COMMISSIONER OF INCOME TAX vs. M/S MYSORE UNIVERSITY

PDF · subscribers
ITA/298/2013HC KarnatakaKAHC01029196201327 June 2014Bench: B.MANOHAR,N.KUMAR6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court answered both substantial questions of law in favour of the assessee and against the revenue. Regarding the first question, the Court referred to its prior decision in ITA No.5006/2013 (THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT). In that case, it was held that if a co-operative society is exclusively carrying on banking business and possesses a license from the RBI, its income is not deductible. However, if it is not a co-operative bank exclusively carrying on banking business, or does not possess an RBI license, it is a co-operative society providing credit facilities to its members, covered under Section 80P(2)(a)(i). The amendment's intent was not to deny this benefit to such societies. For the second question, the Court reiterated that if the assessee is a co-operative society and not a co-operative bank, the Assessing Officer's order extending the benefit of Section 80P(2)(a)(i) was correct. Consequently, the revisional authority's order was without jurisdiction, and the Tribunal rightly set aside that order. The operative direction was to uphold the ITAT's decision.

What were the facts?

The Revenue (Commissioner of Income Tax and Commissioner of Income Tax Officer, Mysore) appealed against an order of the Income Tax Appellate Tribunal (ITAT), Bangalore Bench. The ITAT had granted a deduction under Section 80P of the Income Tax Act, 1961, to the assessee, M/s. Mysore University Employees Co-operative Credit Society Limited, for the Assessment Year 2007-2008. The ITAT also held that the Commissioner of Income Tax had erred in exercising jurisdiction under Section 263 of the Act. The appeal was filed under Section 260-A of the Income Tax Act, seeking to set aside the ITAT's order.

What were the issues?

1. Whether, on the facts and circumstances, the Tribunal was correct in holding that Section 80P(4) is applicable only from Assessment Year 2008-09 onwards, despite the explanatory notes of the Finance Act 2006 indicating applicability from Assessment Year 2007-08? (Question of law) 2. Whether, on the facts and circumstances, the Tribunal was correct in allowing the assessee's appeal when the assessee allegedly did not satisfy the conditions of Section 80P(2)(a)(i) and did not fall under the definition of 'Primary Agricultural Credit Society' or 'primary co-operative agricultural and rural development bank' eligible for deduction under Section 80P, as per the Explanation to Section 80P(4), and was carrying on banking business? (Question of mixed law and fact) Assessee's contentions: Not explicitly recorded in the judgment. Revenue's contentions: The assessee is not entitled to relief as it did not satisfy Section 80P(2)(a)(i) and does not qualify as a 'Primary Agricultural Credit Society' or 'primary co-operative agricultural and rural development bank' eligible for deduction under Section 80P, and was carrying on banking business. The Tribunal erred in applying Section 80P(4) from AY 2008-09 onwards.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(4),Section 263,Section 80P(2)(a)(i)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BANGALORE

DATED THIS THE 27TH DAY OF JUNE, 2014 PRESENT

THE HON’BLE MR. JUSTICE N KUMAR

AND

THE HON’BLE MR. JUSTICE B MANOHAR

ITA NO. 298/2013

BETWEEN:

1.

The Commissioner of Income Tax

No.55/1, ‘Shilashree’, Vidyaranya Complex,

Vishveshwaranagar,

Mysore 570 008.

2.

The Commissioner of Income Tax Officer

Mysore. …Appellants

(By Sri E.I. Sanmathi, Adv.)

AND:

M/s. Mysore University Employees Co-operative Credit Society Limited

Maharaja College Premises Mysore.

…Respondent

(By Sri A. Shankar & M. Lava, Advs.)

This ITA filed under Section 260-A of I.T. Act, 1961 arising out of order dated 28.02.2013 passed in ITA No.887/Bang/2012, for the Assessment year 2007-2008, praying to (i) formulate the substantial questions of law stated therein; (ii) set aside the appellate order of the ITAT, ‘B’ Bench, Bangalore in appeal proceedings ITA No.887/Bang/2012 dated 28.02.2013.

This ITA coming on for hearing this day, N. KUMAR J delivered the following:

J U D G M E N T

This appeal is preferred by the revenue against the order passed by the Tribunal granting deduction under Section 80P of the Income Tax Act, 1961 (for short ‘the Act’) and also holding that the Commissioner of Income Tax committed an error in exercising its jurisdiction under Section 263 of the Act. 2. The two substantial questions of law which arise for consideration are as under:

(i) “Whether on the facts and the circumstances of the case, the Tribunal was right in law in

holding that Section 80P(4) is applicable only for the Assessment Year 2008-09 onwards inspite of the fact that the explanatory notes of the Finance Act 2006 makes it abundantly clear that this provision is applicable from assessment year 2007-08?

(ii) Whether on the facts and circumstances of the case, the Tribunal was right in law in allowing appeal preferred by assessee even when assessee is not entitled for any relief as the assessee had not satisfied the conditions laid down in Section 80)(2)(a)(i) of the I.T. Act and since assessee does not fall under the definition of ‘Primary Agricultural Credit Society’ or ‘primary co-operative agricultural and rural development bank’ which are eligible for deduction under Section 80P as referred to Explanation to Section 80P(4) and also assessee is carrying on banking business?”

3.

Insofar as the first question of law is concerned, 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 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.

4.

Insofar as the second question of law is concerned, in the aforesaid judgment this Court has held, when status of the assessee is a co-operative society and not a co-operative bank, the order passed by the Assessing Authority extending the benefit of the exemption from payment of tax under Section 80P(2)(a)(i) of the Act is correct. There is no error. When there is no error, question of order being prejudicial would not arise and therefore, the order passed by the revisional authority is not at all with

jurisdiction and rightly the tribunal entertained the appeal against this order and set aside the said order. The same holds good even in this case.

5.

Thus, the substantial question of law is answered in favour of the assessee and against the revenue.

(sd/-) JUDGE

(sd/-) JUDGE VP/-

More judgments on Section 80P

All 5,069 judgments and leading authorities on Section 80P →

Recent GST High Court judgments

Search GST case law →