Shree Vemana Souharda Credit Co-op Limited, Bangalore V. Income TAx Officer Ward-7(2)(2), Bangalore

ITA 797/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4687 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 15-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SREENANDINI DAS
• Assessee Lawyers: MADHUKAR HEGDE
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, B ENGALURU BEFORE S HRI N.V.VASUDEVAN , VICE PRESIDENT AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER I TA NO S . 796 & 797 / BANG/2 0 1 8 (ASSESSMENT YEAR S : 201 3 - 14 & 2014 - 15 ) SHREE VEMANA SOUHARDA CREDIT CO - OP.LTD., N O.127/34, 7 TH CROSS, 4 TH MAIN, WILSON GARDEN, BENGALURU - 560 027. PAN: AAGAS 8075 C VS. APPELLANT INCOME - TAX OFFICER, WARD 7(2)(2), BENGALURU. RESPONDENT APPELLANT BY : SHRI MADHUKAR HEGDE, CA. RESPONDENT BY : SMT. SREE NANDINI DAS, ADDL.CIT(DR) DATE OF HEARING : 23/10/2018 DATE OF PRONOUNCEMENT : 26 /10/2018 O R D E R PER INTURI RAMA RAO, A M : THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST THE TWO IDENTICAL ORDERS OF THE LD. COMMISSIONER OF INCOME - TAX(APPEAL S) - 7, BENGALURU, DATED 02/01/2018 FOR THE ASSESSMENT YEARS 2013 - 14 AND 2014 - 15. 2. THE ASSESSEE RAISED THE FOLLOWING IDENTICAL GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) - 7 IS PREJUDICIAL TO THE INTEREST OF T HE APPELLANT, IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS) - 7 ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE INTEREST INCOME EARNED FROM THE TERM DEPOSITS IN THE BANKS AS DEDUCTION U/S. 80P(2)(A) (I) OF THE ACT ON THE GROUND THAT THE SAME CANNOT BE ATTRIBUTABLE TO BUSINESS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS. ITA NO S . 796 & 797 /BANG/20 18 PAGE 2 OF 4 3. THE LEARNED CIT (APPEALS) - 7 ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE INTEREST INCOME EARNED FROM CO - OPERATIVE BANKS AS DEDUC TION U/S. 80P(2)(D) OF THE ACT EVEN THOUGH THE CO - OPERATIVE BANK IS REGISTERED AS A CO - OPERATIVE SOCIETY UNDER KARNATAKA STATE CO - OPERATIVE SOCIETIES ACT, 1959. 4. THE LEARNED CIT (APPEALS) - 7 FAILED TO CONSIDER THAT THE PETITIONER IN APPEAL IS A CO - OPERATIVE ENGAGED EXCLUSIVELY IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND AS SUCH INVESTS ITS SURPLUS FUNDS AS ARE NOT IMMEDIATELY REQUIRED FOR USE IN ITS BUSINESS IN CO - OPERATIVE SOCIETIES AS WELL AS NATIONALIZED /COMMERCIAL BANKS. THEREFORE, THE ENTIRE INTE REST INCOME OF RS.91,23,560/ - DERIVED BY THE APPELLANT FORMS PART OF ITS PROFITS AND GAINS ATTRIBUTABLE TO ITS BUSINESS AND CHARGEABLE U/S. 28 OF THE ACT AND QUALIFIES FOR FULL DEDUCTION U/S. 801?(2)(A)(I) OF THE ACT. THE CITATION OFTOTGARS CO - OPERATIVE SA LE SOCIETY LTD. RELIED UPON BY THE RESPONDENT IS NOT APPLICABLE TO THE APPELLANT S CASE SINCE TOTGARS CO - OP. SALE SOCIETY WAS ENGAGED IN NUMEROUS ACTIVITIES UNLIKE THE APPELLANT. 5. THE IMPUGNED ORDERS PASSED BY THE AUTHORITIES ARE ILLEGAL AND ARE LIABLE TO BE SET ASIDE IN VIEW OF JUDGMENT OF THE HON'BLE HIGH COURT OF KARNATAKA IN ITA 29/2015 IN THE CASE OF M/S. GUTTIGEDARARA CO - OP. SOCIETY LTD. MYSORE VS. ITO, WARD 2(2), MYSORE AND ITA 307/2014 - M/S. TUMKUR SOUHARDA CREDIT CO - OP. LTD. VS. ITO,WARD - 1, TUMK UR. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT. IT IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE - SOCIETY FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2013 - 14 ON 8/9/2013 THROUGH E - FILE MODE DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF RS.91,23,558/ - UNDER THE PROVISIONS OF SECTION 80P OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT]. AGAINST SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE INCOME - TAX OFFICER, WARD 7(2)(2), BENGALURU, VIDE ORDER DATED 28/3/2016 PASSED U/S 143(3) OF THE ACT AT TOTAL ITA NO S . 796 & 797 /BANG/20 18 PAGE 3 OF 4 INCOME OF RS.91,23,560/ - . WHILE DOING SO, THE ASSESSING OFFICER (AO) HAD DENIED THE CLAIM FOR DEDUCTION U/S 80P OF THE ACT ON THE GROUND THAT THE ASSESSEE - SOCIETY IS A PRIMARY CO - OPERATIVE BANK AND ALSO DENIED EXEMPTION IN RESPECT OF INTEREST INCOME EARNED BY THE ASSESSEE - SOCIETY ON SHORT - TERM DEPOSITS MADE WITH BANK PLACING RELIANCE ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO (322 ITR 283) (SC). 4. BEING AGGRIEVED, AN APPEAL WAS PREFER R ED BEFORE THE LD.CIT(A) WHO, VIDE IMPUGNED ORDER, DISMISSED THE APPEAL. BEING AGGRIEVED, THE ASSESSEE IS BEFO RE US IN THE PRESENT APPEAL. 5. LEARNED AR OF THE ASSESSEE ARGUED THAT THE ASSESSEE - SOCIETY IS NOT A CO - OPERATIVE BANK BUT A CO - OPERATIVE SOCIETY AND THEREFORE, THE ASSESSEE IS CLEARLY ENTITLED TO EXEMPTION OF ITS INCOME U/S 80P OF THE ACT. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SRI BILURU GURUBASAPPA PATTINA SAHAKARI SANGHA NIYAMITA (369 ITR 86(KAR). ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDED THAT IT IS NOT A CO - OPERATIVE SOCIETY AND RELIANCE IN THIS REGARD WAS PLACED ON THE KARNATAKA SOUHARDA SAHAKARI ACT. THUS , IT WAS SUBMITTED THAT IT WAS NOT ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT. 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT. THE ISSUE WHETHER A CO - OPERATIVE BANK IS CONSIDERED TO BE A CO - OPERATIVE SOCIETY IS NO LONGER RES INTEGRA . CO - OPERATIVE SOCIETY CAN BE OF A DIFFE RENT NATURE AND CAN BE INVOLVED IN DIFFERENT ACTIVITIES. CO - OPERATIVE BANK IS SPECIE OF GENESIS GENIUS WOULD NECESSARILY BE COVERED BY THE WORD CO - OPERATIVE SOCIETY . RELIANCE IN THIS REGARD CAN BE PLACED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SRI BILURU GURUBASAPPA PATTINA SAHAKARI SANGHA NIYAMITA (SUPRA). IN THE PRESENT CASE, THE ASSESSEE IS REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT. THEREFORE, THE ISSUE ITA NO S . 796 & 797 /BANG/20 18 PAGE 4 OF 4 THAT COMES UP FOR CONSIDERATION IS WHETHER THE ENTITY WHICH IS REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT CAN BE CONSIDERED TO BE A CO - OPERATIVE SOCIETY. THIS ISSUE REQUIRES TO BE ADJUDICATED KEEPING IN VIEW THE PROVISIONS OF THE KARNATAKA SOCIETIES ACT AS WELL AS THE KARNATAKA SOUHARDA SAHAKARI ACT. FURT HER, WE FIND FROM THE PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES THAT THIS ISSUE HAD NOT BEEN EXAMINED ON THE TOUCHSTONE OF PROVISIONS OF BOTH THE STATUTES. THEREFORE, IN OUR CONSIDERED OPINION, THE ISSUE REQUIRES REMAND TO THE FILE OF THE AO FOR FRES H ADJUDICATION IN THE LIGHT OF THE PROVISIONS OF THE KARNATAKA SOCIETIES ACT AS WELL AS KARNATAKA SOUHARDA SAHAKARI ACT. ACCORDINGLY, WE REMAND THE ISSUE BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER AFFORDING DUE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCTOBER 2018 SD/ - SD/ - (N.V.VASUDEVAN) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBER PLACE : BENGALURU. D A T E D : 26/10/2018 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, I TAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE