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Income Tax Appellate Tribunal, MUMBAI BENCHES “D” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the revenue. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner (Appeals) – 28, Mumbai and arises out of the order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal filed by the revenue read as under:-
i. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in directing the allow deductions u/s 80P(2)(a)(i) of the Act to the assessee in respect of interest income of Rs. 41,38,991/- and u/s 80P(2)(d) of the Act in respect of dividend income of Rs. 1,38,720/- derived by the assessee from its shareholding in other co-operative societies, despite the fact that the assessee carries on banking and other business activities in the name of the credit co-operative society. ii. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in allowing the abovementioned deductions without considering insertion of sec. 80P(4) and sub-clause (viia) to section 2(24) vide Finance Act, 2006 w.e.f. 01.04.2007. iii. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in not appreciating the facts that the assessee falls under the category of ‘’Primary Co-operative Bank’’ as per definition in part V of the Banking Regulation Act, 1949. iv. On the facts and circumstances of the case and in law, the learned CIT(A) for conceding the relief to the assessee, has erred in relying upon the decision of the Hon’ble Bombay High Court in the case of Quepem Urban Co-operative Credit Society, 58 taxmann.com 113, without appreciating the fact that the said decision has not been accepted by the Revenue, and the Hon’ble Apex Court has granted SLP in the said case to the Department as reported in 63 taxmann.com 300. v. The appellant prays that the order of the A.O. should be restored and order of the CIT(A) should be set aside.
Briefly stated the facts are that the assessee i.e. M/s. Jansagar Kamgar Sahakari Patpedhi Maryadit (JKSPM) filed its return of income for the A.Y. 2012-13 on 17.09.2012 declaring total income of Rs. Nil. The Assessing Officer (AO) found that JKSPM, a Co-operative Credit Society is registered under Maharashtra Mathadi Kamgars as members providing financial service sector, banking business, providing credit facilities to its members and showing income under the head profits / gains from business and profession. The issue before the A.O. was the claim made by the assessee u/s 80P of the Act. The AO observed in the ‘Profit & Loss Account’ for the impugned assessment year, the major receipt of Rs. 1,21,31,216/- by way of ‘interest on loans and advances’ to members on the income side. As per the AO, it demonstrates that the only activity being carried out by JKSPM is accepting deposits and extending loan facilities. The AO found that the same is supported by Clause (a), (b) and (d) of the objects of the assessee’s Bye laws. The AO further found that the JKSPM has been maintaining a running account with Mumbai District Central Co-operative Bank utilising cash credit facilities. Besides taking a term loan, it has also made investments in shares and FD with Mumbai District Central Co-operative Bank which may be required for availing loan facility etc. In reply, the assessee has submitted before the AO that it does not require a banking license to do the banking business with the members of the society and cannot use cheque / clearing facility which are available. The AO was not convinced with the explanation of the assessee and brought to tax gross total income of Rs. 41,38,991/- and dividend income of Rs. 1,38,720/-.
Aggrieved by the order of the AO, the assessee’s society filed an appeal before the learned CIT(A). We find that the learned CIT(A) relying on the decision in the case of (i) Quepem Urban Co-operative Credit Society Ltd. vs. ACIT (2015) 58 taxman.com 133 (Bom), (ii) CIT vs. Sri Biluru Gurubasave Pattini Sahakari Sangha Niyamitha Bagalkot (2015) taxmann.com 280 (Kar), (iii) CIT vs. Jafari Momin Vikssa Co- operative Credit Society Ltd. (2014) 49 taxmann.com 571 (Guj), (iv) Tashomandir Sahakari Patpedi Ltd. vs. ITO (ITA No. 3477/Mum/2014) held the assessee Co-operative Society as not a Co- operative Bank and thus eligible for deduction u/s 80P(2)(a)(i). The learned CIT(A) further held the dividend income of Rs. 1,38,720/- received by the assessee Co-operative Society from its shareholdings in other Co-operative Societies as eligible for deduction u/s 80P(2)(d). In view of the above, the learned CIT(A) allowed the appeal filed by the assessee.
Before us, the learned DR relies on the order of the AO. On the other hand, the learned counsel of the assessee relies on the order of the learned CIT(A).
We have heard the rival submissions and perused the relevant material on record. We find that a similar issue arose before the Hon'ble Bombay High Court in the case of Quepem Urban Co-operative Credit Society (supra). In the above case, the assessee was a Co- operative Society registered under the Goa Co-operative Societies Act and it was engaged in providing credit facilities to its members. The income so earned from the said activity, was claimed as deduction u/s 80P(2)(a)(i) of the Act. The AO disallowed the assessee’s claim on the ground that the assessee was a primary Co-operative Bank and, therefore, hit by the provisions of section 80P(4) which excluded the benefit of section 80P. However, the Commissioner (Appeals) allowed the assessee’s claim holding that it was not a Cooperative Bank but a Cooperative Credit Society. The Tribunal restored the AO’s order. On appeal, the Hon'ble Bombay High Court held that on facts, the assessee was not a Cooperative Bank rather it was a Cooperative Society and, therefore, its claim for deduction was to be allowed. However, the Hon'ble High Court held further :
“.....Section 80P(1) of the Act restricts the benefits of deduction of income of Cooperative Society to the extent it is earned by providing credit facility to its members. Therefore, to the extent the income earned is attributable to dealings with the non-members are concerned, the benefit of section 80P of the Act would not be available. In the above view of the matter, at the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction u/s 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. “ 6.1 The facts being similar, we follow the judgement of the Hon'ble Jurisdictional High Court and hold that the assessee is entitled to the benefit of deduction available u/s 80P of the Act. However, as held in the above judgement to the extent the income earned is attributable to dealings with non-members are concerned the benefit of section 80P of the Act would not be available to the assessee. In view of the above, the AO is directed to verify the same and pass a consequential order, if any. The assessee is directed to file the relevant details before the AO. Needless to say, the AO is directed to give reasonable opportunity of being heard to the assessee.
In the result, the appeal filed by the revenue is partly allowed.
Order pronounced in the open court on 11/14/2017