Commissioner of vs Shree. Mahila Credit | Karnataka High Court 2016

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 28TH DAY OF JUNE, 2016

PRESENT

THE HON'BLE MR. JUSTICE JAYANT PATEL

AND

THE HON’BLE MR. JUSTICE B.SREENIVASE GOWDA

ITA NO.171/2016

BETWEEN

COMMISSIONER OF INCOME TAX, C.R.BUILDINGS, BELAGAVI.

THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, BELGAUM. …APPELLANTS

(BY SRI E.I.SANMATHI, ADV.,)

AND

SHREE MAHILA CREDIT SOUDHARDHA SAHAKARI LTD. SHOP NO.3, MARUTI COMPLEX, 2ND RAILWAY COMPLEX, TILAKWADI, BELGAUM.

…RESPONDENT

THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961 PRAYING TO DECIDE THE QUESTION OF LAW AND / OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AND SET ASIDE THE APPELLATE ORDER DATED 04.08.2015 PASSED BY THE ITAT, PANAJI, IN APPEAL PROCEEDINGS NO.ITA NO.145/PANJ/2015 FOR ASSESSMENT YEAR 2011-12.

THIS ITA COMING ON FOR ORDERS THIS DAY, JAYANT PATEL J. DELIVERED THE FOLLOWING:

JUDGMENT

In this matter, there are office objections. However, learned counsel for the appellants submitted that the matter is covered by the decision of this Court against the Revenue. Hence, we find it appropriate to take up the matter.

Learned counsel for the appellants-Revenue has preferred this appeal by raising the following questions of law:

“Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee- society is entitled to deduction under Section 80P(2)(a)(i) of the Income Tax Act even when assessee is a Co-operative Bank mainly involved in lending credit facilities to its members in nature of bank transaction, treated on par with the new clause introduced in the definition of income in Section 2(24)(viia) of the Act and comes under the purview of Section 80P(4) w.e.f. 1/4/2007?”

Learned counsel for the appellants fairly concedes that the Tribunal in its impugned order has relied upon the earlier decision of this Court in the case of CIT –vs- Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot in ITA No.5006/2013 dated 05.02.2014 followed by a subsequent Bench of this Court in ITA No.273/2013 dated 27.06.2014. Therefore, he submits that the matter is covered by the decision of this Court against the Revenue.

We may record that this Court in the above said decision dated 27.06.2014 in ITA No.273/2013 has observed thus: “This appeal is preferred by the revenue challenging the order passed by the Tribunal, wherein it is held that sub-section (4) of Section 80P of the Income Tax Act, 1961 is applicable only to co-operative banks and not to credit co-operative societies.

The substantial question of law which is raised in the appeal is as under: “Whether on the facts and in the circumstances of the case, the tribunal was justified in law in holding that the

assessee – society is entitled to deduction under Section 80P(2)(a)(i) of the Income Tax Act?”

The Tribunal in its order has set out the difference between the co-operative bank and society as under:

Nature Co-operative society registered under Banking Regulation Act, 1949 Co-operative Society registered under Karnataka Co-operative Society Act, 1959 Registration Under the Banking Regulation Act, 1949 and Co-operative Societies Act, 1959 Co-operative Societies Act, 1959 Nature of business 1. As defined in Section 6 of Banking Regulation Act. 2. Can open savings bank account, current account, overdraft account, cash credit account, issue letter of credit, discounting bills of exchange, issue cheques, demand drafts (DD), Pay orders, Gift cheques, lockers, bank guarantees etc. 3. Co-operative Banks can act as clearing agent for cheques, DDs, pay orders and other forms. 4. Banks are bound to follow the rules, regulations and directions issued by Reserve Bank of India (RBI) 1. As per the bye laws of the co- operative society. 2. Society cannot open savings bank account, current account, issue letter of credit, discounting bills of exchange, issue cheque, demand drafts, pay orders, gift cheques, lockers, bank guarantees etc. 3. Society cannot act clearing agent, for cheques, DDs, pay orders and other forms. 4. Society are bound by rules and regulations as specified by in the co-operative societies act.

Filing of returns

Co-operative banks have to submit annual return to RBI every year

Society has to submit the annual return to Registrar of Societies.

Inspection RBI has the power to inspect accounts and over all functioning of the Bank Registrar has the power to inspect accounts and over all functioning of the bank. Part V Part V of the Banking Regulation Act is applicable to co-operative banks Part V of the Banking Regulation Act is not applicable to co-operative banks. Use of words The word ‘bank’ ‘banker’, ‘banking’ can be used by a co-operative bank. The word ‘bank’ ‘banker’, ‘banking’ cannot be used ay a co-operative society

This Court had an occasion to consider the said question in ITA No.5006/2013 dated 05.02.2014 in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT, where, after referring to the relevant provisions of the Income Tax Act, and the banking Regulation Act, held as under:

“If a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural

credit society or a primary co-operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society.”

Therefore, the said issue was held in favour of the assessee and against the revenue.

The said judgment answers the issue in this case also. Accordingly, we pass the following order. The appeal is dismissed. The substantial question of law is answered in favour of the assessee and against the revenue.”

In view of the above, we do not find any substantial questions of law arise for consideration as the appeal is dismissed.

In view of the dismissal of the main appeal, the office objection including the question of condonation of delay would not remain.

Sd/-

JUDGE

Sd/-

JUDGE

COMMISSIONER OF vs. SHREE. MAHILA CREDIT