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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN, JM (SMC)
This appeal by the assessee is directed against the order of CIT(A), Belgaum dated 14-08-2013 for the assessment year 2009-10.
The assessee is a co-operative society registered under the Karnataka State Co-operative Societies Act. The assessee filed return of income on 28-09-2009, declaring gross total income of Rs.14,34,736/- after claiming deduction u/s 80P(2)(a)(i) under chapter VIA, the total income is declared at Rs NIL. It was therefore, claimed that the Society is entitled to deduction under section 80P(2)(a)(i) under chapter VIA as it is a co-operative society, carrying on the business of banking or providing credit facilities to its members. However, the claim of the assessee for deduction under section 80P(2)(a)(i) of the Act, was rejected by the AO vide his order u/s 143(3) of the IT Act, dated 23-12-2011. The AO denied the deduction on the ground that the assessee is a ‘co-operative bank’ and hence, not entitled to claim deduction by virtue of section 80P(4).
Aggrieved, assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee relied on the decision in the case of Kerala Co- operative Federation Ltd Vs CIT (170 ITR 455), Addl.CIT Vs U.P.Co- operative Cane Union (114 ITR 70), CIT Vs Co-operative Supply and Commission Shop Ltd., (204 ITR 713), CIT Vs Modern Engineering Construction Co-operative Society Ltd.(2008) 306 ITR 8 (Madras High Court) CIT Vs Attrur Agricultural Producers Co-operative Marketing Society Ltd. (2008) 306 ITR 151 (Madras High Court), CIT VBs Tamilnadu Co- operative Silk Producers Ltd (2009) 311 ITR 224 (Madras High Court)
Bihar State Housing Co-operative Federation Ltd Vs CIT (2009) 315 ITR 286 (Patna High Court) Electro Urban Co-operative Credit Society Ltd., Vs ITO (2001) 76 ITD 43 (Calcutta ITAT), Co-operative Industrial Estate Ltd. Vs ITO (1985) 11ITD 84 (Hyderabad (ITAT) and ACIT Vs M/s Bangalore Commercial Transport Credit Co-operative Society Ltd. (Bangalore ITAT), wherein it was held that income earned y co-operative Society from its act of lending money to members shall be eligible for exemption under section 80P(2)(a)(i) of the Act.
The CIT(A), relied on the decision of DCIT Vs Jayalaxmi Mahila Vividodeshagala Souharda Sahakari Ltd(2012) 23 Taxmann.com 313(Panaji) wherein it was held that the assessee is a co-operative bank within the meaning defined in Part-V of the Banking Regulation Act, 1949 and therefore, the provisions of section 80P(4) are applicable to it and it is not entitled to deduction u/s 80P(2)(a)(i) of the IT Act, 1961. Hence, the CIT(A) dismissed the appeal.
Aggrieved, the assessee preferred an appeal before the Tribunal.
The learned counsel for the assessee reiterated the submissions made before the CIT(A).
On the other hand, learned DR relied on the observation made by the CIT(A) at page - 17 of his order, as under;
“ The AO has come to the conclusion that the assessee co-operative society is doing banking business as ‘providing credit facilities to members’ is akin to banking business and since the membership is open to public, it is accepting deposits from public which can be withdrawn by one of the specified means within the meaning of above mentioned definition of banking”.
I find the decision of the Hon’ble Karnataka High Court in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ( 369 ITR 86(Kar.) it has been held as under;
“ 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. There is no error. When there is no error, the question of order being prejudicial; would not arise. The Tribunal has rightly entertained the appeal and set aside the order. Therefore, the said order is in accordance with law and cannot be found fault with. The substantial question of law is answered in favour of the assessee and against the revenue”.
Since the facts in the present case identical to that of the case which is decided by the Hon’ble Karnataka High Court in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot (in dated 5.2.2014 for the assessment year : 2010-11) of the jurisdictional High Court, I hold that the learned CIT(A) was not correct in denying the assessee’s claim of deduction u/s 80P(2)(a)(i) of the IT Act, 1961.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on the 26th August, 2015.