THE COMMISSIONER OF INCOME TAX V. M/S. SAPTHARISHI CREDIT

ITA/304/2014

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Income-Tax Officer against M/s. Saptharishi Credit Co-operative Society Ltd., challenging the applicability of Section 80P(4) of the Income Tax Act, 1961. The revenue contended that the society, engaged in providing credit facilities to its members, should be treated as a co-operative bank and thus fall under the purview of Section 80P(4), which was amended by the Finance Act 2006. However, the Tribunal and the High Court found that the society is a co-operative society, not a co-operative bank, and therefore not subject to the provisions of Section 80P(4). The court referenced a similar case, ITA No.5006/2013, to support its decision.

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 701068 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-03-2015
• Assessment Year: misc
• Other Referred Cases: THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT
• Laws Referred To: Income Tax Act 1961, Banking Regulation Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: K V ARAVIND
• Keywords: Banking Business; Co-operative Bank; Co-operative Society; Credit Facilities; Income Tax
• Section: 80P; 2(24)(viia); 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF MARCH 2015 PRESENT THE HON’BLE MR.JUSTICE VINEET SARAN AND THE HON’BLE MRS.JUSTICE S SUJATHA ITA NO.304 OF 2014 BETWEEN 1. THE COMMISSIONER OF INCOME TAX C.R.BUILDING, QUEENS ROAD, BANGALORE. 2. THE INCOME-TAX OFFICER WARD-3(1), UNITY BUILDING ANNEXE, MISSION ROAD, BANGALORE-560027. ... APPELLANTS (BY SRI. K V ARAVIND, ADV., ) AND M/S. SAPTHARISHI CREDIT CO-OPERATIVE SOCIETY LTD., 6/1, MALLIKARJUNA TEMPLE STREET, DVG ROAD, BASAVANAGUDI, BANGALORE-560004. ... RESPONDENT THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:25/02/2014 PASSED IN ITA NO.1148/BANG/2013, FOR THE ASSESSMENT YEAR 2008-2009 PRAYING TO: 2 I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO.1148/BANG/2013 DATED:25/02/2014 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD- 3(1), BANGALORE. THIS APPEAL COMING ON FOR ADMISSION THIS DAY, VINEET SARAN J., DELIVERED THE FOLLOWING: JUDGMENT This appeal is preferred by the revenue challenging the order passed by the Tribunal, wherein it is held that sub- section (4) of Section 80P of the Income Tax Act, 1961 is applicable only to co-operative banks and not to credit co- operative societies. 2. The substantial questions of law which are raised in the appeal are as under: 1. Whether the Tribunal was correct in holding that the assessee is not a co-operative bank but only a co- operative society engaged in providing credit facilities to its members? 2. Whether the Tribunal was correct in not appreciating that the main motto of the co-operative Society is lending for its members which is in the 3 nature of banking transaction, treated on par as per the new clause introduced in the definition of income in section 2(24)(viia) and comes under the purview of 80P sub-section (4) of the Act as inserted in Finance Act 2006 to be effective from 01.04.2007? 3. The Tribunal in its order has set out the difference between the Co-operative Bank and Co-operative Society and has arrived at the conclusion, since the assessee is a Co- operative Society and not a Co-operative Bank, the provisions of the said Section 80P(4) of the Act, will not be applicable in the case of the assessee. 4. 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, 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 4 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 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. 5 5. The said judgment answers the issues in this case also. Accordingly, we pass the following order. The appeal is dismissed. The substantial questions of law are answered in favour of the assessee and against the revenue. Sd/- JUDGE Sd/- JUDGE JT/- "