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Income Tax Appellate Tribunal, BANGALORE BENCH “ B ”
Before: SHRI N.V. VASUDEVAN & SHRI JASON P. BOAZ
Appellant By : Shri S. Ramasubramanian, C.A. Respondent By : Dr.P.K. Srihari, Addl. CIT (D.R.) Date of Hearing : 27.5.2015. Date of Pronouncement : 3.7.2015. O R D E R Per Shri Jason P. Boaz, A.M. : This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Belgaum dt.16.04.2010 for Assessment Year 2010-11.
The facts of the case, briefly, are as under :- 2.1 The assessee is a co-operative society registered under the Karnataka State Co- operative Societies Act, carrying on the business of providing credit facilities to its members. For Asst. Year 2010-11, the assessee filed its return of income on 30.3.2010 declaring total income at NIL after claiming deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961 (in short 'the Act'). In assessment proceedings, these claims of the assessee for deduction u/s. 80P(2)(a)(i) of the Act were rejected by the Assessing Officer on the ground that the assessee is a co-operative bank and hence not entitled to be allowed deduction u/s. 80P(2)(a)(i) of the Act by virtue of the provisions of Section 80P(4) of the Act. The assessment was concluded u/s. 143(3) of the Act vide order dt.7.12.2012 wherein the income of the assessee was determined at Rs.31,43,143, in view of the following disallowances were made :- (i) Disallowance of assessee's claim for deduction u/s. 80P(2)(a)(i) : Rs.28,61,768. (ii) Disallowance of Audit Fee under Section 43B : Rs.2,58,035. 2.2 Aggrieved by the order of assessment for Assessment Year 2010-11 dt.7.12.2012, the assessee preferred an appeal before the CIT (Appeals), Belgaum. The learned CIT (Appeals) dismissed the assessee's appeal vide order dt.16.4.2014.
Aggrieved by the order of the CIT (Appeals), Belgaum dt.16.4.2014 for Assessment Year 2010-11, the assessee has preferred this appeal before this Tribunal raising the following grounds :- “
1. That the order of the learned CIT (Appeals), in so far it is prejudicial to the interests of the appellant.
2. That the learned CIT (Appeals) erred in law and on facts in not granting deduction under Section 80P(2)(a)(i) amounting to Rs.28,61,768.
3. That the learned CIT (Appeals) erred in law and on facts in holding that the appellant is a primary co-operative bank and not a co-operative society and such a finding is perverse as being contrary to the materials on record and not being supported by any material and evidences on record.
4. That the learned CIT (Appeals) erred in law and on facts in wrongly applying the provisions of section 80P(4) to the appellant while the provisions will apply only to the banking co-operative institutions.
The learned CIT (Appeals) erred in law and on facts in not following the CBDT instruction NO.F No.123/06/2007-TPL dt.9.5.2008.
6. The learned CIT (Appeals) erred in law in not following the binding decision of the jurisdictional Appellate Tribunal i.e. ITAT, Bangalore Bench. 7. The learned CIT (Appeals) erred in law in disallowing Rs.2,58,035 under Section 43B on the ground that audit fee payable to co-operative auditors was not discharged before the due date of filing return on income under Section 139(1) of the Income Tax Act, 1961 even though it’s not covered u/s. 43B.” 4. The Ground at S.No.1 is general in nature and therefore no adjudication is called for thereon. 5. Grounds at S.No.2 to 6 : Deduction u/s. 80P(2)(a)(i) of the Act. 5.1 In support of the Grounds raised, the ld. Authorised Representative of the assessee submitted that the assessee is a co-operative society carrying on the business of providing banking and credit facilities to its members and thus cannot be said to be carrying on the business of a co-operative bank as held by the authorities below, which finding it is contended is not supported by any material or evidence on record. It is contended that the learned CIT (Appeals) erred in wrongly applying the provisions of Section 80P(4) of the Act in its case to deny the assessee deduction u/s. 80P(2)(a)(i) of the Act, which was applicable to a co-operative bank and not to the assessee who is a co-operative society. It was also contended that the learned CIT (Appeals) had erred in not following the binding decision of the Hon’ble Karnataka High Court in the case of CIT, Belgaum V Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha in dt.5.2.2014 (369 ITR 86) which has been followed by the ITAT, Bangalore Benches and in not following the CBDT Instruction in F. No.123/06/2007-TPL dt.9.5.2008. It was prayed that in view of Section 80P(2)(a)(i) of the Act. 5.2 Per contra, the learned Departmental Representative supported the orders of the authorities below. 5.3 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements relied upon by the assessee. We find that the Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra) was dealing with a case of a society which was initially allowed deduction u/s. 80P(2)(a)(i) of the Act and subsequently the CIT in revisionary proceedings under Section 263 of the Act revised the order of the Assessing Officer holding that the deduction u/s. 80P(2)(a)(i) of the Act was not allowable in view of the provisions of Section 80P(4) of the Act. The ITAT set aside the order under Section 263. On further appeal, the Hon'ble High Court held that Section 80P(4) of the Act was applicable only to a bank and not a co-operative society providing credit facilities to its members and thus upheld the order of the Tribunal setting aside the order under Section 263 of the Act. There is no dispute that the assessee in the case on hand is a co- operative credit society registered under the Karnataka State Co-operative Societies Act, 1959 and that the income earned was from its activity of providing credit facilities to its members. Therefore, respectfully following the decision of the Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha (supra), we hold that since the facts of the assessee in the case on hand are similar, the assessee before us is also eligible for deduction u/s. 80P(2)(a)(i) of the Act.
Ground No.7 – Disallowance of Audit Fee payable u/s.43B of the Act. 6.1 The assessee contends that the authorities below have erred in disallowing and upholding disallowance of Rs.2,58,035 under Section 43B of the Act on the ground that the audit fee payable to co-operative auditors was not discharged before the due date for filing the return of income under Section 139(1) of the Act; even though it is not covered within the ambit of the provisions of Section 43B of the Act. The learned Authorised Representative submitted that this very issue was covered by decision of the co-ordinate bench of this Tribunal in the case of Jamkhandi Urban Minority Co-operative Credit Society Ltd. V ITO in dt.22.1.2015; wherein it was held that government audit fees payable by the society was not covered by the provisions of Section 43B of the Act. 6.2 Per contra, the learned Departmental Representative supported the orders of the authorities below. 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record. We find that a co-ordinate bench of this Tribunal in the case of Jamkhandi Co-operative Credit Society Ltd. (supra) for Assessment Years 2009-10 and 2010-11, following an earlier decision in the case of Jamkhandi Urban Minority Co- operative Credit Society Ltd. (supra) which in turn following the decision of the Hon’ble Bombay High Court in the case of Shree Warna Sahakari Sakhar Karkhana Ltd. 253 ITR 226, held that Government audit fees payable by the society was not covered by the provisions of Section 43B of the Act. Following the decision of the co-ordinate bench in the case of Jamkhandi Co-operative Credit Society Ltd. (supra), we hold that the disallowance of Audit fees payable by the co-operative society under Section 43B of the Act by the authorities below in the case on hand was not correct as it was not covered under Section 43B of the Act and accordingly delete the disallowance made thereunder. Consequently, the Ground raised
by the assessee at S.No.7 is allowed.
7. In the result, the assessee's appeal for Assessment Years 2010-11 is allowed. Order pronounced in the open court on 3rd July, 2015.