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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI GEORGE GEORGE, K & SHRI JASON P BOAZ
This appeal at the instance of revenue is directed against the CIT(A)’s order dated 02-02-2015. The relevant assessment year is 2011-12. The revenue in its grounds of appeal has raised four grounds. However, all the grounds relate to the solitary issue whether the CIT(A) was justified in granting the benefit of deduction u/s 80P(2)(a)(i) of the IT Act, 1961.
The brief facts in relation to the issue are as follows:
The assessee is a co-operative society registered under the Karnataka State Co-operative Societies Act, 1959 and is carrying on business of credit facility to its members. The return of income was filed on 30-09-2011 declaring ‘NIL’ income after claiming deduction u/s 80P(2)(a)(i) amounting to Rs.23,05,234/-. The assessment was taken up for scrutiny by issuance of notice u/s 143(2) dated 30-08-2013. The scrutiny assessment was completed vide order dated 30-08-2013, denying the benefit of deduction u/s 80P(2)(i) of the Act. The AO denied deduction on the ground that the assessee is a co-operative bank and hence not entitled to claim deduction by virtue of Sec.80P(4) of the IT Act, 1961.
Aggrieved by the denial of deduction u/s 80P(2) assessee preferred an appeal to the first appellate authority. The CIT(A) following the judgment of the Hon’ble jurisdictional High Court in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot in dated 5.2.2014 and the judgment of Hon’ble Gujarat High Court in the case of CIT Vs Jafari Mom in Vikas Co-op. Credit Society Ltd ITA No.442,443 & 863 of 2013 decided the appeal in favour of the assessee.
Revenue being aggrieved is in appeal before us.
At the very outset, learned counsel for the assessee submitted that the issue in question is covered by the judgment of the Hon’ble jurisdictional High Court in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot in dated 5.2.2014 and also in the case of CIT Vs Jafari Mom in Vikas Co-op. Credit Society Ltd, ITA No.442,443 & 863 of 2013(Supra).
The learned DR was unable to controvert the above submissions of the learned AR.
We have heard the rival submissions and perused the material on record. In the instant case, the CIT(A) had allowed the benefit of deduction u/s 80P(2)(a)(i) of the Act by following the judgment of the Hon’ble jurisdictional High Court in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot in dated 5.2.2014 and the judgment of the Hon’ble Gujarat High Court in the case of CIT Vs Jafari Mom in Vikas Co-op. Credit Society Ltd, ITA No.442,443 & 863 of 2013(Supra). The relevant finding of the CIT(A) reads as follows:
“8. Now, after the Gujarat High Court in the case of CIT Vs Jafari Mom in Vikas Coop Credit Society Ltd ITA 442,443 & 863 of 2013 deciding the issue in favour of the assessee, the Karnataka High Court in the cases of CIT Vs Sri Siluru Gurubasava Pattina Sahakar Sangha Niyamitha Sagalkot ITA 5006/2013 dated 5th Feb 2014, Commissioner of Income Tax (A), Mysore & Others Vs General Insurance Employees Cooperative Credit Society Ltd dated 27.6.2014 and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No.
505/2013 dated 27/06/2014 has also decided the issue in favour of the assessee.
8.1 The Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, supra which was followed in the cases of General Insurance Employees Cooperative Credit Society Ltd, and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, dated 27/06/2014, Supra, has clearly held that a co-operative society registered as cooperative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(2)(a)(i) of the LT. Act. The operative part of the judgement reads as follows: "Therefore, the intention of the legislature is clear. If a Co-operative Bank is .exclusively carrying on 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 and rural development bank. The Legislature did not want to deny the said benefits 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 this amendment. Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve Bank of India to carry on business, 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 facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society In the instant case, when the status of the assessee is a Co-operative society and is not a Co-operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act is correct”.
8.2 The fact that the appellant is a cooperative society registered under the Karnataka Co operative Societies Act,1959 engaged in providing credit facilities to its members has been clearly mentioned by the A.O in para 3 of his aforesaid assessment order. It is also not the case of the Assessing Officer that the assessee is registered with the RBI as a bank. In its aforesaid submissions dated 17/12/2014 the appellant h-as clearly stated with the help of necessary evidence and an affidavit dated 19-01-2015 to this effect that the appellant is a co-operative society registered under the Karnataka Co operative Societies Act, 1959 engaged in providing credit facilities only to its members and it does not possess any banking licence from the RBI. It is therefore, clear that the appellant's case is squarely covered by the aforesaid decisions of the Jurisdictional High Court of Karnataka in the cases of Sri Biluru Gurubasava Pattina. Sahakari Sangha Nivamitha, supra which was followed in the case of General
Insurance Employees Cooperative Credit Society Ltd and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, dated 27/06/2014 supra. Therefore, in view of the foregoing discussion and respectfully following the aforesaid decisions of the Jurisdictional High Court of Karnataka, it is held that the appellant's case is not covered by section 80P(4) as it is not a 'co-operative bank' and therefore, it is entitled to the exemption u/s 80P(2)(a)(i) of the IT. Act.
The CIT(A) has followed the dictum followed by the jurisdictional High Court in the case cited supra and therefore, we see no reason to interfere with the impugned order of the first appellate authority and we confirm the same. It is ordered accordingly.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open Court on the12th August, 2015.