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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
Before: SHRI G.S. PANNU (AM) & SHRI RAM LAL NEGI (JM)
O R D E R PER RAM LAL NEGI, JM These appeals have been filed by the revenue against orders dated 16/02/2017 passed by the Ld. CIT (Appeals)-32, Mumbai, for the assessment years 2013-2014 and 2014-2015 respectively, whereby the Ld. CIT (A) allowed Assessment Years: 2013-14 & 2014-15 both the appeals filed by the assessee against assessment orders passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’). Since, both the appeals pertain to the same assessee, the same were clubbed and heard together and are being disposed of by this common order for the sake of convenience.
Brief facts of the case are that the assessee a co-operative credit society registered under Maharashtra Co-operative Societies Act, 1960 filed its return of income for the assessment year 2013-14 declaring total income of Rs. 2,73,218/- after claiming deductions u/s 80P of the Act amounting to Rs. 1,03,54,883/-. The case was selected for scrutiny and notice u/s 143(2) and 142(1) was issued. In response thereof the assessee filed the details through its authorized representative. The main object of the society is accepting deposits and advancing loan to its member. The paid capital of the society was Rs. 4,24,08,460/- as on 31/03/2013 and it received interest of Rs. 1,90,42,537/- from deposits amounting to Rs.19,88,50,248/-. The AO issued show cause notice to the assessee asking as to why claim u/s 80 of the Act should not be disallowed in terms of Finance Act amendment 2006 applicable from 01.04.2007.
In response to the notice the assessee, through its authorized representative, filed written submission stating that banking business is different from the activities of credit co-operative societies and as per the CBDT circular No. 6/2010 and the judgments of the various High Courts including the Hon’ble Bombay High Court delivered in Quepem Urban Co-operative Society Ltd.(2015) 58 taxmann113 and decisions of the various Benches of the Tribunal, the assessee is entitled for deduction u/s 80P of the Act. However, the AO rejecting the submissions of the assessee held that the assessee is not eligible for the said deduction and determined the income of the assessee accordingly. Assessment Years: 2013-14 & 2014-15
In the first appeal, the Ld. CIT(A) decided the said issue in favour of the assessee relying on the cases relied upon by the assessee and allowed the appeal of the assessee. The revenue is in appeal against the findings of the Ld. CIT(A).
The revenue has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):-
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 co-operative 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? 6. Before us, the Ld. Departmental Representative (DR) relying on the assessment order passed by the AO submitted that the assessee fulfills all the three conditions laid down u/s 56(c) (ccv) of part V of the Banking Regulation Act, 1949 and therefore falls in the category of a Primary Co-operative Bank, therefore, the provisions of Section 80P (4) comes into picture in the case. Since, the assessee is not entitled for deduction u/s 80P (2) (a)(i) read with 80P(4), the AO has rightly disallowed the claim of the assessee. The Ld. DR further submitted that the order of the Ld. CIT (A) is erroneous therefore the same may be set aside and the order of the Assessing Officer may be restored.
On the other hand, the Ld. counsel for the assessee relying on the findings of the Ld. CIT (A) submitted that the findings of the Ld. CIT (A) are based on the expressed provisions of law and in accordance with the decisions of the various High courts including the Hon’ble jurisdictional High Court rendered in the case of Quepem Urban Co-operative Society Ltd. (supra) and the Assessment Years: 2013-14 & 2014-15 decisions rendered by various Benches of the Tribunal, referred in the impugned order. The Ld. counsel further submitted that since there is no merit in the appeal of the revenue, the same is liable to be dismissed.
We have heard the rival submissions and perused the material on record including the cases relied upon by the authorities below. The only issue to be adjudicated is that whether the Ld. CIT (A) has erred in holding the assessee a Co-operative Society and is eligible for deduction u/s 80P(2)(a)(i) of the Act. The Ld. CIT (A) has decided the issue in question holding as under:-
5.2 From the facts of the instant case, it is quite clear that the appellant has limited himself to his own members. The appellant has not provided banking facilities either to the general public at large or even to the members of the society. Even the bye laws of the appellant does not provide for banking activities. Therefore facts of this case are not identical with any of the case laws relied upon the by the AO. On the other hand, the facts of the instant case are almost similar to the decisions of the ITAT Nagpur & Panji Benches in the cases of (i) ACIT vs Buldana Urban Coop Credit Soc Ltd 32 Taxman 69, ITAT Nagpur and (ii) DCIT vs Jayalaxmi Mahila Vividodeshagala Souharada Sahakari Ltd, Karwar by ITAT Panaji Bench 23 Taxman 313 where the activities of the assessee were limited to the members of a specific group and the area of operations was also limited to the acceptance of deposits of members and providing credit facilities to only member, which have been held as not falling under banking activities as defined in the Banking Regulation Act. Following the aforesaid decisions of ITAT Nagpur and Panaji, the appellant cannot be held as cooperative bank, hence deduction claimed u/s 80P(a)(a) cannot be denied to it. I find that the AO in the present AY has nowhere led any facts to show that banking facilities have been provided to members of the general public without restricting only to its own members. On facts therefore the AO has not demonstrated as to how the appellant qualifies to be a bank. In the circumstances, I hold that the appellant is a cooperative society and not a cooperative bank and is therefore eligible for deduction u/s 80P(2)(a)(i). AO is accordingly directed to allow the deduction claimed by the appellant. Grounds 1 & 2 are allowed in favour of the appellant.
Assessment Years: 2013-14 & 2014-15
We notice that the Ld. CIT (A) has decided the issue relying on the decisions of the various High Courts including the Hon’ble Bombay High Court and the decisions of various Benches of the Tribunal including the decisions of the Nagpur Bench and the Panaji Bench. We find that the Nagpur Bench of the Tribunal in ACIT vs. Buldana Urban Coop Credit Soc Ltd (supra) and Panaji Bench of the Tribunal in DCIT vs Jayalaxmi Mahila Vividodeshagala Souharada Sahakari Ltd, Karwar (supra) have decided the identical issue in favour of the assessee. In Quepem Urban Co-operative Society Ltd.(supra), the Hon’ble Bombay High Court has held that cooperative society could not be regarded as co-operative Bank. Hence, in our considered view, the findings of the Ld. CIT(A) are based on the law laid down by the Hon’ble jurisdictional High Court and the decisions of Tribunals referred above. Therefore, we do not find any reason to interfere with the findings of the Ld. CIT(A). Accordingly, we uphold the order passed by the Ld. CIT(A) and dismiss both the grounds of appeal of the revenue. The revenue has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):-
“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?