Shri Jay Ambe Nagarik Sarafi Sahakari Mandali Ltd., Banaskantha V. The ACIT.,B.K.Circle, Banaskantha

ITA 814/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80296 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: S N DIVETIA
• Keywords: Gift; Question of law
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.814/AHD/2011 A.Y.2007-08 SHRI JAY AMBE NAGARIK SARAFI SAHKARI MANDI LTD. BHAT VAS AMBAJI. PAN: AAAAT 1699R VS ACIT, B.K. CIRCLE, PALANPUR., DIST.- BASANTKANTA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.L. YADAV, SR.D.R., ASSESSEE(S) BY : SHRI S.N. DIVETIA AR / // / DATE OF HEARING : 13/08/2014 / DATE OF PRONOUNCEMENT: 28/08/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M AN ORDER OF THE LD. CIT(APPEALS)-XX, AHMEDABAD, DATED 13/12/201 0. GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS: 1. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON F ACTS IN CONFIRMING THE AO IN DISALLOWING THE CLAIM OF APPELLANT U/S.80P(4) OF RS.10,64,945/- UNDER THE IMPRESSION THAT THE INCOME EARNED FOR THE ACTIV ITY OF CREDIT SOCIETY TO GRANT FINANCE TO ITS MEMBERS IS PARALLEL TO BANKING BUSINESS THE APPELLANT SUBMITS THAT THE APPELLANTS CREDIT S OCIETY IS NOT DOING THE BUSINESS OF BANKING AND THEREFORE THE PROVISION OF SECTION 80P(4) IS NOT APPLICABLE AND THE DEDUCTION IS AVAILABLE U/S.80P(2 )(A)(I) OF THE IT ACT. . 2. IT IS APPARENT FROM THE ABOVE REPRODUCED GROUND, THE ASSESSEES CLAIM IS THAT THE DEDUCTION IS AVAILABLE U/S.80P(2) OF IT ACT, WHICH WAS DENIED BY THE AO VIDE AN ORDER U/S.143(3) OF IT ACT DATED 24.12.2007. THE AO HAD MENTIONED THAT THE ASSESSEE SOCIETY HAD CARRIED OUT THE ITA NO.814/AHD/2011 SHRI JAY AMBE NAGARIK SARAFI SAHAKARI MANDALI LTD. VS. ACIT, PALANPUR FOR A.Y. 2007-08 - 2 - BUSINESS OF BANKING AND CLAIMED THE DEDUCTION U/S.8 0P(2) OF IT ACT. IN HIS OPINION, THE BENEFIT IS ADMISSIBLE ONLY TO PRIM ARY AGRICULTURAL CREDIT SOCIETY, ETC. AND NOT TO THE ASSESSEE. AFTER DETAIL ED DISCUSSION THE CLAIM WAS DISALLOWED. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, LEARNED CIT(A) HAS UPHELD THE ACTION OF THE AO IN T HE FOLLOWING MANNER: 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSIONS OF THE AO CAREFULLY. IT IS SEEN THAT THE CLARIFICATION ON THE SUBJECT ISSUED BY THE CBDT DOES NOT SAY THAT THE ASSESSEE IN THAT CASE WO ULD BE ENTITLED TO DEDUCTION U/S.80P. IT IS ONLY SENT THAT SHRI SOBHAN KAR, UNDER SECRETARY HAS WRITTEN THAT IF THE DELHI CO-OP. URBAN T&C SOCIETY LTD. DOES NOT FALL WITHIN THE MEANING OF CO-OPERATIVE BANK' AS DEFINED IN PA RT V OF THE BANKING REGULATION ACT, 1949, SUB SECTION(4) OF SECTION 80P WILL NOT APPLY IN ITS CASE.' THUS THE CBDT WAS NOT GIVEN ANY DIRECTION AS TO THE FACT WHETHER DEDUCTION U/S.80P SHALL BE AVAILABLE TO THE ASSESSE E. IT IS SEEN THAT AS PER DEFINITION OF THE CO.OP. BANK MENTION IN CLAUSE (CC I) OF SECTION 56(5) OF PART- V OF THE BANK REGULATION ACT, 1949 READS AS UNDER: (CCI) 'CO-OPERATIVE BANK' MEANS A STATE CO-OPERAT IVE SOCIETY, THE PRIMARY OBJECT OF WHICH IS TO PROVIDE FINANCIAL ACC OMMODATION TO ITS MEMBERS AND INCLUDES A CO-OPERATIVE LAND MORTGAGE B ANK: (CCII) 'CO-OPERATIVE CREDIT SOCIETY' MEANS A CO-O PERATIVE SOCIETY, THE PRIMARY OBJECT OF WHICH IS TO PROVIDE FINANCIAL ACC OMMODATION TO ITS MEMBERS AND INCLUDES A CO-OPERATIVE LAND MORTGAGE B ANK; (CCIIA) CO-OPERATIVE SOCIETY MEANS A SOCIETY REGIST ERED OR DEEMED TO HAVE BEEN REGISTERED UNDER ANY CENTRAL ACT FOR THE TIME BEING, IN FORCE RELATING TO THE MULTI STATE CO-OPERATIVE SOCIETIES FOR THE TIME BEING IN FORCE.' 4.3(I) IN VIEW OF THE ABOVE DEFINITION, IT IS CLEAR THAT THE APPELLANT COMES UNDER THE DEFINITION OF CO-OPERATIVE BANK. HENCE, S ECTION 80P(4) IS CLEARLY APPLICABLE TO THE APPELLANT. 4. HEARD BOTH THE PARTIES. ORDERS OF THE REVENUE AU THORITIES ARE PERUSED. AT THE OUTSET, WE HAVE BEEN INFORMED THAT THE ISSUE HAS ALREADY BEEN ADDRESSED BY HONBLE ITAT B BENCH AHMEDABAD IN THE CASE OF M/S. JAFRI MOMIN VIKAS CO-OPERATIVE CREDIT SOCIETY (ITA NO.1491/AHD/2012 A.Y.2009-10, ORDER DATED 31.10.201 2, WHEREIN THE FINAL VERDICT IS AS UNDER: ITA NO.814/AHD/2011 SHRI JAY AMBE NAGARIK SARAFI SAHAKARI MANDALI LTD. VS. ACIT, PALANPUR FOR A.Y. 2007-08 - 3 - 10.4 THUS, THE PROVISIONS OF SECTION 80 P(2) (A) (I) SPECIFICALLY PROVIDE DEDUCTION IN RESPECT OF CO-OPERATIVE SOCIET IES ENGAGED IN CARRYING ON THE BUSINESS OF BANKING PROVIDING CREDIT FACILITIES TO ITS MEMBERS. SECTION 80 P(4) WHICH STIPULATES THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIM ARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK ONLY TAKES OUT CO-OPERATIVE BANKS FROM THE AMBIT OF DEDUCTION U/S 80 P OF THE ACT BUT FURTHER GRANTS EXEMPTION TO CO-OPERATIVE BA NK WHICH IS PRIMARILY AN AGRICULTURAL CREDIT SOCIETY OR CO-OPERATIVE AGRICUL TURAL AND RURAL DEVELOPMENT BANK. THIS VIEW IS ALSO CLARIFIED BY CENTRAL BOARD OF DIRECT TAXES VIDE ITS CLARIFICATION NO. 133/06/2007-TPL DATED 9 TH MAY 2007. FURTHER, THE DISTINCTION BETWEEN CO-OPERATIVE SOCIETY UNDER BANK ING REGULATIONS ACT, 1949 AND CO-OPERATIVE SOCIETY REGISTERED UNDER STATE CO- OPERATIVE SOCIETIES ACT, VIZ. KARNATAKA STATE CO-OPERATIVE SOCIETIES ACT, 19 59 IS VIVIDLY BROUGHT OUT IN THE ITAT ORDER, BANGALORE BENCH IN THE CASE OF A CIT VS BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LT D. IN ITA NO.1069/BANG/2010 FOR AY 2007-08 DATED 08-04-2011 A S UNDER: NATURE CO-OPERATIVE SOCIETY REGISTERED UNDER BANKING REGULATION ACT,1949 CO-OPERATIVE SOCIETY REGISTERED UNDER KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959 REGISTRATION UNDER THE BANKING REGULATION ACT, 1949 AND CO-OPERATIVE SOCIETIES ACT, 1959 CO-OPERATIVE SOCIETIES ACT, 1959 NATURE OF BUSINESS 1. AS DEFINED IN SECTION 6 OF BANKING REGULATION ACT. 2. CAN OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, OVERDRAFT ACCOUNT, CASH CREDIT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFT(DD), PAY ORDER, GIFT CHEQUES, LOCKERS, BANK GUARANTEES ETC. 3. CO-OPERATIVE BANKS CAN ACT AS CLEARING AGENT FOR CHEQUES DDS, PAY ORDERS AND OTHER FORMS. 4. BANKS ARE BOUND TO 1. AS PER THE BYE LAWS OF THE CO-OPERATIVE SOCIETY. 2. SOCIETY CANNOT OPEN SAVINGS BANK ACCOUNT, CURRENT ACCOUNT, ISSUE LETTER OF CREDIT, DISCOUNTING BILLS OF EXCHANGE, ISSUE CHEQUES, DEMAND DRAFTS, PAY ORDERS, GIFT CHEQUES, LOCKERS, BANK GUARANTEES ETC. 3. SOCIETY CANNOT ACT AS CLEARING AGENT FOR CHEQUES, AGENT FOR CHEQUES, DDS, PAY ORDERS AND OTHER FORMS. 4. SOCIETY ARE BOUND BY RULES AND REGULATIONS AS SPECIFIED BY IN THE CO-OPERATIVE SOCIETIES ITA NO.814/AHD/2011 SHRI JAY AMBE NAGARIK SARAFI SAHAKARI MANDALI LTD. VS. ACIT, PALANPUR FOR A.Y. 2007-08 - 4 - FOLLOW THE RULES, REGULATIONS AND DIRECTIONS ISSUED BY RESERVE BANK OF INDIA (RBI) ACT. FILING OF RETURNS CO-OPERATIVE BANKS HAVE TO SUBMIT ANNUAL RETURN TO RBI EVERY YEAR. SOCIETY HAS TO SUBMIT THE ANNUAL RETURN TO REGISTRAR OF SOCIETIES. INSPECTION RBI HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. REGISTRAR HAS THE POWER TO INSPECT ACCOUNTS AND OVERALL FUNCTIONING OF THE BANK. PART V PART V OF THE BANKING REGULATION ACT IS APPLICABLE TO CO-OPERATIVE BANKS. PART V OF THE BANKING REGULATION ACT IS NOT APPLICABLE TO CO-OPERATIVE BANKS. USE OF WORDS THE WORD BANK, BANKER, BANKING CAN BE USED BY CO-OPERATIVE BANK. THE WORD BANK, BANKER, BANKING CANNOT BE USED BY A CO-OPERATIVE SOCIETY. 10.5 THUS, T AKING INTO ACCOUNT OF ALL THE FACTS AND THE ISSUE W E ARE IN CONFORMITY WITH THE ORDER OF THE LEARNED CIT(A) AND ACCORDINGLY HOLD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTIO N U/S 80P (2)(A)(I) OF THE ACT. 4.1 SINCE, THE ISSUE WAS DECIDED IN FAVOUR OF THE A SSESSEE, THEREFORE, THE REVENUE HAS CHALLENGED THAT ORDER BEFORE HONBL E GUJARAT HIGH COURT AND IN TAX APPEAL NO.442, 443, 836 OF 2013 VI DE ORDER DATED 15 TH JANUARY, 2014, IT WAS DECIDED AS UNDER: 6. HAD THIS BEEN THE PLAIN STATUTORY PROVISIONS UN DER CONSIDERATION IN ISOLATION, IN OUR OPINION, THE QUESTION OF LAW COUL D BE STATED TO HAVE ARISEN. WHEN, AS CONTENDED BY THE ASSESSEE, BY VIRTUE OF SU BSECTION (4) ONLY CO- OPERATIVE BANKS OTHER THAN THOSE MENTIONED THEREIN WERE MEANT TO BE EXCLUDED FOR THE PURPOSE OF DEDUCTION UNDER SECTION SOP, A QUESTION WOULD ARISE WHY THEN LEGISLATURE SPECIFIED PRIMARY AGRICU LTURAL CREDIT SOCIETIES ALONG WITH PRIMARY COOPERATIVE AGRICULTURAL AND RUR AL DEVELOPMENT BANKS FOR EXCLUSION FROM SUCH EXCLUSION AND IN OTHER WORDS, C ONTINUED TO HOLD SUCH ENTITY AS ELIGIBLE FOR DEDUCTION. HOWEVER, THE ISSU E HAS BEEN CONSIDERABLY SIMPLIFIED BY VIRTUE OF CBDT CIRCULAR NO.133 OF 200 7 DATED 9.5.2007. CIRCULAR PROVIDES AS UNDER:- 'SUBJECT: CLARIFICATION REGARDING ADMISSIBLY OF DED UCTION UNDER SECTION 80P OF THE INCOME-TAX ACT, 1961. ITA NO.814/AHD/2011 SHRI JAY AMBE NAGARIK SARAFI SAHAKARI MANDALI LTD. VS. ACIT, PALANPUR FOR A.Y. 2007-08 - 5 - 1. PLEASE REFER TO YOUR LETTER NO.DCUS/30688/2007, DATED 28.03.2007 ADDRESSED TO CHAIRMAN, CENTRAL BOARD OF DIRECT TAXE S, ON THE ABOVE GIVEN SUBJECT.' 2. IN THIS REGARD, I HAVE BEEN DIRECTED TO STATE TH AT SUB-SECTION(4) OF SECTION 80P PROVIDES THAT DEDUCTION UNDER THE SAID SECTION SHALL NOT BE ALLOWABLE TO ANY CO-OPERATIVE BANK OTHER THAN A PRI MARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANK. FOR THE PURPOSE OF THE SAID SUB-S ECTION, CO- OPERATIVE BANK SHALL HAVE THE MEANING ASSIGNED TO I T IN PART V OF THE BANKING REGULATION ACT, 1949. 3. IN PART V OF THE BANKING REGULATION ACT, 'CO-O PERATIVE BANK' MEANS A STATE CO-OPERATIVE BANK, A CENTRAL CO-OPERA TIVE BANK AND A PRIMARY CO-OPERATIVE BANK. 4. THUS, IF THE DELHI CO OP URBAN T & C SOCIETY LTD . DOES NOT FALL WITHIN THE MEANING OF 'CO-OPERATIVE BANK' AS DEFINE D IN PART V OF THE BANKING REGULATION ACT, 1949, SUBSECTION (4) OF SEC TION 80P WILL NOT APPLY IN THIS CASE. 5. THE ISSUES WITH THE APPROVAL OF CHAIRMAN, CENTRA L BOARD OF DIRECT TAXES.' 7. FROM THE ABOVE CLARIFICATION, IT CAN BE GATHERED THAT SUB-SECTION (4) OF SECTION 80P WILL NOT APPLY TO AN ASSESSEE WHICH IS NOT A CO-OPERATIVE BANK. IN THE CASE CLARIFIED BY CBDT, DELHI COOP URBAN THRIFT & CREDIT SOCIETY LTD. WAS UNDER CONSIDERATION. CIRCULAR CLARIFIED THAT TH E SAID ENTITY NOT BEING A CO- OPERATIVE BANK, SECTION 80P (4) OF THE ACT WOULD NO T APPLY TO IT. IN VIEW OF SUCH CLARIFICATION, WE CANNOT ENTERTAIN THE REVENUE 'S CONTENTION THAT SECTION SOP(4) WOULD EXCLUDE NOT ONLY THE CO-OPERATIVE BANK S OTHER THAN THOSE FULFILLING THE DESCRIPTION CONTAINED THEREIN BUT AL SO CREDIT SOCIETIES, WHICH ARE NOT CO-OPERATIVE BANKS. IN THE PRESENT CASE, RESPON DENT ASSESSEE IS ADMITTEDLY NOT A CREDIT CO-OPERATIVE BANK BUT A CREDIT CO-OPER ATIVE SOCIETY. EXCLUSION CLAUSE OF SUB-SECTION(4) OF SECTION 80P, THEREFORE, WOULD NOT APPLY. IN THE RESULT, TAX APPEALS ARE DISMISSED. 4.2 FURTHER IN ANOTHER TAX APPEAL NO.1150 OF 2013 I N THE CASE OF CIT VS. SURAT VANKAR SAHAKARI SANGH LTD., ORDER DATED 1 7 TH JANUARY, 2014, IT WAS FINALLY CONCLUDED THAT ASSESSEE BEING NOT A CO- OPERATIVE BANK, THEREFORE, THE PROVISIONS OF SECTION 80P(4) SHALL N OT APPLY, THE HONBLE COURT HAS ALSO REFERRED THAT THE CBDT CIRCULAR HAS CLARIFIED THAT SUCH TYPE OF ENTITY BEING NOT A CO-OPERATIVE BANK AND TH E PROVISIONS OF SECTION 80P(4) WOULD NOT BE ATTRACTED. IT WAS SPECI FICALLY MENTIONED BY THE HONBLE JUDGES THAT IN VIEW OF SUCH CLARIFICAT ION, WE CANNOT ENTERTAIN THE REVENUES CONTENTION THAT SECTION 80P( 4) WOULD EXCLUDE NOT ITA NO.814/AHD/2011 SHRI JAY AMBE NAGARIK SARAFI SAHAKARI MANDALI LTD. VS. ACIT, PALANPUR FOR A.Y. 2007-08 - 6 - ONLY THE CO-OPERATIVE BANKS OTHER THAN THOSE FULFIL LING THE DESCRIPTION CONTAINED THEREIN BUT ALSO CREDIT SOCIETIES, WHICH ARE NOT CO-OPERATIVE BANKS. IN THE PRESENT CASE, RESPONDENT ASSESSEE IS ADMITTEDLY NOT A CREDIT CO-OPERATIVE BANK BUT A CREDIT CO-OPERATIVE SOCIETY . EXCLUSION CLAUSE OF SUB-SECTION(4) OF SECTION 80P, THEREFORE, WOULD NOT APPLY. IN THE RESULT, TAX APPEALS ARE DISMISSED. 4.3 ON PERUSAL OF THE ORDERS OF AUTHORITIES BELOW, IT IS EVIDENT THAT THEY DID NOT HAVE THE BENEFIT OF THESE PRECEDENTS. DUE T O THIS REASON, WE ARE RESTORING THIS ISSUE BACK TO THE FILE OF THE AO TO BE DECIDED DE NOVO AFTER ASCERTAINING THAT THE FACTS OF THIS ASSESSEE ARE ID ENTICAL WITH THE FACTS OF THESE PRECEDENTS. SPECIALLY THE AO SHALL EXAMINE TH E PROFIT AND LOSS ACCOUNT OF THE ASSESSEE ALONG WITH BALANCE SHEET TO EXACTLY ASCERTAIN THE NATURE OF BUSINESS OF THIS ASSESSEE AND IF FOUND TH AT THE SAME IS MATCHING WITH THE BUSINESS ACTIVITY OF THE CITED CASES THEN THE RATIO LAID DOWN CAN BE APPLIED. THE AO IS ALSO DIRECTED TO VERIFY THE A IMS AND OBJECTS OF THIS ASSESSEE. WITH THESE DIRECTIONS, WE HEREBY ALLOW TH E GROUND OF THE ASSESSEE ONLY FOR STATISTICAL PURPOSE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE ONLY. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 28/08/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. ITA NO.814/AHD/2011 SHRI JAY AMBE NAGARIK SARAFI SAHAKARI MANDALI LTD. VS. ACIT, PALANPUR FOR A.Y. 2007-08 - 7 - 3. #$#% ' '& / CONCERNED CIT 4. ' '&() / THE CIT(A)-III, AHMEDABAD 5. )*' %, ' ' % , ,-$ / DR, ITAT, AHMEDABAD 6. *./ 0 / GUARD FILE. / BY ORDER, 1 11 1/ // /,' #2 ,' #2 ,' #2 ,' #2 ( DY./ASSTT.REGISTRAR) ' ' % ' ' % ' ' % ' ' % , , , , ,-$ ,-$ ,-$ ,-$ / ITAT, AHMEDABAD