Income Tax v. Sri Biluru Gurubasava Pattina

IN THR HIGH COURT OF KARNATAKA AT BENGALURU DATEBD THIS THE 1[‘T]DAY OF NOVEMBER 20106) PRESENT THR HON’BLE MR.JUSTICE JAYANT PATEL AND THR HON’BLE MR.JUSTICE SRBENIVAS HARISH KUMAR ITA NO.343 OF 2016 BETWEEN: 1.THR PR. COMMISSIONBR OF INCOME-TAXolTH FLOOR, BMTC BUILDING,olTH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BANGALORE -560 095. PRESENTLY AT ABOVE ADDRESS 2.THE INCOME-TAX OFFICER| WARD-1 (2) (9), 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA,BANGALORE-560 095)PRESENTLY AT ABOVE ADDRESSBANGALORE-560 095)PRESENTLY AT ABOVE ADDRESS .. APPELLANTS (BY SRI.DILIP, ADVOCATE FOR SRI.ARAVIND K V,ADVOCATE) AND: M/S KARNATAKA JOURNALISTSCO-OPERATIVE SOCIETY LITD., SUVARNA BHAVAN,NO.11/1, QUEEN’S ROAD,BANGALORE-560 052. RBSPONDENT| THIS [TA IS FILED UNDER SEKC.260-A OF INCOMETAXACT1961,ARISINGOUTOF|ORDERDATED:16/10/2015—PASSBHBIN-ITANO.739/BANG/2014, FOR THE ASSESSMENT YEAR.2009-2010 PRAYING TO FORMULATE THR SUBSTANTIAL|OUESTIONS OF LAW STATED ABOVE, ALLOW THE|APPKRAL AND SHIT ASIDE THR ORDERS PASSBHBD BY ITAT,BRHRNGALURIN|ITANO.739/BANG/2014DATED:16/10/2015 AND CONFIRM THE ORDER OF THEAPPBKRLLATH COMMISSIONBR CONFIRMING THR ORDEPASSED BY THE INCOME TAX OFFICER, WARD-1(2)(9),|BENGALURU AND TO PASS SUCH OTHEBR SUITABLEORDERS AS THIS HON'BLKE COURT DEBMS FIT TOGRANT IN THR FACTS AND CIRCUMSTANCES OF THE|CASE IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR ORDERS THIS DAY,JAYANT PATEL J., DELIVERED THE FOLLOWING: ORDER The appellants-Revenue has preferred the present appeal by raising the following substantial question oflaw: “Whether,OT]thefactsand1nthe.circumstances of the case, the Tribunal is justified in holding that the assessee is entitled|for benefit under section SOP of the Act and|setting aside order passed under section 263 ofthe Act when the assessee failed to satisfy all|the ingredients to claim such deduction and|falls out side the purview of said section as per|sub-section 4 oft SOP ot the Act and theproceedings initiated under section 263 of the|Act by Commissioner satisfy all the ingredientsof said section?” 2. We have heard Mr.Dilip, learned Counsel forMr.K.V.Aravind, for the appellants. 3. It appears that in the impugned order passedby the Tribunal, the Tribunal has relied upon the earlierdecision of this Court in case ofThe Commissioner of Income Tax Vs. Sri Biluru Gurubasava Pattina| Sahakari Sangha Niyamithain ITA No.5006/2013|decided on 05.02.2014 and based on the decision otf thisCourt, the tribunal has allowed the appeal of theassessee by holding that the Assessing Officer hadrightly allowed the deduction under Section 80P(2)(a)(1).of the Income Tax Act, and the Commissioner ofIncome-Tax wrongly assumed the jurisdiction undersection 263 oft the act. 4. We may record that this Court in the abovereferred decision observed from paragraphs-7 to 9 as.under: “/. The only substantial question of law which.arises for our consideration in this appeal is:- In the facts and circumstances of this case,whether the Revisional Authority was justifiedin invoking his power under Section 263 of theAct without the foundational fact of assessee.being Co-operative bank was not there? Sahakari Sangha Niyamithain ITA No.5006/2013|decided on 05.02.2014 and based on the decision otf thisCourt, the tribunal has allowed the appeal of theassessee by holding that the Assessing Officer hadrightly allowed the deduction under Section 80P(2)(a)(1).of the Income Tax Act, and the Commissioner ofIncome-Tax wrongly assumed the jurisdiction undersection 263 oft the act. 4. We may record that this Court in the abovereferred decision observed from paragraphs-7 to 9 as.under: “/. The only substantial question of law which.arises for our consideration in this appeal is:- In the facts and circumstances of this case,whether the Revisional Authority was justifiedin invoking his power under Section 263 of theAct without the foundational fact of assessee.being Co-operative bank was not there? 8. In the assessment order, the Assessingauthority has clearly stated that the assessee is.a Co-operative society and has not obtained anybanking license. The business of the assessee is.to provide credit facilities to its members. Sincethe assessee cannot carry on any banking.business, the interest on investment is taxableas income from other source. Therefore, the)aforesaid facts, which is not in dispute clearlyestablishes that it 1s not a Co-operative Bank.Infact, the Revisional Authority also in its order.has categorically stated that the assessee is aCo-operative society, which provides. creditfacilities. Section SOP of the Act deals with the.deduction of income of a society. In the case ofany assessee being a Co-operative society, thewhole of the amounts of profits and gains ofbusiness attributable to any of other activities. referred to sub-section (2) of Section 8O0P shallbe deducted in computing the total income ofthe assessee. In other words, the said income is"not taxable. It is a benefit given to the Co-operativesociety.Section|SOP(4)Was,introduced by Finance Act, 2006 with effect.from 01.04.2007 excluding the said benefit to aCo-operative Bank. The said provision reads as_under:- “(4) The provisions of this section shall notapply in relation to any co-operative bank|other than a primary agricultural creditsociety or a primary co-operative agricultural|and rural development bank. (a)“co-operativebank”and|“primaryagricultural credit society~ shall have _ thmeanings respectively assigned to them inPart V of the Banking Regulation Act, 1949(10 of 1949); (b) “primary co-operative agricultural and ruraldevelopment bank" means a society having its area of operation confined to a taluk and the|principal object of which ts to provide for long-termcreditforagriculturaland.ruraldevelopment activities.” Therefore, the intention of the legislature is clear. Ita Co-operative Bank is exclusively carrying on.banking business, then the income derived from thesaid business cannot be deducted in computing thetotal income of the assessee. The said income 1s liable for tax. A Co-operative bank as defined under.the Banking Regulation Act includes the primaryagricultural credit society or a primary co-operativeagricultural and rural development bank. TheLegislature did not want to deny the said benefits 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.bankingbusiness1.e..thepurportof.this amendment. Therefore, as the assessee is not a Co-operative bank carrying on exclusively bankingbusiness and as it does not possess a licence from|Reserve Bank of India to carry on business, it is not a Co-operative bank. It 1s a Co-operative societywhich also carries on the business of lending moneyto its members which is) covered under SectionSOP(2)(a)(i) i.e. carrying on the business of banking|for providing credit facilities to its members. Theobject of the aforesaid amendment is not to excludethe benefit extended under Section 8O0P(1) to suchsociety. Therefore, there was no error committed bythe Assessing Authority. The said order was not.prejudicial to the interest of the Revenue. Thecondition precedent for the commissioner to invokethe power under Section 263 is that the twincondition should be satisfied. The order should be!erroneous and it should be prejudicial to the interestof the revenue. QO. This Court had an occasion to consider Section 263of the Act in the case of -.COMMISSIONER OF|INCOME-TAX AND ANOTHER V. DIGITAL GLOBAL| SOFT LTD. [2013] 354 ITR 489 (Karn)whereparagraph-18, it has held as under: | “As is clear from the wording in section 263, the.Commissioner gets the jurisdiction to revise any proceedings under this Act if he considers that any|order passed therein by the Assessing Officer iserroneous in so far as it is prejudicial to theinterests of the Revenue. Therefore, it its clear thathe cannot exercise the power of revision solely onthe ground that the order passed is erroneous. Hegets jurisdiction only if such erroneous order is|prejudicialTotheinterest|oftheRevenue.“Prejudicial to the Revenue” means, lawful revenuedue to the State has not been realized or cannot be|realized. In other words, by the order of the.assessing authority if the lawful revenue to the|State has not been realized or cannot be realized,as the said order is prejudicial to the interests of|theRevenueand.alsoerroneous,he|getsjurisdiction to interfere with the said order under|section 263. Therefore, for attracting section 263,|the condition precedent is (a) the order of the.Assessing Officer sought to be revised is erroneous,and (b) it is prejudicial to the interests of the|Revenue. If one of them is absent, te., tf the order|of the Income-tax Officer is erroneous but ts not|prejudicial to the Revenue, recourse cannot be had|to section 263(1) of the Act. The satisfaction of both) the conditions stipulated in the section is the sinequa non for the Commissioner to exercise his|jurisdiction under Section 263.” In the instant case, when the status of theassessee iS a Co-operative society and is not aCo-operative bank, the order passed by theAssessing Authority extending the benefit ofexemption from payment of tax under SectionSOP(2)(a)(i) of the Act is correct. There is no.error. When there is no error, the question oforder being prejudicial would not arise. TheTribunal has rightly entertained the appeal and.set-aside the order. Therefore, the said order isin accordance with law and cannot be found.fault with. The substantial question of law isanswered in favour of the assessee and against.the revenue.” o. As the question is already covered by the above referred decision of this Court, it cannot be said that) 03<�57;54034=02�A7/54=?35�?9�20@�@?72:�08=5/�9?8� C?35=:/804=?3���� ����/3C/�4./�011/02�=5�:=5D=55/:�� ��'� ��)*�� �������+,���� ����)*����������+,����