M?S. CHAROTAR NAGRIK SAHAKARI BANK LTD.,ANAND vs. THE INCOME TAX OFFICER, WARD-1, ANAND

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ITA 786/AHD/2014Status: DisposedITAT Ahmedabad28 November 2017AY 2010-118 pages
AI SummaryDismissed

What did the Tribunal hold?

The tribunal decided that the income generated from recovering old dues, including principal and interest, after the suspension of the banking license, should not be treated as business income. The lower authorities' action of classifying it as income from other sources was upheld.

What were the facts?

The assessee, a cooperative bank, had its banking license suspended by the RBI in 2003. It claimed income derived from recovering old dues from members as business income. The Assessing Officer and CIT(A) treated this income as 'income from other sources' because the bank was facing winding-up proceedings.

What were the issues?

Whether income from recovery of old dues after license suspension constitutes business income or income from other sources. Whether the assessee, as a credit cooperative society, is eligible for deduction under Section 80P(2)(a)(i) during liquidation.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD

Before: SHRI N.K. BILLAIYA & SHRI S.S. GODARA

Hearing: 14/11/2017Pronounced: 28/11/2017

PER S.S. GODARA, JUDICIAL MEMBER :

- These three assessee’s appeals for assessment years 2008-09, 2010-11 and 2011-12 arise against the CIT(A)-4, Vadodara’s orders dated 18.06.2015, 21.01.2014 and 13.10.2015; respectively, in case Nos.CAB/4- 276/2014-15, CAB/VI-262/2012-13 & CAB/4-274/2014-15, in proceedings under section 143(3) of the Income-tax Act, 1961; in short the “Act”.

2.

Heard both the parties. Case file perused.

3.

It emerges from assessee’s pleadings that it raises three substantive grievance(s) in principle. The first one is common wherein it seeks to challenge both the lower authorities’ action treating its alleged business income of Rs.2,36,05,880/-, Rs.2,54,90,395/- and Rs.6,78,18,287/- for assessment years 2008-09, 2010-11 and 2011-12; respectively, as income from other sources than business income. We advert to the relevant facts qua the instant issue. There is no dispute that the Reserve Bank of India

ITA Nos. 786/Ahd/ 14, 2678/Ahd/15 & 186/Ahd/16 A.Y :- 2008-09, 2010-11 & 2011-12 (banking sector regulatory body) had suspended assessee’s license on 30.07.2003. The assessee claimed to have derived the impugned income by recovering its old dues from its members/customers in the form of principal as well as interest. We notice from identical assessment findings that the Assessing Officer was of the view that the assessee was facing winding up proceedings through Official Liquidator. He therefore was of the opinion that it could not have been taken as engaged in banking business so as to be entitled for getting treated the above income as business. He therefore treated the same as income from other sources after concluding that the above receipts of interest on deposits and its own advances during liquidation period would not amount to business receipts.

4.

The CIT(A) confirms the Assessing Officer’s action as under:- “4.3 I have considered the facts of the case as well as the order of the AO and the submission of the appellant. During the appellate proceedings, vide order sheet noting dated 05.09.2013, the appellant’s AR was requested to file copy of order appointing the liquidator. The same was filed on 05/12/2013. The appellant's main submission is that even after the cancellation of its banking license, it remains a Credit Co-operative Society and hence, is eligible for deduction u/s 80P(2)(a)(i) of the Act. It is also submitted that the liquidator has been appointed under section 107-108 of the Gujarat Co-operative Society Act, 1961 and accordingly, the reconstruction of the society can take place u/s 110(10) of the Act. In this regard, from the order dated 28.03.2007 of the

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