUDED THAT THE APPELLANT'S PRINCIPAL BUSINESS IS OF ACCEPTING DEPOSITS FROM PUBLIC AND, THEREFORE, IT IS IN BANKING BUSINESS. IN FACT, THE IMPUGNED ORDER ERRONEOUSLY RELIES UPON BY- LAW43 OF THE SOCIETY WHICH ENABLES THE SOCIETY TO RECEIVE DEPOSITS TO CONCLUDE THAT IT CAN RECEIVE DEPOSITS FROM PUBLIC. HOWEVER, THE IMPUGNED ORDER RELIES UPON BYE- LAW 43 TO CONCLUDE THAT IT ENABLES THE APPELLANT TO RECEIVE DEPOSITS FROM ANY PERSON IS NOT CORRECT. THUS IN THE PRESENT FACTS THE FINDING TH AT THE ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 12 APPELLANT'S PRINCIPAL BUSINESS IS OF BANKING IS PERVERSE AS IT IS NOT SUPPORTED BY THE EVIDENCE ON RECORD. SO FAR AS THE ISSUE OF PRIMARY OBJECT OF TH E APPELLANT IS CONCERNED THE IMPUGNED ORDER GIVES NO FINDING ON THAT BASIS TO DEPRIVE THE APPELLANT THE BENEFIT OF SECTION 80P. CONSEQUENTLY THERE IS NO OCCASION TO DEAL WITH THE SAME AS THAT IS NOT THE BASIS ON WHICH THE IMPUGNED ORDER HOLDS THAT IT IS A PRIMARY CO-OPERATIVE BANK. [PARA 10] SO FAR AS CONDITION NO. 3 OF THE DEFINITION/MEANING OF PRIMARY CO- OPERATIVE BANK AS PROVIDED IN SECTION 5(CCV) OF THE BANKING REGULATION ACT IS CONCERNED, THE SAME REQUIRES THE BYE- LAWS OF SOCIETY TO CONTAIN A PROHIBITION FROM ADMITTING ANY OTHER CO- OPERATIVE SOCIETY AS ITS MEMBER. IN FACT THE BYE-LAWS OF THE APPELLANT SOCIETY ORIGINALLY IN BYE-LAW 9(D) CLEARLY PROVIDED THAT NO CO- OPERATIVE SOCIETY SHALL BE ADMITTED TO THE MEMBERSHIP OF THE SOCIETY. THUS THERE WAS A BAR BUT THE SAME WAS AMENDED WITH EFFECT FROM 12-1- 2001 AS TO PERMIT A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE SOCIETY. THEREFORE FOR THE SUBJECT ASSESSMENT YEARS THERE IS NO PROHIBITION TO ADMITTING A SOCIETY TO I TS MEMBERSHIP AND ONE OF THREE CUMULATIVE CONDITIONS PRECEDENT TO BE A PRIMARY CO- OPERATIVE BANK IS NOT SATISFIED. HOWEVER THE IMP UGNED ORDER CONSTRUED THE AMENDED CLAUSE 9(D) OF THE APPELLANT'S BYE- LAWS TO MEAN THAT IT ONLY PERMITS A SOCIETY TO BE ADMITTED TO THE MEMBERSHIP OF THE APPELLANT AND NOT A CO- OPERATIVE SOCIETY. ACCORDING TO THE IMPUGNED ORDER, A SOCIETY AND A CO- OPERATIVE SOCIETY ARE CLEARLY WORDS OF DIFFERENT AND DISTINCT SIGNIFICANCE AND THE MEMBERSHIP IS ONLY OPEN TO SOCIETY AND NOT TO CO- OPERATIVE SOCIETY. AS RIGHTLY POINTED OUT ON BEHALF OF THE APPELLANT THE WORD SOCIETY AS REFERRED TO BYE- LAW 9(D) WOULD INCLUDE THE CO- OPERATIVE SOCIETY. THIS IS SO AS THE DEFINITION OF A SOCIETY UNDER THE CO- OPERATIVE ACT IS CO-OPERATIVE SOCIETY REGISTERED UNDER THE CO- OPERATIVE ACT. BESIDES THE QUALIFYING CONDITION 3 FOR BEING CONSIDERED AS A PRIMARY COOPERATIVE BANK IS THAT THE BYE L AWS MUST NOT PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY. THIS IS A MANDATORY CONDITION I.E . THE BYE- LAWS MUST SPECIFICALLY PROHIBIT ADMISSION OF ANY OTHER CO- ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 13 OPERATIVE SOCIETY TO ITS MEMBERSHIP. THE REVENUE HAS NOT BEEN ABLE TO SHOW ANY SUCH PROHIBITION IN THE BYE- LAWS OF THE APPELLANT. THUS EVEN THE AFORESAID QUALIFYING CONDITION (3) FOR BEING CONSIDERED AS A PRIMARY CO- OPERATIVE BANK IS NOT SATISFIED. THUS, THE THREE CONDITIONS AS PROVIDED UNDER SECTION 5(CVV) OF THE BANKING REGULATION ACT, 1949, ARE TO BE SATISFIED CUMULATIVELY AND EXCEPT CONDITION (2) THE OTHER TWO QUALIFYING CONDITIONS ARE NOT SATISFIED. ERGO, APPELLANT CANNOT BE CONSIDERED TO BE A CO- OPERATIVE BANK FOR THE PURPOSES OF SECTION 80P(4). THUS, THE APPELLANT IS ENTITLED TO THE BENEFIT OF DEDUCTION AVAILABLE UNDER SECTION 80P(2)(A)(I). [PARA 12] THE CONTENTION OF THE REVENUE THAT THE APPELLANT IS NOT ENTITLED TO THE BENEFIT OF SECTION 80P(2)(A) IN VIEW OF THE FACT THAT IT DEALS WITH NON- MEMBERS CANNOT BE UPHELD. THIS FOR TH E REASON THAT SECTION 80P(1) RESTRICTS THE BENEFITS OF DEDUCTION OF INCOM E OF CO- OPERATIVE SOCIETY TO THE EXTENT IT IS EARNED BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, TO THE EXTENT THE INCOME EARNED IS ATTRIBUTABLE TO DEALINGS WITH THE NON- MEMBERS ARE CONCERNED THE BENEFIT OF SECTION 80P WOULD NOT BE AVAILABLE. IN THE ABOVE VIEW OF THE MATTER, AT THE TIME WHEN EFFECT HAS BEEN GIVEN TO THE ORDER OF THI S COURT, THE AUTHORITIES UNDER ACT WOULD RESTRICT THE BENEFIT OF DEDUCTION UNDER SECTION 80 P ONLY TO THE EXTENT THAT THE SAME IS EARNED BY THE APPELLANT IN CARRYING ON ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. [PARA 13] THEREFORE, APPEAL IS HELD IN FAVOUR OF THE ASSESSEE AND AGAINST REVENUE 2.3. IT IS FURTHER NOTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS ALREADY CONSIDERED SECTION- 7 OF THE BANKING REGULATION ACT, 1949 AND THE PROVISION OF S ECTION 22 OF THE MAHARASHTRA COOPERATIVE SOCIETY ACT, 1960. T HE ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 14 ASSESSEE IS A COOPERATIVE SOCIETY, WHEREAS, AS PER THE LD. ASSESSING OFFICER, THE ASSESSEE IS A COOPERATIVE BA NK. UNDISPUTEDLY, THE ASSESSEE IS REGISTERED UNDER THE MAHARASHTRA CO-OPERATIVE SOCIETY ACT. THE ASSESSEE ALSO FIND BENEFIT FROM THE DECISION FROM HON'BLE GUJARAT HIGH COURT IN CIT VS JAFARIMOMIN VIKAS CO-OP. CREDIT SOCIETY (TAX APPEAL NOS.442 AND 443 OF 2013 AND 863 OF 2013). THE ASSES SEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILIT IES TO ITS MEMBERS. THE FACTUAL FINDING IS RECORDED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) HAS NOT BEEN DI SPUTED BY THE REVENUE WITH THE HELP OF ANY POSITIVE MATERI AL. EVEN OTHERWISE, THE ASSESSEE GETS BENEFIT FROM THE DECIS ION FROM HON'BLE APEX COURT IN CITIZEN COOPERATIVE SOCIETY L TD. VS ACIT (CIVIL APPEAL NO.10245 OF 2017), ORDER DATED 08/08/2017. EVEN AS PER THE BYE LAWS, NO PERSON CA N BE ADMITTED AS A MEMBER UNLESS HE FULFILLS THE PROVISI ONS OF SECTION 22 OF THE MAHARASHTRA STATE COOPERATIVE SOC IETY ACT. RESPECTFULLY FOLLOWING THE AFORESAID DECISION FROM HON'BLE HIGH COURTS AND SPECIFICALLY THE HON'BLE JURISDICTI ONAL HIGH COURT ((SUPRA)), WE FIND NO INFIRMITY, IN THE CONCL USION DRAWN ITA NO.6843/MUM/2016 LARSEN TOUBRO KAMGAR SAHAKARI PATPEDHI MARYADIG 15 BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL), CONSEQUENTLY, THE APPEAL OF THE REVENUE IS DISMISSE D. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 06/11/2018. SD/- (N.K. PRADHAN) SD/- (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER / VICE PRESIDENT MUMBAI; 0 DATED : 07/12/2018 F{X~{T? P.S/. $.. , !$%&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. 123 / THE APPELLANT 2. 423 / THE RESPONDENT. 3. 5 5 6' , ( 1 ) / THE CIT, MUMBAI. 4. 5 5 6' / CIT(A)- , MUMBAI 5. 8#9$'$ , 5 1+1 . , / DR, ITAT, MUMBAI 6. :%; / GUARD FILE. ! / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI