ITO 20(2)(1), MUMBAI vs. MUMBAI LOHMARG POLICE KARMACHARI SAHAKARI PATPEDHI MARYADIT, MUMBAI

PDF · subscribers
ITA 1819/MUM/2017Status: DisposedITAT Mumbai17 October 2017AY 2013-145 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee is not a 'cooperative bank' as it lacks an RBI license and its activities are limited to its members. Therefore, the restriction under Section 80P(4) is not applicable, and the assessee is eligible for deduction under Section 80P(2)(a)(i).

What were the facts?

The assessee, a cooperative society, claimed deduction under Section 80P for income from providing credit facilities to its members. The Assessing Officer denied this deduction, considering the society to be a cooperative bank and thus ineligible due to Section 80P(4). The CIT(A) allowed the deduction, finding no evidence of the society functioning as a cooperative bank.

What were the issues?

Whether a cooperative society providing credit facilities to its members, without an RBI banking license, is considered a 'cooperative bank' for the purpose of Section 80P(4) and thus ineligible for deduction under Section 80P.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(4),Section 80P(2)(a)(i)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI

Before: SHRI G.S. PANNU

For Appellant: Ms. N. Hemalatha
Hearing: 25/07/2017Pronounced: 17/10/2017

The captioned appeal by the Revenue is directed against the order of the CIT(A)-32, Mumbai dated 22.12.2016, pertaining to the Assessment Year 2013-14, which in turn has arisen from the order passed by the Assessing Officer dated 24.02.2016 under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).

2.

In its appeal, Revenue has raised the following Grounds of appeal:-

Mumbai Lohmarg Police Karmachari Sahakari Patpedhi Maryadit “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in allowing deduction u/s 80P to the assessee even though assessee carries on the banking business and other business in the name of a credit cooperative society?

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in allowing deduction u/s 80P(2)(a)(i) without considering inserted section 80P(4) and sub-clause (viia) to section 2(24) vide Finance Act 2006 w.e.f. 01.04.2007?

3. The appellant prays that the order of the CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored.”

3.

At the time of hearing, it was noticed that none appeared on behalf of the respondent-assessee inspite of service of notice by RPAD. On the other hand, the ld. DR appeared on behalf of the Revenue.

4.

Accordingly, in view of Rule 25 of the Income Tax (Appellate Tribunal) Rules, 1963, the appeal of the Revenue is being disposed off ex-parte the respondent-assessee after hearing the appellant-Revenue on merits.

5.

In order to appreciate the controversy in this appeal, the following discussion is relevant. The respondent-assessee is a co- operative society which is, inter-alia, engaged in the activity of providing credit facilities to its members. In the course of assessment proceedings, the Assessing Officer noted that assessee was collecting deposits from its members and, in turn, providing credit facilities to its members. It was also noted by the Assessing Officer that assessee had kept fixed deposits with other co-operative banks. The Assessing

Mumbai Lohmarg Police Karmachari Sahakari Patpedhi Maryadit Officer was of the view that the restriction contained in Sec. 80P(4) of the Act was applicable to the assessee inasmuch as the assessee was functioning as a co-operative bank. Therefore, the Assessing Officer held that since Sec. 80P(4) of the Act was attracted, assessee was not eligible for the claim of deduction u/s 80P(2)(a)(i) of the Act. Thus, the income of Rs.38,37,040/-, which has been claimed by the assessee as exempt u/s 80P of the Act, was treated as taxable by the Assessing Officer and accordingly, he assessed the total income at Rs.38,37,040/-. The CIT(A) disagreed with the Assessing Officer and noted that assessee was not providing any banking facilities either to the general public at large or even to its members so as to attract the restriction imposed u/s 80P(4) of the Act. The CIT(A) also referred to an opinion from Reserve Bank of India (RBI) dated 01.02.2012 whereby the RBI stated that where a banking licence has not been issued to a co-operative credit society, such an entity could not be considered as an urban co-operative bank as per the Banking Regulation Act, 1949. Thus, on facts, the CIT(A) concluded that the Assessing Officer has not demonstrated as to how the assessee qualified to be a co-operative bank. Consequently, he set- aside the action of the Assessing Officer and restored the exemption claimed by the assessee u/s 80P(2)(a)(i) of the Act. In this background, Revenue is in appeal before the Tribunal.

6.

Before me, there is no material or cogent reasoning to prove as to how the assessee can qualify to be a co-operative bank, especially in the face of the fact that assessee does not have a licence from the RBI to act as a bank. In this case, it is also not disputed by the Assessing Officer that the activities of the assessee are limited to acceptance of Mumbai Lohmarg Police Karmachari Sahakari Patpedhi Maryadit deposits from the members and providing credit facilities to its members only. Clearly, such an activity falls within the scope of exemption prescribed u/s 80P(2)(a)(i) of the Act which, inter-alia, deals with the income of a co-operative society engaged in the business of providing credit facilities to its members. Quite clearly, the restriction prescribed in Sec. 80P(4) of the Act, which has been invoked by the Assessing Officer, is in relation to a ‘co-operative bank’ other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The assessee is not having licence from the RBI to carry out any business of a co-operative bank and, therefore, it would not fall within the restriction contained in Sec. 80P(4) of the Act. The said position is now well-settled by the judgment of the Hon'ble Supreme Court in the case of The Citizen Co-operative Society Ltd. through its Managing Director, Hyderabad, Civil Appeal No. 10245 of 2017 dated 08.08.2017.

7.

In view of the aforesaid discussion, I hereby affirm the order of the CIT(A) allowing the claim of the assessee for exemption u/s 80P(2)(a)(i) of the Act.

8.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the open court on 17th October, 2017.

More judgments on Section 80P

All 5,069 judgments and leading authorities on Section 80P →

Recent GST High Court judgments

Search GST case law →