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Income Tax Appellate Tribunal, “SMC-A” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV
Per Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order of CIT(A), interalia, on the following grounds:
The Learned CIT (Appeals) erred in upholding the Order of the Assessing Officer in the manner in which he did.
2. The Learned CIT (Appeals) erred in upholding an addition of Rs. 30,35,512/- being interest on Fixed Deposit and Miscellaneous income by relying u/s. 80P(2)(d) of the Act. 3. The Learned CIT (Appeals) erred in upholding the view of the AO by relying u/s. 80P(2)(d) of the Act and without considering the provisions of The Karnataka SouhardaSahakari Act, 1997 and by-laws of the Appellant Society. 4. The Learned CIT (Appeals) failed to appreciate the fact that as per Sec. 18 of KASSA Act, 1997, it was mandatory on the part of the Appellant to invest the surplus funds in Co-operative Bank and therefore the application of Sec. 80P(2)(d) has no base and assessee is therefore eligible for exemption u/s. 80P(2)(a)(1) of the Act.
5. The Learned CIT (Appeals) erred in not considering the judgment of Uttarakhand High Court in the case of CIT vs. Iqbalpur Co-operative Cane Development Union Ltd., (2009) reported in 315 ITR 441 (Uttarakhand).
The Learned CIT (Appeals) failed to appreciate the fact that the Appellant Society is maintaining saving account, current account, collecting fixed deposits from members and lending loans out of the deposits, colleting pigmy deposits, business of pawn brokers i.e., providing loan on pledging jewellery and issue demand draft, however, are being provided only to the members of the society not to the general public. Any surplus funds arising from the said activities and investing the same in Co-operative bank are incidental to the objects/ activities and principle of the appellant and very much comes under the ambit of section 80P(2)(a)(i) of the Act and therefore is eligible for the said exemption.
The learned CIT(A) ought to have appreciated the fact that the AO erred by treating Miscellaneous income under the tax net not being part of the objective and principle of Appellant Society.
Without prejudice, the CIT(A) erred in upholding that the AO was justified in law by bringing interest received out of surplus fund invested in Co-operative income derived from miscellaneous activities to tax.
The learned CIT(A) failed to appreciate the fact that Sec. 80P(2)(a)(i) is to be treated as separate heal of exemption without being influenced by of any other clause or sub-clause as section 80P is introduced with a view to encouraging and promoting the growth of the Co-Operative sector in the economic life of the country and in pursuance of the declared policy of the Government.
For these and other such grounds that may be urged at the time of the hearing of the appeal, the appellant prays that the appeal may be allowed.
During the course of hearing, the learned counsel for the assessee contended that the issue is squarely covered by the orders of the Tribunal, thus the issue can be sent back to the AO to readjudicate the issue in the light of the judgment of jurisdictional High Court in the case of Pr.CIT Vs. Vijay Souharda Credit Sahakari Ltd., in which the matter has been restored back to Page 3 of 4 the file of the AO in the light of judgment of the Apex Court in the case of Citizen Co-operative Society Limited vs. Assistant Commissioner of Income Tax in Civil Appeal No.10245/2017 disposed of on 08.08.2017. Copy of the judgment of the jurisdictional High Court has been placed on record.
The learned DR however agreed to the proposition of the assessee.
Having carefully examined the orders of the authorities below in the light of the rival submission, we find that in identical circumstances, the jurisdictional High Court has restored the matter back to the AO to readjudicate the issue in the light of the judgment of the Apex Court in the case of Citizen Co-operative Society Limited (supra). Relevant observation of the Hon’ble Apex Court is extracted hereunder for the sake of reference: “6. The sole substantial question of law raised by the appellants requires to be answered on the determination of the crucial question whether the respondent-assessee is a co-operative society or a co-operative bank. In the judgment referred to by the learned counsel for the revenue in the Citizen Co-operative Society Limited, supra, a categorical finding was given by the Assessing Officer that the Reserve Bank of India has itself clarified that business of the appellant does not amount to that of a co-operative bank, the appellants therefore would not come within the mischief of sub-section (4) of Section 80P. It was held that the activities of the appellants therein was to cater two distinct categories of people namely, nominal members and the ordinary members. The activities of the assessee therein was construed to be financial business contrary to the provisions of the Co-operative Societies Act. As such, it was held that, the said assessee was not entitled to deduction under Section 80P(2)(a)(i) of the Act. 7. A cursory view of the order impugned herein would indicate that no finding is forthcoming regarding the aspect of the activities carried out by the respondent-assessee, whether as a co-operative society or not. In the absence of such factual finding, the legal propositions rendered by the Hon’ble Apex Court cannot be applied. As such, we are of the considered opinion that the matter requires reconsideration by the Assessing Officer to the effect whether the respondent-assessee comes within the realm of co-operative society to get entitlement of deduction under Section 80P(2)(a)(i) of the Act.
Page 4 of 4 8. Hence, we remand the matter to the Assessing Officer to answer this question and then decide the matter in the light of the judgment of the Hon’ble Apex Court in the case of Citizen Co-operative Society Limited, supra, as expeditiously as possible. Thus, without rendering any finding on the substantial question of law raised, order of the Income Tax Appellate Tribunal impugned herein, is set aside. We direct the Assessing Officer to reconsider the matter in the light of the observations aforesaid.”
In the light of the judgment of the jurisdictional High Court, we feel it proper to restore the matter to the file of the AO for readjudication of the issue afresh after affording opportunity of being heard to the assessee.
Accordingly, we set aside the matter of the CIT(A) and restore the matter to the AO in terms indicated above.
Pronounced in the open court on 23rd November, 2017.