ITO, Bangalore V. M/s Sri. Praja Co-Operative Credit Society Ltd., Bangalore

ITA 813/BANG/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1533 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: SRINIVAS BHARATH N K
• Keywords: Question of law; Benefit of exemption
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 813/BANG/2015 ASSESSMENT YEAR : 2010-11 THE INCOME TAX OFFICER, WARD 2(2)(1), BANGALORE. VS. SRI PRAJA CO-OPERATIVE CREDIT SOCIETY LTD., NO.1567/50, NEW NO.69/3-1, 3 RD MAIN, NAGAPPA BLOCK, SRIRAMAPURAM, BANGALORE 560 021. PAN: AAAJS 1557Q APPELLANT RESPONDENT APPELLANT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) RESPONDENT BY : SHRI SRINIVAS BHARATH N.K., C.A. DATE OF HEARING : 27.10.2015 DATE OF PRONOUNCEMENT : 10.11.2015 O R D E R PER VIJAY PAL RAO,, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 09.02.2015 OF THE CIT(APPEALS) FOR THE ASSESSMENT Y EAR 2010-11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- ITA NO.813/BANG/2015 PAGE 2 OF 6 1) THE ORDER OF THE CIT(A) IS CLEARLY OPPOSED TO LAW AS FAR AS THE FINDINGS ARE PERVERSE, CONTRARY TO THE FACTS AN D CIRCUMSTANCES OF THE CASE AND HENCE NOT SUSTAINABLE. 2) THE CIT(A) ERRED IN GRANTING DEDUCTION U/S 80P( 2)(A)(I) OF THE IT ACT, AS THE ASSESSEE IS A CO-OPERATIVE SOCIE TY CARRYING ON BANKING BUSINESS. 3) THE CIT(A) ERRED IN GRANTING DEDUCTION U/S 80P( 2)(A)(I) RELYING ON THE DECISION OF THE ITAT IN THE CASE OF M/S BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LT D. 4) THE CIT(A) ERRED IN NOT APPRECIATING THE FACTS THAT THE MAIN MOTTO OF THE CO-OPERATIVE SOCIETY IS LENDING F OR ITS MEMBERS, WHICH IS IN THE NATURE OF BANKING TRANSACT ION AND COMES UNDER THE PURVIEW OF SECTION 80P SUBSECTION 4 OF THE IT ACT. 5) THE LD.CIT(A) ERRED IN NOT APPRECIATING THE FAC T THAT THE PROVISIONS OF SECTION 80P(4) IS EQUALLY APPLICABLE TO THE ASSESSEE. 6) FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IS SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RES TORED. 3. THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTER ED UNDER THE KARNATAKA CO-OPERATIVE SOCIETIES ACT. THE ASSESSEE RENDERS FINANCIAL SERVICES TO ITS MEMBERS AND FILED ITS RETURN OF INC OME DECLARING NIL INCOME, AFTER CLAIMING DEDUCTION U/S. 80P OF THE INCOME-TAX ACT, 1961 [THE ACT]. 4. THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCT ION U/S. 80P ON THE GROUND THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE THAT OF A BANKING INSTITUTION AND THEREFORE IN VIEW OF INSERTION OF S ECTION 80P(4) BY THE FINANCE ACT, 2006 W.E.F. 1.4.2007, THE ASSESSEE IS COVERED BY THE SAID ITA NO.813/BANG/2015 PAGE 3 OF 6 AMENDMENT AND CLEARLY IS NOT ENTITLED FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. 5. ON APPEAL, THE CIT(APPEALS) HAS ACCEPTED THE CLA IM OF THE ASSESSEE BY FOLLOWING THE DECISIONS OF THIS TRIBUNA L AND HELD THAT THE INCOME TO THE EXTENT OF INTEREST EARNED BY THE ASSE SSEE FROM ITS ACTIVITY OF LENDING MONEY OUT OF DEPOSITS RECEIVED FROM THE PUB LIC OR ITS MEMBERS SHALL BE ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. 6. WE HAVE HEARD THE LD. DR AS WELL AS THE LD. AR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOT E THAT THIS ISSUE IS NOW COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT V. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGH A NIYAMITHA,BAGALKOT, 369 ITR 86 (KAR) , WHEREIN THE HONBLE HIGH COURT HELD IN PARAS 8 & 9 AS UNDER:- 8. IN THE ASSESSMENT ORDER, THE ASSESSING AUTHORI TY HAS CLEARLY STATED THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND HAS NOT OBTAINED ANY BANKING LICENSE. THE BUSINESS OF THE A SSESSEE IS TO PROVIDE CREDIT FACILITIES TO ITS MEMBERS. SINCE THE ASSESSEE CANNOT CARRY ON ANY BANKING BUSINESS, THE INTEREST ON INVE STMENT IS TAXABLE AS INCOME FROM OTHER SOURCE. THEREFORE, THE AFORESAID FACTS, WHICH IS NOT IN DISPUTE CLEARLY ESTABLISHES THAT IT IS NOT A CO- OPERATIVE BANK. IN FACT, THE REVISIONAL AUTHORITY A LSO IN HIS ORDER HAS CATEGORICALLY STATED THAT THE ASSESSEE IS A CO- OPERATIVE SOCIETY, WHICH PROVIDES CREDIT FACILITIES. SECTION 80P OF TH E ACT DEALS WITH THE DEDUCTION OF INCOME OF A SOCIETY. IN THE CASE O F ANY ASSESSEE BEING A CO-OPERATIVE SOCIETY, THE WHOLE OF THE AMOU NTS OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY OF OTHER ACTIVITIES REFERRED TO SUB-SECTION (2) OF SECTION 80P SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. IN OTHE R WORDS, THE SAID INCOME IS NOT TAXABLE. IT IS A BENEFIT GIVEN T O THE CO-OPERATIVE ITA NO.813/BANG/2015 PAGE 4 OF 6 SOCIETY. SECTION 80P(4) WAS INTRODUCED BY THE FINAN CE ACT, 2006, WITH EFFECT FROM APRIL 1, 2007, EXCLUDING THE SAID BENEFIT TO A CO- OPERATIVE BANK. THE SAID PROVISION READS AS UNDER : '(4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULT URAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK . . . (A) 'CO-OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL C REDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO TH EM IN PART V OF THE BANKING REGULATION ACT, 1949 (10 OF 1949) ; (B) 'PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DE VELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVI DE FOR LONG-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIV ITIES.' THEREFORE, THE INTENTION OF THE LEGISLATURE IS CLEA R. IF A CO- OPERATIVE BANK IS EXCLUSIVELY CARRYING ON BANKING B USINESS, THEN THE INCOME DERIVED FROM THE SAID BUSINESS CANNOT BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. THE SAI D INCOME IS LIABLE FOR TAX. A CO-OPERATIVE BANK AS DEFINED UNDE R THE BANKING REGULATION ACT INCLUDES THE PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVEL OPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEF ITS TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO -OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID N OT WANT TO EXTEND THE SAID BENEFIT TO A CO-OPERATIVE BANK WHIC H IS EXCLUSIVELY CARRYING ON BANKING BUSINESS, I.E., THE PURPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSESSEE IS NOT A CO-O PERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND AS IT DOES NOT POSSESS A LICENCE FROM THE RESERVE BANK OF INDIA TO CARRY ON BUSINESS, IT IS NOT A CO-OPERATIVE BANK. IT IS A CO -OPERATIVE SOCIETY WHICH ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO ITS MEMBERS WHICH IS COVERED UNDER SECTION 80P(2)(A)(I) , I.E., CARRYING ON THE BUSINESS OF BANKING FOR PROVIDING C REDIT FACILITIES TO ITS MEMBERS. THE OBJECT OF THE AFORESAID AMENDME NT IS NOT TO EXCLUDE THE BENEFIT EXTENDED UNDER SECTION 80P(1) T O SUCH SOCIETY. THEREFORE, THERE WAS NO ERROR COMMITTED BY THE ASSESSING AUTHORITY. THE SAID ORDER WAS NOT PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. THE CONDITION PRECEDENT FOR THE COMMISSION ER TO INVOKE THE POWER UNDER SECTION 263 IS THAT THE TWIN CONDITIONS ITA NO.813/BANG/2015 PAGE 5 OF 6 SHOULD BE SATISFIED. THE ORDER SHOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 9. THIS COURT HAD AN OCCASION TO CONSIDER SECTION 263 OF THE ACT IN THE CASE OF - COMMISSIONER OF INCOME-TAX AND ANOTHER V. DIGITAL GLOBAL SOFT LTD. [2013] 354 ITR 489 (KARN) WHERE PARAGRAPH-18, IT HAS HELD AS UNDER : AS IS CLEAR FROM THE WORDING IN SECTION 263, THE COMMISSIONER GETS THE JURISDICTION TO REVISE ANY PROCEEDINGS UNDER THIS ACT IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. THEREFORE, IT IS CLEAR THAT HE CANNOT EXERCISE THE POWER OF REVISION SOLELY ON THE GROUND THAT THE ORDER PASSED IS ERRONEOUS. HE GETS JURISDICTION ONLY IF SUCH ERRONE OUS ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . PREJUDICIAL TO THE REVENUE MEANS, LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZ ED. IN OTHER WORDS, BY THE ORDER OF THE ASSESSING AUTHORIT Y IF THE LAWFUL REVENUE TO THE STATE HAS NOT BEEN REALIZED O R CANNOT BE REALIZED, AS THE SAID ORDER IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE AND ALSO ERRONEOUS, HE GET S JURISDICTION TO INTERFERE WITH THE SAID ORDER UNDER SECTION 263. THEREFORE, FOR ATTRACTING SECTION 263, THE CON DITION PRECEDENT IS (A) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS, AND (B) IT IS PREJUDICI AL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT, I.E., IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BU T IS NOT PREJUDICIAL TO THE REVENUE, RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE SATISFACTION OF BOTH THE CONDITIONS STIPULATED IN THE SECTION IS THE SINE QU A NON FOR THE COMMISSIONER TO EXERCISE HIS JURISDICTION UNDER SECTION 263. IN THE INSTANT CASE, WHEN THE STATUS OF THE ASSESS EE IS A CO- OPERATIVE SOCIETY AND IS NOT A CO-OPERATIVE BANK, T HE ORDER PASSED BY THE ASSESSING AUTHORITY EXTENDING THE BENEFIT OF EXEMPTION FROM PAYMENT OF TAX UNDER SECTION 80P(2)(A)(I) OF T HE ACT IS CORRECT. THERE IS NO ERROR. WHEN THERE IS NO ERROR, THE QUESTION OF ORDER BEING PREJUDICIAL WOULD NOT ARISE . THE TRIBU NAL HAS RIGHTLY ENTERTAINED THE APPEAL AND SET-ASIDE THE ORDER. THE REFORE, THE SAID ORDER IS IN ACCORDANCE WITH LAW AND CANNOT BE FOUND FAULT WITH. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. ITA NO.813/BANG/2015 PAGE 6 OF 6 7. BY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF CIT V. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGH A NIYAMITHA,BAGALKOT (SUPRA) , WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE CIT(APPEALS) ALLOWING THE CLA IM OF DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) (VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 10 TH NOVEMBER, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.