COMMISSIONER OF INCOME TAX V. SRI VASAVI MULTIPURPOSE SOUHARDA SAHAKARI

ITA/505/2013

AI Insights

This case involves an appeal by the Commissioner of Income Tax and the Income Tax Officer against the order of the Income Tax Appellate Tribunal (ITAT), which granted deduction under Section 80P of the Income Tax Act to Vasavi Multipurpose Souharda Sahakari Niyamita for the assessment year 2007-2008. The primary legal issues were whether the Tribunal was correct in allowing the deduction under Section 80P despite the provisions of Section 80P(4) read with Section 2(24)(viia), and whether the ITAT was right in canceling the order under Section 263 which claimed the assessment order was prejudicial to the interests of the revenue. The court referenced a similar case, ITA No.5006/2013, to support its decision.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 741779 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 27-06-2014
• Assessment Year: misc
• Other Referred Cases: THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, 4 BAGALKOT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: K R PRASAD
• Assessee Lawyers: E I SANMATHI
• Keywords: Assessment Order; Co-operative Bank; Deduction; Income Tax; Jurisdiction
• Section: 263; 80P; 2(24)(viia); 260-A

Judgement Text

" IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 27TH DAY OF JUNE, 2014 PRESENT THE HON’BLE MR. JUSTICE N KUMAR AND THE HON’BLE MR. JUSTICE B MANOHAR ITA NO. 505/2013 BETWEEN: 1. The Commissioner of Income Tax No.55/1, ‘Shilashree’, Vidyarany Complex, Vishveshwaranagar, Mysore 570 008. 2. The Income Tax Officer No.55/1, ‘Shilpashree’, Vidhyaranya, Vishveshwaranagar, Mysore 570 008. …Appellants (By Sri E.I. Sanmathi, Adv.) 2 AND: Vasavi Multipurpose Souharda Sahakari Niyamita, VVS Bhavan, Nekar Street, Chikkamagalur. …Respondent (By Sri K.R. Prasad, Adv.) This ITA filed under Section 260-A of I.T. Act, 1961 arising out of order dated 10.05.2013 passed in ITA No.97/Bang/2013, for the Assessment year 2007-2008, praying to (i) formulate the substantial questions of law stated therein; (ii) set aside the appellate order dated 10.05.2013 passed by the ITAT, ‘C’ Bench, Bangalore in ITA No.97/Bang/2013. This ITA coming on for hearing this day, N. KUMAR J delivered the following: J U D G M E N T This appeal is preferred by the revenue against the order passed by the Tribunal granting deduction under Section 80P of the Income Tax Act, 1961 (for short ‘the Act’) and also holding that the Commissioner of Income Tax committed an error in exercising its jurisdiction under Section 263 of the Act. 3 2. The two substantial questions of law which arise for consideration are as under: (i) “Whether in the circumstances of the case, the Tribunal is right in holding that assessee is entitled for deduction under Section 80P ignoring provisions of Section 80P(4) read with Section 2(24)(viia) introduced in statute with effect from 01.04.2007? (ii) Whether the Tribunal is right in cancelling order passed under Section 263 on the ground that the assessment order passed is not prejudicial to the interests of revenue, though detailed reasons were recorded in order under Section 263 as to how the assessment order passed is prejudicial to interest of revenue?” 3. Insofar as the first question of law is concerned, this Court had an occasion to consider the said question in ITA No.5006/2013 dated 05.02.2014 in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, 4 BAGALKOT, where, after referring to the relevant provisions of the Income Tax Act, and the banking Regulation Act, held as under: “If a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a co- operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of 5 lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society.” Therefore, the said issue was held in favour of the assessee and against the revenue. 4. Insofar as the second question of law is concerned, in the aforesaid judgment this Court has held, when status of the assessee is a co-operative society and not a co-operative bank, the order passed by the Assessing Authority extending the benefit of the exemption from payment of tax under Section 80P(2)(a)(i) of the Act is correct. There is no error. When there is no error, question of order being prejudicial would not arise and therefore, the order passed by the revisional authority is not at all with jurisdiction and rightly the tribunal entertained the appeal 6 against this order and set aside the said order. The same holds good even in this case. 5. Thus, the substantial question of law is answered in favour of the assessee and against the revenue. (SD/-) JUDGE (SD/-) JUDGE VP/- "