Income Tax Appellate Tribunal - Bangalore
National Aeronautical Laboratory ... vs Income Tax Officer Ward-4(2)(2), ... on 25 January, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC-A" BENCH : BANGALORE
BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER
ITA Nos.3314 & 3315/Bang/2018
Assessment Years : 2014-15 & 2015-16
M/s. National Aeronautical
Laboratory Employees Co-
operative Housing Society
The Income Tax
Ltd.,
Officer,
NAL Campus, vs.
Ward 4 (2) (2),
Old Airport Road,
Bangalore.
Kodihalli,
Bangalore - 560 017.
PAN: AACAN3679H
APPELLANT RESPONDENT
Appellant by : Smt. Suman Lunkar, CA
Respondent by : Shri A. Ramesh Kumar, JCIT (DR)
Date of hearing : 14.01.2019
Date of Pronouncement : 25.01.2019
ORDER
Per Shri A.K. Garodia, Accountant Member
Both these appeals are filed by the assessee which are directed against two separate orders of ld. CIT(A)-4, Bangalore both dated 28.09.2018 for Assessment Years 2014-15 and 2015-16. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
2. The grounds raised by the assessee for Assessment Year 2014-15 in ITA No. 3314/Bang/2018 are as under.
"1. The learned Assessing officer had erred in passing the order in the manner passed by him and the learned Commissioner of Income Tax (Appeals) has erred in confirming the same. The orders as passed being bad in law and are liable to be quashed.
2. The learned Assessing officer had erred in denying the deduction ITA Nos. 3314 & 3315/Bang/2018 Page 2 of 6 claimed u/s 80P(2)(a)(i) of the Act on the ground that the appellant is a Co- operative Bank, thereby covered in terms of section 80P(4) of the Act and the learned CIT(A) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the appellant is a co-operative Society and not a Co-operative Bank hence the provisions of section 80P (4) of the Act is not applicable to the facts of the appellant. The action of authorities being wholly erroneous both on facts and law is to be negated.
3. In any case, the authorities below have erred in not appreciating that in the absence of any Banking license from RBI, the appellant cannot be termed as Co-operative Bank. Therefore the provisions of section 80P (4) of the Act are not applicable at all.
4. The learned CIT(A) has erred in holding that:
i) the appellant has violated the principles of mutuality by investing in deposits in banks which are not the members of the appellant.
ii) the interest earned from the above banks are assessable under the head Income from other sources and not under the head business
iii) The deduction u/s 80P(2)(a)(i) of the Act is available only to income from business and not to Income from Other Sources.
iv) Interest accrued from surplus deposits in banks/societies is liable for taxation. The above conclusions drawn are contrary to facts and the law applicable is to be disregarded.
5. In any case, the learned CIT(A) has erred in not giving any finding with respect to allowability of deduction u/s 80P(2)(a)(i) of the Act with respect to interest earned from members.
6. The appellant denies liability to pay interest u/s 234A and 234B of the Act. The interest having been levied erroneously is to be deleted.
7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that order passed by AO and CIT(A) to be quashed or at least the denial of deduction u/s 80P(2)(a)(i) of the Act be granted and the return filed by the appellant be accepted and interest levied be also deleted."
3. The grounds raised by the assessee for Assessment Year 2015-16 in ITA No. 3315/Bang/2018 are as under.
"1. The learned Assessing officer had erred in passing the order in the manner passed by him and the learned Commissioner of Income Tax (Appeals) has erred in confirming the same. The orders as passed being bad in law and are liable to be quashed.
ITA Nos. 3314 & 3315/Bang/2018 Page 3 of 6
2. The learned Assessing officer had erred in denying the deduction claimed u/s 80P(2)(a)(i) of the Act on the ground that the appellant is a Co- operative Bank, thereby covered in terms of section 80P(4) of the Act and the learned CIT(A) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the appellant is a co-operative Society and not a Co-operative Bank hence the provisions of section 80P (4) of the Act is not applicable to the facts of the appellant. The action of authorities being wholly erroneous both on facts and law is to be negated.
3. In any case, the authorities below have erred in not appreciating that in the absence of any Banking license from RBI, the appellant cannot be termed as Co-operative Bank. Therefore the provisions of section 80P (4) of the Act are not applicable at all.
4. The learned CIT(A) has erred in holding that:
i) the appellant has violated the principles of mutuality by investing in deposits in banks which are not the members of the appellant.
ii) the interest earned from the above banks are assessable under the head Income from other sources and not under the head business
iii) The deduction u/s 80P(2)(a)(i) of the Act is available only to income from business and not to Income from Other Sources.
iv) Interest accrued from surplus deposits in banks/societies is liable for taxation. The above conclusions drawn are contrary to facts and the law applicable is to be disregarded.
5. In any case, the learned CIT(A) has erred in not giving any finding with respect to allowability of deduction u/s 80P(2)(a)(i) of the Act with respect tar interest earned from members.
6. The appellant denies liability to pay interest u/s 234A and 234B of the Act. The interest having been levied erroneously is to be deleted.
7. In view of the above and on other grounds to be adduced at the time of hearing, it is requested that order passed by AO and CIT(A) to be quashed or at least the denial of deduction u/s 80P(2)(a)(i) of the Act be granted and the return filed by the appellant be accepted and interest levied be also deleted."
4. In course of hearing of these appeals, it was submitted by ld. AR of assessee that there are two disputes in the present case. She submitted that the first dispute is whether the assessee is a co-operative bank or not. She submitted ITA Nos. 3314 & 3315/Bang/2018 Page 4 of 6 that the assessee is not holding any license from RBI and therefore, the assessee cannot be considered as a co-operative Bank. At this juncture, the bench pointed out that as per recent judgement of Hon'ble Apex Court rendered in the case of The Citizen Co-operative Society Ltd. Vs. ACIT as reported in 397 ITR 1, it was held as per Para 24 of this judgement that it is a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a license from the Reserve Bank of India and if the assessee does not possess the same, it cannot be said that the assessee is a co-operative bank but at the same time, this is also noted by Hon'ble Apex Court in same Para of this judgment that in that case, the Reserve Bank of India has itself clarified that the business of the assessee does not amount to that of a co-operative bank. The bench observed that in the present case also, the matter may be restored back to the file of AO for fresh decision and the assessee has to obtain and furnish the certificate from RBI regarding the nature of its business. If the RBI certifies that the business of assessee is not a co- operative bank then only, it can be accepted that the assessee is not a cooperative bank. In reply, she submitted that the matter may be restored back to the file of AO for fresh decision and if this is done then assessee will obtain required certificate from RBI and submit the same before the AO within reasonable time.
5. Thereafter she submitted that the second dispute is regarding allowability of deduction u/s. 80P(2)(a)(i) of IT Act in respect of interest income from banks. She submitted that this issue was decided against the assessee by following the judgement of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. as reported in 395 ITR 611 (Karn). But another judgement of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO as reported in 230 Taxman 309 is in favour of the assessee. She submitted that in the facts of present case, this judgment rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra) is applicable. At this juncture also, it was pointed out by the bench that in both these cases, the issue was decided by Hon'ble Karnataka High Court in the light of facts of those two cases. The bench pointed out that in the case of ITA Nos. 3314 & 3315/Bang/2018 Page 5 of 6 PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra), it was found that the money deposited in bank was out of assessee's liability and not out of assessee's own funds and under these facts, the issue was decided against the assessee. But in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra), it was found that the money deposited in bank was out of assessee's own funds and not out of liability of the assessee and under these facts, the issue was decided in favour of the assessee. The bench observed that on this aspect also, the matter may be restored back to the file of AO for fresh decision after examining the facts of the present case in the light of these two judgements of Hon'ble Karnataka High Court. In reply, it was submitted by ld. AR of assessee that if the matter is restored back to the file of AO, the assessee will establish that the facts in the present case are in line with the facts in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra). As against this, the ld. DR of revenue supported the orders of authorities below on both issues.
6. I have considered the rival submissions and in view of above discussion, I set aside the order of CIT (A) in both years and restore the matter back to the file of AO for fresh decision with the direction that the assessee should obtain a certificate from RBI within reasonable time regarding the nature of assessee's business and if the RBI certifies that the nature of business of the assessee is not that of a co-operative bank then this should be accepted and the first issue should be decided in favour of the assessee.
7. Regarding the second issue i.e. allowability of deduction u/s. 80P(2)(a)(i) of IT Act in respect of interest income from banks, the AO is directed to examine the facts of present case in the light of these two judgements of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co- operative Sale Society Ltd. (supra) and Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra) and if it is found that the facts of present case are in line with the facts in the case of PCIT and Another Vs. Totagars Co- operative Sale Society Ltd. (supra) then the issue should be decided against the assessee. But if it is found that the facts of present case are in line with the facts in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITA Nos. 3314 & 3315/Bang/2018 Page 6 of 6 ITO (supra) then the issue should be decided in favour of the assessee. I want to make it clear that this is the obligation of the assessee to bring on record the necessary facts of the present case to enable the AO to make this comparison and decide this issue.
8. In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on the date mentioned on the caption page.
Sd/-
(ARUN KUMAR GARODIA) Accountant Member Bangalore, Dated, the 25th January, 2019.
/MS/ Copy to:
1. Appellant 4. CIT(A)
2. Respondent 5. DR, ITAT, Bangalore
3. CIT 6. Guard file By order Assistant Registrar, Income Tax Appellate Tribunal, Bangalore.