Assistant Commissioner of Income tax ,Circle-6, Nagpur V. The Medical College Hospital Employees Credit Co-op Society Limited, Nagpur

ITA 85/NAG/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9600 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAJARAM
• Assessee Lawyers: RAJESH GATAGAT
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) . . , . / BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 85/NAG/2011 / ASSESSMENT YEAR 2007-08 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE -6, AAYAKAR BHAVAN, CIVIL LINES, NAGPUR. VS. THE MEDICAL COLLEGE HOSPITAL EMPLOYEES CREDIT CO-OP. SOCIETY LTD., NAGPUR 7 PAN: AAAAT 5279 K ( / APPELLANT ) ( / RESPONDENT ) REVENUE BY : SHRI B. RAJARAM ASSESSEE BY : SHRI RAJESH GATAGAT ! '#$ / DATE OF HEARING : 19-12-2012 %& ! '#$ / DATE OF PRONOUNCEMENT : 19-12-2012 '( / O R D E R PER RAJENDRA, AM CHALLENGING THE ORDER DT. 03-02-2011 OF CIT(A)-II, NAGPUR, ASSESSING OFFICER (AO) HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTIO N U/S. 80P (2)(A)(I) OF THE IT ACT, 1961 IN RESPECT OF INTEREST INCOME OF RS. 11,1 7,310/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE WAS NOT STATUTORILY REQUIRED TO MAKE INVESTMENTS IN SPECIFIED SECURITIES UNLIKE SUCH STIPULATION FOR EN TITIES ENGAGED IN THE BUSINESS OF BANKING. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT U/S. 66 R.W.S. 70 OF THE MAHARASHTR A CO-OPERATIVE SOCIETY ACT, 1960 THE ASSESSEE WAS ONLY BOUND TO CREATE A RESERV E OUT OF ITS PROFIT AND THERE WAS NO STIPULATION THAT SUCH RESERVE COULD NOT ONLY BE INVESTED IN SPECIFIED SECURITIES. 4. ANY OTHER GROUND THAT MAY BE RAISED AT THE TIME OF HEARING. ITA NO. 85/NAG/2011 THE MEDICAL COLLEGE HOSPITAL EMP. CREDIT CO-OP. SOCI ETY LTD., 2 2. ASSESSEE, A CREDIT CO-OPERATIVE SOCIETY, ENGAGED I N THE BUSINESS OF BANKING/PROVIDING CREDIT FACILITY TO ITS MEMBERS, F ILED ITS RETURN OF INCOME ON 02-11- 2007 DECLARING TOTAL INCOME OF RS. 13.28 LAKHS. AS SESSMENT WAS FINALISED BY THE AO U/S. 143(3) OF THE INCOME TAX ACT, 1961 (ACT) ON 22 -12-2009 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS. 23.49 LAKHS. 3. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT T HE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 12.65 LAKHS U/S. 80P (2)(D), BEING THE INTEREST ON FIXED DEPOSITS, SAVINGS BANK A/C AND ON RESERVE FUND DEPOSIT WITH N AGPUR DISTRICT CENTRAL CO- OPERATIVE BANK. AO MADE FURTHER INQUIRIES ABOUT CL AIM MADE U/S. 80(P) OF THE ACT AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE HE HELD THAT ASSESSEE WAS NOT ENTITLED TO DEDUCTIONS AS PER THE PROVISIONS OF SEC TION 80P (2)(D). INVOKING THE PROVISIONS OF SECTION 80P(4) OF THE ACT, HE HELD TH AT THE ASSESSEE WAS A CO-OPERATIVE BANK AND HENCE NOT ELIGIBLE FOR DEDUCTION U/S. 80P (2)(D) OF THE ACT. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE HEL D THAT AS PER SECTION 80P(2)(A)(I) TWO CATEGORIES OF CO-OPERATIVE SOCIETIES WERE CONTE MPLATED ONE THAT CARRIED ON THE BUSINESS OF BANKING AND THE OTHER THAT PROVIDED CRE DIT FACILITIES TO ITS MEMBERS, THAT THESE WERE DISTINCT AND SEPARATE AS WAS EVIDENT FRO M THE DISJUNCTIVE CLAUSE OR USED TO IDENTIFY THE TWO CATEGORIES. AFTER CONSIDERING THE RELEVANT PROVISIONS OF BANKI NG REGULATION ACT AND MAHARASHTRA CO-OPERATIVE SOCIETY CIRCULARS ISSUED B Y THE RBI AND EXPLANATORY NOTES ON PROVISIONS RELATING TO FINANCE ACT, 2006 (CIRCUL AR NO. 14 OF 2006), HE HELD THAT ASSESSEE WAS NOT A CO-OPERATIVE BANK IT WAS A CO- OPERATIVE SOCIETY. FOR ARRIVING AT THE SAID CONCLUSION, FAA OBSERVED AS UNDER: I. ASSESSEE DID NOT OBTAIN LICENSE FROM THE RESERV E BANK OF INDIA U/S. 22 TO FUNCTION AS A BANK. II. ASSESSEE HAD NO POWER TO ISSUE CHEQUE FACILITI ES TO MEMBERS WHICH WAS THE MOST COMMON CHARACTERISTIC OF THE BANK. III. ASSESSEE COMPANY HAD TO COMPLAIN WITH THE RULE S FRAMED FOR CO-OPERATIVE SOCIETIES UNDER THE MAHARASHTRA CO-OPERATIVE SO CIETIES RULES. IV. AS PER THE BANKING REGULATION (CO-OPERATIVE SOC IETIES) RULES, 1966, CO-OPERATIVE BANK WERE SUBJECT TO RESERVE BANK REGULATIONS AND HAD TO SUBMIT VARIOUS RETURNS EVERY MONTH PRESCRIBED UNDER SUCH RULES. THE MANNE R OF PUBLICATION OF ACCOUNTS AND BALANCE SHEET WAS ALSO PRESCRIBED. AO HAS NOT POIN TED OUT THAT ASSESSEE WAS ALSO UNDER ANY OBLIGATION TO ADHERE TO THESE REGULATIONS . HE FURTHER HELD THAT AO HAD FAILED TO APPRECIATE T HE DISTINCTION BETWEEN CREDIT CO- OPERATIVE SOCIETY AND CO-OPERATIVE BANK, THAT CREDI T CO-OPERATIVE SOCIETY WAS IN THE NATURE OF CREDIT RESOURCE SOCIETY WHICH STRIVED TO OBTAIN CREDITS FOR ITS MEMBERS WITH THE OBJECTIVES OF FACILITATING CREDIT TO INDIVIDUAL S WHILE CO-OPERATIVE BANKS WERE FULL- FLEDGED BANKING ORGANIZATION, THAT THE ASSESSEE CO- OPERATIVE CREDIT SOCIETIES WAS UNDER THE PURVIEW OF MAHARASHTRA CO-OPERATIVE SOCIETY ACT AND COULD NOT CONDUCT THE BUSINESS OF BANKING AS CLAIMED BY THE AO WITHOUT FU LFILLING THE CONDITIONS OF THE REGISTRAR OF SOCIETIES AND THE RESERVE BANK OF INDI A, THAT THE ACTION OF THE AO WAS NOT JUSTIFIED, THAT PROVISIONS OF SECTION 80P(4) HAD ON LY SOUGHT TO EXCLUDE THE CO-OPERATIVE BANKS FROM AVAILING THE BENEFITS OF THE DEDUCTION. AS A RESULT APPEAL FILED BY THE ASSESSEE WAS ALLOWED. 5. THE OTHER LIMB OF THE ADDITION WAS ABOUT INTEREST R ESERVE FUND DEPOSIT AND INTEREST EARNED BY THE ASSESSEE. ITA NO. 85/NAG/2011 THE MEDICAL COLLEGE HOSPITAL EMP. CREDIT CO-OP. SOCI ETY LTD., 3 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, FAA HELD THAT INTEREST RECEIVED ON RESERVE FUND DEPOSIT WAS ACTUALLY INCOM E FROM BUSINESS, THAT ASSESSEE WAS ENTITLED TO DEDUCTION U/S. 80P (2)(A)(I) OF THE ACT. RELYING UPON THE ORDER OF THE HONBLE SC DELIVERED IN THE CASE OF NAWANSHAHAR CE NTRAL CO-OPERATIVE BANK LTD. (289 ITR 6), HE DIRECTED THE AO TO ALLOW THE DEDUCT ION CLAIMED BY THE ASSESSEE. HOWEVER, CLAIM OF THE ASSESSEE WITH REGARD TO INTER EST OF RS. 1.48 LAKHS, EARNED ON SAVING DEPOSITS, WAS DIS-ALLOWED BY HIM FOLLOWING T HE DECISION OF HONBLE SUPREME COURT DELIVERED IN THE CASE OF TOTGAR'S CO-OPERATI VE SALE SOCIETY LTD. (322 ITR 283). 7. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO, WHERE AS AUTHORISED REPRESENTATIVE (AR) SUPPORTED T HE ORDER OF THE FAA. 8. AFTER HEARING THE RIVAL SUBMISSIONS, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. AFTE R ANALYSING VARIOUS PROVISIONS OF THE ACTS AND THE CIRCULARS, HE HAS HELD THAT THE AS SESSEE IS NOT A CO-OPERATIVE BANK. IN OUR CONSIDERED OPINION, ASSESSEE-COOPERATIVE SOC IETY CANNOT BE DEPRIVED OF THE BENEFITS OF DEDUCTIONS AVAILABLE AS PER THE PROVISI ONS OF SEC. 80P(2)(A) OF THE ACT, BY INVOKING THE PROVISIONS OF SEC. 80P(2) OF THE ACT W E AGREE WITH FAA, THAT APPELLANT IS A CREDIT CO-OPERATIVE SOCIETY AND NOT A CO-OPERA TIVE BANK AND THEREFORE IT IS ENTITLED TO CLAIM DEDUCTIONS AVAILABLE UNDER CHAPTER-VIA OF THE ACT [SECTION 80(P)]. INTEREST AMOUNTING TO RS. 11.17 LAKHS, EARNED FROM RESERVE F UND DEPOSIT, IT HAS TO BE TREATED THE BUSINESS INCOME OF THE ASSESSEE FOR THE AY UNDE R CONSIDERATION. 9. RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF NAWANSHAHAR CENTRAL CO-OPERATIVE BANK LTD., OF THE HONBLE SC (SUPRA) W E UPHOLD THE ORDER OF THE FAA. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISS ED. ORDER PRONOUNCED BY E-BENCH AT MUMBAI ON THIS 19 TH DAY OF DECEMBER, 2012. SD/- SD/- ( . . / R.K. GUPTA ) ( / RAJENDRA ) ') / JUDICIAL MEMBER $ ') / ACCOUNTANT MEMBER *+ MUMBAI, ,' DATE: 19 TH DECEMBER, 2012 TNMM COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR, ITAT, NAGPUR 6. GUARD FILE -' ' //TRUE COPY// BY ORDER, ASST. REGISTRAR, ITAT