Income Tax Officer (Ward ) 1(3), Belgaum v. Bellad Bagwadi Krishni Seva sahakari Bank Ltd., Belgaum

ITA 104/PAN/2013 | 2009-2010
Pronouncement Date: 11-04-2014 | Result: Allowed

Appeal Details

RSA Number 10424114 RSA 2013
Assessee PAN AAAAT0640C
Bench Panaji
Appeal Number ITA 104/PAN/2013
Duration Of Justice 10 month(s) 21 day(s)
Appellant Income Tax Officer (Ward ) 1(3), Belgaum
Respondent Bellad Bagwadi Krishni Seva sahakari Bank Ltd., Belgaum
Appeal Type Income Tax Appeal
Pronouncement Date 11-04-2014
Appeal Filed By Department
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 11-04-2014
Date Of Final Hearing 11-03-2014
Next Hearing Date 11-03-2014
Assessment Year 2009-2010
Appeal Filed On 20-05-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI P.K. BANSAL HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA HONBLE JUDICIAL MEMBER ITA NO S . 1 02 103 & 104 / PNJ / 2013 INCOME TAX OFFICER VS. WARD 1(3) OPP. CIVIL HOSPITAL DR. B R AMBEDKAR ROAD BELGAUM. (APPELLANT) AN D : (ASST. YEAR S : 2007 - 08 2008 - 09 & 20 0 9 - 1 0 ) BELLAD BAGEWADI KRISHNI SEVA SAHAKARI BANK LTD BELLAD BAGEWADI TQ HUKKERI DISTRICT BELGAUM. PAN : AAAAT0640C (RESPONDENT) CO. NO. 24/PNJ/2013 BELLAD BAGEWADI KRISHNI SEVA SAHAKARI BANK LTD BELLAD BAGEWADI TQ HUKKERI DISTRICT BELGAUM. PAN : AAAAT0640C (APPELLANT) (ASST. YEAR : 2009 - 10) INCOME TAX OFFICER WARD 1(3) OPP. CIVIL HOSPITAL DR. B R AMBEDKAR ROAD BELGAUM. (RESPONDENT) ASSESSEE BY : S HRI B. BARTHAKUR LD. DR REVENUE BY : SHRI PRAKASH G. GHALI C.A. & SHRI PRAVEEN P. GH ALI C.A. DATE OF HEARING : 11 /03/2014 DATE OF PRONOUNCEMENT : 11 /0 4 /2014 O R D E R PER P.K. BANSAL ALL THE THREE APPEAL S HA VE BEEN FILED BY THE REVENUE WHILE C.O FILED AGAINST THE ORDER OF CIT(A) BELGAUM DT D . 26 . 2 .2013 FOR THE ASSESSMENT YEAR S 2007 - 08 2008 - 09 AND 2009 - 10 .THE REVENUE HAS TAKEN THE FOLLOWING COMMON EFFECTIVE GROUND S OF APPEAL IN EACH OF THE ASSESSMENT YEARS : - 1. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FACTS IN NOT CONSIDER ING THE FACT THAT THE BYELAWS OF THE ASSESSEE SOCIETY PROHIBITS MEMBERSHIP FROM THE PERSON 2 ITA NOS.102 103&104/PNJ/2013 (ASST. YEARS:2007 - 08 2008 - 09 & 2009 - 10) C.O.NO.24/PNJ/2013 (ASST. YEAR: 2009 - 10) OTHER THAN A FARMER (AGRICULTURIST) OR WORKER SINCE THE SOC IETY IS FORMED WITH HE OBJECTIVES FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS SUPPLY OF AGRICULTURE IMPLEMENTS SEEDS FERTILIZERS CONSUMER GOODS TO ITS MEMBERS WHO ARE FARMERS AND WORKERS. 2. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FACTS IN N OT APPRECIATING THE FACT THAT THE ASSESSEE SOCIETY BEING A CREDIT CO - OPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS (I.E. FARMER AND WORKERS) CANNOT ENROL L AS NOMINAL MEMBER ANY CORPORATE COMPANY (IN THE CASE OF THE ASSESSEE SH RI VISHWANATH SUGARS LTD) ETC AND AS SUCH THE ORDER OF THE CIT(A) REQUIRES TO BE REVERSED. 3. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FACTS IN APPL YING THE RATIO OF THE HONBLE HIGH COURT OF KARNATAKA DECISION IN THE CASE OF SRI RENUKA DEVI URBAN C REDIT CO - OP SOCIETY AS THE FACTS ARE DISTINGUISHABLE WITH THE FACTS OF THE ASSESSEES CASE. 4. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE INVESTMENT WITH SRI VISHWANATH SUGARS LTD HAS BEEN SHOWN IN THE BALANC E - SHEET AS CALL DEPOSIT INSTEAD OF CLASSIFYING UNDER THE HEAD MEMBER LOANS BY THE ASSESSEE AND AS SUCH THE CIT(A) ACCEPTED AN AFTERTHOUGHT CLAIM OF THE ASSESSEE WITHOUT EXAMINING THE BYELAWS VIS - A - VIS STATEMENT OF ACCOUNTS OF THE ASSESSEE. 5. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FACTS IN ALLOWING THE CLAIM OF DEDUCTION UNDER SECTION 80P TO THE ASSESSEE IGNORING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO - OP SALES SOCIETY LTD VS. ITO (SC) 322 ITR 283. 2. BOTH THE P ARTIES AGREED THAT AS THE ISSUE INVOLVED IN ALL THESE APPEALS IS COMMON THEREFORE ALL THESE APPEALS BE DECIDED ON THE BASIS OF THE FACT FOR THE ASSESSMENT YEAR 2007 - 08. THE BRIEF FACTS OF THE CASE FOR THE ASSESSMENT YEAR 2007 - 08 ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT 1997. THE ASSESSEE ACCEPTING DEPOSITS AND PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE SOCIETY IS ALSO SUPPLYING AGRICULTURE GOODS LIKE SEEDS FERTILISERS PESTICIDES ETC TO ITS MEMBERS. IT FILED ITS RETURN DECLARING NIL INCOME. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 21.12.2009 DISALLOWING AUDIT FEES OF RS.1 65 800/ - U/S 3 ITA NOS.102 103&104/PNJ/2013 (ASST. YEARS:2007 - 08 2008 - 09 & 2009 - 10) C.O.NO.24/PNJ/2013 (ASST. YEAR: 2009 - 10) 43B.THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEES INTEREST INCOME INCLUDES INTEREST EARNED F ROM VISHWANATH SUGARS LTD INCLUDES RS.1 36 84 946/ - . THE SOCIETY HAD SHOWN NET INCOME OF RS. 72 17 343/ - WHICH HAD BEEN CLAIMED AS DEDUCTION U/S 80P(2)(A)(I) AND CONSEQUENTLY FILED NIL RETURN OF INCOME. THE ASSESSING OFFICER HAD TREATED THE INTEREST EARNE D FROM VISHWANATH SUGARS LTD AS INCOME FROM OTHER SOURCES AND ALSO DENIED PROPORTIONATE EXPENSES INCLUDING INTEREST COST AND ALSO DEDUCTION U/S 80P(2)(A)(I). THE ASSESSEE WILL BE IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT( A) THE ASSESSEE FILED THE DETAILS SUBMISSION AND ACCEPTED THAT THE ASSESSEE SOCIETY WAS REGISTERED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY AND IT WAS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS BUT AS PER KARNATAKA GOVT. ORDER DATED 11.12.1996 THE CREDIT SOCIETY WAS CONVERTED INTO PRIMARY AGRICULTURAL KRISHI SEVA SAHAKARI BANK AND NEW CERTIFICATE DATED 8.9.1997 WAS ISSUED WITH THE NEW BYE - LAWS. AS PER THE BYE - LAW 10 THE BANK IS AUTHORISED TO OPERATE AND COLLECT CURRENT ACCOUNT AND SAVINGS ACCOU NT DEPOSITS FIXED DEPOSITS PIGMY DEPOSITS RECURRING DEPOSITS ETC. THE OBJECT OF THE BANK IS INCLUDED ADVANCING OF THE SHORT TERM MEDIUM TERM AND LONG TERM LOANS AND LOSS ON SECURITY OF GOLD AND SILVER ARTICLES. THE BANK IS ALSO PROVIDING SAFE DEPOSIT LO CKER FACILITIES. THUS THE SOCIETY WAS CONVERTED INTO A CO - OPERATIVE BANK. THE CIT(A) ALLOWED THE DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(I) TOWARDS THE INTEREST RECEIVED BY THE SOCIETY FROM VISHWANATH SUGARS LTD WHICH IS A NOMINAL MEMBER OF THE AFORESAID C O - OPERATIVE SOCIETY. THE REVENUE WENT IN APPEAL BEFORE ITAT . ITAT SET ASIDE THE MATTER TO THE FILE OF THE CIT(A) SO FAR IT RELATE TO DEDUCTION U/S 80P. THE ITAT UPHELD THE DECISION OF CIT(A) ON THE ISSUE OF THE DISALLOWANCE OF AUDIT FEES U/S 43B. THE CIT(A ) TOOK THE VIEW THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) ON THE INTEREST EARNED ON INVESTMENT IN VISHWANATH SUGARS LTD. FOLLOWING THE DECISION OF HONBLE HIGH COURT IN THE CASE OF SRI RENUKA DEVI URBAN CREDIT 4 ITA NOS.102 103&104/PNJ/2013 (ASST. YEARS:2007 - 08 2008 - 09 & 2009 - 10) C.O.NO.24/PNJ/2013 (ASST. YEAR: 2009 - 10) CO - OPERATIVE SOCIETY LTD ( ITA NO.5008/2009). NO FINDING WAS GIVEN ON THE APPLICABILITY OF PROVISION OF SECTION 80P(4). 3 . THE LD. DR VEHEMENTLY CONTENDED THAT THE ASSESSEE IS A CO - OPERATIVE BANK IN VIEW OF THE DEFINITION OF THE CO - OPERATIVE BANK GIVEN UNDER EXPLANATION TO SEC. 80P(4) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING. SEC. 80P(4) PUTS AN EMBARGO W.E.F. 1.4.2007 THAT IF A CO - OPERATIVE SOCIETY I S CARRYING ON BANKING BUSINESS THE ASSESSEE WILL NOT BE ENTITLED FOR THE EXEMPTION. RELIANCE WAS PLACED ON THE DECISI ON OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY VS. ADDL. CIT IN ITA NOS. 1003/HYD/2011 & 1004/HYD/2011 DT. 2.7.2012. 4. THE LD. AR ON THE OTHER HAND VEHEMENTLY CONTENDED THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCT ION U/S 80P(2)(A)(I). RELIANCE WAS PLACED ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF SRI RENUKA DEVI URBAN CREDIT CO - OPERATIVE SOCIETY LTD (ITA NO.5008/2009) AND THAT OF ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07. ITAT ORDER PANAJI B ENCH DATED 2.12.2010. ON A QUERY FROM THE BENCH THE LD. A.R WAS FAIR ENOUGH TO ACCEPT THAT THE ASSESSEE IS A PRIMARY CO - OPERATIVE BANK. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONGWITH THE ORDER OF THE TAX AUTHORITIES B ELOW AS WELL AS THE DECISIONS AND THE ENTIRE MATERIAL AND CASE LAWS REFERRED TO BEFORE US. THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) AND WHETHER THE ASSESSEE IS HIT BY THE PROVISIONS OF SEC. 80P(4) WHICH WAS INTRODUCED IN THE STATUTE BY THE FINANCE ACT 2006 W.E.F. 1.4.2007. THE RELEVANT PROVISIONS OF BOTH THE SECTIONS ARE RE - PRODUCED FOR OUR READY REFERENCE AS UNDER : - 5 ITA NOS.102 103&104/PNJ/2013 (ASST. YEARS:2007 - 08 2008 - 09 & 2009 - 10) C.O.NO.24/PNJ/2013 (ASST. YEAR: 2009 - 10) 80P. (1) WHERE IN THE CASE OF AN ASSESSEE BEING A CO - OPERATIVE SOCIETY THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB - SECTION (2) THERE SHALL BE DEDUCTED IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION THE SUMS SPECIFIED IN SUB - SECTION (2) IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS R EFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING NAMELY : (A) IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. 80P(4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO - OPERATIVE AGRICULTURAL AN D RURAL DEVELOPMENT BANK. EXPLANATION. FOR THE PURPOSES OF THIS SUB - SECTION (A) 'CO - OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL CREDIT SOCIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT 1949 (10 OF 1949 ); (B) 'PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK A AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG - TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. 5 .1 FROM THE PLAIN READING OF SEC. 80P(2)(A)(I) IT IS APPARENT THAT IF THE CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING OF BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS THE CO - OPERATIVE SOCIETY IS ENTITLED FOR DEDUCTION ON WHOLE OF THE INCOME RELATING TO ANY ONE OR MORE OF SUCH BUSINESS. FROM THE READING OF SEC. 80P(4) IT IS APPARENT THAT THIS SECTION DENIES DEDUCTION TO A CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RUR AL DEVELOPMENT BANK. THE PROVISIONS OF SEC. 80P(4) WERE INTRODUCED IN THE STATUTE BY THE FINANCE ACT 2006 W.E.F. 1.4.2007. THE EXPLANATION TO THE SECTION DEFINES THE CO - OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY TO HAVE THE SAME MEANING AS A SSIGNED TO THEM IN PART - V OF THE BANKING REGULATION ACT 1949. IT IS NOT THE CASE OF EITHER OF THE PARTIES THAT THE ASSESSEE IS A PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. IT IS ALSO NOT THE CLAIM OF THE ASSESSEE THAT ASSESSEE IS A PRIMARY 6 ITA NOS.102 103&104/PNJ/2013 (ASST. YEARS:2007 - 08 2008 - 09 & 2009 - 10) C.O.NO.24/PNJ/2013 (ASST. YEAR: 2009 - 10) AGRICULTURAL CREDIT SOCIETY. IF WE READ BOTH THE SECTIONS SEC. 80P(2)(A)(I) AND SEC. 80P(4) TOGETHER WE FIND THAT THE PROVISIONS OF SEC. 80P(4) MANDATES THAT THE PROVISIONS OF SEC. 80P WILL NOT APPLY TO ANY CO - OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO - OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK BUT AS PER THE PROVISIONS OF SEC. 80P(2)(A)(I) A CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMB ERS IS ENTITLED FOR DEDUCTION. SINCE THE ASSESSEE IS A PRIMARY CO - OPERATIVE BANK THEREFORE IN OUR OPINION THE ASSESSEE IS HIT BY THE PROVISION OF SECTION 80P(4) AND ASSESSEE WILL NOT BE ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I). 6. WE HAVE ALSO GONE THROUGH THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2006 - 07 . WE NOTED THAT THIS DECISION WILL NOT ASSIST THE ASSESSEE AS THERE WAS NO SECTION 80P(4) THERE DURING THE IMPUGNED ASSESSMENT YEAR. THIS SECTION HAS BEEN INSERTED W.E.F. 1.4.2007. THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF SRI RENUKA DEVI URBAN CREDIT CO - OPERATIVE SOCIETY LTD (ITA NO.5008/2009) ALSO RELATE TO THE A.Y.2003 - 04 THEREFORE THIS DECISION AS REFERRED TO BY CIT(A) AND RELIED ON BY THE LD. AR IS ALSO NOT BE APPLICABLE AFTER 1.4. 2007 I.E. FROM A.Y. 2007 - 08 ONWARDS . 7 . WE THEREFORE IN VIEW OF OUR AFORESAID DISCUSSION HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION U/S 80(P)(2)(A)(I) AS THE ASSESSEE IS HIT BY THE PROVISIONS OF SECTION 80P(4). WE THEREFORE SET ASIDE THE ORDER S OF THE CIT(A) ALLOWING DEDUCTION U/S 80P(2)(A)(I) TO THE ASSESSEE AND DIRECT THE ASSESSING OFFICER NOT TO ALLOW DEDUCTION T O THE ASSESSEE U/S 80P(2)(A)(I). 8 . IN THE C .OS FILED BY THE ASSESSEE IN 2009 - 10 THE ONLY ISSUE RELATE S TO THE CLA IM OF THE ASSESSEE U/S 80P(2)(A)(I) IN RESPECT OF INTEREST RECEIVED BY THE 7 ITA NOS.102 103&104/PNJ/2013 (ASST. YEARS:2007 - 08 2008 - 09 & 2009 - 10) C.O.NO.24/PNJ/2013 (ASST. YEAR: 2009 - 10) ASSESSEE FROM RATNAKAR BANK . WE HAVE ALREADY HELD THAT SINCE THE ASSESSEE IS HIT BY THE PROVISIONS OF SECTION 80P(4) THEREFORE THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION U/S 80P(2)(A)(I). ACCORDINGLY WE DISMISS THE GROUND TAKEN BY THE ASSESSEE IN THE C .O S . 9 . IN THE RESULT THE APPEAL S FILED BY THE REVENUE ARE ALLOWED WHILE THE C .O S FILED BY THE ASSESSEE STAND S DISMISSED . 1 0 . ORDER PRONOUN CED IN THE OPEN COURT ON 11 .0 4 .2014. SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 11 .0 4 .2014 *A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY BY ORDER SR. PRIVATE SECRETARY ITAT PANAJI GOA