Charvaka Seva Sahakari Bank Ltd. Vs ITO (ITAT Bangalore)
Introduction: In a landmark ruling, the Income Tax Appellate Tribunal (ITAT) Bangalore has provided significant relief to Charvaka Seva Sahakari Bank Ltd., a co-operative society engaged in providing credit facilities to its members. The tribunal’s decision, dated January 2, 2024, revolves around the eligibility for exemption under Section 80P(2)(a)(i) of the Income Tax Act for income earned through providing credit facilities to nominal members.
Detailed Analysis: Charvaka Seva Sahakari Bank Ltd., a primary agriculture co-operative society, filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2016-17. The core issue was the disallowance of claims under Section 80P(2)(a)(i) by the CIT(A), Bangalore, which the NFAC upheld. The bank contended that as a co-operative society legislated under the Co-operative Society Act and engaged in providing credit facilities only to its members, it was entitled to the exemption.
The tribunal scrutinized the appellant’s operations, emphasizing its role in providing credit facilities not just to regular but also to nominal members. Citing the landmark judgment by the Supreme Court in Mavilayi Service Co-operative Bank Ltd. Vs Commissioner of Income Tax, Calcutta, the ITAT highlighted the inclusive definition of “members” within co-operative societies as per the Co-operative Society Act. This inclusivity extends the exemption under Section 80P(2)(a)(i) of the Income Tax Act to incomes derived from transactions with nominal members.
Conclusion: The ITAT Bangalore’s ruling is a pivotal development for co-operative societies, especially those functioning in rural and semi-urban areas, facilitating credit facilities to a broader member base. By recognizing nominal members within the ambit of “members” for Section 80P(2)(a)(i) exemptions, the tribunal has not only provided clarity but also supported the co-operative sector’s role in financial inclusion. This decision underscores the judiciary’s interpretative approach towards statutory provisions, ensuring that legislative intent to promote and sustain the co-operative movement is effectively upheld.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal arises out of the order dated 13.09.2023 passed by NFAC, Delhi for A.Y. 2016-17 on following grounds of appeal:
“1. The learned CIT(A), Bangalore erred in passing the Order in the manner he did.
2. The learned CIT(A), erred in disallowing the claim of deduction u/s 80P(2)(a)(i) without appreciating the submission of the Appellant.
3. The learned CIT(A) failed to appreciate the ratio laid down by the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. Vs Commissioner of Income Tax, Calcutta.
4. The learned CIT(A) failed to appreciate that the assessee is not involved in the business of banking and it is only a Co-operative society legislated under the Co-operative Society Act and involved in providing credit facilities only to members as provided in the act and Hence ought to have allowed the same.
5. The learned CIT(A), Bangalore has erred in relying on various case laws, which are not at all applicable to the Appellant’s case.
6. The Appellant craves leave to add, amend or alter any of the foregoing grounds.
7. For these and any other grounds that may be urged before the Hon’ble ITAT, it is prayed that the Hon’ble ITAT may allow the appeal with cost.”
2. At the outset, the Ld.AR submitted that there is delay of 2 days in filing of the present appeal.
2.1 The assessee has filed condonation petition vide affidavit dated 29.11.2023 seeking the delay to be condoned.
2.2 The assessee in the affidavit submitted as under:
2.3 The Ld.AR submitted that in view of the above, the assessee could not file the appeal before this Tribunal well in time and by the time the appeal papers were prepared for filing, there arose delay of about 2 days in filing these present appeal before this Tribunal. The reason for the delay in filing the present appeal was due to reason beyond the control of the assessee. He thus prayed for the delay to be condoned.
2.4 The Ld.DR though objected however could not controvert the reasoning given by the Ld.AR for the delay that was caused in filing the present appeal.
We have perused the submissions advanced by both sides in the light of records placed before us.
2.5 It is noted that there is no malafide intention on behalf of assessee in not filing the present appeal within time. It is noted that there is no malafide intention on behalf of assessee in not filing the present appeal within time. In our opinion there is a sufficient cause for condoning the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 in support of his contentions, wherein, Hon’ble Court observed as under:-
“The Legislature has conferred the power to condone delay by enacting section 51 of the Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on de merits “. The expression “sufficient cause” employed by the Legislature is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice that being the life-purpose of the existence of the institution of courts. It is common knowledge that this court has been making a justifiably liberal approach in matters instituted in this court. But the message does not appear to have percolated down to all the other courts in the hierarchy.
And such a liberal approach is adopted on principle as it is realized that :
1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.
………………………………………….. 1.Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.”
2.6 Considering the above observation by Hon’ble Supreme Court, we find it fit to condone the delay caused in filing the present appeal.
Accordingly, the delay of two days in filing the present appeal stands condoned.
3. Brief facts of the case are as under:
3.1 The assessee is a Primary Agriculture Co-operative society, engaged in the business of acceptance of deposits from members, lending loans, providing banking facility in rural village. For the A.Y.2016-17, assessee society has filed its Return of Income on 23.09.2016 declaring Total Income of Rs.71,330/- after claiming deduction of Rs.52,39,262/- u/s. 80P of the Income Tax Act. The Return of Income was processed u/s. 143(1) of the Act on 06.10.2016.
3.2 During the year under scrutiny, the Ld.AO observed that the assessee had earned Rs. 22,87,757/- as interest and Rs.3,33,116/- as dividend on investment in South Canara District Co-op. Bank. Assessee society has claimed deduction u/s. 80P of the Income Tax Act on the interest and dividend earned through investments in South Canara District Co-op. Bank of Rs. 26,20,873/-(Rs. 22,87,757/- + Rs. 3,33,116/-). The assessee had claimed that, as the society is engaged in the business of providing credit facilities to its members, the whole of the amount of profits and gains of business attributable to such activities is deductible under section 80P and accordingly claimed exemption u/s. 80P(2)(a)(i).
3.3 The Ld.AO further observed that in the computation of income filed, the assessee had declared Total Income of Rs.71,330/-after claiming deduction of Rs.52,39,262/- u/s 80P(2)(a) of the Act. The said deduction was claimed by the assessee in respect of the amount of profits attributable to the activity of providing credit facilities to its members.
3.4 The Ld.AO disallowed the entire claim on two grounds:-
