Uttar Bharat Nagar Sahkari Bank Ltd., vs Assessee

This is assessee's appeal directed against the order passed by learned CIT(A)-I, Lucknow dated 01/10/2014 for the assessment year 2010-2011.

2. Ground No. 1 is as under:

"1. That on facts and in law not allowing deduction of Rs.14,66,516/- u/s 80P(2)(d) on the basis that assessee society is governed by Banking Regulation Act,1949 is factually incorrect, contrary to the provisions of law, totally wrong, unjustified and illegal and deserves to be allowed in full."

3. It was submitted by Learned A.R. of the assessee that registration certificate of the assessee society is available on pages 19 & 20 of the paper book. He also submitted that profit & loss account for the year ending on 31/03/2010 is available on page No. 24 of the paper book. He placed 2

reliance on a Tribunal decision in assessee's own case for assessment year 1996-97 to 1998-99 in I.T.A. No.504, 812 and 813/Lkw/2005 dated 21/03/2006. He submitted copy of the Tribunal decision. He also submitted that in these orders, it was held by the Tribunal that the assessee is entitled for deduction u/s 80P when the income is earned by way of interest or dividend from its investment with any other co-operative society. He submitted that in the present year also, the assessee society is eligible for deduction u/s 80P of the Act.

4. Learned D. R. of the Revenue supported the orders of the authorities below.

5. We have considered the rival submissions. We find that as per the Tribunal decision, deduction u/s 80P is allowable to the assessee if it is found that the income is earned by way of interest or dividend from its investment with any other co-operative society. As per the profit & loss account of the assessee available on page No. 24 of the paper book, interest income of Rs.18,80,378/- has been earned on account of interest from the banks. As per the Tribunal decision cited by Learned A.R. of the assessee, deduction is allowable u/s 80P if the interest income is on account of investment with any other co-operative society. Since the interest income in the present year is not on account of investment in any other co-operative society, this Tribunal decision does not help the assessee. Considering this fact, we find that the issue is covered against the assessee by the Tribunal decision and therefore, respectfully following this Tribunal decision, we decline to interfere in the order of CIT(A). Ground No. 1 is rejected.

6. Ground No. 2 is as under:

"2. That without prejudice to the ground no. 1, the total income of the assessee is exempt from tax on concept on 3

mutuality as the total income has come from funds collected from members and interest earned from Member only. So on the basis of concept of mutuality the total income deserves to be exempt from tax."

7. Learned A.R. of the assessee reiterated the same contentions which were raised before CIT(A) whereas Learned D. R. of the Revenue supported the orders of the authorities below.

8. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per Para 7 of his order, which is reproduced below for the sake of ready reference:-

"I have considered the matter. I agree with the AO that once the license is granted to the appellant society by the RBI for doing banking business the appellant bank has to work on the basis of the Banking Regulation Act, 1949. The principles of mutuality will not apply to the appellant w.e.f. 03.10.1997 as it cannot work on the concept of mutuality. I find that the ratio of the judgment of the Hon'ble I.T.A.T. in this regard has been correctly applied by the AO to facts of the impugned assessment year. Otherwise also interest on surplus kept in form of FDRs has no direct nexus with the activities of the appellant society as provided in its bye laws, therefore, the principle of mutuality cannot apply. Reliance is placed on the following decisions:

a. Walkeshwar Triveni Co-operative Housing Society Ltd. v.

ITO, 267ITR 86 b. CIT v. National Sports Club India (Delhi), 230 ITR 777 c. CIT v. ITI Employees Death and Superannuation Relief Fund, 234 ITR 308 d. Nirma Industries Ltd. v. ACIT, 95 ITD 199 (Ahd.) (SB) e. Rajpath Club Ltd. v. CIT, 211 ITR 379 f. Sports Club of Gujarat Ltd, v. ,CJT, 171 ITR 504

Under the circumstances interest income received by the appellant society on surplus kept as FDR is exigible to tax as principle of mutuality will not apply to these receipts. Ground No. 2 is decided against the appellant."

4 8.1 From the Para from the order of CIT(A), we find that a clear finding has been given by CIT(A) that interest on surplus kept in form of FDRs has no direct nexus with the activities of the assessee society as provided in its bye laws. The CIT(A) has followed several judgments as noted in Para 7 of his order, reproduced above. Learned A.R. of the assessee could not point out as to how the issue is not covered against the assessee by these judgments and therefore, we do not find any reason to interfere in the order of CIT(A). Ground No. 2 is rejected.

9. In the result, the appeal of the assessee stands dismissed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:21/04/2015 *C.L.Singh

Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar