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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 revenue against the order of CIT(A), interalia, on the following ground:
1. The order of the CIT(A), Davangere, is opposed to the law and not on the facts and circumstances of the case. & 139/Bang/2017 Page 2 of 7 Whether the CIT(A), Davangere is right in granting relief to 2. the assessee on the addition made on account of Interest earned from Non-members of the Society U/s 80p(2)(a)(i) of the Income-tax Act, 1961.
The CIT(A), Davanagere, erred in deleting the 3. additions made u/s.80P(2)(a)(i) by deciding the Co- operative Societies are distinct from Cooperative Banks and deduction U/s 80P(2)(a)(i) is applicable to Co-operative Societies as well as deduction U/s 80P(2)(d). On similar issues, SLP filed in Supreme Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot and also in the case of M/s Honnali Urban Co-operative Society, Honnali.
4. For these reasons the order of the CIT(A) may be reversed and that of the AO may be restored.
For these and other grounds that may be urged upon, the order 5. of the CIT(A) may be reversed and that assessment order be restored.
The appellant craves leave to add, alter, amend or delete any other grounds on or before hearing of the appeal.
Decision by the CIT on the scrutiny report :
A Issue wise decision of the CIT, as to whether appeal is to be filed or not, may be recorded with reasons; keeping in view the line of argument the DR is expected to take before ITAT at the time of hearing: Further appeal before the ITAT is considered necessary on this issue, for the following reasons:
The CIT(A) has deleted the additions made on account of the disallowance claimed U/s. 80P(2)(a)(i) aggregating to Rs.1,18,974/- (A) relied on the decision of Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souhardha Credit Co-op Ltd Vs. ITO [ITA No.307 of 2014] dated: 28.10.2014 and held & 139/Bang/2017 Page 3 of 7 that the assessee is entitled to claim deduction U/s 80P(2)(a) of the entire income which has arrived in the course of banking business. In the above referred case, the decision was not accepted and further appeal I was not filed only on the lower tax effect. On similar issue, in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot SLP was filed and admitted in Supreme Court (SLP No. 9958 of 2015). Since the issue has not reached its logical end, the filing of the further appeal is considered necessary.
Further, The Section 80P(2)(a)(i) clearly mandates that (a) The assessee should be Co-op Credit Society and (b) The assessee should be engaged in the activity of providing Credit facility to its members. Here, in the present case, the assessee is a Co-op Society engaged in the activity of providing credit facility to its members also made transactions with non members. The Hon'ble CIT(A) while coming to the conclusion has relied on the order of Hon'ble Karnataka High Court's decision in the case of Tumkur Merchants Souharda Credit Co-op Ltd. However, it is observed in the entire order there is no discussion about non-member transactions. It is an undisputed fact that the Nationalized and Co-op Banks are not the members of the Society. Section 80P(2)(a)(i) allowable/applicable only in respect of the Societies who are dealing with the members and does not mandate to allow deduction in respect of non members. Hence, the Hon'ble CIT(A) erred in coming to conclusion that, the Section 80P(2) does not mandate that the income needs to be earned only from members. Since the question of law is involved in this case and also the issue has not reached its logical end, the filing of the further appeal is considered necessary.
In view of the above, the decision of the CIT (Appeal) allowing the assessee's appeal on this issue is not acceptable and filing of second appeal is suggested on this issue.
Aggregate tax effect on issues proposed Rs.33,672/- to be contested in the ITAT & 139/Bang/2017 Page 4 of 7 B. Grounds of appeal to be raised before the ITAT may be framed in respect of the issues not accepted by the CIT.
GROUNDS OF APPEAL 1. The order of the CIT(A), Davangere, is opposed to the law and not on the facts and circumstances of the case.
2. Whether the CIT(A), Davangere is right in granting relief to the assessee on the addition made on account of Interest earned from Non-members of the Society U/s 80P(2)(a)(i) of the Income-tax Act, 1961.
3. The CIT(A), Davanagere, erred in deleting the additions made u/s.80P(2)(a)(i) by deciding the Co- operative Societies are distinct from Cooperative Banks and deduction U/s 80P(2)(a)(i) is applicable to Co-operative Societies as well as deduction U/s 80P(2)(d). On similar issues, SLP filed in Supreme Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot and also in the case of M/s Honnali Urban Co-operative Society, Honnali.
4. For these reasons the order of the CIT(A) may be reversed and that of the AO may be restored.
5. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order be restored.
6. The appellant craves leave to add, alter, amend or delete any other grounds on or before hearing of the appeal.
In case of a combined order or order in a group case, involving more than one assessee falling under jurisdiction of different CsIT, the CIT shall communicate the stand taken on common issues to the CIT having jurisdiction over other case(s). N.A & 139/Bang/2017 Page 5 of 7 8. Categorization of final decision by CIT A. The appeal is not to be filed (i) As the order is acceptable on merits, or (ii) Even though the order is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the limit prescribed in CBDTs Instruction on monetary limits.
B. Appeal is to be filed on the grounds of appeal framed above (i) As the order is not acceptable on merits, or (ii) Though tax effect is below the prescribed limit, the case falls under the exceptions (to be specified) of the Instruction of CBDT on monetary limits.
NA (iii) Authorisation under section 253(2) of the I.T. Act is issued separately. Appeal to be filed accordingly.
During the course of hearing, the learned counsel for the 2. assessee invited our attention to the order of the CIT(A) with the submission that CIT(A) has adjudicated the issue following the judgment of the jurisdictional High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd., vs ITO, Shri. Biluru Gurubasava Sahakari Sangh Niyamit, Bagalkote and Belgaum Merchants Co-op Credit Society Ltd., Vs. CIT. Besides CIT(A) has also followed the other judgments of different High Courts in this & 139/Bang/2017 Page 6 of 7 regard. Since the CIT(A) has decided the issue in the light of the judgment of jurisdictional High Court, no interference therein is called for.
The learned DR, on the other hand, has submitted that the AO while making the disallowance of the deduction under section 80P, has taken into account the distinguished facts and the bye laws of the cooperative societies. Since the assessee was engaged in banking activities, the AO disallowed the deduction claimed under section 80P(2)(a)(i) of the Income Tax Act.
Having carefully examined the orders of the authorities below, in the light of rival submissions, we find that the assessee is a cooperative society registered under cooperative societies Act which claimed deduction under section 80P on an income by way of interest earned from its members on the loan advanced to them. The AO denied the deduction under section 80P(2)(a)(i) of the Act claimed by the assessee on the ground that the assessee is engaged in banking activities. But the CIT(A) re-examined the claim of the assessee in the light of the judgment of jurisdictional High Court as well as judgments of Hon’ble Gujarat High Court and was of the view that the assessee’s members is eligible for deduction under section 80P(2)(a)(i) of the Act.
During the course of hearing, the learned DR could not specifically point out any specific defect in the order of the CIT(A). Since the CIT(A) decided the issue following the judgment of Hon’ble jurisdictional High Court, I find no infirmity therein. Accordingly, I confirm his order.
In the result, the appeal of the revenue stand dismissed.
Pronounced in the open court on 26th May, 2017.