The Jamakhandi Minority Co-Operative Credit Society Limited, Bagalkot V. ITO, Bijapur

ITA 958/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89976 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 22-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMASUBRAMANIAN
• Keywords: Question of law
• Section: 263; 11

Judgement Text

ITA.958/BANG/2014 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER I.T.A NO.958/BANG/2014 (ASSESSMENT YEAR : 2009-10) THE JAMAKHANDI MINORITY CO-OP ERATIVE CREDIT SOCIET Y LTD, GAVALI GALLI, JAMKHANDI, BAGALKOT DISTRICT 587 301 .. APPELLANT PAN : AAALT0276H V. INCOME-TAX OFFICER, WARD 2, BIJAPUR .. RESPONDENT ASSESSEE BY : SHRI. RAMASUBRAMANIAN, CA REVENUE BY : DR. P. K. SRIHARI, ADDL.CIT HEARD ON : 22.06.2015 PRONOUNCED ON : 30.06.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE, ITS GRIEVANCE IS THAT AO DENIED DEDUCTION U/S.80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 (THE ACTIN SHORT), AND APPLIED SECTION 80P(4) OF THE ACT, FOR THE ASSESSMENT YEAR 2009-10. 02. LD. AR SUBMITTED THAT THE ISSUE RELATING TO DED UCTION U/S. 80P(2)(A)(I) OF THE ACT STOOD DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGH A NIYAMITHA BAGALKOT IN ITA.958/BANG/2014 PAGE - 2 ITA NO.5006/2013 DATED 5.2.2014. ACCORDING TO HIM, THE BYE LAWS OF THE ASSESSEE SOCIETY DID NOT PROHIBIT ANY OTHER COOPERA TIVE SOCIETY FROM BECOMING A MEMBER. 03. PER CONTRA, THE LD. DR SUBMITTED THAT THE ASSES SEE WAS A COOPERATIVE BANK FALLING WITHIN THE DEFINITION OF BANKING REGULATION ACT, 1949 AND THEREFORE THE PROHIBITION PRESCRIBED IN SECTION 80P(4) CLEARLY AP PLIED TO IT. 04. WE HAVE PERUSED THE ORDERS AND ALSO HEARD THE RIVAL CONTENTIONS. THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80P(2)(A)( I) WAS DISALLOWED BY THE AO FOR THE REASON THAT THE ASSESSEE FELL WITHIN THE RE ALM OF BANKING REGULATION ACT, 1949. NO DOUBT, THE ASSESSEE HAD SATISFIED TWO OF THE THREE PRIMARY CONDITIONS MENTIONED IN SECTION 5(CCV) OF THE BANKING REGULATI ON ACT, 1949 VIZ., IT HAD THE PRIMARY OBJECT OF BANKING AND IT HAD SHARE CAPITAL WHICH WAS IN EXCESS OF RS. ONE LAKH. BUT, WE FIND FROM THE MEMBERSHIP QUALIFI CATION AS SET OUT IN THE BYE LAW, WHICH HAS BEEN REPRODUCED BY THE ASSESSING OFF ICER AT PAGE 37 OF HIS ORDER THAT THERE WAS NOTHING WHICH FORBID A COOPERATIVE S OCIETY FROM BECOMING A MEMBER. IT IS CLEARLY STATED THAT EVERY PERSON COMP ETENT TO CONTRACT UNDER SECTION 11 OF THE INDIAN CONTRACT ACT, 1872 COULD B ECOME A MEMBER, PROVIDED OTHER CONDITIONS ARE SATISFIED. A PERSON WILL DEFI NITELY INCLUDE A COOPERATIVE SOCIETY. IN ANY CASE, WE FIND THAT THE HONBLE JUR ISDICTIONAL HIGH COURT IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANG HA NIYAMITHA BAGALKOT (SUPRA) IN RELATION TO A SIMILAR ISSUE, HAS HELD AT PARAGRAPHS 5 TO 8 OF ITS JUDGMENT AS FOLLOWS:- ITA.958/BANG/2014 PAGE - 3 5. THE TRIBUNAL HELD THAT AS THE ASSESSEE IS NOT A COOPERATIVE BANK, SECTION 80P(4) HAS NO APPLICATION. MOREOVER, THE PO WER UNDER SECTION 263 OF THE ACT COULD BE INVOKED BY THE REVISIONAL AUTHO RITY ONLY, IF THE ORDER IS ERRONEOUS AND THEREBY IS PREJUDICIAL TO THE INTERES T OF REVENUE, IN THE INSTANT CASE AS THE ASSESSEE IS NOT A CO-OPERATIVE BANK I.E . THERE IS NO ERROR COMMITTED BY THE ASSESSING AUTHORITY MUCH LESS, THE SAID ORDER WAS PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFOR E, THE ORDER PASSED BY THE REVISIONAL AUTHORITY WAS SET-ASIDE. 6. AGGRIEVED BY THE SAID ORDER, THE REVENUE HAS PRE FERRED THIS APPEAL. 7. THE ONLY SUBSTANTIAL QUESTION OF LAW WHICH ARIS ES FOR OUR CONSIDERATION IN THIS APPEAL IS:- IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, WHET HER THE REVISIONAL AUTHORITY WAS JUSTIFIED IN INVOKING HIS POWER UNDER SECTION 263 OF THE ACT WITHOUT THE FOUNDATIONAL FACT OF ASSESSEE BEING CO- OPERATIVE BANK WAS NOT THERE? 8. IN THE ASSESSMENT ORDER, THE ASSESSING AUTHORITY HAS CLEARLY STATED THAT THE ASSESSEE IS A COOPERATIVE SOCIETY AND HAS NOT O BTAINED ANY BANKING LICENSE. THE BUSINESS OF THE ASSESSEE IS TO PROVIDE CREDIT FACILITIES TO ITS MEMBERS. SINCE THE ASSESSEE CANNOT CARRY ON ANY BAN KING BUSINESS, THE INTEREST ON INVESTMENT IS TAXABLE AS INCOME FROM OT HER SOURCE. THEREFORE THE AFORESAID FACTS, WHICH IS NOT IN DISPUTE CLEARLY ES TABLISHES THAT IT IS NOT A CO- OPERATIVE BANK. IN FACT, THE REVISIONAL AUTHORITY A LSO IN ITS ORDER HAS CATEGORICALLY STATED THAT THE ASSESSEE IS A CO-OPER ATIVE SOCIETY, WHICH PROVIDES CREDIT FACILITIES. SECTION 80P OF THE ACT DEALS WITH THE DEDUCTION OF INCOME OF A SOCIETY. IN THE CASE OF ANY ASSESSEE BE ING A CO-OPERATIVE SOCIETY, THE WHOLE OF THE AMOUNTS OF PROFITS AND GA INS 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 OTHER WORDS, THE SAID INCOME IS NOT TAXABLE. IT IS A BENEFIT GIVEN TO THE CO- OPERATIVE SOCIETY. SECTION 80P(4) WAS INTRODUCED BY FINANCE ACT, 2006 WITH EFFECT FROM 01.04.2007 EXCLUDING THE SAID BENEFIT T O A CO-OPERATIVE BANK. THE SAID PROVISION READS AS UNDER:- (4) THE PROVISIONS OF THIS SECTION SHALL NOT APPL Y IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTUR AL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVEL OPMENT BANK. (A) CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT 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 D EVELOPMENT BANK MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK ITA.958/BANG/2014 PAGE - 4 AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. THEREFORE, THE INTENTION OF THE LEGISLATURE IS CLEA R. IF A CO-OPERATIVE BANK IS EXCLUSIVELY CARRYING ON BANKING BUSINESS, THEN THE INCOME DERIVED FROM THE SAID BUSINESS CANNOT BE DEDUCTED IN COMPUTING THE T OTAL INCOME OF THE ASSESSEE. THE SAID INCOME IS LIABLE FOR TAX. A CO-O PERATIVE BANK AS DEFINED UNDER THE BANKING REGULATION ACT INCLUDES THE PRIMA RY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LEGISLATURE DID NOT WANT TO DENY THE SAID BENEF ITS TO A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATI VE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THEY DID NOT WANT TO EXTEND THE S AID BENEFIT TO A CO- OPERATIVE BANK WHICH IS EXCLUSIVELY CARRYING ON B ANKING BUSINESS I.E. THE PURPORT OF THIS AMENDMENT. THEREFORE, AS THE ASSE SSEE IS NOT A COOPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND A S IT DOES NOT POSSESS A LICENCE FROM RESERVE BANK OF INDIA TO CARRY ON BUSI NESS, 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 C OVERED UNDER SECTION 80P(2)(A)(I) I.E. CARRYING ON THE BUSINESS OF BANKI NG FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE OBJECT OF THE AFORES AID AMENDMENT IS NOT TO EXCLUDE THE BENEFIT EXTENDED UNDER SECTION 80P(1) T O SUCH SOCIETY. THEREFORE, THERE WAS NO ERROR COMMITTED BY THE ASSE SSING AUTHORITY. THE SAID ORDER WAS NOT PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE CONDITION PRECEDENT FOR THE COMMISSIONER TO INVOKE THE POWER UNDER SECTION 263 IS THAT THE TWIN CONDITION SHOULD BE SATISFIED. THE OR DER SHOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 05. WE THEREFORE, DIRECT THAT ASSESSEE BE GIVEN THE CLAIM SOUGHT BY IT U/S 80P(2)(A)(I) OF THE ACT, FOR THE IMPUGNED YEAR. 06. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH DAY OF JUNE, 2015. SD/- SD/- (VIJAYPAL RAO) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER