Karnataka High Court
Commissioner Of Income Tax vs M/S Yeshwanthpur Credit on 27 June, 2014
Bench: N.Kumar, B.Manohar
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 27TH DAY OF JUNE, 2014
PRESENT
THE HON'BLE MR. JUSTICE N KUMAR
AND
THE HON'BLE MR. JUSTICE B MANOHAR
ITA No. 237/2012
BETWEEN:
1. Commissioner of Income Tax-IV
Central Revenue Buildings,
Queens Road,
Bangalore 560 001.
2. Income Tax Officer
Ward-9(3),
Bangalore. ...Appellants
(By Sri E.I. Sanmathi, Adv.)
AND:
M/s. Yeshwanthpur Credit Co-operative
Society Limited
No.61, 7th Main, 8th Cross,
Gokula, I Stage, II Phase,
2
Yeshwanthpur,
Bangalore 560 022. ...Respondent
(By Sri A. Shankar & Sri M. Lava, Advs.)
************
This ITA filed under Section 260-A of I.T. Act, 1961
arising out of order dated 11.04.2012 passed in ITA
No.737/Bang/2011, for the Assessment year 2007-08,
praying to (i) formulate the substantial questions of law
stated therein; (ii) set aside the common appellate order
dated 11.04.2012 passed by the ITAT, A Bench, Bangalore in
appeal proceedings ITA No.737/Bang/2011.
This ITA coming on for hearing this day, N. KUMAR J
delivered the following:
JUDGMENT
This appeal is preferred by the revenue challenging the order passed by the Tribunal, wherein it is held that sub-section (4) of Section 80P of the Income Tax Act, 1961 is applicable only to co-operative banks and not to credit co-operative societies.
2. The substantial question of law which is raised in the appeal is as under: 3
"Whether on the facts and the circumstances of the case, the ITAT was right in law in holding that Section 80P(4) is applicable only for the assessment year 2008-09 onwards inspite of the fact that the explanatory notes of the Finance Act 2006 makes it abundantly clear that this provision is applicable from assessment year 2007-08"
3. The Tribunal in its order has set out the difference between the co-operative bank and society as under:
Nature Co-operative society Co-operative registered under Society registered Banking Regulation under Karnataka Act, 1949 Co-operative Society Act, 1959 Registration Under the Banking Co-operative Regulation Act, 1949 Societies Act, and Co-operative 1959 Societies Act, 1959 Nature of 1. As defined in 1. As per the bye business Section 6 of Banking laws of the co-
Regulation Act. operative society.
2. Can open savings 2. Society cannot bank account, current open savings bank 4 account, overdraft account, current account, cash credit account, issue account, issue letter letter of credit, of credit, discounting discounting bills bills of exchange, of exchange, issue issue cheques, cheque, demand demand drafts (DD), drafts, pay orders, Pay orders, Gift gift cheques, cheques, lockers, lockers, bank bank guarantees etc. guarantees etc.
3. Co-operative Banks 3. Society cannot can act as clearing act clearing agent, agent for cheques, for cheques, DDs, DDs, pay orders and pay orders and other forms. other forms.
4. Banks are bound to 4. Society are follow the rules, bound by rules regulations and and regulations as directions issued by specified by in the Reserve Bank of India co-operative (RBI) societies act.
Filing of Co-operative banks Society has to returns have to submit submit the annual annual return to RBI return to every year Registrar of Societies.
Inspection RBI has the power to Registrar has the inspect accounts and power to inspect over all functioning of accounts and over the Bank all functioning of the bank.
Part V Part V of the Banking Part V of the
Regulation Act is Banking
applicable to co- Regulation Act is
5
operative banks not applicable to
co-operative
banks.
Use of The word 'bank' The word 'bank'
words 'banker', 'banking' 'banker', 'banking'
can be used by a co- cannot be used ay operative bank. a co-operative society
4. This Court had an occasion to consider the said question in ITA No.5006/2013 dated 05.02.2014 in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT, where, after referring to the relevant provisions of the Income Tax Act, and the banking Regulation Act, held as under:
"If a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the 6 primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society."7
Therefore, the said issue was held in favour of the assessee and against the revenue.
5. The said judgment answers the issue in this case also. Accordingly, we pass the following order.
The appeal is dismissed. The substantial question of law is answered in favour of the assessee and against the revenue.
(SD/-) JUDGE (SD/-) JUDGE VP/-