Karnataka High Court
The Commissioner Of Income-Tax vs M/S. Bangalore Credit Cooperative ... on 27 June, 2014
Bench: N.Kumar, B.Manohar
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 27TH DAY OF JUNE, 2014
PRESENT
THE HON'BLE MR. JUSTICE N KUMAR
AND
THE HON'BLE MR. JUSTICE B MANOHAR
ITA No. 598/2013
BETWEEN:
1. The Commissioner of Income Tax
C. R. Building,
Queens Road,
Bangalore.
2. The Income Tax Officer
Ward - 4(1),
C.R. Building,
Queens Road,
Bangalore. ...Appellants
(By Sri Kamaladhar. G, Adv.)
AND:
M/s. Bangalore Credit
Co-operative Society Ltd.,
No.723, New No. 37/1,
2
36th Cross,
7th Main, 4th Block,
Jayanagar,
Bangalore 560 011. ...Respondent
(By Sri A. Shankar & Sri M. Lava, Advs.)
This ITA filed under Section 260-A of I.T. Act, 1961
arising out of order dated 13.06.2013 passed in ITA
No.1659/Bang/2012, for the Assessment year 2009-10,
praying to (i) formulate the substantial questions of law
stated therein; (ii) set aside the order passed by the ITAT,
Bangalore in ITA No.1659/Bang/2012 dated 13.06.2013
confirming the order of the Appellate Commissioner and
confirm the order passed by the Income Tax Officer, Ward-
4(1), Bangalore.
This ITA coming on for admission this day,
N. KUMAR J delivered the following:
JUDGMENT
This appeal is preferred by the revenue challenging the order passed by the Tribunal, wherein it is held that sub-
section (4) of Section 80P of the Income Tax Act, 1961 is applicable only to co-operative banks and not to credit co-
operative societies.
2. The substantial questions of law which are raised in the appeal are as under:
3(i) Whether the Tribunal was correct in upholding the CIT(A)'s order directing the assessing officer to grant deduction under Section 80P(2)(a)(i) of the Act of Rs.70,58,624/- for assessment year 2009-
10 by relying on the earlier order of ITAT on identical issue without appreciating that the revenue had not accepted the said order and an appeals under Section 260A is pending before this Hon'ble Court for adjudication?
(ii) Whether the Tribunal is correct in holding that the assessee is not a Co-operative Bank but only a Co-operative society engaged in providing credit facilities to its members?
(iii) Whether the Tribunal was correct in not appreciating the facts that the main motto of the co-operative society is lending for its members which is in the nature of banking transaction, treated on par as per the new clause introduced in the definition of income to section 2(24)(viia) and comes 4 under the purview of 80P sub-section (4) of the Act as inserted in Finance Act 2006 with effect from 01.04.2007?
(iv) Whether the Tribunal was correct in holding that the provision of sub-section (4) of Section 80P of the Income-tax Act are applicable only to co-operative banks and not to credit co-operative societies, which are engaged in business of banking, including providing credit facilities to their members?
(v) Whether the Tribunal was correct in holding that the assessee is a c-operative society and not a co-operative bank in terms of sub-section (4) of Section 80P of the Income Tax Act without considering the meaning of Co-operative Bank as envisaged under Part V of Banking Regulation Act, 1949 wherein it is defined that Co-operative Bank includes primary co-operative Bank, which is further defined as co-operative society with the primary object of transactions of Banking business?"
53. The Tribunal in its order has set out the difference between the co-operative bank and society as under:
Nature Co-operative society Co-operative Society registered under registered under Banking Regulation Act, Karnataka Co-
1949 operative Society
Act, 1959
Registration Under the Banking Co-operative
Regulation Act, 1949 Societies Act, 1959 and Co-operative Societies Act, 1959 Nature of 1. As defined in Section 1. As per the bye business 6 of Banking Regulation laws of the co-
Act. operative society.
2. Can open savings 2. Society cannot bank account, current open savings bank account, overdraft account, current account, cash credit account, issue letter account, issue letter of of credit, credit, discounting bills discounting bills of of exchange, issue exchange, issue cheques, demand drafts cheque, demand (DD), Pay orders, Gift drafts, pay orders, cheques, lockers, bank gift cheques, guarantees etc. lockers, bank
3. Co-operative Banks guarantees etc. can act as clearing agent 3. Society cannot for cheques, DDs, pay act clearing agent, orders and other forms. for cheques, DDs,
4. Banks are bound to pay orders and 6 follow the rules, other forms.
regulations and 4. Society are bound directions issued by by rules and Reserve Bank of India regulations as (RBI) specified by in the co-operative societies act.
Filing of Co-operative banks have Society has to returns to submit annual return submit the annual to RBI every year return to Registrar of Societies.
Inspection RBI has the power to Registrar has the inspect accounts and power to inspect over all functioning of accounts and over the Bank all functioning of the bank.
Part V Part V of the Banking Part V of the Regulation Act is Banking Regulation applicable to co- Act is not applicable operative banks to co-operative banks.
Use of The word 'bank' The word 'bank' words 'banker', 'banking' can 'banker', 'banking' be used by a co- cannot be used ay a operative bank. co-operative society
4. This Court had an occasion to consider the said questions in ITA No.5006/2013 dated 05.02.2014 in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT, where, after referring to the 7 relevant provisions of the Income Tax Act, and the banking Regulation Act, held as under:
"If a Co-operative Bank is exclusively carrying 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 rural development bank. The Legislature did not want to deny the said benefit 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 the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then 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 8 under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society."
Therefore, the said issue was held in favour of the assessee and against the revenue.
5. The said judgment answers the issues in this case also. Accordingly, we pass the following order.
The appeal is dismissed. The substantial questions of law are answered in favour of the assessee and against the revenue.
(sd/-) JUDGE (sd/-) JUDGE VP/-