THE PRINCIPAL COMMISSIONER OF INCOME TAX vs. SHREE SIDDESHWAR SOUHARDA

: 1 : IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 6TH DAY OF JANUARY, 2016 PRESENT THE HON’BLE MR.JUSTICE H.BILLAPPA AND THE HON’BLE MR.JUSTICE P.S.DINESH KUMAR I.T.A.No.100179/2015 BETWEEN: 1. The Principal Commissioner of Income Tax, Dr.B.R.Ambedkar Veedhi, Belagavi. 2. The Income Tax Officer, Ward-1, Bagalkot. .. APPELLANTS (By Sri.Y.V.Raviraj, Adv.) AND: Shree Siddeshwar Souharda Sahakari Niyamith, Near Bus Stand, Belagi, Dist: Bagalkot, PAN : AACAS 9345 R. .. RESPONDENT (By Sri.H.R.Kambiyavar, Adv.) --- This ITA is filed u/S.260A of the Income Tax Act 1961 praying to formulate the substantial question of law stated above and allow the appeal and set aside the orders

: 2 : passed by the Income Tax Appellate Tribunal, Bengaluru Bench “C” Bengaluru, in ITA.No.503/Bang/2015, dt.24.7.2015 and confirm the order passed by the Income Tax Officer, Ward-1, Bagalkot. This ITA coming on for orders this day, P.S.Dinesh Kumar, J., delivered the following: JUDGMENT Revenue, aggrieved by the order dated 24.07.2015 passed in I.T.A.No.503/BANG/2015, by the Income Tax Appellate Tribunal, Bengaluru Bench “C”, Bengaluru, (‘ITAT’ for short) has presented this appeal by raising the following questions of law: 1. Whether the Tribunal was right in law and on the facts and circumstances of the case in not appreciating that the respondent assessee society being a credit co-operative society engaged in banking business is a Primary Co-operative Bank within the definition of Section 5(cci) read with section 5(ccv) of the Banking Regulation Act, 1949? 2. Whether the Tribunal was right in law and on facts in not appreciating the fact that the assessee being a co-operative society fulfills all the three conditions of being held a Primary Co-Operative Bank as

: 3 : given in section 5(ccv) of the Banking Regulation Act, 1949 and as such section 80P(4) of the Act is applicable to deny the benefit claimed under Section 80P(2)(a)(i)? 3. Whether the Tribunal was right in law and on facts relying upon the decision of Hon’ble Karnataka High Court in the case of Sri. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot wherein, the main issue related to an issue of exercise of revisional powers by the Commissioner of Income Tax under Section 263 of the Act and the Hon’ble High Court did not examine the applicability of Section 80P(4) and Explanation to the said section? 2. Heard Sri Y.V.Raviraj, learned Standing Counsel for the Income Tax Department and Sri.H.R.Kambiyavar, learned counsel for the respondent. 3. The incontrovertible facts of this case are, respondent is a Co-operative Society primarily carrying on the business of lending money to its members. For the assessment year 2011-2012, respondent claimed benefit under Section 80P(2)(a)(i) of the Income Tax Act (for short ‘the Act’). The Assessing Authority denied the said

: 4 : benefit. On appeal, the Commissioner of Income Tax (Appeals) allowed the same vide order dated 19-01-2015 following the judgment of this Court dated 5.2.2014 in the case of the CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot in I.T.A.No.5006/2013. Being aggrieved by the order passed by the CIT (Appeals), Revenue preferred an appeal before the ITAT. By the impugned order, the ITAT, following the very judgment of this Court in the case of CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra), dismissed the appeal filed by the Revenue. Hence, this appeal. 4. An identical case involving the very respondent herein came up for consideration before this Court in I.T.A.No.100080/2014 in the case of The CIT & Another v. Shri Mahalaxmi Urban Co-operative Credit Society Limited, Mudalagi, Gokak. After considering the earlier decision of this Court in CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra) and noticing that similar view was taken by this Court in various other decisions mentioned therein, the questions of law raised by the

: 5 : Revenue in the said appeal were answered in favour of the assessee by order dated 21.09.2015, by holding thus: “10. We are in respectful agreement with the general view taken as to the interpretation of the relevant provisions of law, by the co-ordinate bench of this court, in the above and several other judgments adopting the same view. However, it is to be noticed that there is a seriously disputed question of fact which the Authorities under the IT Act have taken upon themselves to interpret in the face of the BR Act prescribing that in the event of a dispute as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi) of Section 56 of the BR Act, a determination thereof by the Reserve Bank shall be final, would require the dispute to be resolved by the Reserve Bank of India, before the authorities could term the assessee as a co-operative bank, for purposes of Section 80 P of the IT Act. Any opinion expressed therefore is tentative and is not final. The view expressed by this court, however, as to the assessee being a co-operative society and not a co-operative bank in terms of Section 80P (4) of the IT Act, shall hold the field and shall bind the authorities unless held otherwise by the Reserve Bank of India. In the result, the above questions are answered in favour of the assessee and the present appeal of the revenue is dismissed.”

: 6 : 5. In the instant case also, the question that falls for consideration is as to: “Whether the Revenue has satisfactorily proved that the respondent-assessee may be construed as a Co-operative Bank, having fulfilled all the requirements contained in definition clause of Section 5(cci) read with Section 5(ccv) of the Banking Regulation Act, 1949 which would disentitle the asessee the benefit of Section 80P(2)(a)(i)?” 6. Having considered various previous judgments and the decision in the case of CIT v. Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra) in extenso, this Court has disposed of the aforementioned ITA No.100080/2014 in the case of The CIT & Another v. Shri Mahalaxmi Urban Co-operative Credit Society Limited, Mudalagi, Gokak in the above terms. The issue involved in this appeal is identical to the issue in ITA No.100080/2014. We are in respectful agreement with the decision of this Court in the said appeal and do not find any merit in the questions of law raised by the Revenue for consideration.

: 7 : Accordingly, we hold that this appeal deserves to be dismissed. 7. At this juncture, the learned counsel for the Revenue submitted that the issue involved in this appeal has been taken up in a Special Leave Petition and the same is pending adjudication before the Hon’ble Apex Court. On this premise, he prays for liberty to revive this appeal in the event of the Revenue succeeding in the appeal/s filed before the Hon’ble Apex Court. We have held that this appeal lacks merit and deserves to be rejected following the earlier decision of this Court in the case of The CIT & Another v. Shri Mahalaxmi Urban Co-operative Credit Society Limited, Mudalagi, Gokak (I.T.A.No.100080/2014) after hearing both parties. 8. In the event, Revenue succeeds in the SLPs filed before the Hon’ble Apex Court, the parties in this appeal shall be bound by the said decision. Therefore, the request for liberty is misconceived and accordingly rejected.

: 8 : 9. In the result, the appeal stands dismissed. However, it is made clear that the parties herein shall be bound by the Judgment of the Hon’ble Apex Court in the SLPs said to have been filed by the Revenue. No costs. Sri.H.R.Kambiyavar, learned counsel, is permitted to file his vakalath within four weeks from today. Sd/- JUDGE Sd/- JUDGE Bss.