Commissioner Of Income Tax v. Sri Bilurugurubasava Pattina Sahakari Sangha Niyamitha

1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 27 DAY OF JUNE, 2014 PRESENT THE HON’BLE MR. JUSTICE N KUMAR| ANTI THE HON’BLE MR. JUSTICE B MANOHAR| ITA NO. 298/2013 BETWEEN: 1.)The Commissioner ot Income Tax No.99/1, Shilashree’, Vidyaranya Complex, Vishveshwaranagar, Mysore 570 OO8. iaThe Commissioner of Income Tax Officer Mysore. . Appellants (By Sri E.I. Sanmathi, Adv.) AND: M/s. Mysore University EmployeesCo-operative Credit Society Limited Maharaja College Premises Mysore. ...Respondent (By Sri A. Shankar & M. Lava, Advs.) This ITA filed under Section 2600-A of I.T. Act, 1961arising out of order dated 28.02.2013 passed in ITANo.88//Bang/2012, tor the Assessment year 2007-2008,praying to (i) formulate the substantial questions of lawstated therein; (11) set aside the appellate order of the ITAT,‘B’.Bench,BangaloreinappealproceedingsITA|No.88/7/Bang/2012 dated 28.02.2013. This ITA coming on for hearing this day,N. KUMAR Jdelivered the following: JU DBGMENT This appeal is preferred by the revenue against the)order passed by the Tribunal granting deduction under|section 80P of the Income Tax Act, 1961 (for short ‘the Act)and also holding that the Commissioner of Income Tax|committed an error in exercising its jurisdiction under|Section 263 of the Act. © 2.The two substantial questions of law which arise for consideration are as under: <!=“Whether on the facts and the circumstances| of the case, the Tribunal was right in law in| 3 holding that Section 8OP(4) is applicable only|for the Assessment Year 2JOO8-O9 onwardsinspite 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? <!!=Whether on the facts and circumstances otfthe case, the Tribunal was right in law in|allowing appeal preferred by assessee even|when assessee is not entitled for any relief asthe assessee had not satisfied the conditions|laid down in Section 8Q)(2)(a)(i) of the I.T. Act|and since assessee does not tall under the|definition of ‘Primary Agricultural Credit|society or ‘primary co-operative agricultural|and rural development bank’ which are|eligible for deduction under Section 80P as|referred to Explanation to Section 8OP(4) and|also.ASSESSEE1S carryingOT]bankingbusinessr” 3.Insofar as the first question of law is concerned,this Court had an occasion to consider the said question in ITA No.5006/2013- dated05.02.2014in the case ofTHE v COMMISSIONER OF INCOME TAX vs. SRI BILURUGURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT,where, aiter referring to the relevant provisionsof the Income Tax Act, and the banking Regulation Act, heldas under: “If a Co-operative Bank is exclusively carrying|banking business, then the income derived fromthe said business cannot be deducted incomputing the total income of the assessee. Thesaid income is Hable for tax. A Co-operative bankas defined under the Banking Regulation Actincludes the primary agricultural credit society|or a primary co-operative agricultural rural|development bank. The Legislature did not wantto deny the said benefit to a primary agriculturalcredit.societyOT|aprimaryco-operativeagricultural and rural development bank. Theydid 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-operativebank carrying on exclusively banking businessand if it does not possess a license from the| ) ) Reserve Bank of India to carry on business, thenit is not a Co-operative bank. It is a Co-operativesociety which also carries on the business of lending money to its members which is covered|under Section 80P(2)(a)(i) 1.e., carrying on the|businessoT bankingfor.providingcredit.facilitates to its members. The object of the|aforesaid amendment is not to exclude thebenefit extended under Section 8O0OP(i) to thsociety.” Therefore, the said issue was held in favour of theassessee and against the revenue. 4Insofar as the second question of law is|concerned, in the aforesaid judgment this Court has held,when status of the assessee is a co-operative society and nota co-operative bank, the order passed by the Assessing|Authority extending the benefit of the exemption from|payment of tax under Section 8O0P(2)(a)(i) of the Act iscorrect. There is no error. When there is no error, question oforder being prejudicial would not arise and therefore, the|order passed by the revisional authority is not at all with| jurisdiction and rightly the tribunal entertained the appeal|against this order and set aside the said order. The sameholds good even in this case. 5Thus, the substantial question of law is| answered in favour of the assessee and against the revenue. (sd/-)JUDGE| (sd/-)JUDGE VP/-