Income Tax Appellate Tribunal - Indore
Kss Bairasia, Bhopal vs Department Of Income Tax on 31 October, 2012
1
INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
And
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No. 5/Ind/2013
A.Y.2009-10
Asstt. Commissioner of Income Tax 3(1)
Bhopal :: Appellant
Vs
M/s KSS Bairasia
Bhopal
PAN - AAAAK-4061G :: Respondent
ITA No. 6/Ind/2013
A.Y.2009-10
Asstt. Commissioner of Income Tax 3(1)
Bhopal :: Appellant
Vs
M/s LSS Nazeerabad
Bhopal
PAN - AAAAL-1223F :: Respondent
2
Revenue by Shri Bhim Kunvar
Assessees by Shri Amit Jain
Date of hearing 28.10.2013
Date of pronouncement 28.10.2013
O R D E R
PER JOGINDER SINGH, judicial member
These appeals have been filed by the revenue against the common order of the learned CIT(A) dated 31.10.2012 on the common issue that the learned first appellate authority was not justified in deleting the addition of Rs.34,97,339/- in the case of M/s KSS Bairasia and of Rs. 20,55,523/- in the case of M/s LSS Nazeerabad, Bhopal which was made u/s 80P of the Act.
2. At the outset, the learned counsel for the assessee pointed out at the issue involved in these appeals is covered by the order dated 15th July, 2013 of the Tribunal. This factual matrix was not controverted by the Revenue.
3. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the order of the Tribunal dated 15th July, 2013 :-
3" These are the appeals filed by the Revenue against the order of CIT(A) for assessment year 2009-10 in the matter of order passed u/s 143(3) of the Income-tax Act, 1961.
2. Different assessees are involved, however, issue is common, therefore, both the appeals were heard together and now disposed by this consolidated order.
3. Nobody appeared on behalf of the assessee inspite of service of notice, therefore, Bench decided to dispose the appeal after considering the arguments of the ld. Senior DR and going through the orders of the authorities below.
4. Facts in brief are that in the return of income, the assessee filed claim of deduction u/s 80P on the ground that it is a primary agricultural credit cooperative society. During the course of scrutiny of assessment, the Assessing Officer observed as under :-
"Assessee has claimed deduction u/s 80P of Rs. 16,36,839/-. Assessee was asked to justify the claim of Section 80P as after the insertion of sub Section 80P(4) deduction available to Coop. Banks have been withdrawn.
Vide submission dated 25.07.2011 assessee has submitted as follows :-
3. Exemption under any Section of IT Acts :-
(a) Society Registered as Primary Agricultural Credit Society ( Section 80P(1) )
(b) Providing credit facilities to members. ( Section 80P(2)a(i).
(c) Marketing of agricultural products grown by members ( Section 80P(2)(a)(iii). )
(d) Purchase of seeds, fertilizers etc. intended for agriculture for the purpose of supplying them to members. ( Section 80P(2) a(iv).
As per the provision of U/s 80P(4) (Inserted by Finance Act 2006, w.e.f. 1.4.2007) 4 [(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 and rural development bank.
Explanation.- For the purpose 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) :
(b) "primary co-operative agricultural and rural development bank"means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.] After the amendment deduction u/s 80P is allowed only to following Co-operative Banks.
1. Primary agricultural credit society (PACS)
2. Primary co-operative agricultural and Rural Develop-ment Bank (PCARDB)
(b) Assessee is neither PACS nor PCARDB
(i) Assessee is not PCARDB A society full filling two conditions is a PCARDB as per explanation to Section 80P(4).
a. Area of operation confined to a taluk. b. The principal object of which is to provide for long- term credit for agricultural and rural development activities."
5. After having discussion at page nos. 2, 3, 4 & 5, the Assessing Officer concluded as under :-
"From the object and range of activities as above it is clear assessee is engaged in Banking activity while as per the definition of PACS. The primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes 5 or for purposes connected with agricultural. Hence, assessee is not a PACS.
Also from the annual report it has been observed that in financial year 2008-09 total loans of Rs. 2,25,129/- were issued for non-agricultural purposes. This clearly indicates that society is giving loans for non-agricultural activities and the society cannot be termed as PACS.
On page 17 of the bye laws in point no. 3 & 4 is says that other primary Agricultural Credit Society/Bank can also become member of the assessee society. Accordingly, it violates the condition for Primary Agricultural Credit Society as it allows other co- operative societies/Bank from becoming its member.
Hence assessee is neither PACS nor PCARDB hence no exemption is available to the assessee u/s 80P. Accordingly, an amount of Rs. 16,36,839/- is being added back to the total income of the assessee.
In view of the discussions held with the assessee and material available on record, income is assessed as under :-
Income as per Return of income Rs. Nil Add: Disallowed u/s 80P discussed in Para 1 Rs.16,36,839/- Income assessed Rs. 16,36,839/-"
6. Against the above order of Assessing Officer, assessee approached to CIT(A).
7. By the impugned order, the ld. CIT(A) allowed claim of deduction u/s 80P after having the following observations :-6
" In addition, the societies are also engaged in allied agricultural activities in form of provision of agricultural implement/equipoment, sale of produce etc. for its members in furtherance of its main objects. Further, para 5 of the bye laws specifies the condition for eligibility to become its member. It does not allow any other Cooperative Society to be its members except the feeder bank ( foRriks " kd cSad ) which, in case of these appellant , is Bhopal Cooperative Bank. Clause (3) & (4) of para 5 (page 17 ) of bye laws on which Assessing Officer has relied to show that they are not PCAS, are reproduced as under :-
"5. lnL;rk izkIr djus dh ik=rk ( (1) ........................
(2) ........................
(3) foRriks"kd cSd a Hkh lnL; cuus ds fy, ;ksX; gksxk A (4) fdlh vU; izkFkfed d`f"k lk[k lgdkjh lfefr dk lnL; bl laLFkk dk lnL; u cu ldsxk tc rd og ml laLFkk ls vUukifRr u izkIr dj yas ftldk og lnL; gS] vkSj bl laLFkk lapkyd eaMy vuqefr u nsnAs ** Thus, the Assessing Officer's observations that other Cooperative Society can become its member and thereby violating prescribed conditions are found misplaced. In fact, the nodal authority viz. National Bank for Agriculture and Rural Development (NABARD), M.P. has categorically mentioned these appellant societies to be PACS- Category A, B & C to be considered for rehabilitation package and its impact.
Bhopal Cooperative Bank is found to be an independent and separate entity registered under the State Act and having distinct PAN. It is being separately assessed as an independent entity by the Assessing Officer at Bhopal as per return filed by it. Thus Assessing Officer's contention that these appellant societies are running Bhopal Coop. Central Bank is not found acceptable. As far as lending of amount for non- agricultural purposes, as mentioned by the Assessing Officer at page 5 of the order, is concerned, it is seen that these loans have not been given during the year 7 under consideration and that they from a negligible percentage of activities and are in conformity with the principal objects of the society. Societies main/primary function is providing credit facilities to their members as per their financial audited accounts and as per the provisions of the Income-tax Act, 1961. 4.1 From perusal of records, it is also seen that these societies have been granted deduction u/s 80P in previous years on the basis of similar facts. There has been no change in facts during the year under consideration. In fact, on the basis of identical facts, similar other societies operating in same other talukas of Bhopal have been granted deduction u/s 80P vide order u/s 143(3) of the Income-tax Act, 1961, as in the case of M/s. S.C.S., Misrode, Tehsil - Hujur ( vide order dated 10.10.2007 passed u/s 143(3) by ACIT - 1(1), Bhopal and M/s. SCS, Rapadiya, Tehsil-Hujur ( vide order dated 11.10.2007 passed up 143(3) by ACIT,1(1), Bhopal).
4.2 After perusal of submissions, facts and records, Assessing Officer is not found justified in making disallowance of deduction u/s 80P of the Income-tax Act, 1961, to which these appellant societies are found entitled to. Accordingly, addition made in each of the appellant society by disallowing deduction u/s 80P of the amount, as mentioned in respective assessment order is hereby deleted."
8. Against the above order of the ld. CIT(A), the Revenue is in further appeal before us.
9.
10. We have considered the submissions of ld. Senior DR and have gone through the orders of the authorities below and found from record that the assessee has claimed deduction u/s 80P. However, after insertion of sub Section (4) of Section 80-P, by Finance Act, 2006, w.e.f. 1.4.2007, this deduction is available only to -
1. Primary Agricultural Credit Society (PACS) 8
2. Primary Co-operative Agricultural and Rural Development Bank (PCARDB)
11. A society fulfilling two conditions is a PCARDB as per explanation to Section 80P(4).
(a) Area of operation confined to a taluk.
(b) The principal object of which is to provide for long term credit for agricultural and rural development activities.
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 Ac, 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 and the principal object of which is to provide for long-term credit for agricultural and rural development activities.
Thus, the Explanation (a) states that the cooperative bank and primary agriculture credit society shall have the meaning assigned to them in Part V of the Banking Regulation Act. Part V of the Banking Regulation Act (P-46 of the paper book ) defines the word "primary agriculture credit society" which means a co-operative society,-
(1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops) (2) the bye-laws of which do not permit admission of any other cooperative society as member.
12. Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank 9 subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose.
13. In the instant case before us, the lower authorities have not discussed about the total advances given by assessee, the principal object and the purpose for which loans have been advanced by the assessee so as to ascertain the main source of earning as to whether from financing to the farmers or otherwise. Even the main source of income as to whether from agricultural advance or otherwise or main deployment of funds by the assessee Bank for agricultural advance or otherwise have not been discussed by lower authorities so as to ascertain whether assessee come within the purview of primary cooperative agricultural and rural development bank. The provisions of this Section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank. To substantiate its claim u/s 80P neither the balance sheet nor profit and loss account was placed on record. We, therefore, direct the Assessing Officer to verify the main source of income and deployment of funds towards various advances. If the Assessing Officer finds that main source of earning is out of long term credit for agricultural and rural development activities, deduction u/s 80P cannot be denied. We direct accordingly.
14. In view of the above facts, the matter is restored back to the file of Assessing Officer for deciding afresh in terms of our discussion herein above.
15. In the result, the appeals of the Revenue are allowed for statistical purposes.
This order has been pronounced in the open court on 15th July, 2013."
10We, therefore, following the aforesaid order of the Tribunal, direct the learned Assessing Officer to follow the directions contained in the above order of the Tribunal and decide the issue accordingly after affording opportunity of being heard to the assessee.
In the result, both the appeals of the revenue are allowed for statistical purposes only.
This order was pronounced in the open Court in the presence of ld. Representatives from both sides at the conclusion of the hearing on 28.10.2013.
Sd/- Sd/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29.10.2013
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Vyas 11