THE PRINCIPAL COMMISSIONER OF INCOME TAX V. M/S DURDUNDESHWAR URBAN

ITA/100178/2015

AI Insights

The case revolves around the classification of M/s. Durdundeshwar Urban Co-operative Credit Society Ltd. as a 'co-operative bank' under the Banking Regulation Act, 1949, and its implications on the tax benefits under Section 80P of the Income Tax Act, 1961. The Revenue challenged the ITAT's decision which favored the respondent, arguing that the society met the criteria of a primary co-operative bank as defined under the Banking Regulation Act. However, the court referenced its earlier decision in a similar case and upheld the ITAT's ruling, emphasizing that the Reserve Bank of India should determine the primary business of the society.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 764827 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-01-2016
• Assessment Year: misc
• Other Referred Cases: CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot, CIT Vs. Shri Mahalaxmi Urban Co-operate Credit Society Ltd.
• Laws Referred To: Income-Tax Act, 1961, Banking Regulation Act, 1949
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: H R KAMBIYAVAR; PATRI SHASHIKALA K
• Assessee Lawyers: Y V RAVIRAJ
• Keywords: Banking Business; Co-operative Society; Income Tax; Primary Co-operative Bank; Section 80P
• Section: 260A; 80P(2)(a)(i); 80P(4); 5(ccv); 5(cci)

Judgement Text

": 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 5TH 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.100178/2015 BETWEEN: 1. THE PRINCIPAL COMMISSIONER OF INCOME TAX, DR. B.R. AMBEDKAR VEEDHI, BELAGAVI. 2. THE INCOME TAX OFFICER, WARD NO.1, GOKAK. … APPELLANTS (BY SHRI.Y.V.RAVIRAJ, ADV.) AND: M/S.DURDUNDESHWAR URBAN CO-OPERATIVE CREDIT SOCIETY LTD., SANKESHWAR, TAL: HUKKERI, DIST. BELAGAVI, PAN:AAAAS 5612 D. … RESPONDENT (BY SRI H.R.KAMBIYAVAR AND SMT.PATRI SHASHIKALA K. ADVS) THIS APPEAL IS FILED U/SEC.260A OF THE INCOME-TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE, TO ALLOW THE APPEAL AND : 2 : SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, PANAJI, IN ITA NO.82/PNJ/2015, DTD:29.07.2015 AND CONFIRM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-1 (3), BELAGAVI, IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING: JUDGMENT Sri H.R. Kambiyavar, learned Counsel accepts notice for the respondent. 2. Revenue, aggrieved by the order dated 15.07.2015 passed in I.T.A.No.25/PNJ/2015, 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 the Tribunal was right in law and on the facts and circumstances of the case in not appreciating that the respondent assessee society being a credit co-operative society engaged in banking business is a Primary Co-operative Bank within the definition of Section 5(cci) read with section 5(ccv) of the Banking Regulation Act, 1949? : 3 : 2. Whether the Tribunal was right in law and on facts in not appreciating the fact that the assessee being a co-operative society 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 and as such section 80P(4) of the Act is applicable to deny the benefit claimed under Section 80P(2)(a) (i)? 3. Whether the Tribunal was right in law and on facts relying upon the decision of Hon’ble Karnataka High Court in the case of Sri. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot wherein, the main issue related to an issue of exercise of revisional powers by the Commissioner of Income Tax under Section 263 of the Act and the Hon’ble High Court did not examine the applicability of Section 80P(4) and Explanation to the said section? 3. Heard Sri Y.V.Raviraj, learned Standing Counsel for the Income Tax Department and Sri.H.R.Kambiyavar, learned counsel for the respondent. 4. The incontrovertible facts of this case are, respondent is a Co-operative Society primarily carrying on with the business of lending money to its members. : 4 : 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. On appeal, the Commissioner of Income Tax (Appeals), allowed the same vide order dated 24.11.2014 following the judgment 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. Being aggrieved by the order passed by the CIT (Appeals), Revenue preferred an appeal before the ITAT. By the impugned order, the ITAT dismissed the said appeal by following the very same judgment of this Court in the case of CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra). Hence, this appeal. 5. An identical case involving the very respondent herein came up for consideration before this Court in I.T.A.No.100080/2014 (CIT Vs. Shri Mahalaxmi Urban Co-operate Credit Society Ltd.) After considering the : 5 : aforementioned decision of this Court in CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha and noticing that similar view was taken by this Court in 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. : 6 : 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. In the result, the above questions are answered in favour of the assessee and the present appeal of the revenue is dismissed.” 6. 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)?” 7. Having considered various previous judgments and the decision in the case of CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra) in extenso, this Court has disposed of the aforementioned ITA No.100080/2014 (CIT & another vs. Shri Mahalaxmi : 7 : Urban Co-operative Credit Society Limited in the above terms. The issues involved in this appeal are identical to the issues in ITA No.100080/2014. We are in respectful agreement with the decision of this Court in the said appeal and do not find any merit in the questions of law raised by the Revenue for consideration. Accordingly, we hold that this appeal deserved to be dismissed. 8. 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 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. 9. 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 : 8 : 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. 10. 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. Sri H.R.Kambiyavar, learned counsel is permitted to file vakalath within a period of four weeks from today. Sd/- JUDGE Sd/- JUDGE Jm/- "