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Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI N.V. VASUDEVAN & SHRI B.R. BASKARAN, ACCOUTANT MEMBER
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The revenue has filed this appeal challenging the order dated 13.3.2019 passed by Ld. CIT(A)-11, Bangalore and it relates to assessment year 2014-15. The grounds urged by the revenue are extracted below: 1. The order of the CIT(A) is opposed to law and facts of the case.
2. The CIT(A) erred in holding that the addition made by the A.O. is found to be unsustainable as judicial discipline requires that wisdom of higher authorities prevail without appreciating the fact
Shri Bilur Gurubasava Sahakari Pattin Sangha Niyamitha, Bagalkot Page 2 of 6 that the decision of the High Court of Karnataka in the appellants own case was rendered on 5.2.2014 much before the decision of the Supreme Court in the case of Citizen Co Op. Society Ltd. Vs. ACIT (2017) 397 ITR 1 (SC) which was rendered much later on 8.8.2017 in civil appeal 10245 of 2017 and thus the decision of the Supreme Court being a higher authority would prevail over the decision relied upon by the CIT(A).
3. The CIT(A) erred in holding that the decision of the Karnataka High Court on which reliance was placed by the assessee is binding without appreciating the fact that the share capital of the associate members was Rs.1,10,42,700/- where the share capital by the regular members is at Rs.1,04,77,400/- only, which clearly indicates that the assessee society transacting substantially with associate members (non members) rather than the regular members.
4. The CIT(A) erred in holding that the decision of the High Court in the assessee’s own case was squarely applicable in the appeal without appreciating that the decision of the Supreme Court in the case of Citizen Co Op. Society Ltd. V. ACIT (2017) 397 ITR 1 (SC) was squarely applicable, having been rendered subsequent to the decision of the High Court.
5. The CIT(A) erred in allowing the appeal of the assessee without appreciating that the Supreme Court in the case of Citizen Co Op. Society Ltd. Vs. ACIT (2017) 397 ITR 1(SC) has held that the societies having substantial financial transactions with members other than regular members are not eligible for the claim of deduction u/s 80P(2)(a)(i) of the Act.
Shri Bilur Gurubasava Sahakari Pattin Sangha Niyamitha, Bagalkot Page 3 of 6
6. For these and other grounds that may be raised and urged subsequently or at the time of hearing, the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.
The assessee is a credit co operative society registered under Karnataka State Co-operative Societies Act. It accepts deposits from its members and provide credit facilities to them. The assessee claimed exemption u/s 80P(2)(a)(i) of the Income-tax Act,1961 ['the Act' for short]. The AO took the view that the assessee would fall under the category of primary co-operative bank as defined under clause (cci) of section 5 of the Banking Regulation Act, 1949 as the following three conditions mentioned therein are fulfilled in this case. (1) the primary object or principal business of which is the transaction of banking business (2) paid up share capital and reserves are not less than one lakhs of rupees and (3) the bye-laws do not permit the admission of any other co-operative society as a member. The assessee contended that it did not have banking license granted by RBI and further it did not issue cheques, draft or pay order, etc. to its members. The A.O. did not agree with the contentions of the assessee and held that the assessee is a primary co-operative bank. Accordingly, by invoking section 80P(4) of the Act, he rejected the claim made by the assessee u/s 80P of the Act.
Shri Bilur Gurubasava Sahakari Pattin Sangha Niyamitha, Bagalkot Page 4 of 6
The Ld. CIT(A) noticed that the assessee has been held to be eligible for deduction u/s 80P of the Act by the jurisdictional Hon’ble Karnataka High Court by its order dated 5.2.2014 rendered for assessment year 2007-08 in the assessee’s own case, which is reported in 369 ITR 86. Accordingly, he directed the A.O. to allow the deduction u/s 80P of the Act. Aggrieved, the revenue has filed this appeal.
The main contention of the revenue is that the decision rendered by the Hon’ble jurisdictional High Court in the assessee’s own case is much prior to the decision rendered by Hon’ble Supreme Court in the case of Citizen Co-operative Society Limited Vs. ACIT 397 ITR 1. It was submitted that the above said decision of Hon'ble Supreme Court should be applied to the facts of the present case. It is further stated that the assessee is having sizeable number of associate members also. Accordingly it was contended that the assessee is not eligible for deduction u/s 80P of the Act.
We heard the parties and perused the record. We notice that the applicability or otherwise of decision rendered by Hon’ble Supreme Court in the case of Citizen Co-operative Society Ltd. (supra) has not been examined by Ld. CIT(A). When this aspect was pointed out to the parties,
Shri Bilur Gurubasava Sahakari Pattin Sangha Niyamitha, Bagalkot Page 5 of 6 both the parties agreed that the matter may be restored to the file of Ld. CIT(A) for examining the applicability of decision of Hon’ble Supreme Court decision referred above. We also notice that the ld CIT(A) has not addressed the view taken by the AO that the assessee would fall under the category of “Primary Co-operative Bank”. Accordingly, we set aside the said order passed by Ld. CIT(A) and restore the impugned issue to the file of the Ld. CIT(A) for examining it afresh.
In the result, the appeal filed by the revenue is treated as allowed for statistical purposes.
Order pronounced in the open court on 18.03.2020