Txa/26/2016 Of The Pr. Commissioner Of Income Tax, Panaji v. The Goa Shipyard Employees Cooperative Credit Society Ltd. Vasco

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NOS. 25 & 26 OF 2016 The Pr. Commissioner of Income Tax, having office at Aayakar Bhavan,Panaji Goa. ... Appellant V e r s u s The Goa Shipyard EmployeesCooperative Credit Society Ltd.,Canteen Building, Goa Shipyard Ltd.,Vasco-da-Gama, Goa. PAN: AAAAT 9557 G . ... Respondent Ms. Asha A. Desai, Advocate for the appellant. Mr. Yamane D'Souza and Ms. Sharon Lobo, Advocates for therespondent. Coram:- F. M. REIS & NUTAN D. SARDESSAI, JJ. Date:- 4th October, 2016 P.C. Heard Ms. A. Desai, learned counsel appearing for the appellant and Mr. Y. D'Souza, learned counsel appearing for therespondent. 2. The above appeals challenge the order passed by the Income Tax Appellate Tribunal dated 08/09.06.2015 whereby the appeals preferred by the Assessee were allowed by setting aside the order passedby the Commissioner of Income Tax dated 26.12.2012 under Section263 of the Income Tax Act. The learned counsel appearing for theappellant has pointed out that the learned Tribunal was not justified topass the impugned order as it has not examined the fact that the originalassessment was without an inquiry conducted to verify whether therespondent- society was carrying out the banking business andconsequently, the amendment to Section 80P(4) of the Income Tax Actwas not examined to avail of the deduction. The learned counsel furtherpointed out that no inquiry was conducted by the Assessing Officerwhile passing the impugned order for the Assessment Years 2007-2008and 2009-2010 and as such, the learned Tribunal was not justified toallow the appeals preferred by the Assessee. The learned counsel hastaken us through the provisions of Section 80P as well as Section80P(4) of the Income Tax Act to point out that the learnedCommissioner was justified to direct the recourse to the provisions ofSection 263 of the Income Tax Act for the assessment of the respondent.The learned counsel further pointed out that the learned Tribunal hasfailed to examine the relevant provisions while passing the impugnedorder which call for interference by this Court in the present appeals. 3. On the other hand, the learned counsel appearing for the respondent has submitted that the respondent is a Co-operative societycarrying out credit facilities only to the members and not carrying outany banking activities. The learned counsel further pointed out that tocome within the scope of banking business, the institution has to obtaina licence from the Reserve Bank of India which admittedly therespondent do not possess. The learned counsel as such points out thatthe learned Tribunal was justified to pass the impugned order byquashing and setting aside the order passed by the Commissioner ofIncome Tax under Section 263 of the Income Tax Act. 4. We have considered the submissions of the learned counsel and we have also gone through the records. The records reveal that therespondent is a Co-operative Society and not a bank. In this context, thelearned Tribunal while passing the impugned order has relied upon thejudgment of Karnataka High Court wherein it has been observed in verysimilar circumstances at para 8 thus : "8. In the assessment order, the Assessingauthority has clearly stated that the assessee isa Co- operative society and has not obtained 4. We have considered the submissions of the learned counsel and we have also gone through the records. The records reveal that therespondent is a Co-operative Society and not a bank. In this context, thelearned Tribunal while passing the impugned order has relied upon thejudgment of Karnataka High Court wherein it has been observed in verysimilar circumstances at para 8 thus : "8. In the assessment order, the Assessingauthority has clearly stated that the assessee isa Co- operative society and has not obtained any banking license. The business of theassessee is to provide credit facilities to itsmembers. Since the assessee cannot carry onany banking business, the interest oninvestment is taxable as income from othersource. Therefore, the aforesaid facts, whichis not in dispute clearly establishes that it isnot a Co-operative Bank. Infact, theRevisional Authority also in its order hascategorically stated that the assessee is a Co-operative society, which provides creditfacilities. Section 80P of the Act deals withthe deduction of income of a society. In thecase of any assessee being a Co-operativesociety, the whole of the amounts of profitsand gains of business attributable to any ofother activities referred to sub-section (2) ofSection 80P shall be deducted in computingthe total income of the assessee. In otherwords, the said income is not taxable. It is abenefit given to the Co-operative society.Section 80P(4) was introduced by FinanceAct, 2006 with effect from 01.04.2007excluding the said benefit to a Co-operativeBank. 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 agriculturaland rural development bank............. (a) "co-operative bank" and "primaryagricultural credit society" shall have themeanings respectively assigned to them inPart V of the Banking Regulation Act, 1949(10 of 1949); (b) "primary co-operative agricultural andrural development bank" means a societyhaving its area of operation confined to ataluk and the principal object of which is toprovide for long-term credit for agriculturaland rural development activities." Therefore, the intention of the Legislature isclear. If a Co-operative Bank is exclusivelycarrying on banking business, then theincome derived from the said business cannotbe deducted in computing the total income ofthe assessee. The said income is liable fortax. A Co-operative bank as defined underthe Banking Regulation Act includes theprimary agricultural credit society or aprimary co-operative agricultural and ruraldevelopment bank. The Legislature did notwant to deny the said benefits to a primary agricultural credit society or a primary co-operative agricultural and rural developmentbank. They did not want to extend the saidbenefit to a Co-operative bank which isexclusively carrying on banking business i.e.the purport of this amendment. Therefore, asthe assessee is not a Co- operative bankcarrying on exclusively banking business andas it does not possess a licence from theReserve Bank of India to carry on business, itis not a Co-operative bank. It is a Co-operative society which also carries on thebusiness of lending money to its memberswhich is covered under Section 80P(2)(a)(i)i.e. carrying on the business of banking forproviding credit facilities to its members. Theobject of the aforesaid amendment is not toexclude the benefit extended under Section80P(1) to such society. Therefore, there wasno error committed by the AssessingAuthority. The said order was not prejudicialto the interest of the Revenue. The conditionprecedent for the commissioner to invoke thepower under Section 263 is that the twinconditions should be satisfied. The ordershould be erroneous and it should beprejudicial to the interest of the revenue.” 5. Looking into the observations in the said judgment, we find 5. Looking into the observations in the said judgment, we find that as there is no material to suggest that the respondent is carrying outbanking business but is only a Co-operative society, the learnedTribunal has not committed any error while passing the impugned order.Consequently, there are no substantial questions of law which arise inthe present appeals for consideration. The appeals stand accordinglyrejected. NUTAN D. SARDESSAI, J. F. M. REIS, J. at*