Income Tax Appellate Tribunal - Bangalore
M/S Karnataka State Government House ... vs Income Tax Officer Ward-3(2)(2), ... on 22 March, 2019
ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 4
integra, for the said issue has been decided by the Income-tax
Appellate Tribunal itself in different cases . . .". No other
binding precedent was discussed in the said judgment. Of
course, the Bench has observed that a co-operative bank is a
specie of the genus co-operative society, with which we agree,
but as far as applicability of section 80P(2) of the Act is
concerned, the applicability of the Supreme Court's decision
cannot be restricted only if the income was to fall under
section 80P(2)(a) of the Act and not under section 80P(2)(d) of
the Act.
It was submitted that as the issue has already been decided against
the assessee, the legal position may kindly be noted and the matter
may be decided in accordance with law.
06. Per contra the Ld. DR submitted that the assessee had
conceded that the ground had been decided by the Hon'ble
jurisdictional High Court (supra) therefore no further elaboration is
required from the Revenue's side.
07. We have heard the rival submissions and perused the material
on record. The issue pertains to eligibility of the assessee for
claiming the deduction u/s.80P2(d), is squarely covered against the
assessee by the categorical pronouncement in the matter of Pr. CIT
versus Totgars Co-op Sale Society [395 ITR 611] , wherein after
taking into account the judgment of the Hon'ble Supreme Court in
the matter of Totgar's Cooperative Sale Society v. ITO [322 ITR
283] the issue was decided against the assessee. We do not find any
reason to take a contrary view and accordingly the ground raised by
the assessee is dismissed.
08. With respect of ground no.5, it was the contention of the
assessee that the term 'profits and gains' used in section 80P(2)(c)
ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 3
04. The CIT (A) after issuing the show-cause notice had also
denied the deduction of Rs.50,000/- given by the AO u/s.80P(2)(c).
Aggrieved by the denial of deduction by the CIT (A), the assessee is
in appeal before this Tribunal.
05. Regarding ground 4 the Ld. AR submitted that case of the
assessee is covered by the decision of jurisdictional High Court in
the matter of Pr. CIT . Totgars Co-op Sale Society [(2017) 392 ITR
74W], wherein at para 10, it was held as under :
10. Admittedly, the interest which the assessee-respondent had
earned was from a co-operative bank. Therefore, according to
section 80P(2)(d) of the Income-tax Act, the said amount of
interest earned from a co-operative bank would be deductible
from the gross income of the co-operative society in order to
assess its total income. Therefore, the Assessing Officer was not
justified in denying the said deduction to the assessee-
respondent.
It was fairly conceded by the Ld AR that the issue in the present
case was subsequently decided by the jurisdictional High Court in
the matter of Pr. CIT . Totgars Co-op Sale Society [395 ITR 611]
against the assessee , wherein at para 18, it was held as under :
18. The contention of the learned counsel for the assessee that
a Co-ordinate Bench of this court dismissed the Revenue's
appeals by referring, but not applying the decision of the
hon'ble Supreme Court, we observe with greatest respects that
we do not find any detailed discussion of the facts and law
pronounced by the hon'ble Supreme Court in the case of the
respondent-assessee in the said order passed by the Co-
ordinate Bench and therefore, we are unable to follow the
same in the face of the binding precedent laid down by the
hon'ble Supreme Court. We find in paragraph 8 of the said
order passed by a Co-ordinate Bench that the learned judges
have observed that "the issue whether a co-operative bank is
considered to be a co-operative society is no longer res
ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 5
is required to be read in the light of the judgment of the Hon'ble
Supreme Court rendered in the matter of CIT v. Virmani Industries
P. Ltd [216 ITR 607], wherein the Hon'ble Supreme Court held as
under :
We may first consider the meaning of the expression "profits
or gains chargeable". On the first impression, the said
expression appears to refer only to profits or gains of business
or profession chargeable under section 28. But this court has
repeatedly held that the said expression is not so confined and
that it refers to income under all the heads of income specified
in section 14. In Jaipuria China Clay Mines (P.) Ltd.'s case
[1966] 59 ITR 555 (SC), the facts were these : the total income
of the respondentassessee for the assessment year 1952-53
before charging depreciation was Rs. 14,041. After deducting
depreciation of Rs. 5,360, the Income-tax Officer computed the
profit at Rs. 8,681. Against this profit, he set off the losses of
an earlier year. Having done this, the Income-tax Officer
computed the income of the assessee from dividends at Rs.
2,01,130 and levied tax on it. The assessee claimed that the
unabsorbed depreciation aggregating to Rs. 76,857 should be
deducted from the dividend and if it is so done, the total
income would get reduced to Rs. 1,32,955. The Income-tax
Officer rejected the claim. When the matter was ultimately
carried to this court, it took note of the opening words of the
sub-section, viz., "where, in the assessment of the assessee or if
the assessee is a registered firm, in the assessment of its
partners, full effect cannot be given to any such allowance. . .
." and held on that basis that the expression "profits or gains
chargeable" in the said sub-section is not confined to profits
and gains from business or profession but takes within its
ambit all heads of income. This court was of the opinion that
while amending section 10(2)(vi) of the Indian Income-tax Act,
1922, by the Amendment Act 25 of 1953, Parliament has
accepted the interpretation placed upon the said expression by
several High Courts to the above effect. It referred to the
decisions of the Lahore High Court in Karam Ilahi
Muhammad Shafi v. CIT [1929] 3 ITC 456, the Madras High
Court in A. Suppan Chettiar and Co. v. CIT [1929] 4 ITC 211,
the East Punjab High Court in Laxmichand Jaiporia Spg. and
Wvg. Mills, In re, [1950] 18 ITR 919 and the Bombay High
ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 2
28.11.2018, for the assessment years 2009-10, 2013-14 and 2015-
16, respectively.
02. The common grounds of appeal were raised by the assessee.
We are only reproducing the effective grounds 4 & 5 raised by the
assessee for AY 2009-10 which are as under :
03. The Ld. AR has submitted that ground no.1 is general and
ground nos.2 and 3 are not pressed therefore we are not deciding
ground nos.2 and 3.
3.1 Ground 4 pertains to 80P(2)(d). In this regard, the Ld. AR
submitted that the assessee is a Housing Cooperative Society and
filed return of income for AY 2009-10. Thereafter the AO had
issued notice u/s.148 of the Act and in response thereto the assessee
filed the return of income declaring nil income after claiming
deduction u/s.80P2(d) of the Act. The AO considering the
provision of section 80P2(d), had disallowed the deduction claimed
by the assessee. Further the AO has allowed the deduction of
Rs.50,000/- u/s.80P(2)(c) of the Act. Aggrieved, assessee filed
appeal before the CIT (A).
ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 1
IN THE INCOME TAX APPELLATE TRIBUNAL
BENGALURU BENCH 'B', BENGALURU
BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER
AND
SHRI. LALIET KUMAR, JUDICIAL MEMBER
I.T.A Nos.1500 & 1501/Bang/2018
(Assessment Years : 2009-10 & ITA.2013-14)
I.T.A. No.77/Bang/2019
(Assessment year : 2015-16)
M/s. Karnataka State Government House
Building Cooperative Society Ltd,
No.142, 'Vellahalu Nilayam',
8th Main Road, 18th Cross, Vijayanagar,
Bengaluru 560 040 .. Appellant
PAN : AABAK1360M
v.
Income-tax Officer,
Ward -3(2)(2), Bengaluru .. Respondent
Assessee by : Shri. C. Sandeep, CA
Revenue by : Shri. R. N. Siddappaji, Addl. CIT
Heard on : 14.03.2019
Pronounced on : 22.03.2019
ORDER
PER LALIET KUMAR, JUDICIAL MEMBER :
These are three appeals filed by the assessee against the orders of the CIT (A) -3, Bengaluru, dt.13.03.2018, 06.03.2018 and ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 7 Provided that in the case of a co-operative society falling under sub-clause (vi) or sub-clause (vii) the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:--
(1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities ;
(2) the co-operative credit societies which provide financial assistance to the society:
(3) the State Government ;
(b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to--
(i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits or vegetables, as the case may be ; or
(ii) the Government or a local authority ; or
(iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business ;
(c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,--
(i) where such co-operative society is a consumers' co-operative society, 2one hundred thousand rupees ; and
(ii) in any other case, twenty thousand rupees.
Explanation.--In this clause, "consumers' co-operative society" means a society for the benefit of the consumers ;
(d) in respect of any income by way of interest or dividends derived by the co- operative society from its investments with any other co-operative society, the whole of such income ;
(e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income ;
(f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22. ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 6 Court in Ambika Silk Mills Co. Ltd. v. CIT [1952] 22 ITR 58 besides the judgment of the Judicial Commissioner, Nagpur, in Ballarpur Collieries v. CIT [1929] 4 ITC 255 (Nag), interpreting the said expression as covering all heads of income.....
On the basis of the above, it was submitted that the profits and gains attributable to such activities include the activities of the assessee and the profit earned by the assessee from such activities.
09. Per contra, the Ld. DR relies on paras 4.8 & 4.9 of the order of the CIT (A).
10. We have heard the rival contentions and perused the material on record. Section 80P(2) is reproduced below :
80P(2) The sums referred to in sub-section (1) shall be the following, namely:--
(a) in the case of a co-operative society engaged in--
(i) carrying on the business of banking or providing credit facilities to its members, or
(ii) a cottage industry, or
(iii) the marketing of agricultural produce grown by its members, or
(iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or
(v) the processing, without the aid of power, of the agricultural produce of its members, or
(vi) the collective disposal of the labour of its members, or
(vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities:
ITA.1500, 1501/B/18 & ITA.77/B/2019 Page - 11
13. In the result, all the three appeals of the assessee are partly allowed as common grounds of law are raised by the assessee.
Order pronounced in the open court on 22nd day of March,2019.
Sd/- Sd/-
(A. K. GARODIA) (LALIET KUMAR)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bengaluru
Dated : 22.03.2019
MCN*
Copy to:
1. The assessee
2. The Assessing Officer
3. The Commissioner of Income-tax
4. Commissioner of Income-tax(A)
5. DR
6. GF, ITAT, Bangalore
By order
Assistant Registrar,
ITAT, Bengaluru