ITO 20(3)(1), MUMBAI vs. RAHUL URBAN CO OP CREDIT SOCIETY LTD, MUMBAI

सुनवाई की तायीख / Date of Hearing : 08.11.2016 घोषणा की तायीख /Date of Pronouncement : 18.11.2016 आदेश / O R D E R PER D. KARUNAKARA RAO, AM: There are two appeals under consideration. Both these appeals are filed by the Revenue for the assessment years 2011-2012 and 2012-2013. Considering the connectivity of the appeals as well as the commonality of the issues raised therein, both these appeals are clubbed, heard combinedly and disposed off in this consolidated order. Appeal wise adjudication is given in the following paras of this order.

by the Revenue in both the years are identical, therefore, for the sake of reference and for adjudication purpose, the grounds raised in the appeal for the AY 2011-12 are extracted as under:- “1. On the facts and circumstances of the case and in law, the Ld CIT (A) erred in holding that interest earned from surplus fund parked in FDs with other cooperative banks was entitled to claim exemption / deduction u/s 80P(2)(a)(i) of the Act in respect of such income.

2. On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in holding that such income attributable to the activity of banking thus would be eligible for deduction u/s 80P of the Act such income could not be said to attributable to the activity of the society, therefore, would not fall within the meaning and expression „profits and gains of business‟.”

3. In this appeal, the only issue raised by the Revenue relates to the allowability of relief u/s 80P of the Act in respect of the income of the assessee when the assessee is a „credit cooperative society‟. In the assessment, AO treated the same as a „credit cooperative bank‟. During the first appellate proceedings, CIT (A) examined the facts relevant to the definition of „credit cooperative society‟ as well as the applicable citations and came to the conclusion that the assessee is not a „bank‟ and therefore, the provisions of section 80P(4) will not apply to the assessee-credit cooperative society. The contents of para 5.3 of the CIT (A)‟s order are relevant in this regard. Aggrieved with the same, Revenue is in appeal before the Tribunal with the present appeal.

4. During the proceedings before us, Ld DR for the Revenue submitted that the order of the CIT (A) should be reversed. By mentioning the fact that lending and borrowing activities between the members of the society and the assessee constitutes „banking activities‟.

“7. From the facts of the instant case, it is quite clear that the appellant has limited itself to the members. The appellant has not provided banking facilities either to general public at large or even to the members of the society. Even the bye laws of the appellant does not provide for the banking activities. Therefore, the facts of this case are not identical with any of the case laws relied upon by the AO. On the other hand, the facts of the instant case are identical to the decisions quoted by the appellant of the Hon‟ble High Courts of Gujarat & Bombay, the ITAT Mumbai & Pune where the activities of the assessee were limited to the members of a specific group and the area of operations was also limited to the acceptance of deposits of members and providing credit facilities to only members, which have been held as not falling under banking activities as defined in the Banking Regulation Act. I also find that the case of appellant is covered in his favour in his own case for the earlier AYs by my predecessor CIT (A). Therefore, respectfully following the aforesaid decisions of various High Courts & Tribunals as cited by the appellant as well as the decision of the CIT (A) in the appellants own case, I hold that, the appellant cannot be held as a cooperative bank, hence deduction claimed u/s 80P(2)(a)(i) & 80P(2)(d) cannot be denied to it. I find