NATIONAL AERONAUTICAL LABORATORY EMPLOYEES CO-OPERATIVE HOUSING SOCIETY LIMITED ,BANGALORE vs. INCOME TAX OFFICER WARD-4(2)(2), BANGALORE

O R D E R Per Shri A.K. Garodia, Accountant Member Both these appeals are filed by the assessee which are directed against two separate orders of ld. CIT(A)-4, Bangalore both dated 28.09.2018 for Assessment Years 2014-15 and 2015-16. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.

by the assessee for Assessment Year 2014-15 in are as under. “1. The learned Assessing officer had erred in passing the order in the manner passed by him and the learned Commissioner of Income Tax (Appeals) has erred in confirming the same. The orders as passed being bad in law and are liable to be quashed.

2. The learned Assessing officer had erred in denying the deduction claimed u/s 80P(2)(a)(i) of the Act on the ground that the appellant is a Co- operative Bank, thereby covered in terms of section 80P(4) of the Act and the learned CIT(A) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the appellant is a co-operative Society and not a Co-operative Bank hence the provisions of section 80P (4) of the Act is not applicable to the facts of the appellant. The action of authorities being wholly erroneous both on facts and law is to be negated.

3. In any case, the authorities below have erred in not appreciating that in the absence of any Banking license from RBI, the appellant cannot be termed as Co-operative Bank. Therefore the provisions of section 80P (4) of the Act are not applicable at all.

4. The learned CIT(A) has erred in holding that: i) the appellant has violated the principles of mutuality by investing in deposits in banks which are not the members of the appellant. ii) the interest earned from the above banks are assessable under the head Income from other sources and not under the head business iii) The deduction u/s 80P(2)(a)(i) of the Act is available only to income from business and not to Income from Other Sources. iv) Interest accrued from surplus deposits in banks/societies is liable for taxation. The above conclusions drawn are contrary to facts and the law applicable is to be disregarded.

5. In any case, the learned CIT(A) has erred in not giving any finding with respect to allowability of deduction u/s 80P(2)(a)(i) of the Act with respect to interest earned from members.

6. The appellant denies liability to pay interest u/s 234A and 234B of the Act. The interest having been levied erroneously is to be deleted.

7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that order passed by AO and CIT(A) to be quashed or at least the denial of deduction u/s 80P(2)(a)(i) of the Act be granted and the return filed by the appellant be accepted and interest levied be also deleted.”

by the assessee for Assessment Year 2015-16 in are as under.

1. The learned Assessing officer had erred in passing the order in the manner passed by him and the learned Commissioner of Income Tax (Appeals) has erred in confirming the same. The orders as passed being bad in law and are liable to be quashed.

2. The learned Assessing officer had erred in denying the deduction claimed u/s 80P(2)(a)(i) of the Act on the ground that the appellant is a Co- operative Bank, thereby covered in terms of section 80P(4) of the Act and the learned CIT(A) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the appellant is a co-operative Society and not a Co-operative Bank hence the provisions of section 80P (4) of the Act is not applicable to the facts of the appellant. The action of authorities being wholly erroneous both on facts and law is to be negated.

3. In any case, the authorities below have erred in not appreciating that in the absence of any Banking license from RBI, the appellant cannot be termed as Co-operative Bank. Therefore the provisions of section 80P (4) of the Act are not applicable at all. 4. The learned CIT(A) has erred in holding that: i) the appellant has violated the principles of mutuality by investing in deposits in banks which are not the members of the appellant. ii) the interest earned from the above banks are assessable under the head Income from other sources and not under the head business iii) The deduction u/s 80P(2)(a)(i) of the Act is available only to income from business and not to Income from Other Sources. iv) Interest accrued from surplus deposits in banks/societies is liable for taxation. The above conclusions drawn are contrary to facts and the law applicable is to be disregarded. 5. In any case, the learned CIT(A) has erred in not giving any finding with respect to allowability of deduction u/s 80P(2)(a)(i) of the Act with respect tar interest earned from members. 6. The appellant denies liability to pay interest u/s 234A and 234B of the Act. The interest having been levied erroneously is to be deleted. 7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that order passed by AO and CIT(A) to be quashed or at least the denial of deduction u/s 80P(2)(a)(i) of the Act be granted and the return filed by the appellant be accepted and interest levied be also deleted.” 4. In course of hearing of these appeals, it was submitted by ld. AR of assessee that there are two disputes in the present case. She submitted that the first dispute is whether the assessee is a co-operative bank or not. She submitted that the assessee is not holding any license from RBI and therefore, the assessee cannot be considered as a co-operative Bank. At this juncture, the bench pointed out that as per recent judgement of Hon’ble Apex Court rendered in the case of The Citizen Co-operative Society Ltd. Vs. ACIT as reported in 397 ITR 1, it was held as per Para 24 of this judgement that it is a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a license from the Reserve Bank of India and if the assessee does not possess the same, it cannot be said that the assessee is a co-operative bank but at the same time, this is also noted by Hon’ble Apex Court in same Para of this judgment that in that case, the Reserve Bank of India has itself clarified that the business of the assessee does not amount to that of a co-operative bank. The bench observed that in the present case also, the matter may be restored back to the file of AO for fresh decision and the assessee has to obtain and furnish the certificate from RBI regarding the nature of its business. If the RBI certifies that the business of assessee is not a co- operative bank then only, it can be accepted that the assessee is not a cooperative bank. In reply, she submitted that the matter may be restored back to the file of AO for fresh decision and if this is done then assessee will obtain required certificate from RBI and submit the same before the AO within reasonable time.