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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
The captioned appeal is preferred by the Revenue and is directed against the impugned order dated 27/06/2014 of CIT(A)-7, Mumbai, pertaining to the assessment year 2009-10, which in turn has arisen from an order passed by the Assessing Officer dated 07/12/2011 under section 143(3) of the Income Tax Act, 1961( in short “the Act”).
(Assessment Year : 2009-10) 2. In this appeal the Revenue has raised the following Grounds of appeal:-
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the new sub-clause (viia) to clause 24 of section 2 of the Act clearly indicate that income of a co-operative society providing credit facilities to is members is not exempt.
On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the principal business of assessee is banking and its share capital and reserves exceeds Rs.one lakh, hence, it squarely falls within the definition of co-operative bank u/s.5(cci) of Banking Regulation Act, 1949.”
In this case, the respondent assessee filed a return of income, wherein the gross total income was declared at Rs.11,56,234/-, which was claimed as exempt under section 80P of the Act and accordingly, the taxable income was declared at ‘Nil’. The Assessing Officer show- caused the assessee as to why the deduction claimed under section 80P of the Act should not be disallowed in view of the provisions of section 80P(4) of the Act. Section 80P(4) of the Act was inserted by the Finance Act, 2006 w.e.f. 1/4/2001, which prescribe that the provisions of section 80P shall not apply in relation to any ‘Co-operative Bank’ other than a “Primary Agricultural Credit Society” or a “primary co- operative agricultural and rural development bank”. The case made out by the Assessing Officer was that the assessee was a ‘Co-operative Society’ whose principle business was the banking business and therefore, it was to be understood as ‘ Co-operative Bank’ for the purposes of section 80P(4) of the Act. On this basis, the Assessing Officer denied the claim for exemption under section 80P of the Act and accordingly, assessed the total income at Rs.11,56,230/-.
(Assessment Year : 2009-10) 4. On appeal by the assessee, the CIT(A) has disagreed with the Assessing Officer and allowed the claim of exemption under section 80P of the Act. As per CIT(A), respondent-assessee was a Co-operative Society carrying on the business of providing credit facilities to its members and , therefore, it was not to be understood as ‘Co-operative Bank’ for the purposes of section 80P(4) of the Act. In coming to such decision he has relied upon decisions of various Benches of ITAT, namely:-
(i) Vardhman Nagri Sahakari Pat.. vs. Dept. Of Income Tax (ITAT Pune) dated 22/11/2012.
(ii) ITO vs. Jan Kalyan Nagari Sahakari Patsanstha Ltd., (2012) 24 taxmann.com 127 (Pune-Trib).
(ii) ITO vs. Jan Kalyan Nagari Sahakari Patsanstha Ltd, A.Y.2008-09.
Against the aforesaid decision, Revenue is in appeal before the Tribunal.
At the time of hearing, Ld. Departmental Representative appeared for the appellant Revenue, while none appeared on behalf of the respondent assessee inspite of notice of hearing. Therefore, in accordance with Rule-25 of Income Tax (Appellate Tribunal) Rules, 1963, the appeal is being disposed of ex-parte qua the respondent after hearing the appellant-Revenue on merits.
Though the Ld. Departmental Representative has reiterated the reasoning adopted by the Assessing Officer to deny exemption under section 80P(2)(a)(i) of the Act, so however, it is quite clear that the restriction placed under section 80P(4) of the Act does not entitle the (Assessment Year : 2009-10) captioned assessee from the exemption stipulated under section 80P(2)(a)(i) of the Act. Quite clearly, the restriction placed in section 80P(4) of the Act, in the present context, operates in relation to a ‘Co- operative Bank’, which is to be understood in terms of the provisions of the Banking Regulations Act, 1949(10 of 1949). The finding of the CIT(A) is that the respondent- assessee is a Credit Co-operative Society, which is engaged in the business of providing credit facilities to its members and does not enjoy any banking licence from Reserve Bank of India. As a consequence, the status of the assessee cannot be understood as a Co-operative Bank within the meaning of Banking Regulation Act, 1949. Factually speaking, the aforesaid finding of the CIT(A) has not been assailed by the Revenue before me and there is no material on record to negate the same also. Moreover, I find that the CIT(A) has relied upon the various decisions of the Tribunal, wherein a Co-operative Credit Society engaged in the business of providing credit facilities to its members has been held to be not covered by the expression ‘Co-operative Bank’ for the purposes of section 80P(4) of the Act. There is no decision to the contrary brought out by the Revenue before me.
As a consequence, I find no merit in the appeal of the Revenue which is hereby dismissed.
The above decision was pronounced in the open court at the conclusion of the hearing on 20/10/2015.