RASHTRIYA CHEMICALS AND FERTILISERS EMPLOYEES CO OP CREDIT SOCIETY LTD, MUMBAI V. ITO 27(3)(1), NAVI MUMBAI

MA 202/MUM/2023

AI Insights

The case involves the Rashtriya Chemicals and Fertilizers Employee Co-op Credit Society appealing against the Income Tax Officer's disallowance of deductions under sections 80P(2)(c) and 80P(2)(d) for the assessment years 2017-18 and 2018-19. The ITAT had previously adjudicated on a related issue under section 80P(2)(a) but did not address the other grounds. Upon the society's application, the ITAT recalled its earlier order and allowed the deductions, clarifying that the society's activities did not constitute banking and thus were not covered under the restrictive provisions of section 80P(4).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130308 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-05-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 23-02-2023
• Other Referred Cases: Quepem Urban Cooperative Credit Society Ltd vs. ACIT [2015] 377 ITR 272 (Bom), ITO vs. Jankalyan Nagri Sahakari Pat Sanstha 24 taxman.com 127 Pune Tribunal, DCIT vs. Jayalkshi Mahila Vividodeshagala Souharda Sahakari Ltd 23 taxmann.com 313 Panaji Tribunal
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80P; 201

Judgement Text

P a g e | 1 MA Nos. 201 & 202/Mum/2023 Rashtriya Chemicals and Fertilizers Employee Co-op Credit Society Vs. The ITO, Ward 27(3)(1) IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER M.A. No. 201/Mum/2023 & M.A. No. 202/Mum/2023 ITA No.2283/Mum/2022 & ITA No.2284/Mum/2022 s (A.Ys.2017-18 & 2018-19) Rashtriya Chemicals and Fertilizers Employee Co- op. Credit Society, Type 1A/21, 481/484, Chembur, Mumbai 400 074 Vs. The Income Tax Officer, Ward 27(3)(1) Room No.442, 4 th Floor, Tower No. 6, Vashi, Railway Station Commercial Complex, Vashi, Navi Mumbai 400 703 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAAAR1076N Appellant .. Respondent Appellant by : Mayank Thoshar Respondent by : Dinesh A Chourasia Date of Hearing 19.05.2023 Date of Pronouncement 24.05.2023 आदेश / O R D E R Per Amarjit Singh, AM: These miscellaneous applications No. 201 & 202/Mum/2023 are filed against the combined order of the ITAT, dated 06.12.2022 vide ITA No.2283 & 2284/Mum/2022. 2. Since common issues on identical facts are involved in these miscellaneous applications, therefore, for the sake of convenience both these miscellaneous applications are adjudicated together by taking the P a g e | 2 MA Nos. 201 & 202/Mum/2023 Rashtriya Chemicals and Fertilizers Employee Co-op Credit Society Vs. The ITO, Ward 27(3)(1) MA No. 201/Mum/2023 as a lead case and its finding will be applied mutatis mutandis to the other M.A No. 202/Mum/2023. M.A. No. 201/Mum/2023 3. In the miscellaneous application it is submitted that appeal of the assessee for the assessment year 2017-18 along with the appeal for the assessment year 2018-19 were adjudicated vide common order dated 06.12.2012 vide ITA No. 2283 & 2284/Mum/2022. 4. The assessee submitted that vide the aforesaid order dated 06.12.2022 the ITAT has decided the issue on claim of deduction u/s 80P(2)(a) of the Act, however, the other two remaining ground of appeal on the issue of claim of deduction u/s 80P(2)(c) and 80P(2)(d) were remained to be adjudicated. In this regard, the assessee has also furnished the copy of Form No. 36 indicating that these two ground of appeal were also filed as per Form No. 36 dated 09.09.2022 before the ITAT. 5. Heard both the sides and perused the material on record. On perusal of the order dated 16.12.2022 as referred supra it is observed that ground of appeal no. 5 & 6 on the issue of claim of deduction u/s 80P(2)(c) and 80P(2)(d) were not specifically addressed while considering the claim of deduction u/s 80P of the Act made by the assessee. Therefore, we consider that there is an apparent mistake from record and order of the ITAT dated 06.12.2012 is recalled to adjudicate these two ground of appeal filed by the assessee. Therefore miscellaneous applications of the assesse are allowed. ITA No.2283/Mum/2022 & ITA No. 2284/Mum/2022 6. After recalling these orders both the ground of appeal are adjudicated as follows: P a g e | 3 MA Nos. 201 & 202/Mum/2023 Rashtriya Chemicals and Fertilizers Employee Co-op Credit Society Vs. The ITO, Ward 27(3)(1) 7. The AO has disallowed the claim of deduction u/s 80P(2)(c) and 80P(2)(d) of the Act in view of the amended provisions of Sec. 80P(2) considering that assesse was engaged in the banking business and therefore, not eligible for these deductions. The AO has disallowed the whole claim of deduction claimed by the assessee trust u/s 80P which was bifurcated by the assesse u/s 80P(2)(a), 80P(2)(c) & 80P(2)(d). 8. We have adjudicated the claim of the assessee u/s 80P(2)(a) in favour of the assessee after referring the decision of ITAT in the case of the assessee itself vide ITA No. 6093/Mum/2013. The relevant part of the decision is as under: “4. Heard both the sides and perused the material on record. The A.O has denied the claim of deduction u/s 80P(2)(a) on the ground that the assessee cooperative society providing credit facility to its members is also covered by the amended provisions of Sec. 80P(4) of the Act. The ld. CIT(A) held that assessee is cooperative society and engaged in banking business and referred Sec. 80P(4) and observed that the provisions of Sec. 80P(4) shall not apply in relation to any cooperative bank and other than primary agricultural credit society or a primary agricultural and rural development bank. The amended provisions of Sec. 80P(4) w.e.f 2007 is reproduced as under: “(4) The provisions of this section shall not apply in relation to any co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation-For the purposes of this sub section,- (a) “co-operative bank” and “primary agricultural credit society” shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949(10 of 1949) ; (b) “primary co-operative agricultural and rural development bank” means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit or agricultural and rural development activities.” The Banking Revolution Act 1949 specifically define the cooperative bank u/s 5 of the Act and the lower authorities have failed to substantiate how the assessee cooperative society can be held as cooperative bank. It is undisputed fact that assessee society was not engaged in the business of banking and merely engaged in extending credit to its members and on identical facts and similar issue the coordinate bench of the ITAT in the case of the assessee itself vide ITA No. 6903/Mum/2013 held as under: P a g e | 4 MA Nos. 201 & 202/Mum/2023 Rashtriya Chemicals and Fertilizers Employee Co-op Credit Society Vs. The ITO, Ward 27(3)(1) “3. In this appeal, the only issue raised by the Revenue relates to the allowability of relief u/s 80P of the Act in respect of the income of the assessee when the assessee is a ‘credit cooperative society’. In the assessment, AO treated the same as a ‘credit cooperative bank’. During the first appellate proceedings, CIT (A) examined the facts relevant to the definition of ‘credit cooperative society’ as well as the applicable citations and came to the conclusion that the assessee is not a ‘bank’ and therefore, the provisions of section 80P(4) will not apply to the assessee- credit cooperative society. The contents of paras 6 and 7 of the CIT (A)’s order are relevant in this regard. Aggrieved with the same, Revenue is in appeal before the Tribunal with the present appeal. 4. During the proceedings before us, Ld DR for the Revenue submitted that the order of the CIT (A) should be reversed. By mentioning the fact that lending and borrowing activities between the members of the society and the assessee constitutes ‘banking activities’. 5. On the other hand, Ld Counsel for the assessee heavily relied on the order of the CIT (A) and the contents of paras 6 and 7 of the impugned order. Further, Ld Counsel also relied on the citations relied upon by the CIT (A)’s vide para 7 of his order. For the sake of completeness of this order, the said prara 7 of the impugned order is extracted as under: “7. From the facts of the instant case, it is quite clear that the appellant has limited itself to the members of employees of M/s. Rashtriya Chemicals & Fertilizers Ltd. Further, the appellant has not provided banking facilities either to general public at large or even to the members of the society. Even the bye laws of the appellant does not provide for the banking activities. The facts of the instant case are almost similar to the decisions relied upon by the appellant particularly, the facts in the case of (a) ITO vs. Jankalyan Nagri Sahakari Pat Sanstha 24 taxman.com 127 Pune Tribunal, and (b) DCIT vs. Jayalkshi Mahila Vividodeshagala Souharda Sahakari Ltd 23 taxmann.com 313 Panaji Tribunal, where the activities of the assessees were limited to the members of a specific group and the area of operation was also limited to the acceptance of deposits of the members and providing credit facilities only to the members, which have been held as not falling under the banking activities as defined in the Banking Regulation Act. Therefore, respectfully following the aforesaid decisions of the ITAT Pune and Panaji Benches, the appellant also cannot be held as a Cooperative Bankhence the deduction claimed u/s 80P(2)(a)(i) cannot be denied to it. The AO is accordingly directed to allow the deduction claimed by the appellant.” 6. Further, we have also perused the judgment of the jurisdictional High Court in the case of Quepem Urban Cooperative Credit Society Ltd vs. ACIT [2015] 377 ITR 272 (Bom), which was relied upon by the Ld P a g e | 5 MA Nos. 201 & 202/Mum/2023 Rashtriya Chemicals and Fertilizers Employee Co-op Credit Society Vs. The ITO, Ward 27(3)(1) Counsel for the assessee for the proposition that such lending activities do not constitute banking activities as the same are transacted between the cooperative society and the members of the society. Since, no public is involved the definition of ‘banking’ does not cover such activities. As such, there is no Reserve Bank of India’s approval for conducting such banking activities in this case. He also relied on the definition of “banking” and read out from the contents of section 5 of the Banking Regulation Act, 1949 and the same reads as under:- Sec. 5(b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, or otherwise; 7. From the above, Ld. Counsel for the assessee demonstrated that the members of the Credit Cooperative Society do not constitute “public” and there is no depositing, withdrawal by cheque or draft etc. After considering the said judgment of the Hon’ble jurisdictional High Court in the case of Quepem Urban Cooprative Credit Society (supra), we are of the opinion that decision of the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, issue raised in the Revenue’s appeal is dismissed.” Following the decision of the coordinate bench of the ITAT in the case of assessee itself as supra we direct the A.O to allow the claim of deduction to the assessee u/s 80P(2)(a)(i) of the Act. Therefore, ground of appeal of the assessee is allowed.” 9. Following the decision of the coordinate bench on the similar issue and facts in the case of the assessee itself as supra, we consider that provision of Sec. 80P(4) of the Act is not applicable to the case of the assessee. Since, the assesse society was not engaged in the business of banking and merely engaged in extending credit to its members, therefore, we consider that assessee is also entitled for claim of deduction u/s 80P(2)(c) as the amount of deduction claimed is less than Rs. Fifty thousand as specified u/s 80P(2)(c)(ii) of the Act and deduction u/s 80P(2)(d) on the income of Rs.20,20,549 earned in the form of interest and dividend from other co-operative societies. Accordingly, these two ground of appeal of the assessee are also allowed. M.A. No.202/Mum/2023 P a g e | 6 MA Nos. 201 & 202/Mum/2023 Rashtriya Chemicals and Fertilizers Employee Co-op Credit Society Vs. The ITO, Ward 27(3)(1) 10. As the facts and the issue involved in these grounds of appeal are the same as we adjudicated supra vide M.A. No. 201/Mum/2023, therefore applying the finding of M.A. 201/Mum/2023 as mutatis mutandis the miscellaneous application is allowed. ITA No.2284/Mum/2022 11. As the facts and issue involved in both these appeals are the same pertaining to the issue of claim of deduction u/s 80P(2)(c) and 80P(2)(d) as adjudicated supra vide ITA No. 2283/Mum/2022 therefore, applying the same findings mutatis mutandis this appeal of the assesse is allowed. 12. In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 24.05.2023 Sd/- Sd/- (Rahul Chaudhary) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 24.05.2023 Rohit: PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.