TMI Blog2020 (12) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 80P(4) cannot be made applicable to the assessee society in the instant case. Hence, the assessee being a co-operative society would fall within the ambit of Section 80P(2)(a)(i) of the Act and hence, would be eligible for deduction thereon. Status of the assessee should be considered only as a co-operative credit society and not as a co-operative bank. Accordingly, the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the Act for A.Y.2010-11 and we direct the ld. AO accordingly. Penalty u/s.271D - We find that assessee on realising its mistake had preferred an appeal before us against that order (though it is not aggrieved on the result of the order but aggrieved on the observations made thereon) for penalty u/s.271D of the Act for A.Y.2007-08, which is also listed alongwith these main appeals for other assessment years. It is trite law that no addition or denial of any deduction could be made by the revenue authorities merely based on admission of any person much less the authorised representative of the assessee without going into the actual charter documents i.e. in the instant case, objects of the society to ascertain and understand the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal in ITA No.4211/Mum/2018 for A.Y.2007-08 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-II, Thane in appeal No.THN/CIT(A)-II/JCIT Plg.Rg/PLG/68/10-11 dated 29/12/2010 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271D of the Income Tax Act, 1961. ITA No.403/Mum/2018 (A.Y.2014-15) (Assessee Appeal) This appeal in ITA No.403/Mum/2018 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-3, Thane in appeal No.10508-THN/16-17 dated 25/10/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 20/12/2016 by the ld. Income Tax Officer, Palghar (hereinafter referred to as ld. AO). ITA No.5983/Mum/2017 (A.Y.2013-14) (Assessee Appeal) This appeal in ITA No.5983/Mum/2017 for A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-3, Thane in appeal No.10129-THN/16-17 dated 25/07/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/01/2016 by the Income Tax Officer (hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- from its members. Accordingly, it was pleaded that the provisions of Section 269SS of the Income Tax Act would not be applicable to the assessee and consequently, penalty u/s.271D of the Act would not arise in the case of the assessee. This argument of the assessee was accepted by the then CIT(A)-II, Thane and accordingly, deleted the penalty u/s.271D of the Act vide its order dated 29/12/2010. 3.2. In view of the above, the ld. AO did not accept the contention of the assessee that it is a co-operative society and held that it is only the co-operative bank and accordingly, not entitled for deduction u/s. 80P(2)(a)(i) of the Act. 3.3. The ld. CIT(A) observed that assessee had already taken one particular stand before his predecessor in the course of penalty proceedings u/s.271D of the Act, relying on which, his predecessor had already accepted the assessee to be a co-operative bank and not a co-operative society. Against such order deleting the levy of penalty u/s.271D of the Act, the revenue had not preferred any appeal before the Tribunal and matter has attained finality. The ld. CIT(A) also observed that for the A.Y.2010-11, the paid up capital of the assessee is ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank. Hence, it has to be examined whether the assessee is a primary co-operative bank. As per the definition of primary co-operative bank u/s.5(ccv) of Banking Regulation Act, 1949, if a co-operative society fulfils all the following three conditions simultaneously, it shall be regarded as a primary co-operative bank:- (i) Primary object or principal business should be to the banking business. (ii) Paid up share capital and reserves should not be less than One lakh of rupees. (iii) Bye laws of which do not permit admission of any other co-operative as a member. 3.4. Thus, if co-operative society which does not fulfil any of the above conditions, it cannot be regarded as primary co-operative bank. The assessee pleaded that in the instant case, the assessee‟s case does not comply with these three conditions cumulatively and hence, it cannot be regarded as primary co-operative bank and hence, the provisions of Section 80P(4) cannot be made applicable and that the assessee would be entitled for deduction u/s. 80P(2)(a)(i) of the Act, in respect of profit derived from the activity of providing credit facilities to its members. 3.5. The assessee also pleaded that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gular assessment proceedings. It was also respectively submitted that the benefits conferred by the Parliament cannot be allowed or denied on the basis of what one says or what one believes or what one observes. The ld. AO in the instant case had not established that assessee is a co-operative bank within the meaning of Section 80P(4) of the Act r.w.s. 5(cci) of the Banking Regulation Act. 3.9. It was specifically brought to the attention of the ld. CIT(A) that unlike the assessee, (which is a co-operative credit society) co-operative banks are free to deal with non-members. Like co-operative banks, the assessee co-operative society is not subjected to control or supervision of RBI. 4. The ld. CIT(A) completely disregarded the entire contentions made by the assessee as narrated hereinabove and accordingly, placed reliance on the stand taken by the then Chartered Accountant of the assessee before his predecessor i.e. (CITA-II, Thane) during the penalty proceedings u/s. 271D of the Act wherein assessee was construed as co-operative bank in order to escape from the rigours of provisions of Section 269SS of the Act in respect of deposits received in cash in excess of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided by the State Government for the purpose. 6.3. We find that the term banking‟ means accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise. Hence, from the above definitions provided for the expression primary Co-operative bank and for the expression banking as per the Banking Regulation Act 1949, it could be safely concluded that unless the person collects deposits from the general public and provides credit facilities to the general public (both members and non-members), they cannot fall within the category of co-operative bank , primary co-operative bank or said to have engaged in the business of banking. In the instant case it is undisputed that assessee does not have any transaction with non-members of the credit society. At the cost of repetition, we would like to state that assessee had collected deposits only from its members and had provided credit facilities to its members, in consonance with the powers provided in its bye laws. Hence, it could be safely concluded that the provisions of Section 80P(4) of the Act cannot be made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions:- a. Decision of the Hon‟ble Jurisdictional High Court in the case of Nirmala L Mehta vs. A. Balasubramaniam reported in 269 ITR 1 (Bom) b. Decision of the Hon‟ble Jurisdictional High Court in the case of CWT vs. APAR Ltd., reported in 267 ITR 705 (Bom) c. Decision of the Hon‟ble Jurisdictional High Court in the case of Balkukund Acharya vs. DCIT reported in 310 ITR 310 (Bom) d. Decision of Hon‟ble Gujarat High Court in the case of P.V. Doshi vs. CIT reported in 113 ITR 22 (Guj) 6.5. It is also well settled that any amount of admission or misapprehension could not make an item taxable which is otherwise not so. In support of this, we would like to place reliance on the following decisions:- a. Decision of Hon‟ble Allahabad High Court in the case of Abdul Qayume vs. CIT reported in 184 ITR 404 (All) b. Decision of Hon‟ble Calcutta High Court in the case of Mayank Poddar vs. ITO reported in 262 ITR 633 (Cal) c. Hon‟ble Calcutta High Court in the case of SAIL DSP VR Employees Association 1998 vs. Union of India Ors. Reported in 262 ITR638 (Cal) 6.6. We also find that the concerned Chartered Accountant wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gorically raised a ground before us stating that the penalty u/s.271D of the Act ought not to have been deleted on the basis that assessee is a bank. We find that assessee had rather pleaded in its ground that the penalty u/s.271D of the Act need to be examined by the ld. CIT(A) on the facts and circumstances of the case and not based on its status. We find lot of force in this argument made by the ld. AR and we find that this appeal filed by the assessee in ITA No.4211/Mum/2018 against penalty u/s.271D of the Act for A.Y.2007-08 requires to be remanded back to the file of the ld. CIT(A() for denovo adjudication in accordance with law. The ld. CIT(A) is hereby directed to hear this appeal afresh uninfluenced by his earlier decision taken with regard to the status of the assessee. Accordingly, the appeal of the assessee in ITA No.4211/Mum/2018 is allowed for statistical purposes by way of remanding it to the file of the ld. CIT(A). 6.8. We find that subsequent development that had happened in the instant case wherein the then Chartered Accountant of the assessee had filed an affidavit narrating the entire facts and his interpretation of provisions of the Income Tax Act and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in the penalty proceedings u/s.271D of the Act dated 29/12/2010 and the same is pending disposal according to ld. AR. d) Petition u/s.119 of the Act has also been filed by the assessee on 29/05/2018 before the CBDT to put all these disputes to rest and the same is pending disposal according to ld. AR. 6.11. We specifically find that the Hon‟ble Jurisdictional High Court in the case of Quepem Urban Co-operative Credit Society Ltd., vs. Assistant Commissioner of Income Tax reported in 377 ITR 272 (Bom) had categorically held that if the activities of the assessee are confined only to members, then it cannot be construed as a co-operative bank. We find that this decision had also taken note of the point that obtaining licence from RBI for carrying on banking business is a sin qua non for recognising and addressing to be a co-operative bank. In this regard, reliance was also placed on the decision of the Hon‟ble Karnataka High Court in the case of CIT vs. Shri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot (2014) 269 ITR 86 (Kar). 6.12. Considering the totality of the facts and circumstances of the case, we categorically hold that status of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, Palghar Range, Palghar gave directions to the ld. AO to examine the case of the assessee in the light of the decision of the Hon‟ble Jurisdictional High Court in the case of Quepem Urban Co-operative Credit Society Ltd., vs. Assistant Commissioner of Income Tax reported in 377 ITR 272 (Bom). The ld. AO did not examine the applicability of this decision to the facts of the assessee case before us and reiterated the same order as he had passed in the case of the assessee for the earlier years. Since the issue in dispute had been already addressed by us hereinabove, we do not deem it fit to remand this issue to the file of ld. AO for this assessment year. The decision rendered by us for the A.Y.2010-11 supra would apply with equal force for this assessment year also except with variance in figures. 19. In the result, appeal of the assessee in ITA No.403/Mum/2018 for A.Y.2014-15 is partly allowed. 20. TO SUM UP:- ITA NO. A.Y. RESULT ITA No.4211/Mum/2018 2007-08 Partly allowed for statistical purposes ITA No.4296/Mum/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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