ITO 22(2)(2), NAVI MUMBAI V. RCF EMPLOYEES CO OP CREDIT SOCIETY LTD, MUMBAI

ITA 6903/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3298 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2013
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Assessee Lawyers: H P MAHAJANI
• Keywords: Opportunity of being heard; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER I.T.A. NO.6903/M/2013 (ASSESSMENT YEAR: 2010 - 2011 ) ITO - 22(2)(2), 4 TH FLOOR, TOWER NO.6, R.NO.20, STATION COMPLEX, VASHI, NAVI MUMBAI, MUMBAI - 400703. / VS. M/S. RCF EMPLOYEES COOPERATIVE CREDIT SOCIETY LTD., TYPE 1A/21/481 - 484, CHEMBUR, MUMBAI - 400074. ./ PAN : AAAAR1076N ( / APPELLANT) .. ( / RESPONDENT ) I.T.A. NO.7465/M/2013 (ASSESSMENT YEAR: 2010 - 2011 ) M/S. RCF EMPLOYEES COOPERATIVE CREDIT SOCIETY LTD., TYPE 1A/21/481 - 484, CHEMBUR, MUMBAI - 400074. / VS. ITO - 22(2)(2), 4 TH FLOOR, TOWER NO.6, R.NO.20, STATION COMPLEX, VASHI, NAVI MUMBAI, MUMBAI - 400703. ./ PAN : AAAAR1076N ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : MR. H.P MAHAJANI / REVENUE BY : MS. R.M. MADHAVI, DR / DATE OF HEARING : 11.01.2016 / DATE OF PRONOUNCEMENT : 29 .01.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS INVOLVING THE ASSESSMENT YEAR 2010 - 2011. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE INTER - CONNECTED, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2 ITA NO.6903/M/2013 (BY REVENUE ) 2. THIS APPEAL FILED BY THE REVENUE ON 28.11.2013 IS AGAINST THE ORDER OF THE CIT (A) - 33, MUMBAI DATED 2.9.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. 3. IN THIS APPEAL, THE ONLY ISSUE RAISED BY THE REVENUE RELATES TO THE ALLOWABILITY OF RELIEF U/S 80P OF THE ACT IN RESPECT OF THE INCOME OF T HE ASSESSEE WHEN THE ASSESSEE IS A CREDIT COOPERATIVE SOCIETY. IN THE ASSESSMENT, AO TREATED THE SAME AS A CREDIT COOPERATIVE BANK. DURING THE FIRST APPELLATE PROCEEDINGS, CIT (A) EXAMINED THE FACTS RELEVANT TO THE DEFINITION OF CREDIT COOPERATIVE S OCIETY AS WELL AS THE APPLICABLE CITATIONS AND CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT A BANK AND THEREFORE, THE PROVI SIONS OF SECTION 80P(4) WILL NOT APPLY TO THE ASSESSEE - CREDIT COOPERATIVE SOCIETY. THE CONTENTS OF PARAS 6 AND 7 OF THE CIT (A )S ORDER ARE RELEVANT IN THIS REGARD. AGGRIEVED WITH THE SAME, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL WITH THE PRESENT APPEAL. 4. DURING THE PROCEEDINGS BEFORE US, LD DR FOR THE REVENUE SUBMITTED THAT THE ORDER OF THE CIT (A) SHOULD BE REVERSED. BY ME NTIONING THE FACT THAT LENDING AND BORROWING ACTIVITIES BETWEEN THE MEMBERS OF THE SOCIETY AND THE ASSESSEE CONSTITUTES BANKING ACTIVITIES. 5. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE HEAVILY RELIED ON THE ORDER OF THE CIT (A) AND THE CONTENTS OF P ARAS 6 AND 7 OF THE IMPUGNED ORDER. FURTHER, LD COUNSEL ALSO RELIED ON THE CITATIONS RELIED UPON BY THE CIT (A)S VIDE PARA 7 OF HIS ORDER. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAID PRARA 7 OF THE IMPUGNED ORDER IS EXTRACTED AS UNDER: 7. FROM THE FACTS OF THE INSTANT CASE, IT IS QUITE CLEAR THAT THE APPELLANT HAS LIMITED ITSELF TO THE MEMBERS OF EMPLOYEES OF M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. FURTHER, THE APPELLANT HAS NOT PROVIDED BANKING FACILITIES EITHER TO GENERAL PUBLIC AT LARGE OR EVEN TO THE MEMBERS OF THE SOCIETY. EVEN THE BYE LAWS OF THE APPELLANT DOES NOT PROVIDE FOR THE BANKING ACTIVITIES. THE FACTS OF THE INSTANT CASE ARE ALMOST SIMILAR TO THE DECISIONS RELIED UPON BY THE APPELLANT PARTICULARLY, THE FACTS IN THE CASE OF ( A) ITO VS. JANKALYAN NAGRI SAHAKARI PAT SANSTHA 24 TAXMAN.COM 127 PUNE TRIBUNAL, AND (B) DCIT VS. JAYALKSHI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD 23 TAXMANN.COM 313 PANAJI TRIBUNAL, WHERE THE ACTIVITIES OF THE ASSESSEES WERE LIMITED TO THE MEMBERS O F A SPECIFIC GROUP AND THE AREA OF OPERATION WAS ALSO LIMITED TO THE ACCEPTANCE OF DEPOSITS OF THE MEMBERS AND PROVIDING CREDIT FACILITIES ONLY TO THE MEMBERS, WHICH HAVE BEEN HELD AS NOT FALLING UNDER THE BANKING ACTIVITIES AS DEFINED IN THE BANKING REGUL ATION ACT. THEREFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF THE ITAT PUNE AND PANAJI BENCHES, THE APPELLANT ALSO CANNOT BE HELD AS A COOPERATIVE BANK, 3 HENCE THE DEDUCTION CLAIMED U/S 80P(2)(A)(I) CANNOT BE DENIED TO IT. THE AO IS ACCORDINGLY D IRECTED TO ALLOW THE DEDUCTION CLAIMED BY THE APPELLANT. 6. FURTHER, WE HAVE ALSO PERUSED THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF QUEPEM URBAN COOPERATIVE CREDIT SOCIETY LTD VS. ACIT [2015] 377 ITR 272 (BOM) , WHICH WAS RELIED UPON BY THE LD COUNSEL FOR THE ASSESSEE FOR THE PROPOSITION THAT SUCH LENDING ACTIVITIES DO NOT CONSTITUTE BANKING ACTIVITIES AS THE SAME ARE TRANSACTED BETWEEN THE COOPERATIVE SOCIETY AND THE MEMBERS OF THE SOCIETY . SINCE, NO PUBLIC IS INVOLVED THE DEFINITION OF BANKING DOES NOT COVER SUCH ACTIVITIES. AS SUCH, THERE IS NO RESERVE BANK OF INDIAS APPROVAL FOR CONDUCTING SUCH BANKING ACTIVITIES IN THIS CASE. HE ALSO RELIED ON THE DEFINITION OF BANKING AND READ OUT FROM THE CONTENTS OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 AND THE SAME READS AS UNDER: - SEC. 5(B) 'BANKING' MEANS THE ACCEPTING, FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC , REPAYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWAL BY CHEQ UE, DRAFT, OR OTHERWISE; 7. FROM THE ABOVE, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE MEMBERS OF THE CREDIT COOPERATIVE SOCIETY DO NOT CONSTITUTE PUBLIC AND THERE IS NO DEPOSITING, WITHDRAWAL BY CHEQUE OR DRAFT ETC. AFTER CONSIDERING THE SAID J UDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF QUEPEM URBAN COOPRATIVE CREDIT SOCIETY (SUPRA), WE ARE OF THE OPINION THAT DECISION OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, ISSUE RAISED IN THE REVENUES APPEAL IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 7465/M/2013 (BY ASSESSEE) 9. THIS APPEAL FILED BY THE ASSESSEE ON 18.12.2013 IS AGAINST THE SAID ORDER OF THE CIT (A) - 33, MUMBAI DATED 2.9.2013 FOR THE AY 2010 - 2011. 10. IN THIS APPEAL, THE ONLY ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL RELATES TO THE TAXING OF THE COMMISSION INC OME OF RS.2,76,216/ - UNDER THE HEAD INCOME FROM OTHER SOURCES. GIVING THE FACTS ON THIS ISSUE, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT CERTAIN VENDORS ARE ALLOWED TO MARKET THEIR PRODUCTS TO THE MEMBERS OF THE CREDIT COOPERATIVE SOCIETY AND THE C REDIT COOPERATIVE SOCIETY HAS THE RESPONSIBILITY OF RECOVERING THE INSTALMENTS FROM THE DDO AND PAYING THE SAME TO 4 THE VENDORS. THE SAID COMMISSION RECEIVED FROM THE VENDORS WAS PARTLY DISTRIBUTED AMONG THE MEMBERS OF THE COOPERATIVE SOCIETY. 11. BEFORE US, ON THE ABOVE BACKGROUNDS OF THE FACTS, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THERE IS NO OBJECTION IF THE SAID AMOUNT IS TAXED AS PER THE PROVISIONS OF CLAUSE (C) TO SECTION 80P(2) OF THE ACT. HE ALSO MENTIONED THAT AS PER THE SAID PROVISIONS , SUCH AMOUNTS SHOULD NOT BE TREATED AS PROFITS OR GAINS FROM BUSINESS OR PROFESSION. HE ALSO MENTIONED THAT THE WORDING USED IN CLAUSE (C) ATTRIBUTABLE NOT FROM THE BUSINESS. EVENTUALLY, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT GIVING DEDUCTION OUT OF THE SAID COMMISSION INCOME TO THE AMOUNT DISTRIBUTED AMONG THE MEMBERS OF THE COOPERATIVE SOCIETY IS A VERIFIABLE FACT. HE PLEADED FOR REMANDING THE WHOLE MATTER TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AS PER THE PROVISIONS OF CLAUSE (C) OF SECTION 80P(2) OF THE ACT. 12. AFTER HEARING BOTH THE PARTIES AS WELL AS ON PERUSAL OF THE RELEVANT PROVISIONS OF THE ACT AND THE RELEVANT MATERIAL PLACED BEFORE US, WE REMAND THIS ISSUE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AS PER THE SAID PROVISIONS OF CLAUSE (C) OF SECTION 80P (2) OF THE ACT, WHICH COVERS THE ISSUE UNDER CONSIDERATION. WE ORDER ACCORDINGLY. AO IS DIRECTED TO GIVE DEDUCTION OF RS. 50,000/ - AS PER THE PROVISIONS OF SECTION 80P(2)(C)(II) OF THE ACT AND ALLOW A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THE RELEVANT GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 14. CONCLUSIVELY, APPEAL OF THE REVENUE IS DISMISSED AND THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCE D IN THE OPEN COURT ON 2 9 T H JANUARY, 2016. S D / - S D / - ( SANDEEP GOSAIN ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 29 .1.2016 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 5 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI