Sikar Sahakari Bhoomi Vikas Bank Ltd. , ... vs Assessee

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 999/JP/2011 fu/kZkj.k o"kZ@Assessment Year : 2008-09. M/s. Sikar Sahakari Bhoomi cuke The Income-tax Officer, Vikas Bank Ltd., Basant Vs. Ward 1, Vihar, Jaipur Road, Sikar. Sikar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAAAS 1603 E vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mahendra Gargieya & Shri Fazlur Rehman (Advocates) jktLo dh vksj ls@ Revenue by : Smt. Neena Jeph (JCIT)

lquokbZ dh rkjh[k@ Date of Hearing : 21.05.2015. ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17/7/2015.

vkns'k@ ORDER

PER SHRI T.R. MEENA, A.M.

This is an appeal filed by the Assessee emanating from the order of ld. CIT

(A)-III, Jaipur dated 29.08.2011 for the A.Y. 2008-09. The grounds raised in the appeal

are as under :-

1) The impugned additions and disallowances made in the order u/s 143(3) of the Act dated 29.08.2011 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted.

2) Rs. 50,32,224/- : The ld. CIT (A) erred in law as well as on the facts of the case in denying the claim of deduction made by the Society u/s 2 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

80P(2)(a)(i) of the Act. The claim of deduction so denied, being totally contrary to the provisions of law and facts kindly be allowed as claimed.

3) The ld. CIT (A) erred in law as well as on the facts of the case in confirming application of the provisions of Sec. 80P(4) of the Act and consequently, denying the claim of deduction made by the Society u/s 80P(2)(a)(i) of the Act. The claim of deduction so denied, being totally contrary to the provisions of law and facts kindly be allowed as claimed.

2. The assessee society is engaged in the business of banking. The AO observed

that assessee filed its return of income on 30.09.2008 declaring total income at NIL.

The case was scrutinized under section 143(3) of the IT Act. The AO gave show cause

notice after considering the amendment made in Section 80P with effect from

01.04.2007. During the year under consideration the assessee society had claimed

deduction under section 80P(2)(a)(i) of Rs. 50,32,244/- stating that the bank is

Agriculture Credit Society and Primary Co-Operative Agriculture & Rural and Land

Development Bank. As per AO, after the amendment, only Agriculture Credit Society or

Primary Co-operative Agriculture & Rural and Land Development Bank are entitled for

deduction by virtue of section 80P(4) of the IT Act. He also considered the CBDT

Circular dated 20.09.2010 on this issue. The AO held that assessee bank has not

furnished any documentary evidence in respect of its claim and has not furnished the

objects of the Bank wherefrom its claim that it is Agriculture and Rural Development

Bank can be verified. The assessee after this amendment is not entitled for deduction

under section 80P(2)(a)(i). After this amendment, definition of " Co-operative Bank"

and "Primary Agricultural Society" and Primary Co-operative Agricultural and Rural 3 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

Development Bank" has also been given in the Act just below sub-section (4) of section

80P. Therefore, deduction claimed under section 80P at Rs. 50,32,244/- was added to

the income of the assessee.

3. Being aggrieved by the order of AO, assessee carried the matter before ld. CIT

(A) who had confirmed the addition by observing as under :-

"2.3. I have carefully considered the observations of the AO and also the submission made by the ld. AR in this regard. The basic controversy in the present appeal is about the admissibility of Sec. 80P(2)(a)(i) of the Act, in the case of the appellant bank. The AO has mention that after the amendment in the Sec. 80P, w.e.f. 01.04.2007, and introduction of sub- section 4 to the impugned section, the deduction u/s 80P would applied only to a corporative bank/credit society which are primarily engaged in agriculture and rural development activities, as mentioned in the explanation given below the sub-section for of 80P(4) of the Act. Since the appellant bank failed to furnished any details, which could substantiated the above conditions, therefore, the AO disallowed the claimed made u/s 80P(2)(a)(i) of the Act. On the other hand the ld. AR through his written submission, contended that a liberal interpretation of relevant sections with proper understanding of the facts would lead to a conclusion, which would support the appellant case. In the light of the above deliberations, eventually, I find that the AO is quite justified, while holding that the appellant bank is not entitled for the benefit extended u/s 80P of the Act, for the following reasons :-

i) The plain reading of the provisions of relevant sections i.e. 80P(2)(a)(i) and 80P(4) stipulate that a corporative society engaged in carrying on business of banking and providing credit facilities to its member would be entitled for such benefit provided 4 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

such co-operative bank/society should be fulfilling the following conditions -

a. Such bank/society must be having its area of operation confined to a taluka (Tehisel), and

b. The principal object of such bank should be providing a Long Term credits for the 'agriculture and rural development' activities.

2.3.1. In view of the divergent understanding of law on the part of the AO and ld. AR, to perceive the exact meaning and ambit of the above provisions, the help of the of principle of interpretation of law was considered relevant and essential, under the given circumstances. The cardinal rule of interpretation of law suggests that when the meaning of the words/phrase used in a statute is clear and unambiguous, then such words to be given its plain and grammatical meaning and effect of the such law has to be given the in such context only. In such cases, the court can not add anything into a statutory provision, even if it leads to harsh consequences of the statue, if any. In simpler term, when there is no ambiguity in the language of the statute, then such provisions can not be interpreted in different manner to confer benefit on assessee. In this regard the reliance is placed on following decisions :-

Dharmendra Textile Ltd. 306 ITR 277 (SC)\ Vijay Kumar & Others 151 ITR 48 (Kar.) T & Arvinda Ready 120 ITR 461 (SC) IPCA Laboratory Ltd. 266 ITR 5221 (SC)

The ld.AR, in his submission, contended that the interpretation of law should be done, in a manner, which is beneficial to the assessee, therefore, the crucial word used in the explanation to the sub-section 4 of Sec. 80P, i.e. ' a taluka' includes more than one taluka in numbers. Moreover, the objects of the appellant bank are akin and part & partial of the agriculture and rural development only, though they have given different nomenclature in the 'Manual of the Bank'. However in view of the 5 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

above settled law, towards the interpretation of a statute, the appellant requests of perceiving and understanding the relevant provisions in different manner then what they appear from their plain meaning of relevant phrases used therein, is found untenable and rejected accordingly.

2.3.2. In view of the above legal position, the factual position of the appellant is examined and the out came of the same is being discussed as under :-

S.R. Conditions of the relevant Appellant factual position Remarks sections i.e. 80P(2)(a)(i) & i.r.o. such conditions (as 80P(4). mentioned in the manual of the bank)

1. The bank's activities should The bank's area of the Condition not be confined to 'a'/single operations confined to six fulfilled.

taluka Talukia/tehisle of Sikar dist. 2. The major object of the The objects of the bank Since agriculture bank/society is providing are providing loan for and rural long term loan for agriculture immovable properties, developments and rural developments only agriculture land, object is one of the residential plots and several objects of houses, and also to buy the appellant bank, NSC, KVC and towards thus the condition is FDR also. not found fulfilled. 3. Being not a ordinary The Manual of the In view of such fact, cooperative bank, the eligible appellant bank authorities the appellant bank bank/society can not accept them to accept such assumes the loans/deposits from its deposits also. characteristic of a member's/non member's. ordinary cooperative bank thus does not qualified for deduction for the u/s 80P of the act.

2.3.3. As far as the issue of allowability of impugned deduction in the A.y.

2007-08 by my ld. Predecessor is concerned, the same is not found relevant now, as the legal situation has changed, after the amendment in 6 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

the Sec. 80P of the Act, which is effective from 01.04.2007 relevant to A.Y. 2008-09. In the present appellate proceeding, the relevant year is A.Y. 2008-09, therefore the decision given in the earlier year, i.e. before the amendment in the Act, as no bearing in the current year. Accordingly, in the current year the claim of the appellant for impugned deduction has been considered in the light of the amended relevant provisions, asdiscussed hereinabove.

Under the above facts and circumstances, it is evident that the appellant bank has not fulfilled the necessary criterions and conditions, therefore, they are found not eligible for the deduction u/s 80P(2)(a)(i) of the Act. Accordingly the AO's stand, in this regard, is upheld and the present ground of appeal is hereby rejected."

4. Now the assessee is before us. The ld. A/R of the assessee submitted that from a

bare reading of the provisions contained under section 80P of the Act, it is explicitly

clear that if a co-operative society is engaged in carrying on the business of banking or

providing credit facilities to its members and its gross total income includes any income

there from, such co-operative society is entitled for the deduction under section

80P(2)(a)(i). The assessee is a co-operative society and has been providing credit

facilities to its members. The assessee is not a co-operative bank or not a primary co-

operative bank or not even a Regional Rural Bank. Assessee is not engaged in the

business of banking in as much as it has not obtained license required from the Reserve

Bank of India. The AO wrongly interpreted the section 80P(4). Only Primary

Agricultural Co-operative Society (PACS) or Primary Co-operative Agricultural and Rural

Development Bank (PCARDB) is entitled to the deduction provided u/s 80P(2)(a)(i) of 7 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

the Act. In fact, the assessee is not found to be co-operative bank, provision of section

80P(4) become irrelevant and, therefore, one need not consider the further exception

to a cooperative bank i.e. PACS or PCARDB. Section 80P(2)(a)(i) nowhere suggest so.

The law contemplates all types of credit societies including those which are primary

agricultural credit society, engaged in providing credit facilities to its members, eligible

to the deduction. Thus assessee's case is covered under section 80P(2)(a)(i). Section

80P(4) was inserted by the Finance Act, 2006 w.e.f. 01.04.2007 i.e. for and from A.Y.

2007-08. However, ld. AO allowed the deduction under section 80P(2)(a)(i) in A.Y.

2007-08. Therefore, the present year also covered by the order of the AO himself.

Though the doctrine of res judicata do not apply to the income tax proceedings yet

however, unless there is a change in the facts and circumstances, the view taken earlier

should normally be taken consistently. For this he relied on the case of Sardar Kehar

Singh vs. CIT (1992) 195 ITR 769 (Raj.) and a very recent decision in CIT vs. Excel

Industries Ltd. (2013) 358 ITR 295 (SC). This view is also supported by CBDT Circular

No. 14 of 2006 dated 28.12.2006. He further drawn our attention to Definition of

"Banking", "Co-operative Bank". He further relied on following cases :-

DCIT vs. Jayalakshmi Mahila Vividodeshagala Soudharda Saharkari Ltd. (2012) 76 DTR 234 (Panaji Trib.)

CIT vs. Jafari Momin Vikas Co-operative Credit Society Ltd. (2014) 100 DTR 421 (Guj.) CIT vs. Shree Biluru Gurubasave Pattina Sahkari Sangh Niyamitha ITA No. 5006/2013 dated 5th February, 2014.

CIT vs. Bangalore Credit Cooperative Society Ltd.

ITA NO. 598/2013 dated 27th June, 2014.

8 ITA No. 999/JP/2011 A.Y. 2008-09

M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

Sagar Credit cooperative Society Ltd. vs. CIT ITA No. 306/Bangalore/2014

ITO vs. Yeswanthpur Credit Cooperative Society Ltd.

ITA NO. 737/Bang/2011 dated 11th April, 2012.

ACIT vs. M/s. Bangalore Commercial Transport Credit Coop. Society Ltd. ITA No. 1069/Bang/2010 dated 8.4.2011.

ITO vs. Jankalyan Nagri Sahakari Pat Sanstha Ltd.

(2012) 33 CCH 475 (Pune Trib.)

CIT vs. Surat Vankar Sahakari Sangh Ltd.

Tax Appeal No. 1150 of 2013 dated 17.01.2014.

The AR further drawn our attention to the objects of the assessee, the definition of

"Agriculture" as provided under the NABARD Act and definition of "Cooperative Bank",

"Primary Agricultural Credit Society, Primary Cooperative Agricultural and Rural

Development Bank and claimed that assessee is not a Cooperative Bank, but providing

loans to the agriculturists for agricultural purposes. The AO as well as ld. CIT (A)

considered the Taluka for the assessee's activity as per the Act but Taluka consists of

several Tehsils and Districts as per Wikipedia Encyclopedia). The law used the word

'Taluk' and not 'Tehsil'. It is a settled law that every word used by the Legislatures is

significant and has to be given due weightage. The Courts cannot supply something

missing. Therefore, following the principle of strict interpretation of fiscal statute, the

word 'Taluk' has to be understood in its plain grammatical meaning and there is no

scope of any inference. Had the legislatures intended, it could have used the word

'Tehsil'. Thus, even if the operation was spread to 6 Tehsils, it was, in any case within

one taluk only. The assessee is providing long term credit for agricultural and rural 9 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

development activities. The assessee granted loans for improvement of agricultural

land and production there from under the Rajasthan Cooperatives Society Act.

4.1. In any case, if a contrary decision is available, the issue become debatable and

the view which is favourable to the assessee, has to be adopted as held in case of CIT

vs. Vegetable Products Ltd., 88 ITR 192 (SC). Therefore, he requested to allow the

deduction under section 80P(2)(a)(i) of the Act.

5. At the outset, the ld. D/R supported the order of ld. CIT (A).

6. We have heard rival contentions and perused the material on record. The

intention of the amendment made in section 80P(4) has been explained by the CBDT

vide Circular No. 14/2006 dated 28.12.2006 which is reproduced as under :-

" CIRCULAR NO. 14/2006 DATED 28.12.2006.

1. Introduction.

1.1.The Finance Act, 2006 (hereafter referred to as the Act) as passed by the Parliament, received the assent of the President on the 18.4.2006 and has been enacted as Act No. 21 of 2006. This circular explains the substance of the provisions of the Act relating to direct taxes xxxxxxxxxx

22. Withdrawal of tax benefits available to certain co-operative banks.

22.1 Section 80P, inter alia, provides for a deduction from the total income of the Co-operative societies engaged in the business of banking or providing credit facilities to its members, or business of a cottage industry, or of marketing of agricultural produce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc.

22.2 The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new sub section (4) has been inserted to 10 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

provide that the provisions of the said section shall not apply in relating to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The expressions "co-operative bank", "primary agricultural credit society" and primary co-operative agricultural and rural development banki" have also been defined to lend clarity to them.

22.3 Further, a new sub clause (viia) has been inserted in clause (24) of section 2 to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition of 'income'.

22.4 Applicability - From assessment year 2007-08 onwards. "

Assessee is a cooperative society registered under the Rajasthan State Co-operative

Societies Act, 1953. As per copy of Memorandum and Rules & Regulations of the

assessee, the name given to the assessee is Sikar Sahakari Bhoomi Vikas Bank Ltd. It

operates in 6 Tehsils of Sikar District. The objects of the bank are as under :-

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2. ukckMZ@fjtoZ cSd a vkWQ bf.M;k }kjk Lohd`fr izkIr gksus dh n'kk esa lnL;ks@ a xSj lnL;ksa ls vekurs ¼fMiksftV~l½ izkIr djuk A

3. bu mn~n's ;ksa dh iwfrZ gsrq cSd a ] jktLFkku jkT; lgdkjh Hkwfe fodkl cSd a dk lnL; cusxh vkSj muds }kjk fu/kkZfjr _.k uhfr ,oa vekurksa lac/a kh uhfr dk ikyu djsxh A 11 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

The assessee is not a Cooperative Bank as per Banking Regulations Act. Cooperative

Bank means " a State Cooperative Bank, a Central Cooperative Bank and a Primary

Cooperative Bank." Primary Cooperative Bank as per Banking Regulations Act is as

under :-

"(CCV) "primary co-operative bank" means a co-operative society, other than a primary agricultural credit society.

As per this Board's Circular this amendment was applicable from A.Y. 2007-08. In

assessment year 2007-08, the AO had allowed the benefit under section 80P(2)(a)(i) of

the Act in the case of assessee. This issue has been considered by the various High

Courts as well as ITATs particularly in case of ACIT vs. M/s. Bangalore commercial

Transport Credit Cooperative Society Ltd. in ITA No. 1069/Bang/2010 dated 8.4.2011.

The operative portion is reproduced as under :-

" 9.3. If the intention of the legislature was not to grant deduction u/s 80P(2)(a)(i) to co-operative societies carrying on the business of providing credit facilities to its members, then, this section would have been deleted. The new proviso to section 80P(4) which is brought into Statute is applicable only to co-operative banks and not to credit co-operative societies. The intention of the legislature of bring in co-operative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-operative society and not a co-operative bank, the provisions of section 80P(4) will not have application in the assessee's case and, therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act ............". The facts being similar, the decision squarely applies."

The Hon'ble Gujarat High Court also considered this issue in the case of CIT vs. Surat

Vankar Sahakari Sangh Ltd. in Tax Appeal No. 1150 of 2013 dated 17.01.2014. The

operative portion is reproduced as under :-

12 ITA No. 999/JP/2011 A.Y. 2008-09

M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

" 7. From the above clarification, it can be gathered that sub section (4) of section 80P will not apply to an assessee which is not a cooperative bank. In the case clarified by CBDT, Delhi Coop Urban Thrift & Credit Society Ltd. was under consideration. Circular clarified that the said entity not being a cooperative bank, section 80P(4) of the Act would not apply to it. In view of such clarification, we cannot entertain the Revenues contention that section 80P(4) would exclude not only the cooperative banks other than those fulfilling the description contained therein but also credit societies, which are not cooperative banks. In the present case, respondent assessee is admittedly not a credit cooperative bank but a credit cooperative society. Exclusion clause of sub section (4) of section 80P, therefore, would not apply. In the result, Tax Appeals are dismissed."

After considering the aims and objects of the assessee, it is held that assessee is not a

cooperative bank in terms of Banking Regulations Act. The case laws relied upon by the

CIT (A) are not squarely applicable on the case of the assessee. Therefore, we reverse

the order of ld. CIT (A). Assessee is entitled to deduction under section 80P(2)(a)(i) of

the IT Act.

7. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 17.07.2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 17/7/ 2015 Das/ 13 ITA No. 999/JP/2011 A.Y. 2008-09

M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.

2. izR;FkhZ@ The Respondent- The ITO Ward-1, Sikar.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 999/JP/2011)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar 14 ITA No. 999/JP/2011 A.Y. 2008-09 M/s. Sikar Sahakari Bhoomi Vikas Bank Ltd., Sikar.