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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 are the cross appeals filed by the assessee and the revenue respectively against order dated 02/03/2017 passed by the Ld. Commissioner of Income Tax (Appeals)-25, Mumbai, wherein the Ld. CIT (A) has partly allowed the appeal of the appellant/assessee filed against assessment order passed u/s 143(3) of the Income Tax Act, 1961 (for short ‘the Act’). Assessment Year: 2012-2013 2. Brief facts of the case are that the assessee a co-operative credit society carrying on the business of accepting deposits and giving credit facilities to its member s, filed its return of income for the assessment year under consideration declaring NIL income. The case was selected for scrutiny. The assessee had claimed gross total income of Rs.50,41,539/- after claiming deduction u/s. 80-B of the Act. In response to the notice issued by the A.O. u/s. 143(2) and 142(1) of the Act, the authorized representative of the assessee submitted the return stating inter alia that the assessee is a registered co- operative credit society and its main business is to collect deposits from members and give interest on such deposits, to advance loans to members and charge interest from the borrowers. Therefore, the main income of the society is the interest charged from the various borrowers. On making some specific amount as statutory investment, the society also gets interest on the same. Payments of interest against various deposits are main business expenses of the society. Since the main business of the Society is to provide credit facilities to its members, the profit is exempt u/s. 80P(2) and 80P(2)(d) of the Act. The A.O. however, rejected the contention of the assessee and disallowed the claim of deduction of the aforesaid amount.
The assessee challenged the assessment order before the first appellate authority, i.e., the ld. CIT(A), inter alia, on the ground that the A.O. has erred in disallowing the deduction u/s. 80P of the I. T. Act, 1961 amounting to Rs.50,41,539/-, holding that the appellant co-operative society was covered by the provision of section 80P(4) and, therefore, not eligible for deduction u/s. 80P of the Act. The ld. CIT(A) after hearing the assessee confirmed the deduction u/s. 80P(2)(d) of the Act holding that where the assessee is a co- operative credit society, engaged in the business of providing credit facilities to its members and if the funds created by such activities are not required immediately for business purposes and invested to earn interest, the income so earned by the society would come in the category of income from other sources Assessment Year: 2012-2013 taxable u/s 56 of the Act. The assessee is in appeal before the Tribunal against the said order.
The assessee has raised the following effective ground of appeal
against the impugned order passed by the Ld. CIT (A):- “On the facts and in law,
1. The Hon. CIT (A) erred in confirming the addition of Rs.10,93,709/-, by denying the deduction claimed u/s 80P(2)(d) of the IT Act 1961, in respect of interest arising on fixed deposits with co-operative banks, not appreciating that the same arose from investments with other co-operative societies and therefore the disallowance of deduction was not justified in the hands of the appellant.”
5. Before us, the ld. Counsel for the assessee submitted that the assessee’s case is covered by the judgment of Hon’ble Karnataka High Court passed in Principal CIT vs. Totagars Co-op. Sale Society 392 ITR 74 (Kar). Since, the impugned order is contrary to the law laid down in the aforesaid case, the findings of the Ld. CIT(A) is liable to be set aside. On the other hand, the ld. Departmental Representative (DR) relying on the findings of the ld. CIT(A) submitted that there is no infirmity in the order of the ld. CIT(A) to interfere with the same.
We have heard the rival submissions and also perused the material on record including the cases relied upon by the parties. We notice that in Principal CIT and another vs. Totagars Co-op. Sale Society (supra), identical issue has been decided in favour of the assessee by the Hon’ble Karnataka High Court. In the said case A.O. disallowed the deduction u/s. 80P(2)(d) and brought the income to tax under the head other sources. In appeal, the ld. CIT(A) allowed the order of the assessee and deleted the addition made by the A.O. The Revenue challenged the action of the ld. CIT(A) before the ITAT. The ITAT confirmed the action of the ld. CIT(A). In further appeal before the High Court, the Hon’ble High Court upholding the findings of the Tribunal, decided the issue in favour of the assessee holding as under: Assessment Year: 2012-2013 “8. The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. The said issue has been decided by the ITA itself indifferent cases. Moreover the word “Co-0perative Society” are the words of a large extent, and denotes a genus, whereas the word “ Co-operative Bank ” is a word of limited extent, which merely demarcates and identifies a particular species of the genus Cooperative Societies. Co-operative Society can be of different nature, and can be involved in different activities; the Co-operative Bank is merely a variety of Co-operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word “ Co-operative Society”. 9. Furthermore, even according to section 56(i)(ccv)of the Banking Regulation Act, 1949, defines a primary Co-operative Bank as the meaning of Co-operative Society. Therefore, a Co-operative Society Bank would be included in the words “Co-operative Society”. 10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I. T. Act, the said amount of interest earned from a Co- operative Society bank would be deductible from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent.” 7. We notice that the Ld. CIT(A) has relied on the judgment of the Hon’ble Supreme Court passed in Totgars Co-operative Sale Society Ltd. vs. ITO 322 ITR 238(SC). But in Principal CIT and another vs. Totagars Co-op. Sale Society (supra) the Hon’ble Karnataka High Court has decided the identical issue in favour of the assessee holding that the issue before the Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) was different from the issue involved in the present case therefore the sais judgment is not applicable. Since, the identical issue has already been decided in favour of the assessee by the Hon’ble Karnataka High Court, we respectfully following the said judgment decide the sole ground of appeal
in favour of the assessee.
8. The revenue has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):- Assessment Year: 2012-2013
1. “On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in allowing the deduction u/s 80P of the I.T. Act, 1961. Under the provisions of section 80P(4) of the Act which in fact is applicable to only Co-operative banks except for primary agricultural credit society or a primary co-operative agricultural and Rural Development bank and the provisions of section 80P(4) of the Act are not applicable to co-operative credit society.”
9. Before us, the ld. DR submitted that the ld. CIT(A) has erred in allowing the deduction u/s. 80P of the Act. The provisions of section 80P(4) of the Act is applicable only to Co-operative Banks, agricultural credit society or a primary co-operative agricultural and rural development bank and not applicable to the co-operative credit society. The findings of the ld. CIT(A) are contrary to the settled principle of law. Therefore, it is liable to be satisfied.
10. On the other hand, the ld. Counsel for the assessee submitted that this issue involved in this case has already been decided in favour of the assessee by the ITAT Mumbai in assessee’s own case for the A.Y. 2010-11. Therefore, the findings of the ld. CIT(A) is contrary to the decision of the ITAT rendered in the assessee’s own case.
We have heard the rival submissions and perused the material on record. In light of the rival contentions, we find that identical issue has been decided by the Co-ordinate Bench in for the A.Y. 2010-11 vide order dated 15.3.2017 in favour of the assessee. The relevant portion of the decision of the co-ordinate bench reads as under:
We have heard the rival submissions and perused the material before us. We find that the issue stands squarely covered by the order of the Tribunal delivered in the case of Kulswami Co-operative Society(supra).We are reproducing the relevant portion of the order and it reads as under: "The Revenue has raised following Ground of appeal:- Assessment Year: 2012-2013 "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 1,14,64,254/- by holding that the assessee being Co- operative Credit Society is not a Co- operative bank and hence is entitled for deduction u/s 80P of the I.T. Act."
3. The assessee before us is a Co-operative society, which is, inter alia, engaged in the business of providing credit facilities to its members. For the assessment year under consideration i.e. assessment year 2009-10, it filed a return of income declaring total income at Nil on account of claim of exemption u/s 80P of the Act. In the revised return of income filed by the assessee, the gross total income as per the Income and Expenditure Account was declared at Rs. 1,14,64,524/-, which was also claimed as exempt in terms of section 80P of the Act and accordingly, the returned income was declared at Nil.
4. In the course of assessment proceedings, the Assessing Officer show-caused the assesee as to why the claim of exemption u/s 80P of the Act be not disallowed in view of the provisions of sub- section (4) of section 80P of the Act, inserted w.e.f 01.04.2007. In terms of sub-section (4) of section 80P of the Act, the provisions of section 80P of the Act were made inapplicable to a Co-operative Bank other than primary agricultural credit society or primary co- operative agricultural and rural development banks. The stand of the Assessing Officer was that since the assessee was a Co- operative Society registered under the Maharashtra State Co- operative Societies Act, 1960 and was engaged in providing credit facilities to its members, such an assessee would be covered by the provisions of sub-section (4) of section 80P of the Act. Accordingly, assessee's claim for exemption u/s 80P was denied in toto and the gross total income of Rs. 1,14,64,254/- was determined as the final taxable income.
5. In appeal before the CIT(A), the pertinent plea of the assessee was that a Co- operative Society engaged in the activity of providing credit facilities to its members is quite different from a Co- operative Bank, which falls under the restriction placed in sub- section (4) of section 80P of the Act. Therefore, as per the assessee, the provisions of sub-section (4) of section 80P of the Act did not disentitle the assessee from claim of exemption u/s 80P of the Act. The CIT(A) found that similar issue came up in the case of assessee for assessment year 2008-09, wherein, the predecessor CIT(A) had upheld assessee's claim for exemption u/s 80P of the Act. Following the precedent in the assessee's own case, by way of the order of predecessor CIT(A) for assessment year 2008-09, the CIT(A) held the assessee entitled for claim of exemption u/s 80P of the Act. Assessment Year: 2012-2013
6. Before us, it was a common point between the parties that identical controversy has been considered by the Tribunal in the assesse's own case for assessment years 2007-08, and 2008-09 vide & 505/Mum/2012 dated 28.03.2014, whereby it has been held that assessee Co- operative Society does not fall within the restriction placed in sub-section (4) ofsection 80P of the Act. The following discussion in the order of the Tribunal dated 28.03.2014 (supra) is relevant:- "4. Having heard both the sides and perused the material on record, it is pertinent to mention that the only issue arising out of both the appeals relate to the allowability of the exemption/deduction claimed by the assessee u/s 80P of the Income Tax Act. The allowability of exemption of the said income depends on whether the assessee/cooperative credit society is a co-operative bank or not for the purposes ofsection 80P(4) of the Act since according to the said provision, deduction under section 80P shall not be available to any co-operative bank other than primary agricultural society or primary co-operative agricultural and rural development bank. 4.1 It is the case of the Revenue that the assessee has been functioning as a cooperative bank and by virtue of section 80P(4), the assessee is not entitled for the benefit of section 80P and also the assessee is not coming within the purview of primary agricultural society or primary co-operative agricultural and rural development bank. It is the case of the assessee that it is not a cooperative bank but only a cooperative society to which clause (4) of section 80P is not applicable. 4.2 In this connection, it is pertinent to mention that the assessee has brought on record before the lower authorities, the letter of the CBDT bearing No. F. No. 133/06/2007-TPL dated 09.05.2008 addressed to the Delhi Urban T&C Society Ltd., stating that for the purposes of subsection 4 of section 80P, 'cooperative bank' shall have the same meaning as assigned to it in part V of the Banking Regulation Act 1949, according to which 'cooperative banks' means a State Co-operative Bank, a Central Co- operative Bank and Primary Co-operative Bank. Though the said clarification is given by the CBDT in connection with some other assessee, the crux of the matter pertains to the clarification of 'co-operative bank' for the purpose of subsection 4 of section 80P. It is observed that the said clarification has also been relied by the Tribunal in many cases. Therefore, 'cooperative banks' mentioned in the said subsection indicates only the State, Central and Primary Co-operative Banks only. 4.3 Moreover, for commencing a banking business by the co- operative society, due license has to be obtained from the Reserve Bank of India and in the assessee's case, there is no such license obtained for commencing any banking business. The mere fact that the assessee has been providing credit facilities to its members Assessment Year: 2012-2013 and thereby earns interest and dividend cannot make the 'society' into a 'bank' for the purposes of section 80P(4) of the Act. If the intention of the legislature was not to grant deduction to cooperative societies carrying on the business of providing credit facilities to its members, then this section would have been deleted. This proposition is supported by various decisions including the decision of the Gujarat High Court in the case of CIT Vs. Jafari Momin Vikas Cooperative Credit Society Ltd and the decision of the Tribunal in the case of DCIT Vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. [2012] 137 ITD 163. 4.4 In addition to the aforementioned discussion, the distinction between cooperative society registered under the Banking Regulation Act 1949 and the cooperative society registered under the Maharashtra State Cooperative Societies Act 1960 as brought out by the Ld.CIT(A) on the basis of the submission of the assessee is extracted hereunder: XXXX The above distinction makes it very clear that the assessee is not a co-operative bank for the purposes of section 80P(4) of the Act. 4.5 As regards the claim of the revenue that for the Assessment Year 2007-08, the assessee has not claimed the deduction of the section 80P of the Act in the return of income but claimed the same only during the course of the assessment proceedings and hence the claim of the assessee is not admissible in view of the findings of the Hon'ble Apex Court in the case of Goetze India Ltd. [284 ITR 323 (SC) (2006)], it is pertinent to mention that the Hon'ble Bombay High Court in the case of the CIT Vs. Pruthvi Brokers and Shareholders P. Ltd. [(2012) 349 ITR 336 (Bom)] has held that the appellate authorities have the power to consider the claim not made in return of income. The Ho'ble Bombay High Court while deciding so, has considered the judgment of the Hon'ble Apex Court in the case of Goetze India Ltd. (supra). In view of that matter, the Ld.CIT(A) giving relief to the assessee at the appellate stage on the claim of deduction not made in the return of income is justified. 4.6 Considering the entire facts and position of law, we are of the considered opinion that the Ld.CIT(A) is justified in directing the AO to allow the deduction claimed by the assessee u/s80P of the Act on the reason that the assessee, a cooperative credit society is not a bank for the purposes of section 80P(4) of the Act. Thus the orders of the Ld.CIT(A) dated 11.02.2011 and 29.11.2011 for the Assessment Years 2007-08 and 2008- 09 respectively are upheld.
7. Following the aforesaid precedent, which has been rendered in assessee's own case under identical circumstances, we hereby affirm the order of CIT(A) upholding assessee's claim for exemption u/s 80P of the Act. Thus the Revenue fails in its appeal." Assessment Year: 2012-2013 Respectfully following the above order, we hold that the order of the FAA does not suffer from any legal or factual infirmity. All the grounds raised by the AO have been dealt by the Tribunal in it order, So, confirming the order of the FAA, we decide the issue against the AO.
12. Since, there is no change in the facts and circumstances of the case and the issue involved in the present case, we respectfully follow the decision of the co-ordinate bench rendered in assessee’s own case for the assessment year 2010-11 aforesaid and dismiss the sole ground of appeal of the Revenue.
In the result, the appeal filed by the assessee stands allowed and the cross appeal filed by the Revenue stands dismissed.