The Pr. Commissioner Of Income Tax, Having Office At Aayakar Bhavan, Patto Plaza, Panaji Goa v. M/S. Laxmi Narcinva Urban Co-Op.credit Society Ltd., 1St Floor, Karkarsguru Asish Building Rua Clovus Costa,Salcete, Goa

1 Txa 50-17 dt.11.12.17. Vinita IN THE HIGH COURT OF BOMBAY AT GOA. TAX APPEAL NO.50 OF 2017. The Pr. Commissioner Of Income Tax, Having Office at Aayakar Bhavan, Patto Plaza, Panaji Goa. …..Petitioner. Versus M/s. Laxmi Narcinva Urban Co-op.Credit Society Ltd., 1st Floor, KarkarsGuru Asish Building Rua Clovus Costa,Salcete, Goa. PAN: .…. Respondent. Ms. A. Razak, Advocate for the Appellant.Mr. Riyaz Padvekar and Mr. P. Lotlikar, Advocates for theRespondent. Coram : N.M. Jamdar & Prithviraj K. Chavan,JJ. Date : 11 DECEMBER 2017. ORAL JUDGMENT:(Per N.M. Jamdar, J.) By this appeal, the Appellant the Principal Commissionerof Income Tax has challenged the order passed by the Income TaxAppellate Tribunal, Panaji dated 2 March 2016. The appeal isadmitted and taken up for consideration forthwith by consent of the 2 Txa 50-17 dt.11.12.17. parties considering the order that is proposed to be passed. 2.The Respondent is the Co-operative Society and hadfiled returns of income for the previous year 2011-2012, AssessmentYear 2012-2013 on 30 September 2012 declaring total income as nil.The case of the Respondent was taken up for regular scrutiny andnotice under Section 143(2) of the Income Tax Act was issued. TheAssessing Officer, after considering the response of the Respondentand examining the bye-laws and held that the Respondent is not aCo-operative Credit Society but a Primary Co-operative Bank and,therefore, not eligible for deduction under Sections 80P(2)(a)(i) and80P(2)(c)(ii) of the Act. The Assessing Officer after considering theother aspect held that total taxable income of the Respondent/Societyis Rs.62,73,130/- and the tax thereupon payable is Rs.25,73,960/- . 3. An appeal was filed by the Respondent/Societychallenging the order passed by the Assessing Officer, to theCommissioner of Income Tax(Appeals). The CIT(Appeals) acceptedthe case of the Respondent/Society that it is not a bank and the TDSprovision therefore, do not apply to the Respondent/Society andaddition of Rs.32,84,449/- was accordingly directed to be deletedand on this ground the appeal of the Respondent/Society was allowedby order dated 24 August 2015. The Revenue filed an appeal before 3 Txa 50-17 dt.11.12.17. the Income Tax Appellate Tribunal challenging the order passed bythe CIT(Appeals). The Tribunal reproduced the observations of theCIT(Appeals) and thereafter referred to decision of this Court in caseof Quepem Urban Co-Operative Credit Society Ltd Vs. Assistant1Commissioner of Income Tax, Circle-I, Margaoand dismissed theappeal filed by the Revenue by order dated 2 March 2016. Thereafterthe Revenue has come in the appeal before us. 4.observed thus:- In the case of Quepem Urban the Division Bench“On the aspect of the Respondent/Society beinga bank, the CIT(Appeals) held that the maincontention of Ms. Desai, learned Counsel forthe Revenue that the Appellant is not entitled tothe benefit of Section 80P(2)(a)(i) of the Act inview of the fact that it deals with non-memberscannot be upheld. This is for the reason thatSection 80P(1) of the Act restricts the benefitsof deduction of income of Co-operative Societyto the extent it is earned by providing creditfacilities to its members. Therefore, to theextent the income earned is attributable todealings with the non-members are concernedthe benefit of Section 80P of the Act would notbe available. In the above view of the matter, atthe time when effect has been given to the orderof this Court, the authorities under Act wouldrestrict the benefit of deduction under Section80P of the Act only to the extent that the same 4 Txa 50-17 dt.11.12.17. is earned by the appellant in carrying on itsbusiness of providing credit facilities to itsmember. Accordingly, the substantial questionof law as framed is answered in the negative i.e.in favour of the appellant and against therespondent-revenue.” 4 Txa 50-17 dt.11.12.17. is earned by the appellant in carrying on itsbusiness of providing credit facilities to itsmember. Accordingly, the substantial questionof law as framed is answered in the negative i.e.in favour of the appellant and against therespondent-revenue.” 5.The learned Counsel for the Revenue contended that aSpecial Leave Petition challenging the decision in the case ofQuepem Urban Co-operative Credit Society has been admitted bythe Apex Court on 5 October 2015. Reliance is also placed by theRevenue on the decision of Citizen Co-operative Society Ltd. Vs.Assistant Commissioner of Income Tax, Circle-9(1) Hydrabad[1]. Thelearned Counsel for the Respondent/Assessee on the other handsubmitted that merely because the special leave petition has beenadmitted does not mean that there is the law laid down by this Courtin Quepem Urban Co-operative Credit Society would standsuspended. He relied upon the decision of the Bench of three learned2.Judges of the Apex Court in Kunhayammed Vs State of Kerala 6.The entire issue would rest on the factual matrix beforethe legal position regarding the applicability of Sections 80P(2)(a)(i)and 80P(2)(c)(ii) of the Act is considered. Sections 80P(2)(a)(i) and 1[2017]84 taxmann.com114 (SC)2[2011]113 Taxman 470(SC)2[2011]113 Taxman 470(SC) 5 Txa 50-17 dt.11.12.17. 80P(2)(c)(ii) of the Act refer to a Co-operative Society carrying onbusiness of banking or providing credit facilities to member andcertain other criteria have been specified. The language of these twoprovisions clearly indicate that there will have to be an inquiry as tothe nature of the business carried out by the Society. Merely becausein case of one Co-operative Society a decision is taken does not meanthat it would automatically apply to the cases of other societies,unless there is aprimary factual adjudication. 7.The learned Counsel for the Respondent sought tocontend that this exercise was done by the Assessing Officer and hehas arrived at a certain position which itself will support thecontention of the Respondent that the case of the Respondent fallswithin the ambit of the decision of this Court in Quepem Urban .However, the Income Tax Act provides for an appeal to theCIT(Appeals) under Section 143(3) of the Act. Further an appeal isprovided to the Tribunal under Section 253 of the Act. The appealbefore the CIT(Appeals) is an appeal on facts. The CIT(Appeals) hassimply referred to the order of the Assessing Officer and to thedecision of this Court in Quepem Urban. There is no scrutiny onfacts, which was necessary since the CIT was reversing the decisionof the Assessing Officer denying the benefit to the Respondent/ 6 Txa 50-17 dt.11.12.17. Assessee. When the Revenue filed an appeal to the Tribunalchallenging a decision adverse to them, the Tribunal was expected toscrutinize the decision of the CIT(Appeals). Here again, we find thatthe Tribunal has not done so. In paragraph 4 the Tribunal has simplyreproduced the decision of the CIT(Appeals)and thereafter referredto the decision of this Court in case of Quepem Urban and hasdismissed the Appeal. 8.Thus the inquiry into the factual position, which thelearned Counsel for the parties agree is necessary before the legalprinciple is to be considered, is not done by the CIT(Appeals) as wellas the Tribunal. Therefore, before we consider what is the effect ofthe admission of the Special Leave Petition against the decision of thisCourt in Quepem Urban and the legal position enumerating fromQuepem Urban, the factual foundation must be established as regardsthe nature of the business of the Respondent. 9.In these circumstances, the appropriate course of actionwould be to set aside the order passed by the CIT(Appeals) and theTribunal and to direct the CIT(Appeals) to consider the appeal filedby the Respondent against the order passed by the Assessing Officerdated 31 December 2014. Accordingly, the Tax Appeal is disposed of 9.In these circumstances, the appropriate course of actionwould be to set aside the order passed by the CIT(Appeals) and theTribunal and to direct the CIT(Appeals) to consider the appeal filedby the Respondent against the order passed by the Assessing Officerdated 31 December 2014. Accordingly, the Tax Appeal is disposed of 7 Txa 50-17 dt.11.12.17. by quashing and setting aside the order passed by the ITAT PanajiBench Goa dated 2 March 2016 and the order passed by theCIT(Appeals) Panaji dated 24 August 2015. Appeal No. ITANo.342/CIT(A)PNJ-1/14-15 stands restored before the CIT(Appeals). In the light of what is discussed above, the appeal isaccordingly disposed of. Prithviraj K. Chavan, J. N.M. Jamdar, J.