V E R S U S v. Bhadang, Jj

IN THE HIGH COURT OF BOMBAY AT GOATAX APPEAL NOS. 73 & 76 OF 2015 TAX APPEAL NO. 73 OF 2015 The Principal Commissioner of Income Tax,having office at Aayakar Bhavan,Patto-Plaza,Panaji Goa. ….Appellant V e r s u s M/s The Goa PWD Staff Co-op. Credit Society Ltd.,PWD Building, Altinho,Panaji Goa.PAN : ….Respondent AND TAX APPEAL NO. 76 OF 2015 The Commissioner of Income Tax,having office at Aayakar Bhavan,Patto-Plaza,Panaji Goa. ….Appellant V e r s u s M/s. The Goa State Co-operativeHousing Finance & Federation Ltd.,3[rd] Floor, Gomes Building,Opp. Hotel DelmonPanaji Goa. PAN: ….Respondent Mr. Asha A. Desai, Advocate for the appellant. Mr. S. R. Rivankar, Advocate for the respondent. Coram:- F. M. REIS &C. V. BHADANG, JJ. -stDate: 1 December, 2015 ORAL ORDER (Per F. M. Reis, J) Heard Ms. Asha Desai, learned counsel appearing for theappellant and Mr. S. R. Rivankar, learned counsel appearing for therespondent. 2. Both the learned counsel point out that considering theissues involved, both the above appeals may be taken up togetheras they cover the same contentions raised by both the respectiveparties. The above appeals challenge the orders passed by theauthorities below whereby the ITAT has taken a view that therespondents are not a Co-operative Banks but a Co-operativeSocieties and as such entitled for exemption in terms of Section80P(2)(a)(i) of the Income Tax Act ( herein after referred to as “thesaid Act” ). 3. Ms. A. Desai, learned counsel appearing for the appellanthas pointed out that the respondents are to be treated as a Co-operative Banks as according to her the definition of 'income' interms of Section 2(24)(viia) inter-alia includes an income fromcredit facilities provided to the members. The learned counsel further submits that as it is not disputed in the present appeals thatthe respondents provide credit facilities to the members, the incomedrawn by the respondents is the income of a Co-operative Banksand as such, the respondents are not entitled for exemption interms of Section 80P(2)(a)(i) of the said Act. The learned counselthereafter has taken us through the Assessment Order to point outthat the Assessment Officer on the basis of the said definition hastaken a view that the respondents were not entitled to get anexemption in terms of the said provisions. The learned counselfurther points out that both the authorities below have misconstruedthe said provisions to come to the conclusion that the respondentsare a Co-operative Societies and consequently, entitled forexemption in terms of the said provisions. The learned counsel assuch submits that there are substantial questions of law on thatcount to be examined by this Court. 4. On the other hand, Mr. S. R. Rivankar, learned counselappearing for the respondents has pointed out that the fact findingauthorities have come to the conclusion that the respondents arenot Co-operative Banks but Co-operative Societies and as such,they are entitled for exemption in terms of Section 80P(2)(a)(i) ofthe said Act. The learned counsel further points out that this aspectis no longer res integra in view of the judgment of the DivisionBench of this Court dated 17.04.2015 passed in Tax Appeal Nos. 22, 4. On the other hand, Mr. S. R. Rivankar, learned counselappearing for the respondents has pointed out that the fact findingauthorities have come to the conclusion that the respondents arenot Co-operative Banks but Co-operative Societies and as such,they are entitled for exemption in terms of Section 80P(2)(a)(i) ofthe said Act. The learned counsel further points out that this aspectis no longer res integra in view of the judgment of the DivisionBench of this Court dated 17.04.2015 passed in Tax Appeal Nos. 22, 23 and 24 of 2015 in the case of M/s. The Quepem Urban Co-operative Credit Society Ltd.,V/s The AssistantCommissioner of Income Tax, wherein one of us ( F. M. Reis, J)was a party. The learned counsel further pointed that in view of theobservations of this Court while disposing of the said appeals whichclearly disclose that giving credit facilities only to the memberscannot be a Co-operative Bank, the question of entertaining theabove appeals would not arise at all. The learned counsel has takenus through the observations in the said judgment of the DivisionBench at para 9 to point out that such findings are squarelyapplicable to the facts of the present case. 5.Ms. A. Desai, learned counsel appearing for theappellant in reply to the said submissions has pointed out that whiledisposing of the said appeals, this Court has taken a view thatcredit facilities provided to non-members would not be entitled foran exemption under Section 80P(2)(a)(i) of the said Act. Thelearned counsel as such points out that the facts in the said appealswere different and as such the question of applying the principle laiddown therein to the facts of the present cases would not at all bejustified. 6. We have given our thoughtful consideration to the rivalcontentions and with the assistance of the learned counsel, we have also gone through the said judgment and the relevant provisions ofthe said Act. On going through the said judgment dated 17.04.2015in the case of M/s. The Quepem Urban Co-operative CreditSociety Ltd., ( supra ), this Court has observed at para 9 thus : “9. There is no dispute between theparties that the appellant is acooperative society as the same isregistered under the Co-operativeSocieties Act. The appellant isclaiming deduction of income earnedon providing credit facilities to itsmembers as provided under Section80P(2)(a)(i) of the Act. It isappellant's case that, it is notcarrying on the business of thebanking. Consequently, not being aco-operative bank the provisions ofSection 80P(4) of the Act would notexclude the appellant from claimingthe benefit of deduction underSection 80P(2)(a)(i) of the Act.However in terms of Section 80P ofthe Act the meaning of the wordsCooperative Bank is the meaningassigned to it in Chapter V of theBanking Regulation Act, 1949. Acooperative bank is defined inSection 5(cci) of Banking RegulationAct to mean a State CooperativeBank, a Central Cooperative Bank and a primary cooperative bank.Admittedly, the appellant is not aState Cooperative Bank, a CentralCooperative Bank. Thus what has tobe examined is whether the appellantis a primary Cooperative Bank asdefined in Para V of the BankingRegulation Act. Section 5(ccv) of theBanking Regulation Act defines aprimary cooperative bank to mean acooperativesocietywhichcumulatively satisfies the followingthree conditions : (1) Its principal business or primaryobject should be banking business ofBanking; (2) Its paid up share capital andreserves should not be less that rupeesone lakh. (3) Its bye-laws do not permitadmission of any other cooperativesociety as its member.admission of any other cooperativesociety as its member. and a primary cooperative bank.Admittedly, the appellant is not aState Cooperative Bank, a CentralCooperative Bank. Thus what has tobe examined is whether the appellantis a primary Cooperative Bank asdefined in Para V of the BankingRegulation Act. Section 5(ccv) of theBanking Regulation Act defines aprimary cooperative bank to mean acooperativesocietywhichcumulatively satisfies the followingthree conditions : (1) Its principal business or primaryobject should be banking business ofBanking; (2) Its paid up share capital andreserves should not be less that rupeesone lakh. (3) Its bye-laws do not permitadmission of any other cooperativesociety as its member.admission of any other cooperativesociety as its member. It is accepted position that conditionNo.(2) is satisfied as the share capitalin an excess of rupees one lakh. It hasbeen the appellant's contention thatthe conditions No. (1) and (3) providedabove are not satisfied.” 7. Taking note of the above observations, it is clearly heldtherein that unless and until the said three conditions are cumulatively satisfied, the question of holding that such society is aCo-operative Bank would not arise at all. In the present cases, it isnot disputed that the third condition that the bye laws should notpermit admission of any other Co-operative Society as its member isnot at all satisfied. In any event, the fact finding authorities afterexamining the material on record have concurrently come to theconclusion that the respondents' Societies are not Banks but Co-operative Societies and as such they are entitled for exemption interms of Section 80P(2)(a)(i) of the said Act. The findings of factarrived at by the authorities below cannot be interfered by thisCourt in the present appeals unless there is perversity in suchfindings. The learned counsel appearing for the appellant has notpointed out any material which has not considered or that there isany misreading of the evidence whilst coming to such conclusions.The contention of Ms. A. Desai, learned counsel appearing for theappellant that in view of the definition of the word 'income' asprovided in Section 2(24)(viia), the respondents' Societies are to betreated as a Bank cannot be accepted. This aspect has also beentaken note by the Division Bench while disposing of the said appealsin the case of M/s. The Quepem Urban Co-operative CreditSociety Ltd., ( supra ). 8. Taking note of the observations in the said judgment inthe case of M/s. The Quepem Urban Co-operative Credit Society Ltd., ( supra ) to the effect that merely giving creditfacilities to the members would not be a Co-operative Bank butcontinued to be a Co-operative Society and as there is no materialon record that the respondents were giving any such credit facilitiesto the non members, we find that the observations in the saidjudgment in the case of M/s. The Quepem Urban Co-operative Credit Society Ltd., ( supra ) would be squarely applicable to thefacts of the present case. As such, as no other contentions havebeen raised by the learned counsel appearing for the appellant, wefind that the proposed substantial questions of law to that effectwould not survive and does not require any further consideration.For the reasons stated in the said judgment in the case of M/s. TheQuepem Urban Co-operative Credit Society Ltd., ( supra ), wefind that there is no substantial question of law which arises in thepresent appeals for consideration. The appeals stand accordinglyrejected. C. V. BHADANG, J. F. M. REIS, J. at*