ITO, BAGALKOT vs. M/S BAPOOJI PATTIN SOUHARDA SAHAKARI NIYAMIT, BAGALKOT

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ITA 251/BANG/2015Status: DisposedITAT Bangalore30 June 2015AY 2011-124 pages

In favour of the Revenue: the Revenue's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee, being a co-operative society not registered with the RBI and not exclusively carrying on banking business, is eligible for deduction under Section 80P(2)(a)(i). The Explanation to Section 80P(4) does not apply to such societies.

What were the facts?

The assessee, a co-operative society, claimed deduction under Section 80P(2)(a)(i) of the Income-tax Act. The Assessing Officer denied this deduction, stating that the Explanation to Section 80P(4) was attracted as the assessee was carrying on banking business.

What were the issues?

Whether a co-operative society carrying on banking business is eligible for deduction under Section 80P(2)(a)(i) when the Explanation to Section 80P(4) is invoked.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 80P(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE

Before: SMT. P. MADHAVI DEVI & SHRI ABRAHAM P GEORGE

For Appellant: Shri C.H.Sundar Rao, CIT(DR)
For Respondent: Shri Madhukar G.Hegde, CA
Hearing: 18/06/2015

Date of hearing : 18/06/2015 Date of pronouncement: 30/06/2015. O R D E R Per Smt. P.MADHAVI DEVI, JM :

This appeal by the revenue is against the order of the CIT(A), Bijapur, dated 12/12/2014 for the assessment year 2010- 11. The Revenue is aggrieved by the order of the CIT(A) in holding that Explanation to section 80P(4) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] shall not apply to the assessee herein and, therefore, the assessee is eligible for deduction u/s 80(2)(a)(i) of the Act.

M/s.Bapooji Pattin Souharda Sahakari Niyamit, Page 2 of 4 2. Brief facts of the case are that the assessee, a co-operative society, has filed its return of income on 29/9/2011 declaring total income of ‘nil’ for the assessment year 2010-11 after claiming deduction u/s 80P(2)(a)(i) of the Act. During the assessment proceedings u/s 143(3) of the Act, the Assessing Officer (AO) observed that the assessee is carrying on banking business and therefore Explanation to sec.80P(4) is attracted due to which the assessee is not eligible for deduction u/s 80P(2)(a)(i) of the Act.

3.

Aggrieved, assessee preferred an appeal before the CIT(A) who allowed the same by following the judgment of the Hon’ble Gujarat High Court in the case of CIT vs. Jafari Mom-in Vikas Co- op Credit Society in 443 & 863 of 2013 and the decision of the jurisdictional High Court in the case of CIT vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot, ITA 5006/2013 dt.5/12/2014 and Vasavi Multipurpose Souharda Sahakari Niyamita in ITA No.505/2013 dated 27/06/2014. Against the relief given by the CIT(A), the revenue is in appeal before us by relying upon the decision of the ITAT, Panaji Bench wherein the Tribunal has categorically distinguished the decision in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (cited supra) and held that the said decision is in regard to the revisionary order u/s 263 of the Act. The learned Departmental Representative, supported the order of the AO and also the grounds raised by the revenue whereas the learned

M/s.Bapooji Pattin Souharda Sahakari Niyamit, Page 3 of 4 counsel for the assessee has relied upon the orders of the CIT(A) and the decisions on which the CIT(A) has placed reliance upon.

4.

Having regard to the rival contentions and the material on record, we find that this issue is now decided in favour of the assessee by the decision of the Hon’ble Gujarat High Court in the case of Jafari Mom in Vikas Co-op Credit Society (cited supra) as well as the jurisdictional High court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (cited supra). This Tribunal has been consistently following the said decision to hold that a co-operative society not registered with the RBI cannot be denied the exemption u/s 80P(2)(a)(i) of the Act. The relevant portion of the judgment is reproduced hereunder for ready reference:

“Therefore, the intention of the legislature is clear, If a Cooperative 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

M/s.Bapooji Pattin Souharda Sahakari Niyamit, Page 4 of 4 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) is correct.”

We find that the CIT(A) has merely followed the decision of the jurisdictional High Court and therefore, we see no reason to interfere with the same.

5.

In the result, the revenue’s appeal is dismissed.

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