Reserve Bank Staff Co Operative Credit ... vs Assessee

श्री बी. आर. बासकरण, ऱेखा सदस्य, एवुं श्री संजय गगग, न्याययक सदस्य के समक्ष

BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER

आयकर अऩीऱ सं. / ITA no.3600/Mum./2013 (ननधधारण वषा / Assessment Year : 2009-10)

Reserve Bank Staff Co-operative Credit Society Ltd., Amar Building, Sir P.M. Road ................. अऩीऱधथी / Fort, Mumbai 400 001 Appellant PAN - AAAAR0178F

बनधम v/s

Income Tax Officer ................... प्रत्यथी / Ward-12(3)(4), Aayakar Bhavan 101, M.K. Road, Mumbai 400 020 Respondent

रधजस्व की ओर से / Revenue by : Shri Love Kumar ननधधाररती की ओर से / Assessee by : Shri Dinar Prakash Daptari a/w Shri Uday V. Thakurdesai

सन ु वधई की तधरीख / आदे श घोषणध की तधरीख / Date of Hearing - 03.03.2015 Date of Order - 27.05.2015

आदे श / ORDER

संजय गगग, न्याययक सदस्य के द्वारा / PER SANJAY GARG, JUDICIAL MEMBER

The present appeal preferred by the assessee is directed against

the impugned order dated 1st February 2013, passed by the learned

Commissioner (Appeals)-23, Mumbai, for the assessment year 2009- Reserve Bank Staff Co-operative Credit Society Ltd.

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10. The assessee, through its grounds of appeal, has agitated the

sustaining of the additions made by the Assessing Officer consequent to

denial of its claim of deduction under section 80P(2)(a)(i) of the

Income Tax Act, 1961 (for short "the Act").

2. Brief facts of the case are that the assessee is a Co-operative

Credit Society of the employees of Reserve Bank of India. The major

activity of the assessee is in the nature of obtaining contributions from

its members and lending the amount so received from such

contribution to its members on interest. The interest so earned is

distributed among the members.

3. The Assessing Officer noticed that the assessee had shown to

have received interest income of ` 18,38,500, from persons other than

members of the society. He also observed that the assessee had

received insurance commission of ` 2,81,211 and LIC policy charges of

` 92,900. He, therefore, observed that the assessee company had been

providing credit facility to non-members and the interest and other

income earned from non-members was not eligible for deduction under

section 80P, as the same is restricted to the business of providing

credit facilities to the members of the society only. It was submitted by

the assessee that the impugned loan amount was given by the society

to its employees which was incidental or conducive to the attainment of Reserve Bank Staff Co-operative Credit Society Ltd.

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objects of the society. It was also submitted that the LIC agency was

obtained and the insurance of the members was done for the purpose

of securing the loan amount. The LIC commission and the policy

charges were also incidental to the business of providing credit facility

to its members and, hence, the same was eligible for deduction under

section 80P. The Assessing Officer, however, did not agree with the

contention of the assessee and rejected the claim of deduction of the

assessee in respect of interest income earned from non-members and

also income from insurance commission and LIC policy charges.

4. The learned CIT(A), through his detailed findings, held that the

assessee was not eligible for deduction under section 80P of the Act in

respect of interest, insurance commission and LIC charges received

from non-members of the assessee society. Aggrieved by the order of

the learned CIT(A), the assessee has come in appeal before us.

5. The learned Counsel for the assessee has vehemently stressed

that the act of giving loan to the staff members of the society was

incidental to the business activities of the assessee of providing credit

facilities to its members. He has further stressed that the provisions of

section 80P are of wider import as the relevant word used in respect of

business income is the word "attributable" and not the word "derived"

from such activities of the society, as are enumerated in section 80P.

Reserve Bank Staff Co-operative Credit Society Ltd.

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6. The learned Departmental Representative, on the other hand, has

relied upon the findings of the lower authorities. As per the provisions

of section 80P, where an assessee is a co-operative society and its

gross total income includes any income from the activities as referred

to in the said section, then the whole of such income attributable to

any or more of such activities, as mentioned in sub-section (2) of

section 80P of the Act, shall be deducted. We are here concerned with

the activity of carrying on the business of banking or providing credit

facilities to its members by a co-operative society. The other activities

mentioned in the relevant section are not carried on by the assessee

society. Admittedly, the assessee is not in the business of banking. The

other activity is of providing credit facilities to its members. Such credit

facility has been restricted to the members of the society only and it

does not include lending to non-members or even employees or staff

members. In our view, the lending of amount on interest to staff

members is not, in any way, connected or attributable to the business

activity of lending of loan to the members of the society.

7. The other issue is relating to the LIC commission and policy

charges. It is the contention of the assessee that the assessee society

has been doing the LIC policy of its borrowers only for the security of Reserve Bank Staff Co-operative Credit Society Ltd.

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loan amount. It has not been in the business of insurance of any other

persons.

8. In our view, so far as activity of doing the insurance of its

members-creditors is concerned, the same can be safely said to be

connected to the business activity of providing loan to the members of

the society. Moreover, the concept of mutuality will also be applicable

to such commission income and policy charges, etc. However, the

commission income and policy charges received from non-members

though the borrowers of the assessee society will neither fall within the

purview of business activity of providing credit facility to its members

nor the same would fall within the scope of mutuality. Hence, in view of

our above discussion, we do not find any infirmity in the order of the

learned CIT(A) in holding that the interest income, commission income

and policy charges, etc., received from non-members will not be

eligible for deduction under section 80P.

9. At this stage, the learned A.R. for the assessee has submitted

that the assessee society has incurred some expenditure in the course

of earning interest income and from doing the insurance of non-

members-borrowers and that the expenditure so incurred is required to

be deducted and only the net income is liable to be taxed. We find

force in this contention of the assessee. Only the net income from non-

Reserve Bank Staff Co-operative Credit Society Ltd.

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members is required to be taxed. The Assessing Officer is, therefore,

directed to re-compute the taxable income accordingly. Subject to the

above observations, the appeal of the assessee is dismissed.

7. ऩररणधमतः ननधधाररती की अऩीऱ खधररज की जधती है ।

7. In the result, appeal filed by the assessee is dismissed.

Order pronounced in the open Court on 27.05.2015

Sd/- Sd/-

बी. आर. बासकरण संजय गगग ऱेखा सदस्य न्याययक सदस्य B.R. BASKARAN SANJAY GARG ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, DATED: 27-05-15

Copy of the order forwarded to:

(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary

Assistant Registrar ITAT, Mumbai