TMI Blog2023 (1) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that it is a cooperative society. therefore, the ground No.4 is premature. - ITA No.611/Bang/2020 And ITA No.720/Bang/2020 - - - Dated:- 5-12-2022 - Shri George George K. Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Assessee : Shri S Ananthan, C.A, S.V Ravishankar, Advocate For the Revenue : Ms. Susan D George, CIT (DR) ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER : These cross appeals have been filed by the assessee as well as the Revenue against the order passed by the CIT(A) dated 19/03/2020. First we will take up the appeal of assessee in ITA No.611/Bang/2020. 2. The assessee has also filed revised grounds of appeal and additional grounds of appeal dated 01/11/2022 vide receipt No.1894, which is as under:- Grounds of Appeal : 1. The Order of the learned Commissioner of Income Tax [Appeals], Hubballi, passed under section 250 of the Act dated 19/03/2020 in so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case. 2. The Appellant denies itself Liable to be taxed over and above the total business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aged in the Act to resume jurisdiction did not exist or having not been compiled with and consequently, the reassessment requires to be cancelled under the facts and circumstances of the case. 2. The order of assessment is bad in law and void-ab-initio as the assessing officer had no reason to believe that the income of the Appellant has escaped assessment and reassessment amounted to merely reasons to suspect under the facts and circumstances of the Appellant's case. 3. The assessing officer mechanically relied upon the recommendation of Assistant Commissioner of Income Tax [TDS], Hubbatli without applying his mind independently to the facts of the case and completed the assessment on borrowed satisfaction which is liable to be cancelled under the facts and circumstances of the case. 4. The appellant craves leave to add, alter, amend, substitute or delete any or all of the grounds of appeal urged above. 5. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice. Additional grounds of appeal : 1. The authorities below faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. The reply submitted by the assessee was verified by the revenue authorities and the proceedings on this issue was found in order and no addition was made on this count. Further, as per the copy of reasons recorded, it has been observed that for the assessment year 2014-15, it was noticed by the AO that the deduction u/s 36(1)(viia)(a) and deduction u/s 36(1)(viii) of the Act was wrongly claimed by the assessee. In this regard, details were submitted by the assessee and it also submitted that deduction of 7.5% from the total income and 10% from rural advances. The addition made by the Department for the assessment year 2014-15 is acknowledged by the CIT(A) and the matter is pending before the ITAT, Bangalore, therefore reopening cannot be made on the basis of this point. Detailed written submissions before the AO and relying on some case laws, the AO was not agreed and computed the income as under:- 4. Aggrieved from the order of the AO, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee and passed order on 19/03/2020. 5. Aggrieved from the order of the CIT(A), the assessee as well as revenue is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment Jbr the time being injbrce relating to any tax on income, profits or gains, a Regional Rural Bank shall be deemed to be a cooperative society. 32. Act to override the provisions of other laws.-The provisions of this Act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force or in any contract, express or implied, or in any instrument having effect by virtue of any law other than this Act, and notwithstanding any custom or usage to the contrary. c) By virtue of the above section RRB is treated as a co-operative society. In view of the fact that section 32 overrides all other laws. It has to be interpreted accordingly. In view of section 22 of the Regional Rural Bank is deemed to be a Co-operative Society. d) The appellant, being a RRB, is therefore liable to be treated as a cooperative society for the purpose of Income Tax Act, 1961. 3. Whether the provisions of section 8oP () of the Act applicable to Regional Rural Banks? a) The appellant submits that there are three types of Banks, namely, Scheduled Banks, Co-operaLive Banks and Regional Rural Barks. b) The provisions of section 80P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banks within the meaning of this definition; (u) State co-operative bank means the principal co-operative society in a State, the primary object of which is the financing of other co-operative societies in the State: Further NBARD Act also defines Regional Rural Bank as follows: (p) regional rural bank means a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976): d) From the above definitions it can be seen that the appellant is not a co-operative bank as it is not a Central co-operative bank or a State cooperative bank or a primary co-operative bank. e) The above definitions which set the treatment of whether any cooperative society is a co-operative society or a Bank to be eligible for the claim of deduction under section 8oP of the income Tax Act, 1961, treat the appellant unlike a primary Co-operative Bank , which means that the appellant shall not be treated as a Co-operative bank for the purpose of the Banking Regulation Act and thus it is a Co-operative society, eligible for the claim of deduction under section 8oP of the Income Tax Act 1961 and is not hit by section 80P () of the Act. f) Thus a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gional Rural Banks in single rural bank, which is a assessee bank. He also referred to the various definitions as per respective Act and banking regulations Act, it has been mentioned in his written synopsis. He also referred to paper book page no.18, in which sec. 22 have clearly stated that the regional rural bank to be deemed to be a cooperative society for the purpose of Income-tax. It is sec. 22 of Chapter V of the regional rural bank Act 1976 and he also referred to sec. 32 which is overriding provisions of other laws. He also referred to sec. 56 of the Banking Regulations Act 1949, which is an obligation of the Act to cooperative banks and cooperative society subject to the modifications. He also referred to NABARD Act 1981 under which, the definition of sec. 2(d) of Central Cooperative Bank has been defined and he also referred to sec. 2(p) which is definition of regional rural banks. He also relied on the judgment of Hon ble High Court of Allahabad which is placed on record. 1. PCIT Vs. Baroda Uttar Pradesh Gramin Bank [2022] 138 taxmann.com 449 (Allahabad) 2. Baroda Uttar Pradesh Gramin Bank Vs. DCIT [2018] 138 taxmann.com 449 (Allahabad) 8. The ld.AR further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated as under:- 22. Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961.- For the purpose of the Income-tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to any tax on income, profits or gains, a Regional Rural Bank shall be deemed to be a co-operative society. 12. As per the above section, it is clear that for the purpose of Income-tax Act, the assessee is deemed to be a cooperative society and for computing the income from profit or gains as per sec.32 of the Regional Rural Bank Act 1976, is overriding provisions which is stated as under:- 32. Act to override the provisions of other laws.- The provisions of this Act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force or in any contract, express or implied, or in any instrument having effect by virtue of any law other than this Act, and/ notwithstanding any custom or usage to the contrary. 13. From the above cited sections 22 and 32, it is clear that the assessee is deemed to be a cooperative society for the Income-tax purpose. On going through the written s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular that Regional Rural Bank are not entitled for deduction u/s 80P of I.T. Act Circular has been typed in paragraph 3.1 (B) of assessment order. b. A sub-section 80P(4) was introduced by Finance Act, 2006 w.e.f. 1-4- 2007 withdrawing deduction u/s 80P in relation to any cooperative bank. The explanatory note to Finance Act with regard to this section is noted below:- Withdrawl of tax benefits available to certain cooperative banks:- Section 80P, inter alia, provides for a deduction from the total income of the Co-operative societies engaged in the business of banking or providing credit facilities to its members, or business of a cottage industry , or of marketing of agricultural produce of its member, or processing, without the aid of power, of the agricultural produce of its members, etc. The cooperative banks are functioning at per with other commercial banks, which do not enjoy any tax benefit. It is, therefore, proposed to amend section 80P by inserting a new sub-section (4) so as provide that the provisions of the said section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporated by Finance Act, 2006 w.e.f. 1-4-2007 provides as under. Para 1.644 (4) The provisions of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank; Explanation- For the purposes of this sub-section- (a) cooperative bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) 'primary cooperative 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. 8. The Tribunal has passed impugned two common orders, firstly in matters arising out of the assessment orders, and secondly order in matters arising from the penalty orders. 9. In the Income-tax Appeals arising from the assessment order, the Income-tax Appellate Tribunal Allahabad Bench, Allahabad has recorded the following findings of the fact (paragraphs 38, 39, 41, 42, 50, 51, 54, 55, 56, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature, as per section 32 thereof. Therefore, as per simple rule of interpretation, the Regional Rural Bank Act, 1976, overrides the substituted section 80P of the Act. Such an analogy is applicable to sub-section (4) also of section 80P also, for the reason that the said sub-section (4) had been inserted by the Finance Act, 2006 without there being any corresponding amendment in the RRB Act 1976 particularly in section 22 of Regional Rural Bank Act 1976. 41. In short, the effect of over-riding provisions as contained in section 22 read with section 32 of Regional Rural Bank Act 1976, had not/could not have been taken away or whittle down their true effect, as the said provisions remain intact. Accordingly, all the Regional Rural Banks as have been constituted and incorporated under the Regional Rural Bank Act 1976, as the appellant RRB is, continue to be cooperative society and thereby continue to enjoy exemption under section 80P (2)(a)(i). The appellant RRB , is no exception. Meaning thereby, that the appellant RRB', in spite of insertion of bar by virtue of sub-section (4) below section 80P, by the Finance Act 2006 effective from 1-4-2007, continues to be enjoying e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the court construed in the expression 'Prize Chit' in Srinivasa and we find no reason to depart from the Court's construction . 51. Speaking further, even if it is held that the term 'Regional Rural Bank' has a different meaning in its purport, than that given in the Regional Rural Bank Act 1976, this would be the case of ambiguity in the statute. It is a law well settled that benefit of such an ambiguity has to be given to the 'subject', as the 'appellant RRB' is. It is a trite law that provisions contained in the fiscal statutes, have to be read word by word and nothing is to be subtracted therefrom and nothing is to be intended therein. Such a rule of interpretation had been laid down by the Hon'ble Jurisdictional High Court in the case of CIT v. Sahara India Savings and Investment Corpn. Ltd. reported in [2003] 264 ITR page 646, wherein their lordships have observed and held as under: We do not agree. It is a well settled principle of interpretation of taxing statues that while interpreting a taxing statue we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be applied, and consider what was the former state of the law, and what it was that the Legislature contemplated' was made while construing a non-taxing statute. The said rule had only a limited application in interpreting a taxing statute. It follows from this decision that the mischief rule laid down in Heydon's case (1584) 3 Co. Rep 7a has only a limited application to taxing statutes. Hence there is no question of looking into the legislative intent or spirit of the law in a taxing statute. We have only to see the actual words used. In other words, in a taxing statute we have to go by the letter of the law, and not its spirit or intent. The new definition of the word interest in section 2 (7) is in two parts. Firstly, it says that interest means interest on loans and advances. Secondly, it includes two other items in the definition of the word interest . In our opinion, the only correct interpretation of this provision can be that firstly nothing is interest except interest on loans and advances. Secondly, two other categories are also included in the definition of the word interest as specified in clauses (a) and (b) of section 2(7). In our op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 of Regional Rural Bank Act, 1976 and it had been specifically given the status of a 'Cooperative Society' by virtue of section 22 of RRB Act 1976 looking to the preamble of the statute namely Regional Rural Bank Act 1976. 55. It is worthwhile to mention here that in the case of Citizen Cooperative Society Ltd., as has been referred to by the ld. CIT DR, the Hon'ble Supreme Court had also, referred to its earlier decision in the case of CIT v. Nawanshahar Central Co-op Bank Ltd. reported in [2007] 289 ITR 6 wherein it has been held that if a cooperative bank was carrying on business of banking, which required it to place a part of its funds in approved securities, the income attributable thereto, is deductible under section 8OP(2)(a)(i) of the Act. 56. Further, in other case of CIT v. Nawanshahar Central Co- op Bank Ltd. reported in [2012] 349 ITR 689, the Hon'ble Supreme Court has also held that the assessee - cooperative society was entitled for deduction under section 80P(2)(a) (i) of focome Tax Act 961, in respect of underwriting commission and interest on PSEB Bonds and IDBI Bonds, as such is an income, attributable to the business of banking. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in the case of 'appellant RRB' in order dated 8-1- 2018 and reverse the orders passed by the authorities below, in relation to the appellant's claim for exemption under section 80P(2)(a)(i). With such an elaboration as has been given by us, we uphold the appellant's claim for exemption under section 80P(2)(a)(i). 10. Income Tax Appellate Tribunal has recorded a clear finding of the fact in the afore-noted order that the appellant had come into existence for development and growth of agricultural sector. This finding of fact has not been disputed in the present appeals. 11. Assessing authority, in para no. 2 of the assessment order itself has recorded a finding that the respondent-assessee came into existence w.e.f. 31-3-2008, after amalgamation of the two Regional Rural Banks (RRB) i.e. Baroda Eastern U.P. Gramin Bank and Baroda Western Gramin Bank. It has not been disputed that by virtue of deeming provision under section 22 of the Regional Rural Banks Act, 1976, the respondent/assessee is deemed cooperative society. 12. We have perused the impugned common order of the Tribunal arising from the assessment order and we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) has accepted the claim of the assessee without revising return of income filed by him ignoring judgment in the case of Goetze (India) Ltd., Vs. CIT reported in 284 ITR 323 (SC), therefore the CIT(A) is not justified in giving relief to the assessee, hence the order of the AO should be restored. 24. The ld.AR relied on the order of the CIT(A). 25. After going through the record and arguments put forth by the before us, the revenue has challenged that the CIT(A) cannot accept the claim of the assessee. However, the CIT(A) has coterminous power as per sec. 251 of the Act. Aes pr sec.251 of the Act, the power of the CIT(A) has been defined. According to the sec.251 of the Act, the CIT(A) can grant relief during the course of hearing before him which was raised by the assessee. In the impugned case, the fresh claim was raised by the assessee, which has been rightly accepted by the CIT(A) as per sec. 251 of the Act. There is no any infirmity for accepting fresh claim by the CIT(A). Therefore, the ground raised by the revenue on this count is dismissed. 26. The appeal of the revenue is dismissed. 27. In the result, the appeal of assessee is partly allowed and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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