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Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI – VIRTUAL COURT
Before: SHRI INTURI RAMA RAO, AM & SHRI S. S. VISWANETHRA RAVI, JM
ORDER
PER INTURI RAMA RAO, AM:
This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals), Gulbarga (‘CIT(A)’ for short) dated 29.12.2017 for the assessment year 2012-13.
Briefly, the facts of the case are that the appellant is a cooperative society registered under the Karnataka State Co-operative Society Act, 1959 with the object of accepting deposits from its member s and providing credit facilities to its members. The return of income for the assessment year 2012- 13 was filed on 23.09.2012 declaring total income of Rs.Nil after claiming exemption u/s 80P(2)(a)(i) of the Income Tax Act, 1961 (‘the Act’) of Rs.4,27,305/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Nipani (‘the Assessing Officer’) vide order 30.06.2014 passed u/s 143(3) of the Act at a total income of Rs.4,86,105/-. While doing so, the Assessing Officer made disallowance of interest paid on deposits received from members for non-deduction of tax at source invoking the provisions of section 40(a)(ia) of the Act holding that the appellant is not a cooperative society but a cooperative bank. Similarly, the Assessing Officer also denied the claim of exemption u/s 80P(2)(a)(i) of the Act holding it to be cooperative bank.
Being aggrieved by the above action of the Assessing Officer, an appeal was preferred before the ld. CIT(A), who vide impugned order confirmed the same placing reliance on the decision of the Hon’ble Supreme Court in the case of Citizen Co-operative Society [TS-326-SC-2017] dated 16th August, 2017.
Being aggrieved by the above decision of the ld. CIT(A), the assessee is in appeal before us in the present appeal.
The ld. AR submits that the appellant is not a cooperative bank but a cooperative society and eligible for deduction u/s 80P(2)(a)(i) of the Act. She further submitted that the provisions of section 194A have not application in respect of the interest paid on deposits as the appellant is only a cooperative society.
On the other hand, ld. Sr. DR placed reliance on the orders of the lower authorities.
We heard the rival submissions and perused the material on record. The first issue raised by the assessee in the grounds of appeal relates to whether the appellant can be termed as a cooperative society or cooperative bank. The undisputed position is that the appellant is registered a cooperative society under the Karnataka State Co-operative Society Act, 1959 and does not enjoy any licence from Reserve Bank of India to carry on the business of banking. It is a trite law that the assessing authority cannot go behind the registration certificate granted under the Cooperative Societies Act as held by the Hon’ble Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. & ors. vs. CIT, 431 ITR 01 (SC).
So long as the appellant society had not obtained any licence from Reserve Bank of India for the purpose of banking business, it cannot be termed as cooperative bank. In the circumstances, we hold that the appellant status continued to be a cooperative society though interest income as received from its members. Thus, appellant society qualifies for exemption u/s 80P(2)(a)(i) of the Act. Thus, the first issue raised by the assessee in grounds of appeal
stands allowed.
9. The second issue raised by the assessee in the grounds of appeal relates to the disallowance of interest paid on deposits received from members for non- deduction of tax at source invoking the provisions of section 40(a)(ia) of the Act holding that the appellant is not a cooperative society but a cooperative bank. Having held that the appellant is a cooperative society, the provisions of section 194A of the Act have no application. In the circumstances, we hold that the Assessing Officer is not justified in invoking the provisions of section 40(a)(ia) of the Act in respect of interest paid on deposits received from its members. Thus, the second issue raised by the assessee in the grounds of appeal stands allowed.