THE COMMISSIONER OF INCOME TAX, V. LAXMI CREDIT SOUHARD SAHAKARI LTD.,

ITA/100001/2015

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Income Tax Officer against Sri Laxmi Credit Souharda Sahakari Ltd., concerning the classification of the respondent as a 'Primary Co-operative Bank' under the Banking Regulation Act, 1949, and its eligibility for tax benefits under Section 80P of the Income Tax Act, 1961. The Income Tax Appellate Tribunal had previously ruled in favor of the respondent, leading to this appeal by the Revenue. The High Court of Karnataka, referencing a similar case, upheld the Tribunal's decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 745971 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 06-01-2016
• Assessment Year: misc
• Other Referred Cases: CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot, The Commissioner of Income Tax & Another v. Shri Mahalaxmi Urban Co-operative Credit Society Limited, Mudalagi, Gokak
• Laws Referred To: Income Tax Act 1961, Banking Regulation Act 1949, Karnataka Souhard Sahakari Act 1997
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SANGRAM KULKARNI
• Assessee Lawyers: Y V RAVIRAJ
• Keywords: Banking Regulation Act; Co-operative Society; Income Tax; Primary Co-operative Bank; Karnataka Souhard Sahakari Act
• Section: 260A; 20; 80P(2)(a)(i); 5(ccv)

Judgement Text

": 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 6TH DAY OF JANUARY, 2016 PRESENT THE HON’BLE MR.JUSTICE H.BILLAPPA AND THE HON’BLE MR.JUSTICE P.S.DINESH KUMAR I.T.A.No.100001/2015 BETWEEN: 1. The Commissioner of Income Tax, Dr.B.R.Ambedkar Road, Belagavi. 2. The Income Tax Officer, Ward(1), Nippani. .. APPELLANTS (By Sri.Y.V.Raviraj, Adv.) AND: Sri Laxmi Credit Souharda Sahakari Ltd., 521, Main Road, At Post: Manjari, Tal: Chikodi, Dist: Belagavi, PAN : AABAS 3175 N .. RESPONDENT (By Sri.Sangram S.Kulkarni, Adv.) --- This ITA is filed u/S.260A of the Income Tax Act 1961 against the order passed in ITA.No.326/PNJ/2013 dt.22.8.2014 on the file of the Income Tax Appellate Tribunal, : 2 : Panaji Bench, Panaji, allowing the appeal filed by the assessee. This ITA coming on for admission this day, P.S.Dinesh Kumar, J., delivered the following: JUDGMENT Revenue, aggrieved by the order dated 22.08.2014 passed in I.T.A.No.326/PNJ/2013, by the Income Tax Appellate Tribunal, Panaji Bench, Panaji (‘ITAT’ for short) has presented this appeal by raising the following questions of law: 1. Whether in law and on facts the Tribunal erred in not appreciating the fact that the assessee is a co-operative society which fulfills all the three conditions of being held a Primary Co-operative Bank as given in Section 5(ccv) of the Banking Regulation Act, 1949? 2. Whether in law and on facts the Tribunal erred in holding that the provisions of section 20 of the Karnataka Souhard Sahakari Act, 1997 permits admission of any other Co-operative Society as a member and therefore, the assessee has not satisfied the condition enumerated in section 5(ccv) of the Banking Regulation Act, 1949, to treat it as Primary Co- operative Bank within the meaning of section 80P(4) of the Income Tax Act? : 3 : 3. Whether in law and on facts the Tribunal erred in ignoring the fact that as per provisions of section 5(ccv) of the Banking Regulation Act, 1949, the byelaws of the assessee which should not permit admission of any other co-operative society as a member and not the provisions of section 20 of the Karnataka Souhard Sahakari Act, 1997? 4. Whether in law and on facts the Tribunal erred in not appreciating the facts of the case that the byelaws of the assessee do not permit admission of any other co- operative society as a member and as such, conditions enumerated in section 5(ccv) of the Banking Regulation Act, 1949 are duly satisfied to become primary co- operative Bank within the meaning of section 80P(4) of the Income Tax Act, 1961? 5. Whether in law and on facts, the Tribunal erred in not appreciating the definition of a co-operative bank which as per explanation below section 80P(4) “the co- operative bank” shall have the meaning assigned to it in Part-V of the Banking Regulation Act, 1949? 2. Heard Sri Y.V.Raviraj, learned Standing Counsel for the Income Tax Department and Sri.Sangram S.Kulkarni, learned counsel for the respondent- assessee. : 4 : 3. The incontrovertible facts of this case are, the respondent is a Co-operative Society primarily carrying on the business of lending money to its members. For the assessment year 2011-2012, respondent claimed benefit under Section 80P(2)(a)(i) of the Income Tax Act (for short ‘the Act’). The Assessing Authority denied the said benefit. The appeal preferred by the assessee before the CIT (Appeal) also came to be dismissed. The assessee challenged the said order before the Income Tax Appellate Tribunal. By the impugned order, the Income Tax Appellate Tribunal after referring to various decisions and also the decision of this Court dated 5.2.2014 in the case of the CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot in I.T.A.No.5006/2013 has allowed the appeal. Being aggrieved by the impugned order of the Income Tax Appellate Tribunal, the revenue has preferred this appeal. 4. An identical case came up for consideration before this Court in I.T.A.No.100080/2014 in the case of The Commissioner of Income Tax & Another v. Shri Mahalaxmi Urban Co-operative Credit Society Limited, Mudalagi, Gokak. : 5 : After considering the earlier decision of this Court in CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra) and various other decisions mentioned therein, the questions of law raised by the Revenue in the said appeal were answered in favour of the assessee by order dated 21.09.2015, by holding thus: “10. We are in respectful agreement with the general view taken as to the interpretation of the relevant provisions of law, by the co-ordinate bench of this court, in the above and several other judgments adopting the same view. However, it is to be noticed that there is a seriously disputed question of fact which the Authorities under the IT Act have taken upon themselves to interpret in the face of the BR Act prescribing that in the event of a dispute as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi) of Section 56 of the BR Act, a determination thereof by the Reserve Bank shall be final, would require the dispute to be resolved by the Reserve Bank of India, before the authorities could term the assessee as a co-operative bank, for purposes of Section 80 P of the IT Act. Any opinion expressed therefore is tentative and is not final. The view expressed by this court, however, as to the assessee being a co-operative society and not a co- operative bank in terms of Section 80P (4) of the IT Act, shall hold the field and shall bind the authorities unless held otherwise by the Reserve Bank of India. : 6 : In the result, the above questions are answered in favour of the assessee and the present appeal of the revenue is dismissed.” 5. In the instant case also, the question that falls for consideration is as to: “Whether the Revenue has satisfactorily proved that the respondent-assessee may be construed as a Co-operative Bank, having fulfilled all the requirements contained in definition clause of Section 5(cci) read with Section 5(ccv) of the Banking Regulation Act, 1949 which would disentitle the asessee the benefit of Section 80P(2)(a)(i)?” 6. The issue involved in this appeal is identical to the issue in ITA No.100080/2014. We are in respectful agreement with the decision of this Court in the said appeal and therefore do not find any merit in the questions of law raised by the Revenue for consideration. Accordingly, we hold that this appeal deserves to be dismissed. 7. At this juncture, the learned counsel for the Revenue submitted that the issue involved in this appeal has been taken up in a Special Leave Petition and the same is : 7 : pending adjudication before the Hon’ble Apex Court. On this premise, he prays for liberty to revive this appeal in the event of the Revenue succeeding in the appeal/s filed before the Apex Court. 8. After hearing both parties, we have held that this appeal lacks merit and deserves to be rejected by following the decision of this Court in ITA 100080/2014. Therefore, in the event, Revenue succeeds in the SLPs filed before the Hon’ble Supreme Court, the parties herein shall be bound by the decision of the Apex Court. Hence, the request for liberty is misconceived and accordingly rejected. 9. In the result, the appeal stands dismissed. However, it is made clear that the parties herein shall bound by the Judgment of the Hon’ble Apex Court in the SLPs said to have been filed by the Revenue. No costs. : 8 : Sri.Sangram S.Kulkarni, learned counsel, is permitted to file his vakalath within four weeks from today. Sd/- JUDGE Sd/- JUDGE Bss. "