ITO 22(2)(2), NAVI MUMBAI v. THE BHARAT PETROLEUM EMPLOYEES CO OP CREDIT SOCIETY LTD, MUMBAI

ITA 6905/MUM/2013 | 2010-2011
Pronouncement Date: 28-04-2015 | Result: Dismissed

Appeal Details

RSA Number 690519914 RSA 2013
Assessee PAN CEACT2006W
Bench Mumbai
Appeal Number ITA 6905/MUM/2013
Duration Of Justice 1 year(s) 5 month(s)
Appellant ITO 22(2)(2), NAVI MUMBAI
Respondent THE BHARAT PETROLEUM EMPLOYEES CO OP CREDIT SOCIETY LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-04-2015
Assessment Year 2010-2011
Appeal Filed On 28-11-2013
Judgment Text
B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI BEFORE SHRI G.S. PANNU ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA JUDICIAL MEMBER ./ I.T.A. NO.6905 /MUM/2013 ( / ASSESSMENT YEAR : 2010-2011 I.T.O. - 22(2)(2) MUMBAI 4 TH FLOOR TOWER NO.6 ROOM NO. 20 VASHI RAILWAY STATION COMPLEX VASHI NAVI MUMBAI. / VS. M/S BHARAT PETROLEUM EMPLOYEES CO-OP. CREDIT SOCIETY LTD. REFINING DIVISION MAHUL MUMBAI 400 074. ./ PAN : AAAJTO226F ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SMT NEELAM NADKARNI R E SPONDENT BY : SHRI NISHIT GANDHI / DATE OF HEARING : 28-04-2015 / DATE OF PRONOUNCEMENT : 28-04-2015 [ !' / O R D E R PER G.S. PANNU A.M . #.$. % ! THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) - 33 MUMBAI DATED 02-09-2013 FOR THE A. Y. 2010-11 IN THE MATTER OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER S ECTION 143(3) OF THE INCOME TAX ACT 1961 DATED 16-01-2013. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) ERRED IN ALLOWING ASSESSEE'S APPEAL AND A LLOWING RELIEF U/S 8OP OF THE ACT IN THE CASE OF THE ASSESSEE CREDIT C O-OPERATIVE SOCIETY. ITA 5689/M/12 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT(A) ERRED IN HOLDING THAT THE CREDIT CO-OPERA TIVE SOCIETY IS DIFFERENT FROM THE CREDIT CO-OPERATIVE BANK. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD CIT(A) ERRED IN HOLDING THAT THE AMENDED PRO VISION OF SECTION 80P(4) OF THE ACT IS NOT APPLICABLE TO THE CREDIT C O-OPERATIVE SOCIETY. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. 3. IN BRIEF THE RELEVANT FACTS ARE THAT THE RESPON DENT ASSESEE IS A CO- OPERATIVE SOCIETY REGISTERED UNDER THE MAHARASHTRA C0-OPERATIVE SOCIETIES ACT 1960. THE SOCIETY IS RUN BY THE EMPLOYEES OF BHARAT PETROLEUM CORPORATION LTD. AND ITS MAIN ACTIVITY IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY WHO HAPPEN TO BE THE EMPLOYEES OF BHA RAT PETROLEUM CORPORATION LTD. THE SOCIETY IS GIVING LOANS TO IT S MEMBERS AND ALSO ACCEPTING DEPOSITS FROM ITS MEMBERS. IN THE RETURN OF INCOME FILED FOR A.Y. 2010-11 IT DECLARED A GROSS TOTAL INCOME OF RS. 80 98 490/- WHICH WAS CLAIMED AS EXEMPT IN TERMS OF SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT 1961. THE A.O. DENIED THE CLAIM OF THE ASSESSEE FO R EXEMPTION UNDER SECTION 80P(2)(A)(I) OF THE ACT ON THE BASIS OF THE PROVISI ONS OF SECTION 80P(4) OF THE ACT WHICH WAS INSERTED BY FINANCE ACT 2006 W.E.F. APRIL 1 2007. THE A.O. WAS OF THE OPINION THAT AFTER THE INSERTION OF SUB- SECTION (4) OF SECTION 80P EXEMPTION SHALL NOT BE AVAILABLE IN RELATION TO ANY CO-OPERATIVE BANK OTHER THAN PRIMARY AGRICULTURAL CREDIT SOCIETY OR PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. ACCORDING TO THE A.O. SUB CLAUSE (VIIA) WAS ALSO INSERTED IN CLAUSE (IV) OF SECTION 2 TO PROVIDE THA T THE PROFITS AND GAINS OF ANY BUSINESS OF BANKING (INCLUDING PROVIDING CREDIT FAC ILITIES) CARRIED BY CO- OPERATIVE SOCIETY WITH ITS MEMBERS SHALL BE INCLUDE D IN THE DEFINITION OF EXPRESSION INCOME. ON THE BASIS OF HIS COMBINED READING OF SECTIONS OF SECTION 2(24) (VIIA) AND SECTION 80P OF THE ACT AFT ER AMENDMENT BY FINANCE ACT 2006 THE A.O. CONCLUDED THAT EVEN A CO-OPERAT IVE SOCIETY ENGAGED IN ITA 5689/M/12 3 PROVIDING CREDIT FACILITIES TO ITS MEMBERS WOULD BE DENIED THE EXEMPTION U/S 80P OF THE ACT. ACCORDINGLY THE A.O. ASSESSED THE TOTAL INCOME AT RS. 80 98 490/- AND REJECTED ASSESSEES CLAIM FOR DEDUC TION UNDER SECTION 80P OF THE ACT. 4. THE LD. CIT(A) HAS SINCE DISAGREED WITH THE A.O. PRIMARILY ON THE GROUND THAT THE ASSESSE-SOCIETY WAS NOT CARRYING OU T ANY BANKING FACILITIES AND THAT ITS ACTIVITIES WERE LIMITED TO ITS MEMBERS ONLY. THE LD.CIT(A) ALSO HELD THAT THE ACTIVITIES OF THE ASSESSEE DO NOT FAL L FOR CONSIDERATION AS BANKING ACTIVITIES AS DEFINED IN BANKING REGULATION ACT 19 49. IN COMING TO SUCH CONCLUSION THE LD. CIT(A) HAS RELIED ON THE FOLLOW ING DECISIONS OF THE TRIBUNAL:- (I) ITO WD 1(4) PUNE V/ JANKALYAN NAGRI SAHAKARI PATS ANSTHA LTD 54 SOT 60(PUNE)/24 TAXMMAN.COM 127(PUNE) (2012) (II) ITO V/S JAIN NAGRI PATSANSTHA LTD ITAT PUNE BENCH (2010) (III) DCIT V/S JAYALAKSHMI MAHILA VIVIVDODESHAGALA SOUHAR DA SAHAKARI LTD. 137 ITD 163(PANJI) (2012) (IV) SRI VASAVI MULTIPURPOSE VS CIT ITAT BANGALORE BENCH ORDER DATED 10 05.2015. 5. ACCORDINGLY HE DIRECTED THE A.O. TO ALLOW DEDUC TION TO THE ASSESSEE UNDER SECTION 80(P)(2)(A)(I) OF THE ACT EXCEPT TO T HE EXTENT OF INTEREST INCOME EARNED BY THE ASSESSE FROM SBI PATIALA. AGAINST THE AFORESAID DECISION OF THE LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 6. BEFORE US THE LD. REPRESENTATIVE OF THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE CONCLUSION DRAWN BY THE LD. CIT(A) IS IN ACCORDANCE WITH JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. JAFARI MOMIN VIKAS CO. OP. CREDIT SOCIETY LTD. [2014] 362 ITR 33 1 (GUJ). IN THIS CONTEXT THE ITA 5689/M/12 4 FOLLOWING DISCUSSION IN THE JUDGMENT OF HONBLE GUJ ARAT HIGH COURT IS RELEVANT:- THE ASSESSING OFFICER HELD THAT BY VIRTUE OF SECTI ON 80P(4) THE RESPONDENT-ASSESSEE WOULD NOT BE ENTITLED TO THE BE NEFITS OF DEDUCTION UNDER SECTION 80P. THE COMMISSIONER (APPEALS) AS WE LL AS THE TRIBUNAL REVERSED THE DECISION OF THE ASSESSING OFFICER ON T HE PREMISE THAT THE RESPONDENT-ASSESSEE NOT BEING A BANK EXCLUSION PRO VIDED IN SUB-SECTION (4) OF SECTION 80P WOULD NOT APPLY. THIS IRRESPECT IVE OF THE FACT THAT THE RESPONDENT WOULD NOT FALL WITHIN THE EXPRESSION 'PR IMARY AGRICULTURAL CREDIT SOCIETY'. HAD THIS BEEN THE PLAIN STATUTORY PROVISIONS UNDER CONSIDERATION IN ISOLATION IN OUR OPINION THE QUESTION OF LAW COUL D BE STATED TO HAVE ARISEN. WHEN AS CONTENDED BY THE ASSESSEE BY VIRT UE OF SUB-SECTION (4) ONLY CO-OPERATIVE BANKS OTHER THAN THOSE MENTIONED THEREIN WERE MEANT TO BE EXCLUDED FOR THE PURPOSE OF DEDUCTION UNDER S ECTION 80P A QUESTION WOULD ARISE WHY THEN THE LEGISLATURE SPECIFIED PRIM ARY AGRICULTURAL CREDIT SOCIETIES ALONG WITH PRIMARY CO-OPERATIVE AG RICULTURAL AND RURAL DEVELOPMENT BANKS FOR EXCLUSION FROM SUCH EXCLUSION AND IN OTHER WORDS CONTINUED TO HOLD SUCH ENTITY AS ELIGIBLE FO R DEDUCTION. HOWEVER THE ISSUE HAS BEEN CONSIDERABLY SIMPLIFIED BY VIRTU E OF THE CENTRAL BOARD OF DIRECT TAXES CIRCULAR NO. 133 OF 2007 DATED MAY 9 2007. CIRCULAR PROVIDES AS UNDER : 'SUBJECT: CLARIFICATION REGARDING ADMISSIBILITY OF DEDUCTION UNDER SECTION BOP OF THE INCOME-TAX ACT 1961. 1. PLEASE REFER TO YOUR LETTER NO. DCUS/30688/2007 DATED MARCH 28 2007 ADDRESSED TO THE CHAIRMAN CENTRAL BOARD OF DIRECT TAXES ON THE ABOVE GIVEN SUBJECT. 2. IN THIS REGARD I HAVE BEEN DIRECTED TO STATE TH AT SUB-SECTION(4) OF SECTION 80P PROVIDES THAT DEDUCTION UNDER THE SA ID SECTION SHALL NOT BE ALLOWABLE TO ANY CO-OPERATIVE BANK OTHER THAN A PRI MARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANK. FOR THE PURPOSE OF THE SAID SUB-S ECTION CO-OPERATIVE BANK SHALL HAVE THE MEANING ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT 1949. 3. IN PART V OF THE BANKING REGULATION ACT 'CO-OPE RATIVE BANK MEANS A STATE CO-OPERATIVE BANK A CENTRAL CO-OPERATIVE BAN K AND A PRIMARY CO- OPERATIVE BANK. 4. THUS IF THE DELHI CO-OP. URBAN THRIFT AND CREDI T SOCIETY LTD. DOES NOT FALL WITHIN THE MEANING OF 'CO-OPERATIVE BANK' AS D EFINED IN PART V OF THE BANKING REGULATION ACT 1949 SUB-SECTION (4) OF SE CTION 80P WILL NOT APPLY IN THIS CASE. ITA 5689/M/12 5 5. THIS IS ISSUED WITH THE APPROVAL OF THE CHAIRMAN CENTRAL BOARD OF DIRECT TAXES.' 7 FROM THE ABOVE CLARIFICATION IT CAN BE GATHERED THAT SUB-SECTION (4) OF SECTION 80P WILL NOT APPLY TO AN ASSESSEE WHICH IS NOT A CO-OPERATIVE BANK. IN THE CASE CLARIFIED BY THE CENTRAL BOARD OF DIRECT TAXES THE DELHI CO-OP. URBAN THRIFT AND CREDIT SOCIETY LTD. WAS UND ER CONSIDERATION. THE CIRCULAR CLARIFIED THAT THE SAID ENTITY NOT BEING A CO-OPERATIVE BANK SECTION 80P(4) OF THE ACT WOULD NOT APPLY TO IT. IN VIEW OF SUCH CLARIFICATION WE CANNOT ENTERTAIN THE REVENUE'S CO NTENTION THAT SECTION 80P(4) WOULD EXCLUDE NOT ONLY THE CO-OPERATIVE BANK S OTHER THAN THOSE FULFILLING THE DESCRIPTION CONTAINED THEREIN BUT AL SO CREDIT SOCIETIES WHICH ARE NOT CO-OPERATIVE BANKS. IN THE PRESENT CASE TH E RESPONDENT-ASSESSEE IS ADMITTEDLY NOT A CREDIT CO-OPERATIVE BANK BUT A CREDIT CO-OPERATIVE SOCIETY. THE EXCLUSION CLAUSE OF SUB-SECTION(4) OF SECTION 80P THEREFORE WOULD NOT APPLY. IN THE RESULT THE TAX APPEALS ARE DISMISSED. 7. APART FROM THIS THE HONBLE KARNATAKA HIGH COUR T IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA N IYAMITHA IN INCOME TAX APPEAL NO. 5006/2013 DATED 5 TH FEBRUARY 2014 ALSO CONSIDERED A SIMILAR ISSUE. THE FOLLOWING DISCUSSION IN THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IS RELEVANT:- SECTION 80P OF THE ACT DEALS WITH THE DEDUCTION OF INCOME OF A SOCIETY. IN THE CASE OF ANY ASSESSEE BEING A CO-OPERATIVE SOCIETY THE WHOLE OF THE AMOUNTS OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY O F OTHER ACTIVITIES REFERRED TO SUB-SECTION (2) OF SECTION 80P SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. IN OTHER WORDS THE SAID INCOME IS NO T TAXABLE. IT IS A BENEFIT GIVEN TO THE CO-OPERATIVE SOCIETY. SECTION 80P(4) WAS INT RODUCED BY FINANCE ACT 2006 WITH EFFECT FROM 01.04.2007 EXCLUDING THE SAID BENE FIT TO A CO-OPERATIVE BANK. THE SAID PROVISION READS AS UNDER:- '(4) THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK. (A) 'CO-OPERATIVE BANK' AND 'PRIMARY AGRICULTURAL C REDIT 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 DE VELOPMENT BANK' MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG-TE RM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES.' ITA 5689/M/12 6 THEREFORE THE INTENTION OF THE LEGISLATURE IS CLEA R. IF A CO-OPERATIVE 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 CR EDIT 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 EX CLUSIVELY CARRYING ON BANKING BUSINESS I.E. THE PURPORT OF THIS AMENDMENT. THEREF ORE AS THE ASSESSEE IS NOT A CO- OPERATIVE BANK CARRYING ON EXCLUSIVELY BANKING BUSINESS AND AS IT DOES NOT POSSESS A LICENCE FROM RESERVE BANK OF INDIA TO CAR RY ON BUSINESS IT IS NOT A CO-OPERATIVE BANK. IT IS A CO-OPERATIVE SOCIETY WHI CH ALSO CARRIES ON THE BUSINESS OF LENDING MONEY TO ITS MEMBERS WHICH IS C OVERED UNDER SECTION 80P(2)(A)(I) I.E. CARRYING ON THE BUSINESS OF BANKI NG FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE OBJECT OF THE AFORESAID AMENDME NT IS NOT TO EXCLUDE THE BENEFIT EXTENDED UNDER SECTION 80P(1) TO SUCH SOCIE TY. 8. FOLLOWING THE AFORESAID JUDGMENTS OF THE HONBLE GUJARAT HIGH COURT AND HONBLE KARNATAKA HIGH COURT AND IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT TO OUR NOTICE BY THE LD. D.R. THE IMPUGNED DECISION OF THE LD. CIT(A) IS HEREBY AFFIRMED. AS A CONSEQUENCE T HE APPEAL OF THE REVENUE IS DISMISSED. 9. ABOVE DECISION WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF BOTH THE PARTIES AT THE CONCLUSION OF THE HEARING O N 28-04-2015. SD/- SD/- (AMIT SHUKLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER 2 3 MUMBAI ; 4! DATED 28-4-2015 .<../ RK RKRK RK SR. PS ITA 5689/M/12 7 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. = () / THE CIT(A) 33 MUMBAI 4. = / CIT - 23 MUMBAI 5. @AB <