Progressive Urban Cooperative Bank Ltd., Lucknow V. Astt. Commissioner of Income Tax-3, Lucknow

ITA 690/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1161 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 28-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: YOGESH AGRAWAL
• Keywords: Business income
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 690/LKW/2016 ASSESSMENT YEAR: 2013 - 14 PROGRESSIVE URBAN COOPERATIVE BANK LTD. LUCKN OW V. ASST. CIT RANGE 3 LUCKNOW T AN /PAN : AAAAP1475D (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI YOGESH AGRAWAL, ADVOCATE RESPONDENT BY: SHRI HIMANSHU PANDEY, D.R. DATE OF HEARING: 16 01 201 8 DATE OF PRONOUNCEMENT: 18 01 201 8 O R D E R PER P ARTH A SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - 1, LUCKNOW DATED 1/7/2016. 2 . THOUGH THE ASSESSEE HAS PREFERRED MULTIPLE GROUNDS OF APPEAL, THE MAIN GRIEVANCE OF THE ASSESSEE ARE TWOFOLD I.E. (1) DISA LLOWANCE OF RS.34,43,484/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 80P(2)(D) OF THE ACT; AND (2) DISALLOWANCE OF DEDUCTION UNDER SECTION 80P(2)(C) OF THE ACT FOR AN AMOUNT OF RS.50,000/ - . 3 . THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE FILED ITS RET URN OF INCOME ON 29/9/2012 SHOWING TOTAL INCOME AT RS.29,66,320/ - . THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 2/9/2014 AND SERVED UPON THE ASSESSEE BEFORE THE DATE SPECIFIED IN THE ACT FOR SERV ICE OF NOTICE. SUBSEQUENTLY , ITA NO.690/LKW/201 6 PAGE 2 OF 7 NOTICE UNDER SECTION 142(1) OF THE ACT DATED 7/8/2015 ALONG WITH QUESTIONNAIRE WAS ISSUED AND SERVED UP ON THE ASSESSEE. IN RESPONSE TO TH E NOTICE, THE LD. A.R. OF THE ASSESSEE APPEARED FROM TIME TO TIME AND EXPLAINED THE RETU RN . THE ASSESSEE IS AN AOP AND DOING BANKING BUSINESS UNDER THE SUPERVISION OF THE RESERVE BANK OF INDIA. THE BOOKS OF ACCOUNT ARE MAINTAINED AND AUDITED AS REQUIRED UNDER THE PROVISIONS OF SECTION 40AB OF THE ACT. THE COPY OF AUDIT REPORT ALONG WITH BA LANCE SHEET, PROFIT & LOSS ACCOUNT AND OTHER DETAILS WERE FILED BEFORE THE ASSESSING OFFICER. THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED WITH THE REGISTRAR OF CO - OPERATIVE SOCIETY AND ENGAGED IN BANKING BUSINESS UNDER CO - OPERATIVE SOCIETY ACT. THE ASSESSEES SOURCE OF INCOME IS FROM BANKING BUSINESS TRANSACTION AND INVESTMENT DULY AUTHORIZED BY RESERVE BANK OF INDIA. THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.34,43,484/ - UNDER SECTION 80P(2)(C) OF THE ACT FOR INTEREST EARNED FROM CO - OPERATIVE SOCIET Y I.E. UTTAR PRADESH CO - OPERATIVE BANK LTD. WHERE IN THE CASE OF THE ASSESSEE BEING A CO - OPERATIVE SOCIETY, THE GROSS TOTAL INCOME ANY INCOME REFERRED TO IN SUB - SECTION (2) THERE SHALL BE DEDUCTED IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF SECTIO N 80P(2)(D) OF THE ACT , THE SUMS SPECIFIED IN SUB - SECTION (2) , IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDEND DERIVED BY THE CO - OPERATIVE S OCIETY FROM ITS INSTRUMENTS WITH ANY OTHER CO - OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT A C O - OPERATIVE S OCIETY CAN CLAIM DEDUCTION UNDER SECTION 80P BUT BY VIRTUE OF SUB - SECTION (4) OF SECTION 80P INSERTED BY THE FINAN CE ACT, 2006 W.E.F. 1/4/2007, PROVISIONS OF SECTION 80P OF THE ACT SHALL NOT APPLY IN RELATION TO ANY C O - OPERATIVE B ANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. FOR THE PURPOSE OF THIS SUB - SECTION , PRIMARY CO - OPERATIVE AGRICULTURAL AND ITA NO.690/LKW/201 6 PAGE 3 OF 7 RURAL DEVELOPMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERATIONS CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT A CTIVITIES. DURING THE COURSE OF ASSESSMENT, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE FOR QUERY OF DEDUCTION UNDER SECTION 80P OF THE ACT. IN RESPONSE TO THE NOTICE, ASSESSEE SUBMITTED REPLY WHICH FIND PLACE IN THE RECORD AS PART OF THE LD. CIT(A)S ORDER. HOWEVER, THE CRUX OF ASSESSEES SUBMISSION WAS THAT SECTION 80P(4) ONLY WITHDRAW EXEMPTION UNDER SECTION 80P(2)(9)(1) OF THE ACT RELATING TO BUSINESS INCOME FR OM BANKING BY THE CO - OPERATIVE S OCIETY AND PROVISIONS OF SECTION 80P(2)(D) OF THE ACT. AS THE INTEREST EARNED FROM OTHER CO - OPERATIVE SOCIETY, THE WHOLE OF THE INTEREST INCOME IS EXEMPT UNDER SECTION 80P(2)(D) OF THE ACT. THE ASSESSING OFFICER , AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND OTHER MATERIALS ON RECORD , HELD THAT THE ASSESSEE - BANK IS NOT A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL BANK, RATHER IT IS ENTITLED TO CARRY ON BUSINESS IN LUCKNOW MUNICIPAL CORPORATION LIMIT AND URBAN AREAS COVERED UNDER LUCKNOW MASTER PLAN. THEREFORE, DEDUCTI ON UNDER SECTION 80P(2)(D) OF THE ACT AMOUNTING TO RS.34,43,484/ - WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . THE MATTER FURTHER TRAVELLED TO THE LD. CIT(A) AND THE ASSESSEE FILED DETAILED WRITTEN SUBMISSION STATING THAT BY THE FINANCE BI LL, 2006 , A NEW SECTION 80P(4) WAS INTRODUCED W.E.F. ASSESSMENT YEAR 2007 , WHICH READ THAT SECTION 80P OF THE ACT SHALL NOT BE APPLICABLE TO THE CO - OPERATIVE BANK I.E. BUSINESS INCOME FROM BANKING BUSINESS. IT MEANS THAT PROVISIONS OF SECTION 80P , CLAUSE (2) SUB - CLAUSE (A)(I) OF THE ACT SHALL NOT BE APPLICABLE FOR EXEMPTING THE INCOME FROM BANKING BY A CO - OPERATIVE SECTOR. THE ASSESSMENT IS BEING MADE ON A BUSINESS INCOME OF THE CO - OP ERATIVE SOCIETY BUT NOT A BANK. HENCE , IT IS OBVIOUS THAT THE ITA NO.690/LKW/201 6 PAGE 4 OF 7 BUSINESS I NCOME OF THE CO - OP ERATIVE SOCIETY FROM BANKING IS TAXABLE ONLY , BUT THE OTHER EXEMPTION AVAILABLE TO THE CO - OP ERATIVE SOCIETY CANNOT BE DENIED. THE ASSESSEE IS ENTITLED TO THE EXEMPTION U/S 80P(2)( C ) AND 80P(2)(D) OF THE ACT , WHICH ARE MANDATORY PROVISIONS . THE ASSESSEE VEHEMENTLY OPPOSED THE ASSESSMENT DONE BY THE ASSESSING OFFICER BY NOT CONSIDERING THE REPLY FURNISHED BY THE ASSESSEE AND THE CASE LAWS RELIED UPON. 5 . THE LD. CIT(A) , AFTER CONSIDERING T HE WRITTEN SUBMISSION OF THE ASSESSEE AND THE ORDER OF THE ASSESSING OFFICER, OBSERVED AND HELD THAT THE ASSESSING OFFICER HAS CORRECTLY MENTIONED THAT AS PER ASSESSEES SUBMI SSION, SECTION 80P(4) OF THE ACT ONLY WITHDRAW THE EXEMPTION U/S 80P(2)(9)(1) RELATING TO BUSINESS INCOME FROM BANKING BY CO - OPERATIVE S OCIETY AND THE PROVISION OF SECTION 80P(4) OF THE ACT ARE NOT APPLICABLE ON THE DEDUCTION CLAIMED U/S 80P(2)(D) OF THE ACT. AS THE INTEREST EARNED FROM OTHER CO - OPERATIVE SOCIETY, THE WHOLE OF THE INTEREST INCOME IS EXEMPT U/S 80P(2)(D) OF THE ACT. IT IS ALSO OBSERVED THAT THE SUBMISSIONS OF THE ASSESSEE, BASED ON SEVERAL CASE LAWS , ARE NOT ANYWHERE NEAR TO PROVE THAT ASSESSEE IS A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL BANK. NO DOCUMENTS REGARDING WORKING AS PRIMARY CO - OPERATIVE AGRICULTURAL AND RURA L BANK AS HAS BEEN SUBMITTED DURING THE COURSE OF ASSESSMENT. RATHER , ASSESSEE TRIED TO PROVE THAT SECTION 80P(4) IS NOT APPLICABLE FOR THE DEDUCTION CLAIMED U/S 80P(2)(D) OF THE ACT. WHEREAS , IN THE ACT THERE IS A CLEAR CUT MENTION THAT TO CLAIM ANY DEDUC TION UNDER SECTION 80 P OF THE ACT , THE ASSESSEE MUST FULFILL THE CONDITION MENTION ED IN SECTION 80P(4) OF THE ACT. THE ASSESSING OFFICER HAS ALSO CONSIDERED THE LICENCE ISSUED TO THE ASSESSEE BY THE RESERVE BANK OF INDIA. IN THIS LICENCE , IT IS CLEARLY M ENTIONED THAT THE AREA OF OPERATION OF THE BANK SHALL BE CONFINED ONLY TO THE LUCKNOW MUNICIPAL CORPORATION LIMIT AND URBAN AREAS COVERED UNDER LUCKNOW MASTER PLAN. ITA NO.690/LKW/201 6 PAGE 5 OF 7 HE ACCORDINGLY CONCLUDED THAT FROM THE FACTS AND CIRCUMSTANCES , IT IS CLEAR THAT THE ASSES SEE IS NOT A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL BANK, RATHER IT IS ENTITLED TO CARRY ON BUSINESS IN LUCKNOW MUNICIPAL CORPORATION LIMIT AND URBAN AREAS COVERED UNDER LUCKNOW MASTER PLAN. THE LD. CIT(A), TH EREFORE, CONFIRMED THE DISALLOWANCE OF RS.34,43,484/ - UNDER SECTION 80P(2)(D) OF THE ACT AND UPHELD THE ORDER OF THE ASSESSING OFFICER. 6 . BEING FURTHER AGGRIEVED, THE MATTER HAS TRAVELLED BEFORE US ON APPEAL BY THE ASSESSEE. 7 . AT THE TIME OF HEARING BEFORE US, THE LD. A.R. OF THE ASSESSEE VEHEMENTLY ARGUED AND REITERATED THE SUBMISSIONS PLACED BEFORE THE SUBORDINATE AUTHORITIES AND STATED THAT SECTIONS 80P(1) AND 80P(4) ARE DISTINCT AND INDEPENDENT PROVISIONS. THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THA T A NEW SECTION 80P(4) OF THE ACT WAS INSERTED W.E.F. 1/4/2007 STATING THAT PROVISIONS OF SECTION 80P SHALL NOT BE APPLICABLE W.E.F. ASSESSMENT YEAR 2007 - 08 FOR THE BUSINESS INCOME OF CO - OPERATIVE SOCIETIES FROM THE BANKING BUSINESS. THE PROVISION OF SECTI ON 80P LAYS DOWN THAT SINCE ASSESSMENT YEAR 2007 - 08 , THE INCOME FROM BANKING BUSINESS RUN BY A CO - OPERATIVE SOCIETY SHALL BE TAXABLE. IT IS IN REFERENCE ONLY TO SECTION 80P(2)(1)(A) OF THE ACT. THE OTHER EXEMPTION UNDER SECTION 80P HAS NOT BEEN WITHDRAWN. THE LD. A.R. OF THE ASSESSEE FURTHER STATED THAT ASSESSEE HAS S HOWN INCOME FROM THE BUSINESS OF BANKING AS TAXABLE INCOME SINCE ASSESSMENT YEAR 2007 - 08 AND WAS GETTING THE EXEMPTION ON THE INTEREST INCOME EARNED FROM OTHER CO - OP ERATIVE SOCIETIES I.E. U.P. CO - OP ERATIVE BANK. 8 . THE LD. A.R. OF THE ASSESSEE ALSO RELIED UPON THE DECISIONS OF THE JODHPUR BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT VS. M/S HANUMANGARH KENDRIYA SAHAKARI BANK LTD. IN ITA NO.55 & ITA NO.690/LKW/201 6 PAGE 6 OF 7 56/JODH/2015 AND 248/JODH/2015 (JODHPUR BENCH). THE O THER DETAILS INCLUDING THE COPY OF FINANCE BILL, 2006 DATED 23/10/2015 WERE FILED IN THE PAPER BOOK. 9 . THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 10 . WE HAVE PERUSED THE CASE RECORD, ANALYSED THE FACTS AND CIRCUMSTANCES OF THE CASE AND WE FIND THAT THE QUESTION WHETHER DEDUCTION UNDER SECTION 80P(2)(D) AND DEDUCTION UNDER SECTION 80P(2) (C) OF THE ACT WAS ALLOWABLE OR NOT REQUIRES, BOTH FACTUAL AND LEGAL INVESTIGATION. THE ASSESSEE HAS STRESSED ON THE APPLICABILITY OF THE F INANCE BILL, 2006 WHEREAS THE DEPARTMENTAL AUTHORITIES HAVE FOCUSED ON AND GIVEN THEIR DECISION ON THE FACTUAL MATRIX THAT ASSESSEE BANK IS NOT A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. IN THI S VIEW OF THE MATTER , WE ARE OF THE CONSIDERED VIEW THAT IN THE INTEREST OF JUSTICE , THE ENTIRE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE THE ISSUE IN THE LIGHT OF FACTUAL AND LEGISLATIVE PARAMETERS AND AFTER AFFORDI NG REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE LD. CIT(A). 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 / 01 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH JANUARY , 201 8 JJ: 1701 ITA NO.690/LKW/201 6 PAGE 7 OF 7 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR