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2021 Supreme(Bom) 1081
IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT GOA
M.S. Sonak, Dama Seshadri Naidu, JJ.
Pr Commissioner Of Income Tax - Appellant
Versus
M/s The Quepem Urban Co-operative Credit Society Ltd - Respondent
Tax Appeals No. 2 of 2018, 9 of 2018, 23 of 2018, AND 26 of 2018
Decided On : 07-05-2021
Susan Linhares, Advocate, Chythanya K.K., Advocate, Tata Krishna, Advocate, S. Redkar, Advocate, Amira Razaq, Advocate, D.J. Pangam, Advocate, P. Sawant, Advocate
The main legal point established in the judgment is that a cooperative credit society engaged in providing credit facilities to its members is entitled to deductions under section 80P of the IT Act, despite engaging in banking activities and accepting deposits from non-members.
Headnote:
Cooperative Credit Society - Goa Cooperative Societies Act, 2001 - Income-Tax Act, 1961 - Section 80P(2)(a)(i), Section 80P(4), Section 40a(ia), Section 194A, Section 194J - The court discussed the applicability of section 80P(2)(a)(i) of the IT Act to a cooperative credit society engaged in banking business and accepting deposits from non-members. It emphasized the interpretation of the statutory provisions and the society's bye-laws to determine its eligibility for deductions under section 80P of the IT Act. The court held that the society's core activity of providing credit facilities to its members entitled it to the benefits under section 80P of the IT Act, despite accepting deposits from non-members.
Fact of the Case:
The Assessee, a Cooperative credit society, claimed deductions under section 80P of the IT Act. The Assessing Officer held that the Assessee was not eligible for deductions and assessed its total income. The Assessee appealed to the Commissioner of Income Tax (Appeals) and subsequently to the Income Tax Appellate Tribunal, which dismissed the Revenue's appeal. The Revenue then appealed to the High Court.
Finding of the Court:
The court found that the Assessee's core activity of providing credit facilities to its members entitled it to the benefits under section 80P of the IT Act, despite accepting deposits from non-members. It also held that the authorities under the IT Act cannot go behind the registration certificate of a cooperative society to examine its activities and determine its true nature.
Issues: The issues involved the eligibility of a cooperative credit society for deductions under section 80P of the IT Act, the interpretation of statutory provisions, and the authority of the IT Act authorities to examine the activities of a cooperative society.
Ratio Decidendi: The court's decision was based on the interpretation of the statutory provisions, the society's bye-laws, and the previous rulings establishing the Assessee's status as a cooperative credit society entitled to the benefits under section 80P of the IT Act.
Final Decision: The substantial questions of law were answered against the Revenue and for the Assessee, affirming the Assessee's eligibility for deductions under section 80P of the IT Act and rejecting the Revenue's contentions.
JUDGMENT
Dama Seshadri Naidu, J. - Introduction:
A cooperative credit society, registered under the Goa Cooperative Societies Act, 2001, claims deductions under section 80P(2)(a) (i) of the Income-Tax Act, 1961 ("IT Act"). It is in the face of section 80P(4) of the same Act, effective from 01.04.2007. The question is, with its lending and borrowing involving non-members, whether the society still retains its character as cooperative society or whether it should be treated as a cooperative bank, disentitled to the benefits under section 80P(2)(a)(i) of the IT Act.
Facts:
2. There are four appeals. In all those appeals, the facts are similar and the issues, too, are identical. The learned counsel on both sides have advanced common arguments. So we dispose of all the appeals through this common judgment. For the narrative convenience, we will refer to the facts in Tax Appeal No.2 of 2018.
3. The Respondent ("the Assessee") is a Co-operative credit society said to be engaged in the activity of providing credit facilities to its members and carrying on the business of Banking. On 31 March 2013, the Assessee filed its e-return of income for the Assessment Year 2012-13 declaring total income as Nil after claiming deduction under section 80P of the Act. On 8 August 2013, the Assessee's return was processed under section 143(1) of the IT Act, and subsequently the case was selected for scrutiny under CASS and notice dated 08.08.2013 was issued under section 143(2).
4. Through Assessment Order, dated 10.03.2015, passed under section 143(3) of the Act, the Assessment Officer (AO) held that the Assessee is not a co-operative credit society but a Primary Co-operative Bank. As a result, it was declared ineligible for deductions under section 80P(2)(a)(i) and 80P(2)(c)(ii) of the Act. Besides, the AO has also held that because of section 40a(ia) of the IT Act, the entire expenditure of Rs. 94,38,864/- is liable to be disallowed for the Assessee's failure to comply with section 194A of the IT Act. The Audit Fee of Rs. 2,34,222/- was also disallowed for the Assessee's failing to comply with section 194J. The AO has assessed the Assessee's total income at Rs. 3,69,82,101/-.
5. Aggrieved, the Assessee appealed to the Commissioner of Income Tax (Appeals), Panaji-1 (CIT). Through Order, dated 29.11.2016, the CIT(A) held that the issue of disallowance made under section 80P(2)(a)(i) of the IT Act stands precedentially established in the Assessee's favour. That is, the previous year, in Assessee's own case, this Court has ruled in Assessee's favour. The addition of Rs. 94,38,864/- under section 40(a)(ia) of the IT Act was deleted because the assessee's case is covered by clause (v) to section 194A(3) of the IT Act. But CIT(A) has upheld the disallowance of audit fees of Rs. 2,34,222/-.
6. Aggrieved by the CIT (A)'s Order, dated 29.11.2016, the Revenue appealed under section 253 of the IT Act to the Income Tax Appellate Tribunal (Tribunal). The Tribunal by Order, dated 10.07.2017, dismissed the Revenue's appeal. Further aggrieved, in November 2017, the Revenue has preferred this appeal under section 260A of the IT Act, 1961.
7. On 26 February 2018, this Court admitted the appeal after framing these substantial questions of law:
Substantial Questions of Law:
I. Is the Income Tax Appellate Tribunal right in not appreciating the fact that the assessee is a co-operative society which fulfills all the three conditions of being held a Primary Co-operative Bank, as given in Section 5(ccv) of Banking Regulation Act, 1949?
II. Is the Tribunal right in not appreciating the definition of a cooperative bank, which, as per explanation below Section 80P(4) "The Co-operative bank", shall have the meaning assigned to it in part-V of the Banking Regulation Act, 1949?
III. Is the Tribunal right in not appreciating the facts that the assessee Society being a credit cooperative society engaged in banking business is a Primary Co-operative Bank within the definition of Section 5(ccv
