THE BAKSARA CO-OPERATIVE CREDIT SOCIETY LTD.,HOWRAH vs. ACIT, CIRCLE-48, KOLKATA, KOLKATA

The assessee in the present case is a co-operative society which, as stated by the A.O. in the assessment order, is engaged in banking business. The return of income for the year under consideration was filed by it on 14.09.2012 declaring a total income of Rs. NIL after claiming deduction of Rs. 1,07,03,157/- under section 80P of the Act. During the course of assessment proceedings, it was submitted by the The Baksara Co-operative Credit Society Ltd. assessee in support of its claim for deduction under section 80P that the same is not a bank. In this regard, reliance was placed by the assessee on the decision rendered by the Ld. CIT (A) as well as by the Tribunal in its own case for the earlier years whereby the similar claim was allowed by accepting the stand of the assessee that it was not a bank. The A.O. however did not follow the decision of the Ld. CIT (A) as well as of the Tribunal rendered in assessee’s own case on a similar issue for the earlier years and took a different view by relying on the provisions of section 80P (4) and section 2 (24) (viia). According to him, it was clear from the combined reading of these two provisions that the benefit of deduction was not available to the profits and gains arising to the cooperative societies from their business of banking even with its members for providing them credit facilities. Accordingly, the claim of the assessee for deduction under section 80P was disallowed by the A.O. in the assessment completed under section 143(3) vide an order dated 03.03.2015.

Against the order passed by the A.O. under section 143(3), an appeal was preferred by the assessee before the Ld. CIT (A) and although the decision of the Tribunal rendered in its own case on a similar issue for the earlier years was cited on behalf of the assessee, the Ld. CIT (A) did not follow the same and proceeded to confirm the disallowance made by the A.O. on account of assessee’s claim for deduction under section 80P of the Act for the following reasons given in his impugned order: During the appeal, the appellant submitted that this matter was covered by the decision of the ITAT, Kolkata in the appellant’s own case for the AY 2009-10 in its favour. The appellant also produced a copy of the order of The Baksara Co-operative Credit Society Ltd. the Hon’ble ITAT, Kolkata. This order has been perused. The operative parts are reproduced below, “As found by the CIT(A), from the perusal of the objects of the assessee Society as extracted by him in this impugned order for the bye-laws, the assessee society is not allowed to accept deposits money from the public for the purpose of lending or investment. As further found by him, the entire transactions of accepting deposits and giving loans has been done by the assessee-society with its members only and there are no such transactions done by it with non-members. He has also found that the assessee society was not registered under the banking regulation Act, 1949 and it was registered under the West Bengal Cooperative Societies Act, 1983. On the basis of all these findings recorded by him, the Ld. CIT(A) has held by following the decision of the Tribunal cited on behalf of the assessee before him that the assessee society is not a cooperative bank which is covered by section 80P(2)(a)(1). At the time of hearing before us, Ld. DR has not been able to rebut or controvert any of the findings of fact recorded by the Ld. CIT(A). He has also not been able to cite any authority where a different or contrary view is taken on this issue, which is favour of the Revenue. We therefore, find no justifiable reason to interfere with the impugned order of the Ld. CIT(A) allowing the claim of the assessee for deduction u/s 80P(2)(a)(i)....” It is clear from the above that the Hon’ble Tribunal has held this allowability of the said deduction to be a matter of fact. It is also settled law that it is the conduct of an assessee that is material and final in deciding whether any particular deduction is to be made available to him or not. In this case, it is undisputed that the appellant is a registered cooperative credit society as mentioned earlier. It is also uncontested that as per its bye laws the appellant is mandated to accept deposits only from its members and not from members of the public. It is also a fact that while the appellant can indulge in all activities and businesses a bank indulges in, it cannot accept moneys from the public at large- that is , the appellant cannot allow itself to be treated like a bank. Despite these positions, it is however, found that the appellant shows itself to be a bank on public internet sites, and invites deposits like any other bank. Once such evidence is presented before the appellant, the onus shifts to the appellant to prove that it has not been showing, through its business conduct, anything that might by categorized as an activity of a bank. This onus can be discharged only through proving that it has not taken deposits from the public at large; or conversely, the all the deposits that have been accepted by it have come from only its members. The onus no longer rests upon the revenue to bring forth any instance of such a violation of its bye-laws by the appellant. The appellant has not been able The Baksara Co-operative Credit Society Ltd. to clearly show that all its deposits came from only its members. In fact the only thing relied upon by the appellant is the above mentioned ITAT order. It may not be out of place to mention that this fact that the appellant itself treats itself and advertises itself as a “Bank” on public domains and invites deposits from the general public, was not brought before the Hon’ble Tribunal when it passed the above mentioned order. The fact has the important effect of changing material facts and shifting the onus back to the appellant - an onus that initially rested upon the revenue. Without the discharge of this onus, it is not clear how the appellant can be allowed to take advantage of the said deduction. Going further, it is established law that it is the conduct of the assessee that becomes the determining factor in deciding how the assessee should be viewed from the point of view of determining its revenue liability. In the case of the appellant, it is clear that it has advertised itself upon public domains as a bank. Therefore, irrespective of the factum – which itself has as yet not been proved in any case- of whether the appellant succeeded in getting deposits from the public or not, the conduct of the appellant clearly shows that despite its statutory registrations, the appellant wishes itself to be viewed as a bank and has taken tangible steps towards creating such an image. It has been mentioned on public sites a bank. In this scenario, it is clear that it is the intent of the appellant to operate as a bank- whether it succeeds or not is matter that is not material to the intent or the conduct of the appellant. In these circumstances, it is circumstances, it is difficult to see how the deduction u/s 80P can be made available to the appellant. The decision of the AO is accordingly confirmed. Aggrieved by the order of the Ld. CIT (A), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. It is observed that although a similar issue involved in assessee’s own case was decided by the Tribunal for A.Y. 2009-10 in favour of the assessee and the same was followed to give relief to the assessee even in A.Y. 2007- 08 and 2008-09, the said issue has been subsequently restored by the