Income Tax Appellate Tribunal - Mumbai
Abhyalaxmi Coperative Credit Society ... vs Ito 21(1)(1), Mumbai on 31 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "SMC", MUMBAI
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
ITA NO. 1525/MUM/2017 : (A.Y : 2013-14)
ITO-21(1)(1), Vs. M/s. Abhaylaxmi Co-op. Credit
Mumbai (Appellant) Society Ltd.,
B/107, Siddhivinayak Co-op. Hsg.
Society Ltd., K.K. Marg, Satrasta,
Mumbai 400 011.
PAN : AALFA5733F(Respondent)
ITA NO. 1614/MUM/2017 : (A.Y : 2013-14)
M/s. Abhaylaxmi Co-op. Credit Vs. ITO-21(1)(1),
Society Ltd., Mumbai (Respondent)
B/107, Siddhivinayak Co-op.
Hsg. Society Ltd., K.K. Marg,
Satrasta, Mumbai 400 011.
PAN : AALFA5733F (Appellant)
Assessee by : Shri Dinesh Ahir
Revenue by : Ms. N. Hemalatha
Date of Hearing : 24/07/2017
Date of Pronouncement : 31/07/2017
ORDER
PER G.S. PANNU, AM :
These are cross-appeals filed by the assessee and the Revenue against the order of CIT(A)-33, Mumbai dated 21.12.2016, pertaining to the Assessment Year 2013-14, which in turn has arisen from the order 2 ITA Nos. 1525 & 1614/Mum/2017 M/s. Abhaylaxmi Co-op. Credit Socy. Ltd.
passed by the Assessing Officer dated 22.01.2015 under section 143(3) of the Income Tax Act, 1961 (in short 'the Act').
2. Briefly put, the relevant facts are that the assessee before me is a co-operative society and is, inter-alia, engaged in the business of providing credit facilities to its members. For the assessment year under consideration it filed return of income declaring total taxable income at NIL after claiming exemption in terms of Sec. 80P(2)(a)(i) of the Act. In the course of the assessment proceedings, the Assessing Officer noted that the major incomes credited in the Income & Expenditure account was on account of 'interest on members loan' - Rs.1,04,57,334/- and 'interest on fixed deposit with bank' - Rs.20,58,272/-. It was also noticed by the Assessing Officer that on the expenditure side, the major expenditure was on account of interest paid of Rs.48,27,784/-. In this manner, the net income earned by the assessee was claimed as exempt u/s 80P(2)(a)(i) of the Act. The Assessing Officer was of the view that assessee was carrying on the activity of accepting deposits and extending loan facilities, an activity which was akin to the business of banking. Therefore, according to the Assessing Officer, assessee was to be understood as a co-operative bank and because of Sec. 80P(4) of the Act, exemption u/s 80P(2)(a)(i) of the Act was not available to the assessee. As a consequence, the Assessing Officer computed the net taxable income at Rs.43,09,714/-, after denying assessee's claim of exemption u/s 80P(2)(a)(i) of the Act.
3. The CIT(A) disagreed with the Assessing Officer and noted that the assessee's activity of providing facilities was to its members and was 3 ITA Nos. 1525 & 1614/Mum/2017 M/s. Abhaylaxmi Co-op. Credit Socy. Ltd.
thus eligible for the benefits of u/s 80P(2)(a)(i) of the Act. In coming to such a decision, CIT(A) also took note of the detailed submissions made by the assessee, which has been reproduced by him in the impugned order. One of the points raised by the assessee was that it was a co- operative credit society and not a co-operative bank and for this purpose, it tabulated before the CIT(A) a number of distinctions between a 'co-operative bank' and a 'co-operative credit society'. Considering the submissions put forth, the CIT(A) held that the provisions of u/s 80P(2)(a)(i) of the Act were applicable to the assessee, which was a co-operative credit society and not a co-operative bank and, therefore, Sec. 80P(4) of the Act was wrongly invoked by the Assessing Officer. Against such a decision, Revenue is in appeal before the Tribunal.
4. Insofar as the assessee's appeal before the Tribunal is concerned, the same arises from the action of the CIT(A) in holding that the interest income of Rs.20,58,272/- earned by the assessee was not exempt on the principles of mutuality since it was earned from a third party, i.e. bank. The CIT(A) also negated the plea of the assessee - that the interest income was earned on deposits with other co-operative banks and was, therefore, specifically exempt in terms of Sec. 80P(2)(d) of the Act apart from being subsumed in the income eligible for exemption u/s 80P(2)(a)(i) of the Act. Be that as it may, the CIT(A) noted that the Ahmedabad Bench of the Tribunal in the case of SBI Employees Co- operative Credit Society Ltd., (2015) 57 taxman.com 367 dated 26.3.2015 had ruled that interest income from bank was not eligible for 4 ITA Nos. 1525 & 1614/Mum/2017 M/s. Abhaylaxmi Co-op. Credit Socy. Ltd.
benefit of Sec. 80P(2)(d) of the Act. Against such a decision, assessee is in appeal before the Tribunal.
5. In this background, the cross-appeals have been heard together and a consolidated order is being passed for the sake of convenience and brevity.
6. The learned representative for the assessee vehemently pointed out that there was no justification for the Assessing Officer to treat the assessee as a co-operative bank and invoke Sec. 80P(4) of the Act since assessee was a mere co-operative credit society providing credit facilities to its members after receiving deposits from its members. He has relied on the order of the CIT(A) to that extent. With regard to the exemption u/s 80P(2)(d) of the Act, the learned representative pointed out that the interest income was earned from other co-operative banks and, therefore, it was clearly exempt and the CIT(A) has wrongly denied the claim of the assessee.
7. On the other hand, the ld. DR has placed reliance on the order of the Assessing Officer and pointed out that the activities of the assessee were akin to banking business and, therefore, Sec. 80P(4) of the Act clearly prohibited the benefits of Sec. 80P to the assessee.
8. I have carefully considered the rival submissions. Quite clearly, Sec. 80P(2)(a)(i) of the Act provides exemption in the case of a co- operative society engaged in the business of banking or providing credit facilities to its members. In the instant, the case made out by the 5 ITA Nos. 1525 & 1614/Mum/2017 M/s. Abhaylaxmi Co-op. Credit Socy. Ltd.
assessee is that it is a co-operative credit society, which is receiving deposits from its members and providing credit facilities to its members and thus not in the business of banking. Thus, the claim of the assessee for exemption u/s 80P(2)(a)(i) of the Act is on account of it being engaged in the business of providing credit facilities to its members, and not the business of banking. Factually speaking, I find no infirmity in the claim of the assessee inasmuch as there is no case made out by the Assessing Officer that the assessee society has a banking licence to carry on business of banking. The only point made out by the Assessing Officer is that the activities of credit society are akin to a society carrying on banking business. In my considered opinion, it is a complete misnomer on the part of the Assessing Officer to treat the assessee as a co-operative bank within the meaning of Sec. 80P(4) of the Act without establishing that the assessee is a co-operative bank in the eyes of law. Therefore, in my view, the CIT(A) made no mistake in allowing the claim of assessee for exemption u/s 80P(2)(a)(i) of the Act and accordingly, Revenue fails in this aspect.
9. Insofar as the assessee's claim for exemption u/s 80P(2)(d) of the Act with respect to interest on deposits with other co-operative banks of Rs. 20,58,272/- is concerned, the same, in my view, is fully covered by the phraseology of Sec. 80P(2)(d) of the Act itself. So far as the reliance placed by the CIT(A) on the decision of the Ahmedabad Bench of the Tribunal in the case SBI Employees Co-operative Credit Society Ltd. (supra) is concerned, the same is clearly distinguishable. In the case before the Ahmedabad Bench of the Tribunal, the interest income was received from State Bank of India whereas in the present case, the 6 ITA Nos. 1525 & 1614/Mum/2017 M/s. Abhaylaxmi Co-op. Credit Socy. Ltd.
assessee has claimed exemption with respect to interest on deposits with other co-operative banks, which is specifically covered by Sec. 80P(2)(d) of the Act. At the time of hearing, the learned representative relied upon the judgment of the Hon'ble Karnataka High Court in the case of M/s. The Totgars' Cooperative Sale Society Limited, 392 ITR 74 (Kar) to point out that in the context of Sec. 80P(2)(d) of the Act, the expression "co-operative society" would include a co-operative bank also. In my considered opinion, in view of the clear phraseology of Sec. 80P(2)(d) of the Act and the judgment of the Hon'ble Karnataka High Court in the case of M/s. The Totgars' Cooperative Sale Society Limited (supra), the amount of interest earned by the assessee from deposits with other co-operative banks is eligible for exemption. Accordingly, on this aspect also, order of CIT(A) is set-aside and the Assessing Officer is directed to allow the claim of the assessee.
10. Resultantly, whereas the appeal of the Revenue is dismissed, that of the assessee is allowed.
Order pronounced in the open court on 31st July, 2017.
Sd/-
(G.S. PANNU) ACCOUNTANT MEMBER Mumbai, Date : 31st July, 2017 *SSL* 7 ITA Nos. 1525 & 1614/Mum/2017 M/s. Abhaylaxmi Co-op. Credit Socy. Ltd.
Copy to :
1) The Appellant
2) The Respondent
3) The CIT(A) concerned
4) The CIT concerned
5) The D.R, "SMC" Bench, Mumbai
6) Guard file
By Order
Dy./Asstt. Registrar
I.T.A.T, Mumbai