Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI ASHWANI TANEJA
Date of hearing : 05-12-2016 Date of Order : 11-01-2017
O R D E R Per ASHWANI TANEJA, AM: These appeals have been filed by the same assessee for different assessment years involving identical issues. Therefore, these appeals were heard together and are disposed of by this common order.
2. First, we shall take up appeal for A.Y.2009-10 filed by the assessee on the following grounds:- “Being aggrieved by the order dated 06.05.2016 passed by the learned Commissioner of Income Tax (Appeals)-32, Mumbai. ["Ld. CIT(A)"] u/s 250 of the Income-tax Act,1961
2 I.T.A. No.4014, 4033/M/2016 ("Act"), your appellant prefers this appeal, among others, on the following grounds of appeal, each of which is without prejudice to, and independent of, the other:
Legal Validity of reassessment proceedings u/ s.147 of the Act:
On the facts and in the circumstances of the case, and also in law, the reopening of the assessment u / s.14 7 of the Act is bad in law as the mandate of section 147 of the Act was not satisfied in the appellant's case. Your appellant, therefore, prays that impugned assessment order, being bad in law, be quashed.
Denial of Deduction u/s 80P(2)(a)(i) of the Act: Rs.25,95,792/-
2.1 On the facts and in the circumstances of the case, and also in law, the Ld. CIT(A) erred in confirming the disallowance of deduction u] s.80P(2) of the Act of Rs.25,95,792/ - made by the Ld. A.O. by invoking section 80P(4) of the Act, treating the appellant-society as a co-op bank, whereas the appellant is a co- op. credit society, and not a co-op. bank.
2.2 On the facts and in the circumstances of the case, and also in law, the Ld. CIT(A) erred in holding the appellant-society as a co- op bank merely because - (a) in the tax audit report the nature of business was stated to be banking business; and (b) in the registration certificate, the appellant-society was classified as a co-operative bank with sub-category "Other Bank", and erred in not considering the provisions of section 80P(4) read with the relevant provisions of the Banking Regulation Act, 1949.
Your appellant, therefore, prays that the deduction of Rs.25,95,792/- claimed u/s. 80P(2)(a)(i) of the Act be allowed.”
The main issue involved in this appeal is that the AO denied benefit of deduction u/s 80P(2) by invoking 80(P)(4) of the Act by treating the assessee society as a co-operative bank whereas the claim of the assessee
The brief background of the case is that the case of the assessee was reopened by the AO on the ground that deduction u/s 80P was wrongly allowed to the assessee for the reason that assessee was engaged in banking business and section 80P(4) prohibits a bank from the benefits of this section. During the course of assessment proceedings, the assessee explained that assessee was not a co-operative bank but a cooperative credit society. But it was held by the AO that the registration certificate given by the Registrar of Societies indicated that assessee was a co-operative bank. In the tax audit report also it has been mentioned that assessee is engaged in business of banking. Therefore, the AO denied the benefit of deduction u/s 80P(2) by invoking provisions of section 80P(4).
During the course of hearing before the Ld. CIT(A), the assessee reiterated its submissions and brought out few evidences to show that assessee was not acting as a co-operative bank. Ld. CIT(A) was not convinced with the arguments of the assessee and, therefore, he endorsed the action of the AO by observing as under:-
“The controversy appellant himself which states categorically that he is engaged in the business of banking. A few pointers to this are the TAR of the appellant himself which states categorically that he is engaged in the business of banking. This has been brought out by the AO in the assessment order. During appeal, through written submissions the appellant produced a copy of his bye laws and relied on them to show that he is not engaged in the business of banking. The appellant also relied on a number of case laws to bolster his stand. To resolve this controversy of fact, I specifically called for the registration 4 I.T.A. No.4014, 4033/M/2016 certificate granted to the appellant by the Registrar of Cooperative Societies. The same was filed before me and is revealing. The registration certificate classifies the appellant as a Cooperative Bank and the sub category in is "Other Bank". This certificate is issued in 1987 by the Registrar of Cooperative Societies Mumbai. On facts, I am afraid, the appellant has no case. The certificate of registration very clearly classifies the appellant as a cooperative bank. The appellant himself has stated in his TAR that he is in the banking business. Evidently, the amended section 80P(4) would therefore squarely apply to the appellant. The appellants own conduct as well as the registration of the Registrar of Cooperative Societies Mumbai clearly shows the appellant to be a cooperative bank. In the light of this, the case laws cited by the appellant do not help him in any way as those were in cases where the assessees were classified as cooperative societies and not banks. I therefore have no hesitation in holding that the appellant is a cooperative bank and therefore the deduction u/s 80P(2)(a) or 80P(2)(d) is not available to him in view of the provisions of sec 801)(4). Accordingly the action of the AO is upheld and grounds 1&2 dismissed.”
During the course of hearing, it was vehemently argued by the Ld. Counsel that evidences of the assessee have not been properly appreciated by the lower authorities. The assessee also filed amended certificate granted by the Registrar of Societies wherein the name of the assessee has been altered and assessee has been described as credit society. It was further submitted that assessee is not a bank within the meaning of Banking Regulations Act. The assessee has not obtained any banking licence. Our attention was drawn upon the bye laws of the assessee society. It was also submitted that no loans have been advanced to non-members nor any deposit has been accepted from non-members. The deposits have been accepted from the members only and loans have been granted to members only. Under these circumstances, the assessee
5 I.T.A. No.4014, 4033/M/2016 society cannot be designated as a “bank” merely because it was mentioned in the tax audit report that assessee was engaged in the business of banking. The status of the assessee society should be decided on the basis of real facts and not because it has been wrongly described by any particular authority in a wrongful manner.
He placed reliance on the following judgements:-
1. Yashomandir Sahakari Patpedhi Ltd. vs. I.T.O. 3475 & 3476/Mum/2014) dt 11-12-02015 2. Quepem Urban Co-operative Credit Society Ltd. vs. ACIT [2015] 377 ITR 272 (Bombay) 3. Pr. CIT vs. Goa PWD Staff Co-op. Credit Society Ltd. [2016] 73 taxmann.com 38 1 (Bombay) 4. Belgaum Merchants 0o-op. Credit Society Ltd. vs. CIT(A) [2015] 64 taxmann.com 274 (Karnataka) 5. CIT vs. Jafari Momin Vikas Co-op. Credit Society Ltd. [2014] 362 JTR 331 (Gujarat) 6. CIT vs. Raipadi Co-operative Township Ltd. [2016] 74 taxmann.com 226 (Madras)
Our attention was drawn particularly on the judgment of Hon'ble Bombay High Court in the case of Quepem Urban Co-operative Credit Society Ltd (supra) wherein it was held that co-operative bank could not be regarded as co-operative bank on mere fact that insignificant proportion of its income was received from non members and thus it was entitled for the benefit of deduction u/s 80P(2)(a)(i).
Per contra, the Ld. DR relied upon the orders of the lower authorities. It was also submitted by him that the facts narrated by the Ld. Counsel have not been properly presented before the lower authorities. There are no details available on record to show that no deposits or loans were taken / given from / to non-members.
Thus, these issues cannot be decided at this stage and needs to be sent back to the lower authorities for proper verification.
We have gone through the orders passed by lower authorities and also considered the submissions made by both the sides. We agree with the submissions of the Ld. DR that first of all, proper facts need to be analysed to examine the real status of the assessee society. It has been contended before us that no deposits / loans have been taken / given from / to non-members and entire business has been done with members only. It is noted that no such facts have ever been analysed by the lower authorities and they have gone merely by the certificate issued by the registrar and description given in the tax audit report. It has been contended that an amended certificate has been duly granted by the Registrar of Societies wherein the correct status of the assessee society has been described. The copy of the amended certificate was also placed before us. It is noted that the amended certificate has not been taken into account by the lower authorities. It has also been contended before us that assessee has not obtained any banking licence and cannot be characterized as a ‘Bank’ within the meaning of Banking Regulations Act. It is noted that no such facts have been analysed by the lower authorities to examine whether the assessee could be characterised as “bank” within the meaning of Banking Regulations Act and whether any banking licence has been obtained by the assessee. Thus, looking into all the facts and circumstances of the case, we send this issue back to the file of the AO where the assessee shall bring on record all the details and requisite documentary evidence as may be considered necessary by the AO from time to time. The AO shall ascertain all the facts including the fact that whether the assessee has obtained any banking licence and whether the assessee has taken / given any deposit / loan from / to non-members and whether assessee could be characterised as a bank under the Banking Regulations Act. The AO shall also keep in mind various judgments as have been relied upon before us and as may be relied upon by the assessee before him
7 I.T.A. No.4014, 4033/M/2016 and after considering all the facts and circumstance of the case and judgments, as may be applicable, on the facts of the case, this issue shall be decided afresh. Needless to add that adequate opportunity of hearing shall be given to the assessee. The assessee shall also extend full co-operation to the AO. The assessee shall be free to raise all factual and legal issues including the issues with regard to reopening of the case.
Thus, with these directions all the grounds raised before us are sent back to the file of the AO. These grounds may be treated as allowed for statistical purposes.
It is noted that identical issues are involved in appeals for A.Ys 2010- 11 & 2011-12. Therefore, our above order shall apply mutatis mutandis on the grounds raised in these appeals also. As a result, grounds raised in these years are also sent back to the file of the AO with similar directions and, therefore, these may be treated as allowed, for statistical purpose.
Order was pronounced in the open court at the conclusion of the hearing.