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Income Tax Appellate Tribunal, SMC – “A” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA
O R D E R Per Shri A.K. Garodia, Accountant Member; This appeal is filed by the revenue which is directed against the order of ld. CIT(A) – 6, Bangalore dated 24.07.2017 for Assessment Year 2014-15.
The grounds raised
by the revenue are as under. “1. The order of the CIT (Appeals) is opposed to law and the facts and circumstances of the case.
2. On the facts and in the circumstances of the case, the learned CIT(A) erred in deleting the disallowance of deduction u/s 80P(2)(a)(i) made by the AO, without appreciating the fact that the assessee society was carrying on business of banking nature.
3. On the facts and in the circumstances of the case, the learned CIT(A) erred in placing reliance upon the decision of the Hon'ble High Court of Karnataka in the case of Shri BiluruGurubasava Patina Sahakari Sangha Niyamitha without appreciating the fact that the SLP filed by the Department before the Hon'ble Apex Court is still pending
Page 2 of 4 judgment. 4. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A), in so far as it relates to the above grounds may be reversed and that of the Assessing Officer be restored. 5. The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal.”
The ld. DR of revenue supported the assessment order whereas the ld. AR of assessee supported the order of CIT(A). He also submitted copy of a judgment of Hon'ble Karnataka High Court, Dharwad Bench dated 06.01.2016 rendered in the case of CIT Vs. Biluru Gurubasav Sahakari Pattina Sangh Niyamithin ITA No. 100029/2015. At this juncture, a specific query was raised by the bench asking the ld. DR of revenue to point out any difference in facts in the present case and in those cases where Hon'ble Karnataka High Court has decided the issue in favour of the assessee which are followed by CIT(A) and which is cited before us by ld. AR of assessee. In reply, it was submitted by ld. AR of assessee that against these judgments of Hon'ble Karnataka High Court, the matter is pending at Hon’ble Apex Court. This query was also raised by the bench as to whether operation of these judgments had been stayed by Hon’ble Apex Court. In reply, the ld. DR of revenue submitted that there is no stay granted by Hon’ble Apex Court.
I have considered the rival submissions. I find that the issue in dispute was decided by CIT(A) as per para nos. 6 to 11 and therefore, these paras from the order of CIT(A) are reproduced hereinbelow for the sake of ready reference.
“6. The grounds of appeal
, appellant's statement of facts, AO's observations and legal position have been duly considered while disposing the appeal. The solitary issue to be adjudicated in the appeal concerns denial of exemption u/s 80P of the Act.
7. In this context, it is noted that in the case of Sri BiluruGurubasavaPattinaSahakari Sangha Niyamitha Bagalkot, in dated 05/02/2014, the Hon’ble jurisdictional High Court of Karnataka had held as follows:-
If a Co-operative Bank is exclusively carrying on 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 and rural development bank. The Legislature did not want to deny the said benefits 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 this amendment. Therefore, as the assessee is not a Co- operative bank carrying on exclusively banking business and if it does not possess a licence from 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 facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society”……… …..Therefore, the substantial question of law is answered in favour of the assessee and against the revenue.
It is also noted that the Hon’ble High Court of Karnataka in the case of M/s Bangalore Commercial Transport Credit Co-operative Society Limited in dated 27/06/2014 on the question raised by revenue whether sub section (4) of section 80P of the Act would apply to only co-operative banks and not to credit co-operative societies, dismissed the appeal of revenue by relying on its earlier decision in the case of Sri BiluruGurubasavaPattinaSahakari Sangha Niyamitha Bagalkot, in ITA No. 5006/2013 dated 05/02/2014 which has been cited in para 7 supra.
It is further noted that the Hon’ble High Court of Karnataka in the case of Shri LaxmiCredit Souhard Sahakari Ltd (2016) 65 taxmann.com 96 (Karnataka) in IT Appeal No 100127 of 2014 dated 21/09/2015 held that where assessee, a co-operative society, did not satisfy all three basic conditions mentioned in section 5(cvv) of Banking Regulation Act, to become primary co-operative bank, it could not be held as a co-operative bank under section 80P(4) so as to deny deduction under section 80P.
It is seen that facts in the instant appeal are similar to facts in the cases of M/s Sri BiluruGurubasavaPattinaSahakari Sangha Niyamitha Bagalkot in dated 05/02/2014, M/s Bangalore Commercial Transport Credit Co-operative Society Limited in ITA No 599/2013 dated 27/06/2014 and in the case of Shri Laxmi Credit Souhard Sahakari Ltd (2016) 65 taxmann.com 96 (Karnataka) in IT Appeal No 100127 of 2014 dated 21/09/2015.
Therefore in the light of the aforesaid decisions of Hon’ble jurisdictional High Court of Karnataka which are applicable in the instant appeal, and in view of the fact that the decisions are binding, and furthermore since judicial discipline requires that wisdom of higher authorities prevail, the AO is directed to recompute deduction allowable to appellant by following above judicial decisions. The grounds are therefore allowed.” 5. In the above paras reproduced from the order of CIT(A), it is seen that the CIT(A) has followed various judgements of Hon'ble Karnataka High Court and this is not the case of the revenue that the operation of these judgments is stayed by Hon’ble Apex Court and this is also not the case of the revenue that there is any difference in the facts of the present case and these cases and therefore, these judgments are applicable in the present case. Under this factual and legal position, I find no infirmity in the order of CIT(A) and hence, I decline to interfere in the order of CIT(A).
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on the date mentioned on the caption page.