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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ A ’
Before: SHRI JASON P BOAZ & SHRI LALIET KUMAR
2 & 2682/Bang/2017 and we deem it appropriate to dispose off the same by way o this common order.
Briefly stated, the facts of the case are as under :- 2.1 For Assessment Year 2013-14, the assessee filed its return of income on 25.9.2013, declaring NIL income after claiming deduction under Section 80P(2)(a) and 80P(2)(d) of the Income Tax Act, 1961 (in short 'the Act') to the extent of Rs.75,09,226. The case was taken up for scrutiny for this assessment year. The Assessing Officer rejected the claims and submissions of the assessee that it was a ‘co-operative society’ and therefore eligible to claim deduction under Section 80P(2)(a) and 80P(2)(d) of the Act in respect of interest earned on credit facilities afforded to Members and on interest on deposits from other co- operative institutions, etc. The Assessing Officer held the assessee to be a ‘co-operative Bank’ and therefore by virtue of the insertion of Sec. 80P(4) of the Act, was not eligible to claim deduction under Section 80P of the Act. The assessment was accordingly completed under Section 143(3) of the Act vide order dt.28.3.2016, wherein the assessee's income was determined at Rs.75,09,230 in view of the Assessing Officer rejecting the assessee's claim for deduction under Section 80P of the Act. On appeal, the CIT (Appeals)-5, Bangalore dismissed the assessee's appeal vide the impugned order dt.1.8.2017. 2.2 For Assessment Year 2014-15, the assessee filed its return of income on 11.10.2014 declaring NIL income after claiming deduction under Section 80P(2)(a) and 80P(2)(d) of the Act to the extent of 3 & 2682/Bang/2017 Rs.1,03,30,715. The case was taken up for scrutiny for this Assessment Year also. The Assessing Officer rejected the claim and submissions put forth by the assessee that it was a ‘co-operative society’ and therefore eligible to claim deduction under Section 80P(2)(a) and 80P(2)(d) of the Act in respect of interest earned on credit facilities afforded to its Members and from interest earned on deposits with other co-operative institutions, etc. As in the earlier Assessment Year 2013-14, in this assessment year also the Assessing Officer held that the assessee is a ‘co- operative Bank’ and therefore by virtue of the provisions of Section 80P(4) of the Act was not eligible to claim deduction under Section 80P of the Act. The assessment was completed under Section 143(3) of the Act vide order dt.23.12.2016; wherein the assessee's income was determined at Rs.1,03,30,715 in view of the Assessing Officer rejecting the assessee's claim for deduction under Section 80P of the Act. On appeal, the CIT (Appeals) – 5, Bangalore dismissed the assessee's appeal vide the impugned order dt.2.8.2017. 3.1 Aggrieved by the aforesaid order software CIT (Appeals)-5, Bangalore dt.1.8.2017 for Assessment Year 2013-14 and dt.2.8.2017 for Assessment Year 2014-15, the assessee has preferred these appeals before this Tribunal. On a perusal of the grounds raised in the appeals for both assessment years, we find that the grounds are identical in number and content; except for the figure of deductions claimed under Section 80P of the Act which was rejected in both assessment years. We, 3.2 Since identical issues have been raised by the assessee in appeals for both assessment years 2013-14 and 2014-15, we proceed to consider and decide the issues for both years together hereunder. 3.3 The learned AR for the assessee was heard in support of the grounds raised. The learned AR submitted that the primary issue raised in these appeals was in respect of the finding of the AO, and upheld by the CIT(A) that the assessee is a ‘Co-operative Bank’ and not a ‘Co- operative Society’, which it is contended is factually erroneous since the assessee did not possess a banking license issued by the R.B.I., the regulator of banking in India. In these circumstances, the learned AR submits that it is evident that the assessee is not a Co-operative Bank and therefore the assessee being a Co-operative Society as claimed, would notbe hit by the mischief of the provisions of Section 80P(4) of the 6 & 2682/Bang/2017 Act and hence as such, would be entitled to be allowed its claim for deduction u/s 80P(2) of the Act. The AR contended that the authorities below have failed to render any finding as to whether the assessee held a licence from RBI to conduct the business of banking/money lending and hence this matter requires to be remanded to file of the AO for ascertaining whether the assessee did possess a banking licence from RBI, as held by the Hon’ble Karnataka High Court in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bengaluru (2014) 369 ITR 86 (Karnataka).
3.4 The learned DR for Revenue contended that Revenue has not accepted the decision of the Hon’ble Karnataka High Court in the case of CIT Vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bangalore (supra) and that the SLP preferred by Revenue has been admitted by the Hon’ble Apex Court, on the very same issue.
3.5 In Rejoinder, the learned AR submitted that the above issue; in so far as to whether a Co-operative Society was a Co-operative Bank has already been settled by the Hon’ble Apex Court in the case of M/s. Citizens Co-operative Society Ltd., Vs. ACIT, reported in (2017) 397 ITR 1 (SC).
3.6.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial decisions cited.
7 & 2682/Bang/2017 The primary issues for consideration is whether the assessee is a Co- operative Society, eligible for the claim of deduction under section 80P(2) of the Act as claimed by assessee, or whether the assessee is a ‘Co-operative Bank’ as contended by the authorities below and thus not eligible for deduction under section 80P of the Act.
3.6.2 The crucial finding of fact as to whether the assessee was a Co- operative Bank and held a banking licence issued by RBI, as laid down by the Hon’ble Apex Court in the case of M/s. Citizens Co-operative Society Ltd., (supra) has not been examined and rendered by the authorities below. In this regard, the Hon’ble Apex Court at para 24 of its order (supra) has held as under:
“24) Undoubtedly, if one has to go by the aforesaid definition of ‘co-operative bank’, the appellant does not get covered thereby. It is also a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a licence from the Reserve Bank of India, which the appellant does not possess. Not only this, as noticed above, the Reserve Bank of India has itself clarified that the business of the appellant does not amount to that of a co-operative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Section 80P.” 3.6.3 In the light of the facts and circumstances of the case and judicial pronouncement of Hon’ble Apex Court (Supra) as discussed above,the impugned orders of both the authorities below for both assessment years 2013-14 and 2014-15 are set aside and the matter remanded to the file of the AO for examining/ascertaining as to whether the assessee
8 & 2682/Bang/2017 in the case on hand has obtained a licence from the RBI to conduct banking business. If the assessee is found to be possessing a licence from the RBI to conduct banking business, it will be hit by the mischief of sub-section (4) of Section 80P of the Act and thus would not be eligible to deduction under section 80P(2) of the Act as claimed. Needless to add the AO shall afford the assessee adequate opportunity of being heard and to file details/submissions required which shall be duly considered before deciding the issue in the light of the observations above and the aforesaid decision of the Hon’ble Apex Court (supra).
In view of the above, the grounds raised on merits, become academic and are not adjudicated.
In the result, the assessee’s appeals for assessment years for both Assessment Years 2013-14 and 2015-16 are allowed for statistical purposes.
Order pronounced in the open court on the 14th day of Nov.,2018.