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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA & SHRI LALIET KUMAR
O R D E R Per Shri A.K. Garodia, Accountant Member Out of this bunch of three appeals, there are two cross appeals in respect of the Bijapur Co-operative Credit Society Ltd. and there is one appeal of assessee in the case of M/s. Navakarnataka Souharda Credit Co-op Ltd. vs. ITO in ITA No. 1134/Bang/2017. All these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
ITA Nos. 1306 & 1314/Bang/2016 & 1134/Bang/2017 Page 2 of 6 2. The grounds raised by the assessee in are as under. “1. That the order of the learned Commissioner of Income Tax (Appeals) is prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case.
2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing the interest income of Rs.4,82,337/- as deduction u/s. 80P(2)(a)(i) of the Act.
3. That the learned Commissioner of Income tax (Appeals) erred in law and on facts in holding that the interest income is not attributable to the activity of providing credit facilities to its members.
4. That the learned Commissioner of Income Tax (Appeals) erred in law in not following the decision of the Jurisdictional High Court. Each of the above ground is without prejudice to one another and the appellant craves the leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or modify otherwise any of the ground either before the hearing or at the time of hearing this appeal.”
3. The grounds raised by the assessee in are as under. “1. That the order of the learned Commissioner of Income Tax (Appeals) in so far it is prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case.
2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing the interest income of Rs. 14,90,058/- as deduction u/s. 80P(2)(a)(i) of the Act.
3. That the learned Commissioner of Income Tax (Appeals) erred in in not appreciating the fact that the investments made in various banks are out of surplus funds like reserve funds, share capital and profits of the appellant.
4. Without prejudice to the above grounds, the learned Commissioner of Income Tax (Appeals) erred in law and on facts in denying deduction u/s. 80P(2)(d) of the Act to the extent of Rs.14,90,058/- being the interest earned from the deposits made in the co-operative banks even though the co-operative banks are also co-operative societies engaged in the business of banking. Each of the above grounds is without prejudice to one another, the appellant seeks the leave of the Hon’ble Income Tax Appellate Tribunal (Bangalore) to add, delete, amend or otherwise modify one
ITA Nos. 1306 & 1314/Bang/2016 & 1134/Bang/2017 Page 3 of 6 or other grounds of appeal either before or at the time of hearing of this appeal.”
4. The grounds raised by the revenue in are as under. “1. The learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee is a co-operative society which fulfills all the three conditions of being held a Primary Co-operative Bank as given in section 5(ccv) of the Banking Regulation Act, 1949.
2. The learned CIT(Appeals) erred in law and on facts in not appreciating the definition of a co-operative bank which as per Explanation below section 80P(4) "the co-operative bank" shall have the meaning assigned to it in Part-V of the Banking Regulation Act, 1949.
3. The learned CIT(Appeals) erred in law and on facts in not appreciating the fact that the assessee society being a credit co- operative society engaged in banking business is a Primary Co- operative Bank within the definition of section 5(ccv) of the Banking Regulation Act, 1949 and as such, not eligible for deduction under section 80P(2)(a)(i) of the I.T. Act, 1961.”
5. At the very outset, it was submitted by ld. AR of assessee that in the appeal of the revenue in ITA No. 1306/Bang/2016, the tax effect is below Rs. 20 Lakhs and therefore, this appeal of revenue is not maintainable because of low tax effect. Regarding the computation of tax effect, it was pointed out by ld. AR of assessee that as per return of income filed by assessee, the assessee had declared Nil income and in the assessment order, the assessed income is Rs. 42,98,396/- and therefore, the tax effect in the present case is bound to be below Rs. 20 Lakhs. The ld. DR of revenue had nothing to say.
6. In view of above facts and as per recent CBDT instructions as per Circular No. 3/2018 dated 11.07.2018, this appeal of the revenue is not maintainable because of low tax effect and the same is dismissed accordingly.
7. In the result, the appeal filed by the revenue is dismissed.
8. Now we take up the appeal of the assessee in the same case i.e. M/s. Bijapur Co-op Credit Society Ltd. vs. ITO. The ld. AR of assessee drawn our attention to para no. 10.3 of the order of CIT(A) and pointed out that in this Para, the CIT(A) has gone on this basis that the deposit in bank is long term by way of term deposit and therefore, any such interest on term deposit is not eligible for deduction u/s. & 1314/Bang/2016 & 1134/Bang/2017 Page 4 of 6 80P of IT Act. He submitted that whether the deposit is for short term or long term, it is not important and the sources of deposit is important. He placed reliance on judgement of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO as reported in 230 Taxman 309 and submitted that as per this judgement, it was held by Hon'ble Karnataka High Court that the amount deposited in bank is out of assessee’s own funds and not out of liability of the assessee and the same is eligible for deduction u/s. 80P of IT Act. As against this, the ld. DR of revenue placed reliance on the judgement of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co- operative Sale Society Ltd. as reported in 395 ITR 611 (Karn). At this juncture, the bench pointed out that in both these cases, althogh the ultimate decision of Hon'ble Karnataka High Court is different but there is no contradiction in these two judgements of Hon'ble Karnataka High Court. The bench pointed out that in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra), it was found that the money deposited in bank was out of liability of the assessee and not out of assessee’s own funds and therefore, the issue was decided against the assessee. In the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra), it was found that the money deposited in bank was out of assessee’s own funds and not out of liability of the assessee and therefore, the issue was decided in favour of the assessee. The bench observed that under these facts, the matter should go back to the file of AO for fresh decision after examining the facts of present case in the light these two judgements of Hon'ble Karnataka High Court. In reply, both sides agreed to this proposition put forward by the bench.
9. We have considered the rival submissions and in view of the above discussion, we feel it proper to restore the matter back to the file of AO for fresh decision after examining the facts of present case in the light of these two judgements of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra) and Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra). We also hold that if it is found that the facts of present case are in line with the & 1314/Bang/2016 & 1134/Bang/2017 Page 5 of 6 facts in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra) then the issue should be decided against the assessee and if the facts of the present case are in line with the facts in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra) then the issue should be decided in favour of the assessee. Needless to say, reasonable opportunity should be provided to assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Now we take up the appeal of the assessee in the case of M/s. Navakarnataka Souharda Credit Co-op Ltd. in ITA No. 1134/Bang/2017. It was submitted by ld. AR of assessee that in this case, the issue should go back to the file of AO for examining the facts of present case in the light of these two judgement of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra) and Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra). The ld. DR of revenue supported the order of CIT(A) and reliance was placed by him on the judgement of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra) and also the judgement of Hon’ble Apex Court rendered in the case of Totgars Cooperative Sales Society Ltd. vs. ITO as reported in 322 ITR 283 (SC).
We have considered the rival submissions and in view of the facts of present case, we feel it proper that the matter should go back to the file of AO for fresh decision after examining the facts of the present case in the light of these two judgements of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra) and Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra) and also the judgement of Hon’ble Apex Court rendered in the case of Totgars Cooperative Sales Society Ltd. vs. ITO (supra). We also hold that if it is found that the facts of present case are in line with the facts in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. & 1314/Bang/2016 & 1134/Bang/2017 Page 6 of 6 (supra) then the issue should be decided against the assessee and if the facts of the present case are in line with the facts in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra) then the issue should be decided in favour of the assessee. Needless to say, reasonable opportunity should be provided to assessee.
In the result, this appeal filed by the assessee is allowed for statistical purposes.
In the combined result, the appeal of the revenue is dismissed and both the appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.