ITO WD 22(2)(3), NAVI MUMBAI V. MUMBAI TELEWORKERS CO OP CREDIT SOC. LTD, MUMBAI

ITA 7106/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79273 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMBIT MISHRA
• Section: 56; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 7106/ MUM/2012 ASSESSMENT YEAR: 2009-10 ITO WD22(2)(3) VASHI RLY. STATION COMPLEX, TOWER NO 6, 4 TH FLOOR, VASHI, NAVI MUMBAI VS. M/S. MUMBAI TELEWORKERS COOP. CREDIT SOCIETY LTD, V.N.PURAV MARG DEONAR, MUMBAI-400 088 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. : AA AAM 3176 C ASSESSEE BY : NONE REVENUE BY : SHRI SAMBIT MISHRA DATE OF HEARING : 19.06.2014 DATE OF PRONOUNCEMENT : 30.06.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A)-33, MUMBAI DATED 25.09.2012 FOR THE ASSES SMENT YEARS 2009-10 WHEREIN THE REVENUE HAS AGITATED THE DECISION OF THE LD.CIT (A) IN DIRECTING THE AO TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P OF TH E ACT. 2. NO ONE APPEARED ON BEHALF OF THE ASSESSEE DURING THE HEARING OF THE CASE AND WE THEREFORE, PROCEED TO DECIDE THE APPEAL OF T HE REVENUE AFTER CONSIDERING THE SUBMISSIONS OF THE LD.DR AND PERUSING THE ORDERS OF THE LOWER AUTHORITIES. 3. BRIEFLY STATED, THE ASSESSEE, A CO-OPERATIVE CRE DIT SOCIETY, DURING THE YEAR UNDER CONSIDERATION, HAD DECLARED THE TOTAL INCOME AT NIL AFTER CLAIMING A DEDUCTION OF RS.30,13,699/- UNDER SECTION 80P(2) OF THE INCOM E TAX ACT. HOWEVER, IN THE ASSESSMENT FRAMED, THE AO DISALLOWED THE CLAIM OF D EDUCTION AND THEREBY DETERMINED THE TOTAL INCOME AT RS.30,13,700/-. THE AO MADE THE IMPUGNED DISALLOWANCE BY CONCLUDING THAT THE ASSESSEE IS A C OOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING AND THUS IT IS ELIGIBLE ONLY FOR THE DEDUCTION U/S 36(1)(VIIA) OF THE ACT. ON APPEAL, THE LD.CIT(A) HE LD THAT THE ASSESSEE IS ENTITLED FOR ITA NOS. 7106/MUM/2011 M/S. MUMBAI TELEWORKERS COOP. CREDIT SOCIETY LTD. ASSESSMENT YEAR: 2009-10 2 EXEMPTION U/S 80P OF THE ACT. AGGRIEVED BY THE IMPU GNED ORDER, THE REVENUE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE LD.DR PERUSED THE MATERIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ONLY ISSUE ARISING OUT OF BOTH THE APPEAL RELATE TO THE ALLOWABILITY OF THE EXEMPTION/DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P OF THE INCOME TAX ACT. THE ALLOWABILITY OF EXEMPTION OF THE SAID INCOME DE PENDS ON WHETHER THE ASSESSEE/COOPERATIVE CREDIT SOCIETY IS A CO-OPERATI VE BANK OR NOT FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT SINCE ACCORDING TO THE SA ID PROVISION, DEDUCTION UNDER SECTION 80P SHALL NOT BE AVAILABLE TO ANY CO-OPERAT IVE BANK OTHER THAN PRIMARY AGRICULTURAL SOCIETY OR PRIMARY CO-OPERATIVE AGRICU LTURAL AND RURAL DEVELOPMENT BANK. 4.1 IT IS THE CASE OF THE REVENUE THAT THE ASSESSEE HAS BEEN FUNCTIONING AS A CO- OPERATIVE BANK AND BY VIRTUE OF SECTION 80P(4), THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF SECTION 80P AND ALSO THE ASSESSEE IS NOT COMING WITHIN THE PURVIEW OF PRIMARY AGRICULTURAL SOCIETY OR PRIMARY CO-OPERATIV E AGRICULTURAL AND RURAL DEVELOPMENT BANK. 4.2 IN THIS CONNECTION, IT IS PERTINENT TO MENTION THAT THE LETTER OF THE CBDT BEARING NO. F. NO. 133/06/2007-TPL DATED 09.05.2008 ADDRESSED TO THE DELHI URBAN T&C SOCIETY LTD., STATING THAT FOR THE PURPOSES OF SUBSECTION 4 OF SECTION 80P, COOPERATIVE BANK SHALL HAVE THE SAME MEANING AS A SSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT 1949, ACCORDING TO WHICH CO OPERATIVE BANKS MEANS A STATE CO-OPERATIVE BANK, A CENTRAL CO-OPERATIVE BANK AND PRIMARY CO-OPERATIVE BANK. THOUGH THE SAID CLARIFICATION IS GIVEN BY THE CBDT IN CONNECTION WITH SOME OTHER ASSESSEE, THE CRUX OF THE MATTER PERTAINS TO THE CL ARIFICATION OF CO-OPERATIVE BANK FOR THE PURPOSE OF SUBSECTION 4 OF SECTION 80P. IT IS OBSERVED THAT THE SAID CLARIFICATION HAS ALSO BEEN RELIED BY THE TRIBUNAL IN MANY CASES. THEREFORE, COOPERATIVE BANKS MENTIONED IN THE SAID SUBSECTIO N INDICATES ONLY THE STATE, CENTRAL AND PRIMARY CO-OPERATIVE BANKS ONLY. 4.3 MOREOVER, FOR COMMENCING A BANKING BUSINESS BY THE CO-OPERATIVE SOCIETY, DUE LICENSE HAS TO BE OBTAINED FROM THE RESERVE BAN K OF INDIA AND IN THE ASSESSEES CASE, THERE IS NO SUCH LICENSE OBTAINED FOR COMMENC ING ANY BANKING BUSINESS. THE MERE FACT THAT THE ASSESSEE HAS BEEN PROVIDING CRED IT FACILITIES TO ITS MEMBERS AND ITA NOS. 7106/MUM/2011 M/S. MUMBAI TELEWORKERS COOP. CREDIT SOCIETY LTD. ASSESSMENT YEAR: 2009-10 3 THEREBY EARNS INTEREST AND DIVIDEND CANNOT MAKE THE SOCIETY INTO A BANK FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT. IF THE INTEN TION OF THE LEGISLATURE WAS NOT TO GRANT DEDUCTION TO COOPERATIVE SOCIETIES CARRYING O N THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THEN THIS SECTION WOULD HAVE BEEN DELETED. THIS PROPOSITION IS SUPPORTED BY VARIOUS DECISIONS INCLUDING THE DEC ISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS COOPERATIVE CREDIT SOCIE TY LTD AND THE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT VS. JAYALAKSHMI MAHILA VIVIDODESHAGALA SOUHARDA SAHAKARI LTD. [2012] 137 ITD 163. 4.4 IN ADDITION TO THE AFOREMENTIONED DISCUSSION, THE DISTINCTION BETWEEN COOPERATIVE SOCIETY REGISTERED UNDER THE BANKING RE GULATION ACT 1949 AND THE COOPERATIVE SOCIETY REGISTERED UNDER THE MAHARASHTR A STATE COOPERATIVE SOCIETIES ACT 1960 AS BROUGHT OUT BY THE LD.CIT(A) IS EXTRACTED H EREUNDER: SL CO-OPERATIVE SOCIETIES CO-OPERATIVE BANKS 1 THE CO-OPERATIVE CREDIT SOCIETIES ARE REGISTERED UNDER MAHARASHTRA STATE CO- OPERATIVE SOCIETIES ACT, 1960 AND GOVERNED, REGULATED, ADMINISTERED AND SUPERVISED BY THE REGISTRAR OF THE CO- OPERATIVE SOCIETIES, GOVERNMENT OF MAHARASHTRA. CO-OPERATIVE BANKS ARE REGISTERED UNDER MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960 AND ADMINISTERED BY REGISTRAR OF CO-OPERATIVE SOCIETIES, GOVT. OF MAHARASHTRA. CO-OPERATIVE BANKS ARE REGULATED AND SUPERVISED BY THE RESERVE BANK OF INDIA. PROVISIONS OF BANKING REGULATION ACT, 1949 WITH MODIFICATIONS SPECIFIED IN SECTION 56 OF THE BANKING REGULATION ACT, 1949 ARE APPLICABLE TO CO-OPERATIVE BANKS. SCHEDULE 1 TO SCHEDULE V ARE APPLICABLE TO CO- OPERATIVE BANKS. 2 CO-OPERATIVE SOCIETIES ARE CLASSIFIED AS RESOURCE/THRIFTS SOCIETIES IN THE CERTIFICATE OF REGISTRATION ISSUED BY REGISTRAR OF CO- OPERATIVE SOCIETY. CO-OPERATIVE BANKS ARE CLASSIFIED AS CO-OPERATIVE BANK. 3 CO-OPERATIVE CREDIT SOCIETIES CAN ACCEPT DEPOSITS AND ADVANCE LOANS ONLY TO THE MEMBERS. HENCE THE BUSINESS ACTIVITIES ARE RESTRICTED TO MEMBERS AND HENCE IT CAN BE TERMED AS A MUTUAL ASSOCIATION/SELF HELP GROUP. CO-OPERATIVE BANKS CAN ACCEPT DEPOSITS FROM PUBLIC. HOWEVER, UNLIKE CO-OPERATIVE CREDIT SOCIETIES THEY CAN ADVANCE LOANS TO THE MEMBERS ONLY. 4 CO-OPERATIVE CREDIT SOCIETIES CANNOT ACCEPT DEPOSITS FROM PUBLIC. CO-OPERATIVE CAN ACCEPT DEPOSITS FROM PUBLIC. 5 THE PROVISIONS OF BANKING REGULATION ACT 1949 ARE NOT APPLICABLE TO THE CO-OPERATIVE CREDIT SOCIETIES. THE PROVISIONS OF BANKING REGULATION ACT 1949 ARE APPLICABLE TO THE CO-OPERATIVE BANK. 6 THE CO-OPERATIVE CREDIT SOCIETIES DO NOT REQUIRED LICENSE FROM RESERVE BANK OF INDIA TO CARRY ON ITS BUSINESS. THE CO-OPERATIVE BANKS ARE REQUIRED TO OBTAIN LICENSE FROM RESERVE BANK OF INDIA TO CARRY ON ITS BUSINESS. 7 THE CO-OPERATIVE CREDIT SOCIETIES DO NOT HAVE CHEQUE FACILITIES, CLEARING FACILITIES AND THEY CANNOT ISSUE DEMAND DRAFTS, PAY THE CO-OPERATIVE HAVE CHEQUE FACILITIES, CLEARING FACILITIES AND THEY ISSUE DEMAND DRAFTS, ASSESSMENT YEAR ORDER, BANK GUARANTEES ETC. ITA NOS. 7106/MUM/2011 M/S. MUMBAI TELEWORKERS COOP. CREDIT SOCIETY LTD. ASSESSMENT YEAR: 2009-10 4 ORDERS ETC. 8 CO-OPERATIVE CREDIT SOCIETIES CANNOT USE WORK BANK/BANKERS IN THEIR NAME CO-OPERATIVE BANKS ARE MANDATORILY REQUIRED TO USE WORLD BANK/BANKERS IN THEIR NAME. 9 RESERVE BANK OF INDIA HAS NO STATUTORY POWER OF CONTROL AND SUPERVISION OF CO- OPERATIVE SOCIETIES. RESERVE BANK OF INDIA HAS VESTED WITH STATUTORY POWERS OF CONTROL AND SUPERVISION OF CO- OPERATIVE BANKS. THE ABOVE DISTINCTION MAKES IT VERY CLEAR THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK FOR THE PURPOSES OF SECTION 80P(4) OF THE ACT. INCIDENTALLY, THE LD.CIT(A) HAS NOTED THAT A SIMILAR ISSUE HAS BEEN DECIDED BY HIM IN THE CASE OF ANOTHER ASSESSEE NAMELY, M/S KULSWAMY CO-OPERATIVE CREDIT SOCIETY LT D FOR THE AY 2008-09. HOWEVER, IT IS THE CONTENTION OF THE REVENUE THAT THE SAID D ECISION OF THE LD.CIT(A) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND THEY ARE IN FUR THER APPEAL. HOWEVER, IT IS OBSERVED THAT THE APPEALS FILED BY THE REVENUE AGAI NST THE SAID ASSESSEE HAVE BEEN DISMISSED BY THE TRIBUNAL IN ITA NOS 3223/MUM/2011 & 505/MUM/2012 FOR THE AYS 2007-08 & 2008-09 THEREBY THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 4.5 CONSIDERING THE ENTIRE FACTS AND POSITION OF LA W, WE ARE OF THE CONSIDERED OPINION THAT THE LD.CIT(A) IS JUSTIFIED IN DIRECTIN G THE AO TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P OF THE ACT ON THE R EASON THAT THE ASSESSEE, A CO- OPERATIVE CREDIT SOCIETY IS NOT A BANK FOR THE PURP OSES OF SECTION 80P(4) OF THE ACT. THUS THE ORDER OF THE LD.CIT(A) IS UPHELD. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 0 TH DAY OF JUNE, 2014. SD/- SD/- (SANJAY ARORA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.06.2014. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.