ITO, WARD-1(5), JODHPUR vs. PUSTIKAR SAKH SAHAKARI SAMITI LTD., JODHPUR

(Virtual hearing) Shri Rajendra Purohit –C.A. Assessee By Shri Lovish Kumar, CIT-DR Revenue By Date of hearing 04/07/2023 Date of Pronouncement 07/07/2023 O R D E R PER: Dr. S. Seethalakshmi, JM

These two appeals are filed by the Revenue against the orders of the Learned Commissioner of Income Tax (Appeals)-1, Jodhpur [herein after Pustikar Sakh Sahakari Samiti Ltd. “Ld.CIT(A)”] both dated 24. 09.2019 & 25.02.2020 for the assessment years 2016-17 & 2017-18 respectively.

2. Whether on the facts and in the circumstances of the case, the Ld. CIT(Appeals) is justified in law in holding that the assessee is not cooperative bank by ignoring that the assessee fulfilled conditions applicable to cooperative banks as per Part V of the Banking Regulation act, 1949, and is therefore, not eligible for such deduction as provided u/s 80P(4) of the I.T. Act, 1961.

3. Whether on the facts and in the circumstances of the case, the Ld. CIT(Appeals) is justified in allowing deduction u/s 80P(2)(a)(i) by ignoring the fact that the assessee society itself admitted doing banking business and therefore, as per Explanation (a) to section 80P(4) such deduction is not admissible to it.”

Pustikar Sakh Sahakari Samiti Ltd.

6. I have carefully considered the AO's order and submissions of the appellant. I find that the issue under consideration is squarely covered in favour of the appellant by the orders of the Hon'ble Jurisdictional ITAT in appellant's own case in to 149/JODH/2015 for AY 2007-08 & 2009-10 to 2011-12 dated 15-03-2016, in ITA Nos. 428/Jodh/2016 for AY 2014-15 dated 05-05-2017 and in Nos 246 and 247/Jodh/2016 for AY 2008-09 & 2013-14 dated 24-04-2017 The operative part of the Hon'ble ITAT's order in ITA Nos. 146 to 149/JODH/2015 is reproduced as below:-

“7. We find that the issue is now covered by the decision of the Hon'ble Karnataka High Court in favour of the assessee in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot, in dated 05-02-2014, which was followed in the cases of General Insurance Employees Co-operative Credit Society Ltd. and in the case of Vasavi Multipurpose Souharda Sahakari Niyamitha, ITA No.505/2013 dated 27/06/2014, has clearly held that a co-operative society registered as co-operative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(1) of the IT Act. The operative part of the judgment reads as follows:-

"Therefore, the intention of the legislature is clear, if a co- operative bank is exclusively carrying on 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 and rural development bank.

ITA No. 90/Jodh/2020 Pustikar Sakh Sahakari Samiti Ltd. The legislature did not want to deny the said benefits 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 ie the Shri Holehucheshwar Co-op Credit Society Ltd. Page 4 of 6 purpose of this amendment. Therefore, as the assessee is not a Co-operative bank carrying on exclusively banking business and as it does no possess a licence from Reserve Bank of India to carry on business, 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) Le carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under section 80P(1) to such society, in the instant case, when the status of the assessee is a co-operative society and is not a co-operative bank, the order passed by the Assessing authority extending the benefit of exemption from payment of tax under section 80P(2XaXi) of the Act is correct

Respectfully following the same, we uphold that the assessee is a cooperative society and not a cooperative bank and, therefore, entitled to deduction under sec. SOP of the Act. We therefore, set aside the orders of the lower authorities and direct the Assessing Officer to allow deduction under sec. 80P of the Act to the assessee."

Respectfully following the order of the Hon'ble ITAT, Jodhpur Bench, it is held that the appellant society is entitled to deduction u/s. 80P. This issue is decided in favour of the appellant and the addition made at Rs. 5.36.23.5071- is hereby deleted. The appellant gets relief of same amount. The appellant succeeds on these grounds.”

5. Feeling dissatisfied from the order of the ld. CIT(A), the Revenue has filed the appeal as per grounds so raised. Before us the ld. AR for the assessee as filed detailed submissions the same is reproduced hereinebelow:-

ITA No. 90/Jodh/2020 Pustikar Sakh Sahakari Samiti Ltd. “The facts of this case are as below: 1. That the assessee, being a Co-operative Society, is engaged in "Carrying on the business of banking or providing credit facilities to its Members" as mentioned in section 80P(2)(a)(i) of the Income Tax Act, 1961 and is registered with the Central Registrar of Co-operative Societies, Government of India, Ministry of Agriculture (Department of Agriculture and Co-operation); 2. That the Honuorable Assessing Officer has passed the order determining the income of the assessee for the above referred Assessment year to Rs. 5,49,73,323 and raising a demand of Rs2,50,00,635 including interest under section 234; 3. That on appeal by the assessee against the order of the Honurable Assessing Officer, the appeal was allowed by the Honourable Commissioner of Income Tax (appeals)- 1,Jodhpur. While allowing the appeal the order of Income Tax Appellate Tribunal, Jodhpur Bench was followed by the Honurable Commissioner of Income Tax (appeals)-1, Jodhpur; 4. That the Revenue preferred above referred appeal against the order of the Commissioner of Income Tax (appeals)-1, Jodhpur. B. SUBMISSIONS The Appellant humbly beg to submit as under: That in the assessee's own case (for the assessment years 2007-088 2009-10 to 2011-12, 2008-09 and 2013-14, 2014-15 and 2015-2016) the Honourable Income Tax Appellate Tribunal, Jodhpur Bench has set aside the orders of the lower authorities and directed the Assessing Officer to allow the deduction under section 80P of the Income Tax Act, 1961. The copy of order of the Income Tax Appellate Tribunal, Jodhpur Bench is enclosed herewith as annexure 1. While allowing the appeal, the of Income Tax Appellate Tribunal, Jodhpur Bench has held that- "We find that the issue is now covered by the decision of the Hon'ble Karnatka High court in favour of the assessee in the case of CIT Vs. Sri Bilurur Gurubasava Pattina Sahakari Sangha Niyamatha, Bagalkot, in dated 05.02.2014, which was flowed in the cases of General Insurance Employees Co- operative Credit Socitey Ltd. and in the case of Vasavi Multipurpose Souharda Sahakari Niyamitha, ITA no.505/2013 dated 27.06.2014, has clearly held that a co-operative society registered as Co-operative Society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(1) of the IT Act. The operative part of the judgment reads as follows: "therefore, the intention of the legislature is clear, if a co-operative bank is exclusively carrying on 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 and rural development ban. They did not want to extend the said benefit to a co-operative bank which is ITA No. 90/Jodh/2020 Pustikar Sakh Sahakari Samiti Ltd. exclusively carrying on the banking business i.e. the Shri Holehucheshwar Co-op Credit Society Ltd. page 4 of 6 purpose of this amendment. Therefore, as the assessee is not a co-operative bank carrying on exclusively banking business and it does not possess a license from the Reserve Bank of India to carry on business, it is not Co-operative Bank. It is a co-operative society which also carried on the business of lending money to its member which is covered under section 80P(2)(a)(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under section 80P(1) to such society..... in the instant case, when the status of the assessee is a co- operative society and is not a co- operative bank, the order passed by the Assessing authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act is correct". Respectfully following the same, we uphold that the assessee is a co-operative society and not a co-operative bank and, therefore, entitled to deduction under section 80P of the act. We therefore, set aside the orders of the lower authorities and direct the Assessing Officer to allow deduction under sec. BOP of the Act to the assessee." It is, therefore, evident that Honourable Commissioner of Income Tax (Appeals)-1 Jodhpur has rightly allowed the appeal of the assessee for the assessment year 2016-17 by following the order of the Honuorable Income Tax Appellate Tribunal, Jodhpur Bench in the assessee's own case for different assessment years as mentioned above. It is further, very humbly, submitted that the facts of the case are identical to the facts of the case of the assessment years 2007-08, 2009-10,2010-11 and 2011-12, 2008-09 and 2013-2014 and 2014-15 and 2015-2016.

In view of above, your Honour is very humbly requested to consider the submissions and oblige.”

6. In support, reliance was placed on the following decisions in assessee own case which is reproduced as under:-  to 149/Jodh/2015 Pushtikar Laghu Vyaparik Partisthan Bachat Evam Sakh Sahakari Samiti Ltd. vs. ITO dated 15.03.2016.  ITA No. 246 & 247/Jodh/2016 ITO vs Pushtikar Laghu Vyaparik Partisthan Bachat Evam Sakh Sahakari Samiti Ltd dated 24.04.2017.

ITA No. 90/Jodh/2020 Pustikar Sakh Sahakari Samiti Ltd.  ITO vs. Pushtikar Laghu Vyaparik Partisthan Bachat Evam Sakh Sahakari Samiti Ltd dated 05.07.2017.  428/Jodh/2016 ITO vs. M/s Pushtikar Sakh Sahakari Samiti Ltd. dated 05.05.2017.  ITA No. 176/Jodh/2018 ITO vs. M/s Pushtikar Sakh Sahakari Samiti Ltd. DATED 19.03.2020.

ITA No. 90/Jodh/2020 Pustikar Sakh Sahakari Samiti Ltd. “6. I have carefully considered the AO’s order and submissions of the appellant. I find that the issue under consideration is squarely covered in favour of the appellant by the order of the Hon’ble Jurisdictional ITAT in the case of M/s Pushtikar Sakh Sahakari Samiti Ltd., in to 149/JODH/2015 for AY 2007-08 & 2009-10 to 2011-12 dated 15-03-2016. The operative part of the Hon’ble ITAT’s order is reproduced as below:- "7. We find that the issue is now covered by the decision of the Hon'ble Karnataka High Court in favour of the assessee in the case of CIT Vs. Sri Biluru Gurubasavl Pattina Sahakari Sangha Niyamitha, Bagalkot, in ITA No.5006/2013 dated 05-02- 2014, which was followed in the cases of General Insurance Employees Co- operative Credit Society Ltd. and in the case of Vasavi Multipurpose Souharda Sahakari Niyamitha, ITA No.505/2013 dated 27/06/2014, has clearly held that a co-operative society registered as co-operative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(1) of the IT Act. The operative part of the judgment reads as follows:- “Therefore, the intention of the legislature is clear, if a cooperative bank is exclusively carrying on 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 cooperative agricultural and rural development bank. The legislature did not want to deny the said benefits to a primary agricultural credit society or a primary co- operative agricultural and rural development bank. They did not want to extend the ITA No. 90/Jodh/2020 Pustikar Sakh Sahakari Samiti Ltd. said benefit to a co-operative bank which is exclusively carrying on banking business i.e. the Shri Holehucheshwar Coop Credit Society Ltd. Page 4 of 6 purpose of this amendment. Therefore, as the assessee is not a Co-operative bank carrying on exclusively banking business and as it does no possess a licence from Reserve Bank of India to carry on business, it is not a cooperative 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 facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under section 80P(1) to such society………..in the instant case, when the status of the assessee is a co-operative society and is not a cooperative bank, the order passed by the Assessing authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act is correct”. Respectfully following the same, we uphold that the assessee is a cooperative society and not a cooperative bank and, therefore, entitled to deduction under sec. 80P of the Act. We therefore, set aside the orders of the lower authorities and direct the Assessing Officer to allow deduction under sec. 80P of the Act to the assessee."

We do not find any infirmity with the order of the ld. CIT(A) since he has adjudicated these issues on the basis of decisions of the ITAT Jodhpur bench which has held in the assessese’s own case that the assessee society is entitled to deduction u/s 80P of the Act and the Ld DR did not contravert the submissions made by the asseseee. We are concluding that the assessee is a co-operative society and not a co-operative bank and, therefore, entitled to deduction under section 80P of the act. We therefore, uphold the order of ld. CIT(A) and we see no merits in the grounds so taken and therefore the appeal filed by the Revenue is dismissed.