The Advocates Mutually Aided Cooperative Society Ltd. Vs DCIT (ITAT Hyderabad)
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
These appeal filed by the Assessee as well as Revenue are directed against CIT(A) – 7, Hyderabad’s separate orders, dated 21/02/2019 for AY 2011-12 & 2014-15 involving proceedings u/s 143(3) rws 147of the Income Tax Act, 1961 ; in short “the Act”. As the facts and grounds are identical in these appeals, they were clubbed and heard together and therefore a common order is passed for the sake of convenience.
2. At the time of hearing these appeals, none appeared on behalf of the assessee , therefore, we proceed to dispose of these appeals after hearing the ld. DR and considering the facts available on record as well as the orders of revenue authorities.
3. The assessee has raised a ground against disallowance claim of deduction u/s 80P(2)(a)(i) in both the appeals under consideration and another ground raised in AY 201415 is relating to disallowance u/s 40(a)(ia) of the Act.
4. The revenue has raised a ground in both the appeals against the action of CIT(A) in allowing the assessee’s claim of deduction u/s 80P(2)(d) of the Act.
5. First, we take up assessee’s appeals and the facts as culled out from AY 2011-12 are that the assessee is a cooperative society deriving income from the activity of providing credit facilities to the members/normal members as well as income from sale of stamps. The assessee filed its return of income for the AY 2011-12 on 29/01/2011 declaring total income at Rs. 90,84,410/-. The AO completed the assessment u/s 143(3) rws 147 of the Act on 14/12/2018 by assessing the total income at Rs. 4,04,77,722/- by making the disallowance of assessee’s claim of deduction u/s 80P(2)(a)(i) of Rs. 41,44,498/- and deduction u/s 80P(2)(d) of Rs. 2,59,50,392/-.
5.1 The AO disallowed the assessee’s claim of deduction u/s 80P(2)(a)(i) on the following grounds:
i. The appellant cooperative society Is not providing credit facilities to its members.
ii. The society has 3 kinds of members (1) Permanent Members (2) Associate Members (3) Nominal Members.
iii. Associate Members and Nominal members do not have any voting rights al1t1 do not participate in dividends.
iv. Only permanent members, such as advocates have voting rights.
v. The appellant accepts deposits mostly from the associate members and nominal members.
vi. Depositors and borrowers are quite distinct and activity is finance business and cannot be termed as cooperative activity. One category of members is getting benefited at the expense of the. other category of members.
vii. Assessee is also engaged in the activity of sale of stamps which is nothing to do amongst the cooperation of members.
viii. Assessee has purchased’ land by entering into transaction with non-members.
ix. The principle of mutuality is missing in the society as permanent members are. enjoying the facility of availing loans.
While disallowing the claim of deduction U/s.80P(2)(a)(i), the Assessing Officer relied upon the ratio of the decision of Hon ‘ble Supreme Court in the case of Citizen Cooperative Society Limited, Hyderabad decided in Civil Appeal Jurisdiction in Civil Appeal No.1 0245 of 2017 (arising out of the SLP(c) No.20044of.2015), dated 8-8-2017.”
5.2 As regards the claim of deduction u/s 80P(2)(d) of Rs. 2,59,50,392/- the AO disallowed the claim on the ground that the assessee is not engaged in the business of banking, is not providing credit facility to its members and also on the ground that interest was earned on surplus funds. Since the assessee earned incomes on the investments made from cooperative sector, the AO had calculated the proportionate incomes earned from cooperative banks.
6. Aggrieved by the order of AO, the assessee preferred appeal before the CIT(A). The ld. CIT(A) disallowed the assessee’s claim of deduction u/s 80P(2)(a)(i) and allowed the deduction claimed u/s 80P(2)(d) of the Act. By following the decision of the co-ordinate bench of the Tribunal in assess’s own case for the in ITA Nos. 546,547 and1331/Hyd/2012 and ITA No. 1860/Hyd/2013 for Assessment Year 2007-08,2008-09,2009-10 and 2010-11 respectively Aggrieved from the order of the CIT(A), both the assessee and revenue are in appeals before the ITAT.
7. The ld. DR relied on the order of the CIT(A) in respect of the claim of deduction u/s 80P(2)(a)(i) and he further submitted that assessee has not obtained licence form RBI for carrying out banking business activity, even though, the assessee itself engaged in the banking business. He further submitted that in respect of deduction u/s 80P(20(d), assessee has earned interest on surplus funds deposited with the Bank. Therefore, the judgment of the Hon’ble Supreme Court in the case of Totgars Cooperative Sales Society Ltd. Vs. ITO, 322 ITR 283 is squarely applicable to the facts of the present case. Therefore, he submitted that the order of the CIT(A) may be set aside and the order of the AO be restored on this issue.
8. We have considered the submissions of the Ld. DR and perused the material on record as well as gone through the orders of revenue authorities. We observe that the CIT(A) confirmed the AO’s decision in respect of claim of deduction u/s 80P(2)(a)(i) relying on the judgment of the Hon’ble Supreme Court in the case of Citizen Cooperative Society Ltd., Hyd. In Civil Appeal No. 10245 of 2017, dated 08/08/2017, the decision of which was followed by the AO while confirming the disallowance. As regards the assessee’s claim of deduction u/s 80P(2)(d) of the Act, the CIT(A) relying on the decision of the coordinate bench of this Tribunal in assessee’s own case cited supra, directed the AO to delete the disallowance made under the said section.
8.1 Further, on perusal of the orders of authorities below, we observe from the order of the Assessing Officer that various allegations have been made by the AO regarding the activity of the assessee , without obtaining licence from RBI the assessee carrying out the banking business activity, giving loan to Members and to others and kinds of Members etc which is clear from the assessment order. It is interesting to note here that both the authorities below alleged that the assessee is providing loans to others, but , it is clear from the order of the CIT(A) at para No. 4.3 of his order, the assessee has given loans to only shareholder members as under:
