Karnataka High Court
The Principal Commissioner Of vs M/S. Vijay Souharda Credit Sahakari ... on 23 October, 2017
Bench: S.Sujatha, H.B.Prabhakara Sastry
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 23RD DAY OF OCTOBER, 2017
PRESENT
THE HON'BLE MRS. JUSTICE S.SUJATHA
AND
THE HON'BLE Dr. JUSTICE H. B. PRABHAKARA SASTRY
INCOME TAX APPEAL NO.100056/2016
BETWEEN:
1. THE PRINCIPAL COMMISSIONER OF
INCOME TAX,
DR.B.R. AMBEDKAR VEEDHI,
BELAGAVI.
2. THE INCOME-TAX OFFICER,
WARD-2, BAGALKOT.
... APPELLANTS
(BY SRI Y V RAVIRAJ, ADVOCATE)
AND
M/S. VIJAY SOUHARDA CREDIT SAHAKARI LTD.,
NIRANI SUGARS ENCLAVE,
VIJAY NAGAR, TQ: MUDHOL,
DIST: BAGALKOT.
... RESPONDENT
(BY SRI SANGRAM S KULKARNI, ADVOCATE)
THIS APPEAL IS FILED UNDER SECTION 260A OF THE
INCOME TAX ACT, 1961, PRAYING TO ALLOW THE APPEAL AND
SET ASIDE THE ORDERS PASSED BY THE INCOME TAX
APPELLATE TRIBUNAL, BENGALURU BENCH 'C', BENGALURU,
IN ITA NO.1162/BANG/2015, DATED 11.12.2015 AND CONFIRM
THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-2,
BAGALKOT.
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THIS APPEAL COMING ON FOR ADMISSION THIS DAY,
S.SUJATHA J., DELIVERED THE FOLLOWING:
JUDGMENT
Revenue has filed this appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred as the 'Act' for short). The relevant substantial question of law raised is, Whether the assessee respondent who is dealing with the general public apart from its regular members is entitled for deduction under Section 80P(2) (a) (i) of the Income Tax Act, 1961 considering the law laid down by the Hon'ble Apex Court in the case of 'the Citizen Co-operative Society Limited V/s Assistant Commissioner of Income Tax, Circle-9(1), Hyderabad' in Civil Appeal No.10245 of 2017 dated 08.08.2017 on the availability of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961?
2. The respondent-assessee filed its return of income for the assessment year 2011-12 declaring total income after claiming deduction under Section 80P(2)(a)(i) of the Act. The Assessing Authority completed the assessment under Section 143(3) of the Act holding that the respondent-assessee was not entitled to the deduction as claimed in view of the provisions of Section 80P(4) of the Act. The appeal filed by the respondent-assessee before the Commissioner of Income Tax 3 came to be allowed, against which the revenue preferred an appeal before the Income Tax Appellate Tribunal. The said appeal came to be dismissed placing reliance on the judgment of the jurisdictional High Court in the case of CIT V/s Shri Biluru Gurubasava Pattina Sahakari Sangha Niyamita, Bagalkot in ITA No.5006/2013 dated 05.02.2014. Aggrieved by the same, the revenue is in appeal.
3. Learned counsel Sri Y.V.Raviraj appearing for the revenue placing reliance on the judgment of the Hon'ble Apex Court in the case of Citizen Co-operative Society Limited V/s Assistant Commissioner of Income Tax, Circle-9(1), Hyderabad in Civil Appeal No.10245/2017 disposed of on 08.08.2017 would contend that the definition of co-operative bank has to be construed in the light of Section 80P(4) of the Act, it is contended that the activities of the respondent- assessee are in the nature of commercial transactions with a motive to earn maximum returns. Considering the activities of the respondent-assessee, it can be held to be a finance business and not to be construed as the activities of a co- operative society. Thus, the learned counsel submits that 4 Assessing Officer has given a clear finding to this effect, which has been totally lost sight of, by the Commissioner of Income Tax as well as the Income Tax Tribunal to the full extent. Thus, the learned counsel submits that the benefit of Section 80P(4) of the Act cannot be extended to the respondent- assessee.
4. Learned counsel Sri Sangram S.Kulkarni appearing for the respondent-assessee would contend that the Division Bench of this Court in the case of Shri Basaveshwar Urban Co-operative Credit Society Limited V/s the Income Tax Officer in I.T.A.No.100066/2014 disposed of on 21.09.2015, has categorically held that whether the co- operative society referred to in clauses (cciv), (ccv) and (ccvi) of Section 56 of the Banking Regulation Act, is carrying on the activities of the co-operative society or a co-operative bank requires to be determined by the Reserve Bank of India, before the authorities could term the assessee as a co- operative bank, for purpose of Section 80P of the Act. In view of the same, without there being any determination to the said effect by the authorities, the stand taken by the 5 department in this appeal proceedings based on the judgment of the Hon'ble Apex Court in the case of Citizen Co-operative Society Limited, supra, is wholly arbitrary and unjustifiable. Thus, the learned counsel seeks for rejection of the appeal as there is no substantial question of law arising for consideration before this Court.
5. We have heard the learned counsel appearing for the parties. Perused the material on record.
6. The sole substantial question of law raised by the appellants requires to be answered on the determination of the crucial question whether the respondent-assessee is a co- operative society or a co-operative bank. In the judgment referred to by the learned counsel for the revenue in the Citizen Co-operative Society Limited, supra, a categorical finding was given by the Assessing Officer that the Reserve Bank of India has itself clarified that business of the appellant does not amount to that of a co-operative bank, the appellants therefore would not come within the mischief of sub-section (4) of Section 80P. It was held that the activities 6 of the appellants therein was to cater two distinct categories of people namely, nominal members and the ordinary members. The activities of the assessee therein was construed to be financial business contrary to the provisions of the Co- operative Societies Act. As such, it was held that, the said assessee was not entitled to deduction under Section 80P(2)(a)(i) of the Act.
7. A cursory view of the order impugned herein would indicate that no finding is forthcoming regarding the aspect of the activities carried out by the respondent- assessee, whether as a co-operative society or not. In the absence of such factual finding, the legal propositions rendered by the Hon'ble Apex Court cannot be applied. As such, we are of the considered opinion that the matter requires reconsideration by the Assessing Officer to the effect whether the respondent-assessee comes within the realm of co-operative society to get entitlement of deduction under Section 80P(2)(a)(i) of the Act.
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8. Hence, we remand the matter to the Assessing Officer to answer this question and then decide the matter in the light of the judgment of the Hon'ble Apex Court in the case of Citizen Co-operative Society Limited, supra, as expeditiously as possible. Thus, without rendering any finding on the substantial question of law raised, order of the Income Tax Appellate Tribunal impugned herein, is set aside. We direct the Assessing Officer to reconsider the matter in the light of the observations aforesaid.
Appeal stands disposed of accordingly.
Sd/-
JUDGE Sd/-
JUDGE CLK/-