Deductions u/s 80P(2)(iv)—Deduction in respect of income of co-operative societies

BHADRAN SEVA SAHAKARI MANDLI LTD. vs.INCOME TAX OFFICER

AHMEDABAD TRIBUNAL

RAJPAL YADAV, JM & ANIL CHATURVEDI, AM.

ITA No. 2946/Ahd/2013, 119 & 120/Ahd/2014

Oct 19, 2015

(2015) 45 CCH 0126 AhdTrib

Legislation Referred to Section 80P(2)(iv)

Case pertains to Asst. Year 2008-09, 2009-10 & 2010-11

Decision in favour of:Assessee (partly)

Deductions u/s 80P(2)(iv)—Deduction in respect of income of co-operative societies—Business if sale and credit facility services—Assessee was co-operative society alleged to have been established in 1958—Assessee was engaged in business of selling fertilizers, petrol, diesel and retail consumer items as well as providing credit facilities to its members through bank etc.—Assessee was assessed to tax from Asst. Year it came into existence—Assessee filed returns of income in all three years declaring Nil income—AO computed income for all years—Appeal to CIT(A) did not bring any relief to Assessee—AO construed that total sale was being made to non-members and denied exemption u/s 80P(2) to Assessee—Held, sale of diesel to farmers who were members of Assessee society would fall within meaning of expression “other articles intended for agriculture for purpose of supplying them to its members”—Thus if diesel was being supplied to farmers for agricultural use, then profit would qualify for deduction u/s 80P(2)—However, Assessee had not been able to maintain specific details demonstrating sales exclusively made to farmers and who used such diesel for agricultural operation—In past, Assessee had been claiming deduction to extent of 70% on ground that only 30% of sales were made to outsiders, but that figure had always been adopted by Assessee on estimate basis—It was not possible to verify sale bills because to identify purchasers out of sale bills was quite difficult for any adjudicator—Thus in totality of facts and circumstances of AO was directed to consider 50% of sales to farmers who were members of Assessee society—Rest 50% was being estimated as made to non-members—This estimation should not be considered as guiding factor in future—Appeals filed by Assessee partly allowed.

Held

Sale of diesel to the farmers who are members of the assessee society would fall within the meaning of expression “other articles intended for agriculture for the purpose of supplying them to its members”. Thus if diesel is being supplied to the farmers for agricultural use, then the profit would qualify for deduction under section 80P(2) of the Act. However, we find that assessee has not been able to maintain specific details demonstrating the sales exclusively made to the farmers and who have used such diesel for agricultural operation. In the past assessee has been claiming deduction to the extent of 70% on the ground that only 30% of the sales were made to the outsiders, but this figure has always been adopted by the assessee on estimate basis. It is not possible to verify the sale bills at this stage because to identify purchasers out of the sale bills is quite difficult for any adjudicator. Thus in the totality of facts and circumstances of the case we direct the AO to consider 50% of the sales to the farmers who are members of assessee society. The rest 50% is being estimated as made to the non-members. This estimation should not be considered as guiding factor in future. (para 5)

Conclusion

Sale of diesel to the farmers who are members of the assessee society would fall within the meaning of expression “other articles intended for agriculture for the purpose of supplying them to its members”, hence, diesel being supplied to the farmers for agricultural use, would qualify for deduction under section 80P(2) of the Act.

In favour of

Assessee (partly)

Counsel appeared:

S. N. Divetia, AR for the Appellant.: Somogyan Pal, Sr.DR for the Respondent

RAJPAL YADAV, JM.

1. The present three appeals are directed at the instance of assessee against separate orders of CIT(A) dtd. 23/09/2013, and dtd.1.10.2013, passed for Asst. Years 2009-10, 2008-09 & 2010-11 respectively. The grounds of appeal taken by the assessee are not in consonance with Rule-8 of ITAT Rules, 1963. They are descriptive and argumentative in nature. In brief the grievance of the assessee is that ld. CIT(A) has erred in upholding the disallowance of deduction under section 80P(2)(iv) of the Income-tax Act, 1061 (in short the Act) in respect of the profit earned from diesel pump division.

2. The facts on vital points are common, therefore, for the sake of convenience, we take the facts for Asst. Year 2008-09. Brief facts of the case are that the assessee is a co-operative society alleged to have been established in 1958. It is engaged in the business of selling fertilizers, petrol, diesel and retail consumer items as well as providing credit facilities to its members through bank etc. The assessee is assessed to tax from the Asst. Year it came into existence. It has filed returns of income in all these three years declaring Nil income. The ld. AO has computed the income these years as under :-

For AY 2008-09

Total income as per return of income	Rs.Nil
Add: Net profit from diesel and petrol as per account filed by the assessee	Rs.4,57,817/-
Add: Net profit from provision items including edible oils & Misc.	Rs.14,683/-
Total income	Rs.4,72,500/-
Less: Deduction u/s 80P(2)©(ii)	Rs.50,000/-
Taxable income	`Rs.4,22,500/-

Total income as per return of income	Rs.Nil
Add: Net profit from diesel and petrol as per account filed by the assessee	Rs.3,94,740/-
Add: Net profit from provision items including edible oils & Misc.	Rs.55,508/-
Add: Loss from Handloom, Hosiery & school dress	Rs.(-)759/-
Total income	Rs.4,49,489/-
Less: Deduction u/s 80P(2)©(ii)	Rs.50,000/-
Taxable income	`Rs.3,99,489/-
i.e.	Rs.3,99,490/-

Total income as per return of income	Rs.Nil
Add: Net profit from diesel and petrol as per account filed by the assessee	Rs.43,300/-
Add: Net profit from provision items including edible oils & Misc.	Rs.23,137/-
Add: Loss from Handloom, Hosiery & School Dress	Rs.(-) 1,300/-
Total income	Rs.65,137/-
Less: Deduction u/s 80P(2)©(ii)	Rs.50,000/-
Taxable income	`Rs.15,140/-

For AY 2009-10

For AY 2010-11

3. The appeal to the CIT(A) did not bring any relief to the assessee. The ld. counsel for the assessee has filed Paper Book running into 272 pages. He has also placed on record copies of registration certificates of the tractors owned by the members of the society. The ld. counsel for the society submitted that diesel is an item which is used by the farmers in the agricultural operation. Therefore, as per section 80P(2)(iv) any article intended for agricultural purposes and such articles are being supplied by the assessee than profits earned on the supply of such articles would qualify for exemption under section 80P(2) of the Act. He conceded to the fact that the assessee has not been maintaining specific account exhibiting the purchase and sale of diesel to the members only. In the past assessee has recognized 70% of its sale to the members and 30% to general public. This accounting method adopted by the assessee has always been accepted by the AO. This year ld. AO has construed that the total sale is being made to non-members and denied exemption under section 80P(2) of the Act to the assessee. For buttressing his contentions he placed on record copies of certain bills, copies of ledger account exhibiting different sales made by the assessee. He also placed on record details showing how members have deposited the amount with the assessee out of which sales were made to them.

4. On the other hand, the ld. DR relied upon the order of A.O. She contended that assessee failed to demonstrate the sales made to the members as well as sales made to the non-members. The assessee ought to have maintained accounts specifying its sales.

5. We have duly considered the rival contentions and gone through the record carefully. We deem it pertinent to note all the relevant provisions of section 80P(2) of the Act. It read as under :-

80P. (1) Where, in the case of an assessee being a co- operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:

(a) In the case of a co-operative society engaged in –

(i) Carrying on the business of banking or providing credit facilities to its members, or

(ii) A cottage industry, or

(iii) The marketing of agricultural produce grown by its members, or

(iv) The purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or

(v) The processing, without the aid of power, of the agricultural produce of its members, or

(vi) The collective disposal of the labour of its members, or

A bare perusal of sub-clause (iv) of section 80P(2) (a) would indicate that the sale of diesel to the farmers who are members of the assessee society would fall within the meaning of expression “other articles intended for agriculture for the purpose of supplying them to its members”. Thus if diesel is being supplied to the farmers for agricultural use, then the profit would qualify for deduction under section 80P(2) of the Act. However, we find that assessee has not been able to maintain specific details demonstrating the sales exclusively made to the farmers and who have used such diesel for agricultural operation. In the past assessee has been claiming deduction to the extent of 70% on the ground that only 30% of the sales were made to the outsiders, but this figure has always been adopted by the assessee on estimate basis. This situation put us in a difficult position. Taking into consideration the material placed on record, though remained unverifiable and it is not possible to verify the sale bills at this stage because to identify purchasers out of the sale bills is quite difficult for any adjudicator. Thus in the totality of facts and circumstances of the case we direct the AO to consider 50% of the sales to the farmers who are members of assessee society. The rest 50% is being estimated as made to the non-members. This estimation should not be considered as guiding factor in future. We hope that assessee would maintain specific details exhibiting sales made to the farmers. Rather the assessee should keep specific account of each member who is owner of a tractor or a diesel pump or any other machinery required for agricultural operation. The AO can verify such details in future by calling that farmer. We allow the appeal partly and direct the AO to re-computed the income of assessee after treating 50% sales in the diesel pump operation division made to the members. The profit on such sales could be considered as eligible for deduction under section 80P(2).

6. In the result, all the appeals filed by the assessee are partly allowed.

First proviso to section 2(15) has no role to play in cancellation or granting of trust’s registration

IN THE ITAT AMRITSAR BENCH
Kapurthala Improvement Trust v. Commissioner of Income-tax, Jalandhar
PRAMOD KUMAR, ACCOUNTANT MEMBER
AND A. D. JAIN, JUDICIAL MEMBER
IT APPEAL NO. 732 (ASR.) OF 2013
[ASSESSMENT YEAR 2009-10]
JUNE  11, 2015

Y.K. Sud for the Appellant. Tarsem Lal for the Respondent.

ORDER
Pramod Kumar, Accountant Member – By way of this appeal, the assessee has challenged correctness of the learned Commissioner’s order dated 18th November 2013 withdrawing registration under section 12AA(3) of the Income Tax Act, 1961.
2. Grievances raised by the assessee are as follows:
“1. That the CIT was not justified in cancelling the Registration of the trust granted u/s. 12AA on invoking the provisions of section 12AA(3).
2. That the CIT clearly ignored the submissions made by the assessee in response to his show cause notice and passed a mechanical order.
3. That the action of the CIT of cancellation of the registration amounts to contempt of the Punjab & Haryana High Court who have approved and declared the objects of the Improvement Trusts in Punjab as charitable and of General Public utility in the case of Moga Improvement Trust. The CIT failed to appreciate that the order of the High Court was binding tooth and nail.
4. That the CIT has failed to record his satisfaction on the two conditions prescribed in section 12AA(3) regarding its violation and has clearly exceeded his powers in the cancellation of the registration.
5. That the CIT failed to appreciate the amendment in law in section 13(8) and 143(3) proviso made by the Finance Act 2012 w.e.f. 1.4.2009 and also the Board Circular No. 11 of 2008 dated 19.12.2008 which was binding upon him.
6. That CIT had no power to cancel the registration with retrospective effect of 1.4.2009.
7. That the order of the CIT is against the law and facts of the case.”
3. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is a body set up under the Punjab Towns Improvement Act, 1922. On 22nd September 2005, the assessee filed an application seeking registration under section 12AA of the Act but the same was rejected by the then Commissioner vide order dated 18th May 2007. When the order so declining the registration was carried in appeal before this Tribunal, grievance of the assessee was upheld and he became entitled to the benefit of registration. This decision of the Tribunal was challenged before Hon’ble Punjab & Haryana High Court but Their Lordships declined to interfere in the matter.
4. The matter, however, did not rest at that.
5. On 20th September 2013, learned Commissioner required the assessee to show cause as to why the registration so granted to the assessee not be withdrawn. In this show cause notice, the Commissioner, inter alia, stated as follows:
“Sub:- Review of registration granted u/s 12(AA)- Regarding.
Please refer to the subject cited above.
2. In this connection, it is reported by the A.O. that as per records, the assessee trust applied for grant of registration under section 12AA of Income Tax Act, 1961 which was rejected by my predecessor on the ground that the activities of the trust as spelt out in Punjab Town Improvement Act 1922 are clearly in the nature of commercial activities, intended to earn profit and not of charitable nature. In appeal, the ITAT, Amritsar, decided in the favour of the trust and allowed the registration to the trust. Against the order of Ld. ITAT, the Hon’ble Punjab & Haryana High Court dismissed the appeal of the revenue. So the trust is enjoying registration u/s 12A of the Act.
3. The case was decided in your favour much before the insertion of first proviso to section 2(15) by the Finance Act, 2008 w.e.f. 01.04.2009 according to which “the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.”
3.1 Further, recently, the Hon’ble ITAT, Amritsar vide its order dated 23.07.2013 in ITA No. 274(Asr)/2013 in the case of Improvement Trust, Phagwara, decided the case in favour of revenue upholding the order passed by my predecessor vide which registration u/s 12AA was withdrawn. It is held by the Hon’ble ITAT in the above referred order that the Commissioner of Income Tax, Jalandhar-II has passed a well reasoned order by respectfully following the order of various Courts. It is worth mentioning that my predecessor while passing the order in the case of Improvement Trust, Phagwara followed the following decision of Hon’ble Courts/Tribunals :—
(i) ITA No. 36(Asr)/2012 dated 18.12.2012 in the case of Improvement Trust, Bathinda v. CIT, Bathinda.
(ii) 103 TTJ-Chd-988 dated 01.06.2006 in the case of Puda v. CIT
(iii) 165 CTR (SC): (2001) 247 ITR 785 (SC) in the case of Asstt. CIT v. Thanthi Trust.
Aims/objects and activities of your trust are same as are in the case of Improvement Trust, Phagwara.
3. Keeping in view the above facts and amendment made to section 2(15) of the Income Tax Act, 1961 w.e.f. 01.04.2009 it is proposed to review registration granted to the trust u/s 12AA of the I.T. Act. You are therefore, afforded an opportunity to show cause as to why action suggested above may not be taken.”
6. So far as the present appeal is concerned, it is sufficient to note that the assessee, inter alia, pointed out that “Section 12AA(3) mandates cancellation of registration on satisfaction of the two conditions i.e. (i) that the activities of the trust are not genuine, and (ii) that the activities of the trust or the institution are not being carried out in accordance with the objects of the trust or the institution” and that “in the present case, none of these two conditions have been satisfied”. Without dealing with this contention of the assessee but holding that that, on merits, the assessee did not deserve registration under section 12AA, learned Commissioner withdrew the registration. While doing so, learned Commissioner observed as follows:
“9. As per amended definition of charitable purpose u/s. 2(15) of the Act with effect from 01.04.2009, the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on any activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business for a cess of fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. As discussed above since the applicant is engaged in the activity in the nature of trade, commerce and business and is engaged in the trade of real estate business with a profit motive, its engagement in any of the activities as stated above will not affect its character as such since the proviso provides that the advancement of any other object of general public utility shall not be regarded as charitable purpose if it involves the carrying on any activity in the nature of trade, commerce or business or rendering any service in relation to any trade, commerce or business for a cress or fee or any other consideration irrespective of the nature of use or application, or retention, of the income from such activity.
The activities of the assessee are aimed at earning profit as it is carrying on activity in the nature of trade, commerce or business. Further profit making by the assessee is not mere incidental or by product of the activity of the assessee. The main pre-dominant purpose of assessee is making profit, it is real object of the assessee and also there is no spending of the income exclusively for the purpose of charitable activities and profits of the assessee not used for charitable purpose under the terms of the object and there is no obligation on the part of the assessee to spend on ‘charitable purpose’ only.
10. It is now pertinent to refer to the observations of the Hon’ble Income Tax Appellate Tribunal Chandigarh vide their judgment dated 01.06.2006 in the case of PUDA v. CIT (2006) 103 TTJ Chd 988 with regard to the provisions of section 2(15) of the Income Tax Act, 1961. It is held in the said order that this issue requires deliberation from a different angle whether the assessee was constituted to provide any charity to the public at large or to satisfy the needs for housing accommodation for the people of Punjab and also planning and development of the cities, towns and villages or whether the development in such a way is of charitable nature. A plea was raised by the learned counsel for the assessee that funds are provided by the Punjab Government or generated by the assessee itself. To generate its funds for carrying out its objects, the assessee is acquiring lands, developing them and selling the plots to the general public who apply for the same. Even the economically weaker strata of the society is generally applying. It is not the case that the assessee is allotting houses to the poor masses free of cost. While delivering the judgment in the case of PUDA, the Hon’ble Chandigarh Bench of Income-tax Appellate Tribunal has also referred to a case adjudicated by Hon’ble apex Court in the case of Asstt. CIT v. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC) where the Honble Court has deliberated upon the issue of charitable purposes and held that where certain activities of an assessee claiming exemption u/s. 12AA of the Act are such where profit motive is involved and where no charity towards general public is being done, the applicability of section 2(15) is certainly established and benefits of exemption u/s 12AA are not allowable to such an assessee.
11. The reliance was also placed on the decision of Hon’ble ITAT, Amritsar Bench, Amritsar contained in their order dated 18.12.2012 passed in ITA No. 366(ASR)/2012 in the case of the Improvement Trust, Bathinda v. CIT, Bathinda,wherein the order passed by the CIT, Bathinda u/s. 12AA(3) of the Act on 20.7.2012 has been upheld. In the order dated 20.7.2012 the CIT, Bathinda had withdrawn the exemption allowed to the Improvement Trust, Bathinda u/s 12AA of the Act on the exactly similar set of facts and circumstances of the case as brought out in the present case before me. The Hon’ble ITAT while upholding the order of the CIT, Bathinda has observed as under:
“7.2. After perusing the aforesaid activities, we are of the view that the ld. First appellate authority has rightly held that the land of the assessee trust is in the same category of other real estate products available in the market offered by the private colonizers and real estate agents. Because the assessee advertised this value added product widely in print as well a electronic media so as to attract a large number of customers/clients from all the general public including the financially sound persons from the public.
7.3. It is a matter of record that the assessee-trust sells off all these plots by organizing a public auction, where through the bidding process and the competition generated in it, the prices of their land keep escalating and finally, the land is sold off to the highest bidder. The surplus income which is generated through the sale of land is again used for buying more land, developing it and selling it the same way, thereby generating more profit. On the facts and circumstances explained above, we are of the view that the assessee trust is not merely a mediator in buying and selling of land to the general public. Rather it operates in a business oriented way on the well known principles of profit generation. Therefore, the activities of the assessee trust clearly constitute activities in the nature of trade, commerce or business because no plots are reserved for any socio-economically lower society, there is no element of donation or support to any cause, none of the land is earmarked to be sold at no profit, no loss basis to any person whatsoever, which clearly establish that the element of charity is clearly absent from the activities of the trust, which is contrary to the provisions of section 2(15) of the Act amended w.e.f. 01.04.2009 and the Ld. CIT Bathinda has rightly issued show cause notice to the assessee trust for cancelling the registration already granted to the assessee-trust which the ld. CIT, Bathinda has the power under section 12A(3) of the Act.
7.4 After going through the aforesaid, we are of the considered opinion that the ld. CIT(A) has rightly cancelled the registration granted to the assessee trust w.e.f. 12.06.2003 in view of the amended provision of section 12AA(3) of the Act. In the recent case, the ld. CIT, Bathinda is fully satisfied that the activities of the assessee-trust are not genuine and not being carried out in accordance with the objects of the assessee-trust, as discussed above.”
12. Further, recently, the Hon’ble ITAT, Amritsar vide its order dated 23.07.2013 in ITA No. 274(ASR)/2013 in the case of Improvement Trust, Phagwara, decided the case in favour of revenue upholding the order passed by Commissioner of Income Tax, Jalandhar-II, Jalandhar vide which registration u/s 12AA has been withdrawn. It is held by the Hon’ble ITAT in the above referred order that the Commissioner of Income Tax, Jalandhar-II, Jalandhar has passed a well reasoned order by respectfully following the order of various Courts. The ITAT relied upon the decision of Improvement Trust, Bathinda (supra).
13. As regards the reliance of the assessee on CBDT circular No. 11/2008 dated 19.12.2008 mentioned by the assessee’s counsel in his arguments, it is significant to mention here that in this circular it is mentioned that what is the advancement of any other object of general public utility is a question of fact and whether an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided on the nature, scope, extent and frequency of the activity. In para 3.2 of this circular it is further mentioned that each case would, therefore, be decided on is own facts and no generalization is possible.
Thus this circular’s context is not applicable in this case, since it is clearly mentioned that no generalization about the fact that whether an entity is involved in the trade, commerce or business. Moreover, this circular was issued by the CBDT prior to the enforcement of the amendment in the provisions of section 2(15) of the Act.
Further, the submissions made in para (6) of the reply to show cause notice, as reproduced earlier, are concerned, one at the best academic in nature. As per provisions of second proviso to section 2(15) section 13(8) and proviso to 143(3) of I.T. Act the assessee has to be treated as a taxable entity, as it is nowhere brought on records that in any of the A.Y.s its receipts are below Rs. 25 Lacs. In any case when after amendments as referred above and in view of the decisions of Hon’ble ITAT, Amritsar (supra) the benefit of exemption u/s. 12AA of I.T. Act is not available to assessee.
14. In view of the above stated facts and circumstances of the case, I am satisfied that the activities of the applicant authority are not charitable in nature within the meaning of proviso to section 2(15) of the Income Tax Act, 1961. Further in view of the facts on record, the applicant authority does not qualify to be treated as a charitable institution and registration deemed to have been granted to it is required to be withdrawn in view of the amended provisions of the Income Tax Act, 1961 and in view of the discussion made in the preceding paragraphs.
15. Accordingly, in view of amendment in section 2(15) of Income Tax Act and relying on the decision of ITAT, Amritsar Bench, Amritsar in the case of Improvement Trust Phagwara dated 23.07.2013, the registration of the trust u/s 12AA of Income Tax Act, 1961 is hereby cancelled w.e.f. 01.04.2009.”
7. The assessee is aggrieved and is in appeal before us.
8. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
9. We find that, as learned counsel rightly points out, the scope of powers of the Commissioner under section 12AA(3) for cancellation of registration already granted is very limited in scope inasmuch as it can only be invoked only when (i) that the activities of the trust are not genuine, and (ii) that the activities of the trust or the institution are not being carried out in accordance with the objects of the trust or the institution. Section 12AA(3) specifically provides that when the CIT “is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution”. It is not even the case of the CIT that the activities of the assessee trust are “not genuine” or that the “activities of the assessee are not being carried out in accordance with the objects” of the assessee trust. The case of the CIT rests on the first proviso to Section 2(15) coming into play on the facts of this case but then such a factor cannot warrant or justify the powers under section 12AA(3) being invoked. We, therefore, uphold the grievance of the assessee that the action of the learned Commissioner, in withdrawing the registration under section 12AA(3), was well beyond the limited scope of the powers conferred on him by the statute. The assessee, therefore, must succeed in the appeal for this short reason alone.
10. There is, however, a much more fundamental a reason for the assessee succeeding in this appeal. In our considered view, the considerations with respect to the first proviso to Section 2(15) coming into the play and, for that reason, the objects of an assessee trust or institution being held to be not covered by the definition of ‘charitable purposes’, have no role to play in the matters relating to registration of a trust or institution under section 12A or 12AA – whether in respect of granting or declining of a registration or in respect of cancellation, even if otherwise permissible, of a registration. A closer look at the scheme of the Act would unambiguously show this aspect of the matter.
11. Let us begin by taking a look at Section 2(15) which defines charitable activities and first and second provisos thereto. These statutory provisions are as follows:
(15) “charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year: (Emphasis supplied)
12. What is clear from the riders in the above definition of ‘chartable purposes’ is that rider set out therein, under first proviso to Section 2(15), can only come into play on year to year basis and not in absolute terms. The same activity can be hit by this rider in one year and thus the assessee trust or institution may not qualify to be existing for ‘charitable purposes’, and that very activity of the assessee trust or institution may remain unaffected by the same disabling provision for another year. The reason is that it is not only the nature of the activity but also the level of activity which, taken together, determine whether this disabling clause can come into play. The safeguard against the objects of the trust being vitiated insofar as their character of ‘charitable activities’ is concerned, is inbuilt in the provisions of Section 13(8) which was brought into effect with effect from the same point of time when proviso to Section 2(15) was introduced -i.e. with effect from 1st April 2009. Section 13(8) provides as follows:
”Section 13-Section 11 not to apply in certain cases.
(8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year”.
13. While introducing this amendment, Explanatory Memorandum to the Finance Bill 2012 fhttp://indiabudgetnic.in/budget2012-2013/ub2012-13/mem/meml.pdFI explained the reasons and backdrop of this legislative amendment as follows:
Assessment of charitable organization in case commercial receipts exceed the specified threshold
Sections 11 and 12 of the Act exempt income of any charitable trust or institution, if such income is applied for charitable purposes in India and such institution is registered under section 12AA of the Act . . . . . .Section 2(15) of the Act provides definition of charitable purpose. It includes “advancement of any other object of general public utility” as charitable purpose provided that it does not involve carrying on of any activity in the nature of trade, commerce or business.
2nd proviso to said section provides that in case where the activity of any trust or institution is of the nature of advancement of any other object of general public utility, and it involves carrying on of any activity in the nature of trade, commerce or business; but the aggregate value of receipts from the commercial activities does not exceed Rs. 25,00,000 in the previous year, then the purpose of such institution shall be considered as charitable, and accordingly, the benefits of exemption shall be available to it. Thus, a charitable trust or institution pursuing advancement of object of general public utility may be a charitable trust in one year and not a charitable trust in another year depending on the aggregate value of receipts from commercial activities.
There is, therefore, need to expressly provide in law that no exemption would be available for a previous year, to a trust or institution to which first proviso of sub-section 2(15) become applicable for that particular previous year. However, this temporary excess in one year may not be treated as altering the very nature of the trust or institution so as to lead to cancellation of registration or withdrawal of approval or rescinding of notification issued in respect of trust or institution.
Therefore, there is need to ensure that if the purpose of a trust or institution does not remain charitable due to application of first proviso on account of commercial receipt threshold provided in second proviso in a previous year. Then, such trust or institution would not be entitled to get benefit of exemption in respect of its income for that previous year for which such proviso is applicable. Such denial of exemption shall be mandatory by operation of law and would not be dependent on any withdrawal of approval or cancellation of registration or a notification being rescinded.
It is, therefore, proposed to amend . . . . . section 13 . . . . . of the Act to ensure that such organization does not get benefit of tax exemption in the year in which it’s receipts from commercial activities exceed the threshold whether or not the registration or approval granted or notification issued is cancelled, withdrawn or rescinded.
This amendment will take effect retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent assessment years. (Emphasis supplied)
14. It is thus clear that the impact of the proviso to Section 2(15) being hit by the assessee will be that, to that extent, the assessee will not be eligible for exemption under section 11 of the Act. The mere fact that the assessee is granted registration under section 12 A or 12AA as a charitable institution will have no bearing on this denial of registration. As a corollary to this legal position, the fact that the objects of the assessee may be hit by the proviso to section 2(15) cannot have any bearing on the grant, denial or withdrawal of the registration under section 112AA.
15. It is also important to bear in mind the fact that in terms of the second proviso to Section 2(15), which was introduced by the Finance Act 2010 with retrospective effect from 1st April 2009, the legal prescription set out in first proviso to section 2(15) cannot come into play “if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year”. Clearly, therefore, in order that the benefits under section 11 are declined to the assessee on the ground that it is engaged in such activities as may be hit by the first proviso to Section 2(15), not only the assessee must be engaged in carrying out such activities as may hit the first proviso to Section 2(15) but also the receipts of the assessee from such activities must exceed a specified limit. The second limb of this disability clause needs to be satisfied with respect to each assessment year. Obviously, therefore, this aspect of the matter cannot be examined at the stage of the grant or withdrawal of registration since the registration exercise is a one time exercise and not something which must be done for each assessment year separately. That is precisely the reason, as noted in the Explanatory Memorandum, as to why the remedy for the activities being hit by the first proviso to Section 2(15) lies not in grant, decline or withdrawal of registration but in declining the benefits of exemption under section 11 on that count, on year to year basis, notwithstanding the status of registration.
16. The scheme of the Act, in this respect, is thus clear. The status of registration under section 12A or 12AA has no bearing, as recognized in Section 13(8), on the availability of exemption under section 11. To the extent income of the assessee arises from the activities hit by the first proviso to Section 2(15) in any assessment year, the assessee will be disentitled for exemption under section 11 to that extent. It is also important to bear in mind the fact that the disentitlement for exemption under section 11, as a result of the activities of an assessee being held to be not for charitable purposes under section 2(15) read with provisos thereto, is in respect of entire income of the assessee trust or institution but only for the assessment year in respect of which the first proviso to Section 2(15) is triggered.
17. If the status of registration is to be declined to an assessee only on the ground that some of the objects may be hit by the first proviso to Section 2(15) but the assessee’s receipts from such activities do not exceed specified threshold in a particular assessment year, the assessee will be subjected to undue hardship in the sense that while the assessee will be disentitled to exemption under section 11 due to denial of registration under section 12 A or 12AA which is sine qua non for admissibility of exemption under section 11. On the other hand, if the status of registration is granted to the assessee even when some of the objects may be hit by the first proviso to Section 2(15) and the assessee’s receipts from such activities do exceed specified threshold, no prejudice will be caused to the legitimate interests of the revenue because, notwithstanding the status of registration and by the virtue of section 13(8), the assessee will not be eligible for exemption under section 11 in respect of such income. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e., to make it workable rather than redundant.
18. The considerations about the possibilities of the first proviso to Section 2(15) coming into play affecting the grant, decline or withdrawal of registration under section 12AA will thus lead to wholly avoidable undue hardships to the assessee, will be unworkable in practice and be contrary to the scheme of the Act.
19. In view of the above discussions, in our considered view, the considerations about the possibilities of first proviso to Section 2(15) into play are wholly extraneous in the present context. As the withdrawal of registration is solely based on these considerations, the very foundation of the learned Commissioner’s action is unsustainable in law and consists of reasons which are not at all relevant in the context of registration status under section 12A or 12AA of the Act. For this reason also, the action of the learned Commissioner is wholly devoid of any legally sustainable merits.
20. Having decided the issue in favour of the assessee on these issues, we see no need to address ourselves, at this stage, to the question whether the first proviso to Section 2(15) could indeed apply on the facts and in the circumstances of this case. That aspect of the matter is wholly academic as on now.
21. In the result, the appeal is allowed.

No section 12A registration if Society formed only for benefit of Christians Community

 No section 12A registration if Society formed only for benefit of Christians Community

Fact that assessee society was formed only for benefit of Christians community definitely could form a ground for denial of its registration

In as much as its income is liable to be excluded for consideration under sub section 11 and 12 where nothing had been brought on record to show that assessee-society had undertaken any charitable project in a wholly impartisan manner that is, devoid of any consideration as to religion, either in terms of people employed or support provided or served thereby; thus, assessee’s appeal for registration as a charitable institution under section 12AA was to be rejected

IN THE ITAT PATNA BENCH

Buxar Diocesan Society v. Commissioner of Income-tax -1, Patna

A.D. JAIN, JUDICIAL MEMBER
AND SANJAY ARORA, ACCOUNTANT MEMBER
IT APPEAL NO. 104 (PATNA) OF 2012

JULY  20, 2015

Shikesh Jha for the Appellant. Rishi Raj Sinha for the Respondent.

ORDER

Sanjay Arora, Accountant Member – This is an Appeal by the Assessee agitating the Order u/s.12AA(b)(ii) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 23.05.2012 by the Commissioner of Income Tax-I, Patna (‘CIT’ for short), rejecting the assessee’s appeal for registration as a charitable institution u/s.12AA of the Act.

2. The controversy involved in the instant case is the maintainability or otherwise in law of the denial of registration as envisaged section 12A  r/w s.12AA of the Act to the assessee-society vide the impugned order.

3. The brief facts of the case are that the assessee, a society registered under the Societies Registration Act, 1860, applied for registration u/s.12A(1)(aa) on 25.11.2011. The ld. CIT, i.e., the competent authority under the Act, in view of clauses 3(i), 3(ii) and 3(vii) of the assessee society’s ‘Aims’ and ‘Objects’, as well as the fact that its membership, governed by clause 4 of its Charter, is restricted to Priests incardinated in the Diocese of Buxar and member of the religious order/congregations, held it to be established or formed for the benefit of a particular religious community, i.e., the Christian community, so that section 13(1)(b) of the Act, which reads as under, is attracted and, accordingly, denied registration, leading to the present appeal by the assessee:

’13. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof—

(a) ** ** **
(b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste.’ [emphasis supplied]

4. We have heard the parties, and perused the material on record.

4.1 The assessee’s case as made before us, was that it is both, i.e., a charitable as well as a religious society (institution). As such, even if the condition of section 13(1)(b) stands satisfied per se, the same would not be applicable in-as-much as it is a composite Trust, bearing both a charitable as well as a religious character. That is, the same would not disqualify it u/s.13(1)(b) of the Act, which is applicable only to a charitable trust/institution and, consequently, operate to deny it registration u/s.12AA of the Act. Toward the same, it relies on the decision in the case of CIT v. Barkete Saifiyah Society [1995] 213 ITR 492 (Guj), besides others by the Tribunal.

The first thing, therefore, that we ought to and, thus, consider is the character of the assessee-society and, toward which we may reproduce its ‘Object’ clause, as under:

‘ The objects for which the Society is established is to perform works of charity, social, moral, spiritual and corporal which include education, relief to the poor, medical relief through health care and any other objects of general utility and to that end:

i. To establish churches, convents, presbyteries and other religious. educational and charitable institutions of its choice for the service and welfare of the people in general and of Christians in particular and to provide for their support, maintenance and development for carrying out the purposes of the society.
ii. To provide for the proper Christian education and vocational training of the children and youth of the Christian Community and to the extent possible also of other scholars who resort to its institutions, and for that purpose to establish, administer and maintain schools, colleges, and other educational and vocational and professional-training institutions.
iii. To organize and support education and training of children and adults, both formal and non-formal, and thereby to promote a healthy human, cultural, social, political and economic environment in society.
iv. To render medical assistance to the needy through public health centers, health care centers, hospitals and dispensaries.
v. To establish homes and welfare centers for the aged, sick and destitute and conduct and promote social welfare programmes for the needy irrespective of their caste creed, race or social status.
vi. To educate, maintain and support at the discretion of the Governing Body those engaged for the works of the Society in its own institutions or other institutions and to provide such personnel with residential accommodation, and equip them suitably with necessary facilities for their work and study and to maintain them during the period of training either free of cost or for a consideration.
vii. To provide for the training and formation of priests; religious and lay persons for the more effective service of the Christian Community and of the people at large especially those belonging to the weaker sections of the society.
viii. To diffuse useful knowledge and information, human values and ideals through the medium of newspapers, films, journal, bulletins, audio visuals and other means of communication.
ix. To organize, promote, contribute and assist in social, economic, and cultural programmes aimed at promotion of social, religious, cultural and economic life and welfare of all persons and especially of the weaker sections of the Society.
x. To initiate, promote, and support projects and programmes aimed at preservation and promotion of a healthy secular, human and ecological environment.
xi. To render assistance to victims of natural calamities such as earthquakes, famine, floods, fire, epidemics, etc., irrespective of caste or creed.
xii. To promote, alter, extend, modify or terminate any social and development services to promote the establishment of a just, fair, and caring social order and for the alleviation and eradication of poverty.
xiii. To organize conferences, meetings, seminars, fees, etc., for promoting and furthering the aims of the society.
xiv. To collaborate with the government and voluntary agencies in the development, promotion and execution of charitable social economic and humanitarian.
xv. To establish, promote, or assist in the establishment and promotion of other societies and voluntary organizations with the same or similar charitable objectives as the society.
xvi. To collaborate with and assist other voluntary agencies in formulation and preparation of development projects and programmes and help in implementation and evaluation of the same.
xvii. To cooperate with national and international societies/ agencies for furthering tile attainment of the charitable objects of the Society.
xvii. To do all things that may be incidental, conducive, expedient or necessary for the better attainment of the purposes of the society. [emphasis, ours]
It is well settled that for the purpose of ascertaining or determining the nature or the character of a trust/institution, it is the predominant object or purpose governing its formation or establishment that is to be seen (refer: Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC)). We are unable to, on both a cursory and even a careful reading of the same, see as to how the assessee could be said to be a religious institution or society, or even partly so. In fact, each of the defining elements of a ‘charitable purpose’, i.e., for which it is established, as stated in its preamble, find mention in the definition of the term ‘charitable purpose’, inclusively defined u/s.2(15) of the Act, i.e., as obtaining at the relevant time. The Hon’ble Courts have explained ‘religious purpose’ to be one relating to religion, which would encompass objects relating to observance of rituals or ceremonies, propagation of tenets of the religion and other allied activities of the religious community. There is nothing in the object clause to suggest propagation of Christianity or the Christian religion, much less expressed in a manner so as to bestow upon it a religious character, but only to serve the said community in particular. Even if we were to consider the three object clauses which stand singled out and impugned by the ld. CIT, the same nowhere speak of or advert to any object of a religious purpose but only of a charitable purpose. Discussing each of the said clauses afore-referred, the first, Clause 3(i), speaks of establishment of different institutions for the service and welfare of the people, i.e., states of the establishment of different institutions through the modality or instrumentality of which it intends to operate for the welfare of the society or serve the people. Clause 3(ii) speaks of educational and vocational training through the establishment and administration of different types of educational institutions, including professional training institute, i.e., concerns education. Clause 3(vii) speaks of training of different functionaries for the service of the community at large and especially people belonging to the weaker sections of the society. None of these or the other clauses of the object clause of its Memorandum could be regarded as religious, if we are not to include charity, education, medical relief, relief to the poor, or otherwise being of social, moral or spiritual service/benefit to the community at large as being a religious purpose. The same would then be of no consequence in-as-much as charitable and religious purposes would become completely intermingled or intertwined, obliterating their definite purport and independent existence, which gets rendered as of no relevance or avail. True, one can discern a sprinkling or undertone of a religious purpose, as where the object clause/s speaks of establishment of a Church, Presbytery or other religious institution. Firstly, however, the same is again only for the ‘service’ and ‘welfare’ of the people, and in that sense charitable in nature. Again, being of moral or spiritual service, or the moral or spiritual upliftment of the people – which would though assume a religious color; there being admittedly areas of overlap between charitable and religious purposes, would definitely qualify to be regarded as a work of a charitable nature. To the extent the two coincide, the assessee-society would only be considered as being of a charitable nature, i.e., including within its field areas which could also be regarded as religious. As afore-stated, it is in any case the principal or the predominant object or purpose that the institution is formed to serve, which would define its character and which we find as charitable in all its different facets. We, accordingly, find little scope for the application of the decision in the case ofBarkete Saifiyah Society (supra) in the facts and circumstances of the case. The said decision in fact cannot be said to represent the correct law, as clarified in CIT v. Dawoodi Bohra Jamat [2014] 364 ITR 31 (SC). It was held by the Apex Court that s. 13(1)(b) is equally applicable to a composite trust, and what is intended is to exclude from exemption of s. 11 is a trust which is established for the benefit of any particular religious community or caste (pg. 51, p.45).

4.2 Though subsumed in its argument, so that it does not lie in its mouth to contend to the contrary, we may yet consider, next, the validity of the charge on the assessee of it being formed for the benefit of a particular religious community, attracting section 13(1)(b) of the Act. We find the said intent to permeate the assessee’s objects, nay, Charter. The assessee-society; its name; condition of its membership; its objects, all read in conjunction and in harmony, clearly bring out the intent to serve the Christian community in preference to others, who are though not excluded, i.e., to the Christian community as being the intended beneficiary. It is nobody’s case that s. 13(1)(b) implies, or that the said provision mandates a total exclusion of all other categories, i.e., other than the preferred religious community. The word ‘only’ cannot be imported in s. 13(1)(b), i.e., prior to the words ‘for the benefit’ therein. Casus omissus cannot be lightly inferred (refer:Padmasundara Rao (Decd.) v. State of Tamil Nadu [2002] 255 ITR 147 (SC)). Then, again, what prevents a trust/institution, expressly for the benefit of a particular religious community, in-as-much as it seeks to protect, serve and promote its interest, cater only thereto. That is, it cannot be said to violate the terms or the mandate of its charter when it, through its projects, programs or other undertakings, serve only the interest of the said particular community, even as other communities are not excluded. People drawn from a cross-section of the society, affiliated by a bond of religion, as its beneficiaries would not adversely impact or detract from its public character (Ahmedabad Rana Caste Association v. CIT[1971] 82 ITR 704 (SC)). The word ‘only’ thus is not required in its Memorandum, and the words ‘in particular’ serve the desired purpose well. Its membership inures only to and the management vests only in a restricted category of Christians, i.e., belonging to a particular religious Order. It is to serve the said community, which is only a particular religious community, that the assessee-society is formed and is being administered. Further, it could be that, in reality, the society runs a school, for example, the majority students of which are non-christians. That, to our mind, would be besides the point. What is of relevance, and paramount, is that the assessee-society has the relevant power or mandate per its charter. That it may not exercise it, or may choose not to, is another matter (refer: Delhi Stock Exchange Association Ltd. v. CIT [1997] 225 ITR 235 (SC)). It is fully open for the assessee society to either not admit non-christians or admit them in a minority in-as-much as it is expressed to work for the benefit of the Christians in particular. The expression, ‘in particular’ in this context came for the consideration by the Apex Court in CIT v. Kamla Town Trust [1996] 217 ITR 699 (SC). In the facts of that case the object of the trust included construction of houses for workmen in general and, in particular, for the workmen, staff and other employees of the settlor company. The Hon’ble Court observed that though the provision relating to workmen in general did constitute a charitable object, the words ‘in particular for the workmen of the company’ negatived its public character, so that the trust could not be considered to have been established wholly for charitable purposes. What, we may again clarify, we are concerned with is the intent as expressed in the Charter, i.e., in terms of the primary purpose and the predominant object for which the institution is established, including the manner of its administration, so as to determine if it reveals a clear mandate to undertake charitable works with a view to benefit a particular religious community or not, a finding of fact, i.e., principally, the answer to which in the present case is an emphatic yes.

4.3 We may finally consider the issue as to if the assessee could be denied registration in view of attraction of section 13(1)(b) of the Act, i.e., considering that the same is expressed to preclude sections 11 and 12 of the Act. We consider it as so in-as-much as the same forms an abiding or defining feature of the applicant, in which case to what effect or purpose, one may ask, is the registration, i.e., if not toward grant of exemption u/ss. 11 and 12 of the Act, as observed by the tribunal in International School of Human Resources and Social Welfare Society (in ITA Nos. 72/Pat/2011 & 99/Pat/2012 dated 20.07.2015):

‘What, we are unable to comprehend, effect or purpose the registration would have where, notwithstanding the same, no benefit u/ss. 11 and 12 can be allowed in view of an abiding feature of the applicant’s constitution or its’ inherent nature.’

This aspect of the matter stands also gets support from the decision in the case of Dawoodi Bohra Jamat (supra), wherein the Hon’ble Court considered applicability or otherwise of s. 13(1)(b) as a valid ground while considering the issue of registration u/s. 12AA of the Act in-as-much as registration is a pre-requisite for availing the benefit of ss. 11 & 12 (pg. 41). In the facts of the case, we have found the assessee society to be formed for the benefit of the Christians community and which therefore definitely could form a ground for denial of its registration in-as-much as its income is liable to be excluded for consideration u/ss. 11 and 12 of the Act. Nothing has been brought on record to exhibit, or otherwise any case made out of, the assessee-society undertaking any (charitable) project in a wholly impartisan manner, i.e., devoid of any consideration as to religion, either in terms of the people employed; provided support (refer Cl. 3(vi)), or served thereby.

4.4 We, accordingly, in view of the foregoing, find little merit in the assessee’s case.

5. In the result, the assessee’s appeal is dismissed.

Deduction u/s 80P(2)(a)(i)

INCOME TAX OFFICER vs.BHAMHANATH CREDIT SOUHARDA SAHAKARI LTD.

PANAJI TRIBUNAL

N.S. SAINI, AM & GEORGE MATHAN, JM.

ITA No. 300/PNJ/2015

Oct 5, 2015

(2015) 45 CCH 0101 PanajiTrib

Legislation Referred to

Section 80P(2)(a)(i), 80P(4)

Case pertains to

Asst. Year 2012-13

Decision in favour of:

Assessee

Deduction u/s 80P(2)(a)(i)—Deduction in respect of income of co-operative societies—Assessee society had filed return of income after claiming deduction u/s 80P(2)(a)(i) on grounds that it was a Cooperative Society carrying on the business of banking or providing credit facilities to its members—Assessees claim of deduction u/s 80P(2)(a)(i) was rejected by AO on the ground that the assessee was a cooperative bank, and hence, not entitled to claim deduction by virtue of section 80P(4)—CIT hadallowed assessees claim—Held, By virtue of introduction of clause(4) in section 80P, the ‘Co-operative banks’ have been taken out of the purview of exemption granted u/s 80P whereas other entities/cooperative societies specified in other clauses of section 80P continue to enjoy such exemptions— Karnataka High Court in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot had also held that   as the assessee was not a cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve bank of India to carry on business , it was not a Cooperative Bank—Thus, income earned by cooperative society from its act of lending money to members shall be eligible for exemption u/s 80P(2)(a)(i)—Bangalore Tribunal bench while deciding the issue in favour of the assessees has held that the cooperative societies are not doing banking business and therefore, the provisions of section 80P(4) are not applicable to them—Panjim Tribunal bench had also held that where the assessee cooperative society engaged in providing credit facilities to its members and not accepting deposit from public as evidenced from their bye laws or the cooperative societies accepting other cooperative societies as members have held that those cooperative societies are entitles to the benefit of deduction u/s 80P(2)(a)(i)—Thus, co-operative society registered as cooperative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(2)(a)(i)—CIT (A) had allowed the claim of deduction u/s 80P(2)(a)(i) by following the decisions of the Karnataka High Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot and in the case of General Insurance Employees Cooperative Credit Society Ltd—Revenue appeal dismissed.

Held

By virtue of introduction of clause(4) in sec.80P, the ‘Co-operative banks’ have been taken out of the purview of exemption granted under sec.80P whereas other entities/cooperative societies specified in other clauses of sec.80P continue to enjoy such exemptions. The Explanation to sec.80P provides that “co- operative bank” and “Primary agricultural credit society” shall have the meanings respectively assigned to them in Part V of the banking Regulation Act, 1949 (10 of 1949).

The appellants have relied on the decision in the cases of (i)Karnataka High Court (Dharwad Bench )0rder in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ITA 5006/2013 dt 5th Feb 2014 wherein apart from the deciding on section 263 it has also held, on section 80P that " As the assessee is not a cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve bank of India to carry on business , it was not a Cooperative Bank. In all these cases it was held that income earned by cooperative society from its act of lending money to members shall be eligible for exemption under section 80P(2)(a)(i) of the Act.

Various ITATs across the country. The jurisdictional ITAT of Bangalore bench in a number of cases while deciding the issue in favour of the assessees has held that the cooperative societies are not doing banking business and therefore, the provisions of section 80P(4) are not applicable to them. The jurisdictional ITAT Panjim bench has also in a number of cases where the assessee cooperative society engaged in providing credit facilities to its members and not accepting deposit from public as evidenced from their bye laws or the cooperative societies accepting other cooperative societies as members have held that those cooperative societies are entitles to the benefit of deduction u/s 80P(2)(a)(i).

High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, which was followed in the cases of General Insurance Employees Cooperative Credit Society Ltd, and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014. Supra, has clearly held that a co-operative society registered as cooperative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(2)(a)(i).

Therefore, the intention of the legislature is clear. If a Co- operative Bank is exclusively carrying on banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co- operative agricultural and rural development bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a. primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a Co-operative bank which is exclusively carrying on banking business i.e. the purport of this amendment. Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve Bank of India to carry on business, it is not a Co-operative bank. It is a Cooperative society which also carries on the business of lending money to its members which is covered under Section 80P{2)(a}(i) i.e. carrying on the business of banking for providing credit facilities to its members.

 The CIT (A) had allowed the claim of deduction u/s 80P(2)(a)(i) by following the decisionsof the Karnataka High Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot and in the case of General Insurance Employees Cooperative Credit Society Ltd. No contrary decision could be cited by the revenue. Tribunal had not found any good and justifiable reason to interfere with the order of the CIT (A), which was hereby confirmed and the ground of appeal of the Revenue was dismissed.In the result, appeal of the Revenue is dismissed.

(Para 5,6,)

Conclusion

Where assessee was not a cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve bank of India to carry on business , it was not a Cooperative Bank and thus, income earned by cooperative society from its act of lending money to members shall be eligible for exemption u/s 80P(2)(a)(i).

In favour of

Assessee

Cases Referred to

CIT vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ITA 5006/2013 dt 5th Feb 2014 Mysore & Others vs. General Insurance Employees Cooperative Credit Society Ltd ITA No 273/2013 dt 27.6.2014Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014Taramani Manila Coop Credit Society vs. ITO Ward 1(2), Belgaum ITA 229 & 230/PNJ/2013dt 28.2.2014ITO vs. Yeshwantpur Credit Coop Society Ltd ITA No. 717/Bang/2011 Dt 11.4.2012CIT vs. Jafari Mom in Vikas Coop Credit Society Ltd ITA 442, 443 & 863 of 2013

Counsel appeared:

U.G. Ammangi – CA for the Assessee.: Siddappaji R.N. - DR for the Department

N. S. SAINI, AM.

1. This is an appeal filed by the Revenue against the order of Commissioner of Income Tax (Appeals), Belagavi, dated 11/05/2015.

2. The sole issue involved in this appeal is that the Commissioner of Income Tax (Appeals) erred in allowing deduction to the assessee under sec. 80P(2)(a)(i) of the Income Tax Act, 1961.

3. The facts of the case are that the assessee filed return of income after claiming deduction under sec. 80P(2)(a)(i) of the Act for Rs. 76,30,025/-. It was claimed that the society is entitled to deduction under sec. 80P(2)(a)(i) as it was a Cooperative Society carrying on the business of banking or providing credit facilities to its members. However, the claim of the assessee for deduction under sec. 80P(2)(a)(i) was rejected by the Assessing Officer in the order passed under sec. 143(3) of the Act on the ground that the assessee was a cooperative bank, and hence, not entitled to claim deduction by virtue of sec. 80P(4).

4. On appeal, Commissioner of Income Tax (Appeals) allowed the claim of the assessee by observing as under:-

“6. I have carefully perused and considered the aforesaid submission made by the appellant and the contents of the Assessment Order passed by the Assessing Officer. I have also perused the case laws relied upon by the appellant and the Assessing Officer. The main plank of argument of the Assessing Officer has been that after careful analysis of Section 80P(4) read with section 2(24)(viia) of the Income- tax Act, 1961 and Part V of the Banking Regulation Act and the facts of the case, the appellant assessee co-operative credit society is held to be a 'Primary Co-operative Bank' hence is not eligible for deduction under sec.80P(2)(a)(i) in view of the newly inserted provisions of section 80P(4). The assessing Officer has arrived at a conclusion that if a cooperative society satisfies all the three conditions as laid down in the definition as given u/s 5(ccv) in Part V of the Banking Regulation Act, 1949, then it becomes a "primary co-operative bank", and therefore deduction u/s 80P(2)(a)(i) can be denied by virtue of Sec.80P(4).

6.1 The relevant part of Section 80P of the I.T Act under which the appellant co-operative society has claimed deduction reads as under:

"Deduction in respect of Income of co-operative societies.

80P. (1) Where, in the case of an assessee being a co- operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee.

(2) The sums referred to in sub-section (1) shall be the following, namely:-

(a) in the case of co-operative society engaged in –

(i) carrying on the business of banking or providing credit facilities to its members, or

(ii) ------------------------------

the whole of the amount of profits and gains of business attributable to any one or more of such activities:

6.1.1 The clause (4) of sec.80P inserted by the Finance Act,2006 w.e.f. 01-04-2007, which has been invoked by the Assessing Officer to deny deduction to the appellant co-operative society reads as under:

(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank.

Explanation: For the purposes of this sub-section:

(a) “co-operative bank” and “Primary agricultural credit society” shall have the meanings respectively assigned to them in Part V of the banking Regulation Act, 1949 (10 of 1949);

(b) “primary co-operative agricultural and rural development bank” means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.

By virtue of introduction of clause(4) in sec.80P, the ‘Co-operative banks’ have been taken out of the purview of exemption granted under sec.80P whereas other entities/cooperative societies specified in other clauses of sec.80P continue to enjoy such exemptions. The Explanation to sec.80P provides that “co- operative bank” and “Primary agricultural credit society” shall have the meanings respectively assigned to them in Part V of the banking Regulation Act, 1949 (10 of 1949).

6.1.2 Following the provisions of aforesaid Explanation to sec.80P, the Assessing Officer, with a view to find out the definition of “co- operative bank” has taken recourse to the relevant provisions of The Banking Regulation Act, 1949.

Sl. No.	Category	Clause/section of the Banking Regulation Act, 1949	Definition
1	2	3	4
1	Co- operative Bank	Clause (cci) of section 5	Co-operative Bank means a State Co- operative Bank, a Central Co-operative Bank and a Primary co-operative Bank
2	Primary Co- operative Bank	Clause (ccv) of Section 5	Primary Co-operative bank means a Co- operative Society other than a primary agricultural credit society — (1) the primary object or principal business of which is the transaction of banking business; (2) the paid up share capital and reserves of which are not less than one lakhs of rupees; and (3) the bye- laws of which do not permit admission of any other co-operative society as a member.
3	Primary Credit Society	Clause (ccvi) of section 5	Primary Co-operative Society means a co-operative society other than a primary agricultural credit society —(1) the primary object or principal business of which is the transaction of banking business; (2) the paid up share capital and reserves of which are not less than one lakhs of rupees; and (3) the bye- laws of which do not permit admission of any other co-operative society as a member.

The Assessing Officer has thus mentioned that the ‘Co-operative Bank’ includes ‘Primary Co-operative Bank’ and ‘Primary Co-operative Bank’ means Co-operative Society — (1) the primary object or principal business of which is the transaction of banking business; (2) the paid up share capital and reserves of which are not less than one lakhs of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member.

6.1.3 The Assessing Officer has concluded that the appellant co- operative society satisfies all the above mentioned three conditions and therefore it is held to be a ‘Primary Cooperative Bank’ and hence its claim of deduction u/s 80P(2)(a)(i) has been denied u/s 80P(4). Before arriving at this conclusion the Assessing Officer has also referred to the newly inserted provisions of Sec.2(24)(viia), inserted by the Finance Act,2006 w.e.f. 01-04-2007 which reads as under:

“(24) “Income” includes -

(viia) The profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;”

The Assessing Officer has contended that the purpose of introduction of these provisions was to tax the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members. The Assessing Officer has also referred to the definition of ‘Banking’ as provided in sec.5(b) of the Banking Regulation Act,1949 which reads as under:

“(b)”Banking” means the accepting for the purpose of lending or investment, of deposit of money from public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.”

The A.O has come to the conclusion that the appellant co- operative society is doing banking business as ‘providing credit facilities to members’ is akin to banking business and since the membership is open to public, it is accepting deposits from public which can be withdrawn by any one of the specified means within the meaning of above mentioned definition of banking.

6.1.4. Similar issue is also involved in a number of cases pertaining to credit co-operative societies which are also in appeal and they have all contested the action of the AO is invoking the provisions of Sec. 80P(4) in their respective cases on the basis of various contentions discussed herein below.

6.2 The appellants on the other hand has challenged the interpretation of Sections 80P(2), 80P(4) and relevant provision of the Banking Regulation Act, 1949 as adopted by the A.O in his Assessment Order. The appellants have also contended that the intention of the legislature as revealed by the speech of the Finance Minister was not to deny deduction to all the cooperative societies by introduction of sec. 80P(4).

6.2.1 It has also been a contention of the appellants that to fulfil the first condition for becoming a ‘Primary Co-operative Bank’, the society should carry on the business of banking as per the definition of ‘banking’ in Banking Regulation Act, 1949. The appellants have also contended that the respective appellant assessee society registered under the Karnataka Cooperative Societies Act, 1959 is carrying on the business of providing credit facility to its members and is not allowed to issue cheques, drafts, pay orders, etc. As per the Banking Regulation Act, permission of Reserve Bank of India is required to issue cheques, drafts and pay orders, etc. and the respective appellant has not obtained any such license/permission from the Reserve Bank of India to carry on the business of banking.

6.2.2 The appellant cooperative societies have contended that the explanatory note to memorandum explaining the provisions in the Finance Bill, 2006 wherein the Hon'ble Finance Minister explains the reasons for withdrawal of tax benefits available to certain co-operative banks, the relevant portion of the said notes is reproduced hereinbelow:

"Section 80P, inter alia, provides for a deduction from the total income of the cooperative societies engaged in the business of banking or providing credit facilities to its members, or business of 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.

The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefits. It is, therefore, proposed to amend section 80P by inserting a new sub-section (4) so as to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than primary credit society or a primary co-operative agricultural and rural development bank. It is also proposed to define the expressions "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank".

It is also proposed to insert a new sub-clause (viia) in clause (24) of the section 2 so as 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".

This amendment will take effect from 1st April, 2007 and will, accordingly, apply in relation to the assessment year 2007-08 and subsequent years."

The appellants have thus contended that it was clear that the intention of the Finance Minister was to tax 'co-operative banks' only.

6.2.3 The appellants have relied on the decision in the cases of (i)Karnataka High Court (Dharwad Bench )0rder in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ITA 5006/2013 dt 5th Feb 2014 wherein apart from the deciding on section 263 it has also held, on section 80P that " As the assessee is not a cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve bank of India to carry on business , it is not a Cooperative Bank.

(ii) The Karnataka High Court decision in the case of The Commissioner of Income Tax (A), Mysore & Others Vs General Insurance Employees Cooperative Credit Society Ltd ITA No 273/2013 dt 27.6.2014.

(iii) Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014.

(iv) CIT Vs Jafari Mom in Vikas Coop Credit Society Ltd ITA 442,443 & 863 of 2013 of Gujarat High Court.

(v) Taramani Manila Coop Credit Society Vs ITO Ward 1(2), Belgaum ITA 229 & 230/PNJ/2013dt 28.2.2014

(vi) ITAT Bangalore B Bench decision vide ITA No 1069/Bang/2010 for the Asst Year 2007-08 of M/s Bangalore Commercial Transport Coop Society Ltd, Bangalore.

(vii) ITO Vs Yeshwantpur Credit Coop Society Ltd ITA No. 717/Bang/2011 Dt 11.4.2012 rendered by ITAT A Bench, Bangalore.

(viii) M/s Jayalakshmi Mahila Vividodeshagala Souharada Sahakari Ltd & Another in ITA No 01 to 03/PNJ/2012 and ITA 04 to 06/PNJ/2012.

The appellants have claimed that in all these cases it was held that income earned by cooperative society from its act of lending money to members shall be eligible for exemption under section 80P(2)(a)(i) of the Act.

7. The important aspects relating to the issues in this case have been considered and decided by various ITATs across the country. The jurisdictional ITAT of Bangalore bench in a number of cases while deciding the issue in favour of the assessees has held that the cooperative societies are not doing banking business and therefore, the provisions of section 80P(4) are not applicable to them. The jurisdictional ITAT Panjim bench has also in a number of cases where the assessee cooperative society engaged in providing credit facilities to its members and not accepting deposit from public as evidenced from their bye laws or the cooperative societies accepting other cooperative societies as members have held that those cooperative societies are entitles to the benefit of deduction u/s 80P(2)(a)(i) of the I.T. Act.

8. Now, after the Gujarat High Court in the case of CIT Vs Jafari Mom in Vikas Coop Credit Society Ltd ITA 442, 443 & 863 of 2013 deciding the issue in favour of the assessee, the Karnataka High Court in the cases of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot ITA 5006/2013 dt 5th Feb 2014, Commissioner of Income Tax (A), Mysore & Others Vs General Insurance Employees Cooperative Credit Society Ltd ITA No 273/2013 dt 27.6.2014 and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014 has also decided the issue in favour of the assessee.

8.1 Now a question which may be asked in the case of the appellant being a ‘Souharda’ is; whether, ‘Souharda’ is a ‘co operative society’ within the meaning of section 80P/2(19) of the I.T. Act.? Since the deduction u/s80P of the Income Tax Act, 1961 is available to the co-operative societies, it is imperative to go into the definition of “Co-operative society” which has been specifically defined in Section 2(19) of the Act. Section 2(19) reads as follows:

“co-operative society” means a co-operative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies;

This definition has two parts:

“co-operative society” means

(1) a co-operative society

(2) registered

(a) under the Co-operative Societies Act, 1912 (2 of 1912), or

(b) under any other law for the time being in force in any State for the registration of cooperative societies;

8.1.1 As far as first part of the definition given in section 2(19) is concerned, a Souharda is a society which is cooperative in nature and thus it is a co- operative society. The dictionary meaning of ‘society’ as per Oxford English Dictionary is:

‘An association or body of people united by a common aim, interest, belief, profession etc.’

The Webester Dictionary gives the meaning of ‘society’ as;

‘A voluntary association of individuals for common ends; especially: an organized group working together or periodically meeting because of common interests, beliefs, or profession’

Going by the bye laws of the Souhardas and the provisions of The Karnataka Souharda Sahakari Act, 1997, it is clear that the Souhardas are societies which are cooperative in nature. They are registered under an Act which provides for recognition, encouragement and voluntary formation of co-operatives based on self help, mutual aid, wholly owned, managed and controlled by members as accountable, competitive, self reliant and economic enterprises guided by co-operative principles and matters connected therewith. It is also worth noting that the word Co-operative has been used on innumerable occasions in The Karnataka Souharda Sahakari Act, 1997. A few examples of which are:

a. Section 4(1) - Co-operatives which may be registered:- No Co-operative shall be registered under this Act, Unless

b. Section 6(1) - Certificate of Registration:- Where a co- operative is registered or deemed to be registered, the certificate of registration duly signed and sealed by the Registrar shall be conclusive evidence that the co-operative mentioned therein, is a cooperative registered or deemed to be registered under this Act.

c. Section 10(1) - Bye Laws - Subject to the provisions of this Act or rules, every cooperative shall function in accordance with its bye-laws which as far as possible shall adhere to the co-operative principles.

d. Section 32(1) - Maintenance of records, Accounts, etc:- Every co-operative shall maintain at its registered office the following, namely:-

e. Section 33(1) - Audit :- Every Cooperative shall get its accounts audited atleast once a year

f. Section 35(1) - Inquiry:-The Registrar may conduct an inquiry or cause an inquiry to be conducted expeditiously into any specific matter touching the constitution, management, working or financial conditions of a Cooperative.

g. Section 47(1) - Winding up of a Co-operative :- On an application made by not less than one-fifth of the members of a co-operative to wind up the affairs of the said cooperative, the board shall convene a general- meeting by issuing a notice to each member

8.1.2 Souhardas satisfy the second part of the definition also as they are registered under the Karnataka Souharda Sahakari Act,1997, an Act in force in the state of Karnataka for the registration of Co-operative societies in addition to the co- operative societies Act.

8.1.3 Further, in a number of decisions by the Panjim and Bangalore benches of the ITAT and by the Karnataka High Court, no distinction has been drawn between the Souhardas and the co-operative societies as far as the applicability of the provisions of section 80P of the Act are concerned. Some of such decisions are:

(i) Karnataka High Court (Dharwad Bench )Order in the case of CIT Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot ITA 5006/2013 dt 5th Feb 2014.

(ii) Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014.

(iii) M/s Jayalakshmi Mahila Vividodeshagala Souharada Sahakari Ltd & Another in ITA No 01 to 03/PNJ/2012 and ITA 04 to 06/PNJ/2012.

(iv) DCIT Vs. M/s Dwarka Souharda Credit Sahakari Ltd. ITA No.04-06/PNJ/2012

8.1.4 Thus, it is amply clear that ‘Souhardas’ are ‘co-operative societies’ within the meaning of section 80P of the Income Tax Act,1961. Moreover, it is not the case of the A.O that the appellant Souharda is not a co-operative Society within the meaning of section 80P of the l.T. Act.

8.2 The Hon'ble High Court of Karnataka in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, supra which was followed in the cases of General Insurance Employees Cooperative Credit Society Ltd, and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014. Supra, has clearly held that a co-operative society registered as cooperative society, providing credit facilities to members and not registered with the RBI cannot be denied the exemption under section 80P(2)(a)(i) of the I.T. Act. The operative part of the judgment reads as follows:

"Therefore, the intention of the legislature is clear. If a Co- operative Bank is exclusively carrying on banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co- operative agricultural and rural development bank. The Legislature did not want to deny the said benefits to a primary agricultural credit society or a. primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a Co-operative bank which is exclusively carrying on banking business i.e. the purport of this amendment. Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve Bank of India to carry on business, it is not a Co-operative bank. It is a Cooperative society which also carries on the business of lending money to its members which is covered under Section 80P{2)(a}(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(1) to such society .................................... In the instant case, when the status of the assessee is a Co-operative society and is not a Co-operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under section 80P(2)(a)(i) of the Act is correct. "

8.3 The fact that the appellant is a cooperative society registered under the Karnataka Co operative Societies Act,1959 engaged in providing credit facilities to its members has been clearly mentioned by the A.O in para 3 of his aforesaid assessment order. It is also not the case of the assessing officer that the assessee is registered with the RBI as a bank. In its aforesaid submissions dated 27/10/2014 the appellant has clearly stated with the help of necessary evidence and an affidavit dated 20/10/2014 to this effect that the appellant is a cooperative society registered under the Karnataka Cooperative Societies Act, 1959 engaged in providing credit facilities only to its members and it does not possess any banking licence from the RBI. It is therefore, clear that the appellant's case is squarely covered by the aforesaid decisions of the Jurisdictional High Court of Karnataka in the cases of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha. supra which was followed in the case of General Insurance Employees Cooperative Credit Society Ltd, and Karnataka High Court decision in the case of Vasavi Multipurpose Souharda Sahakari Niyamita, ITA No. 505/2013 dated 27/06/2014 supra. Therefore, in view of the foregoing discussion and respectfully following the aforesaid decisions of the Jurisdictional High Court of Karnataka, it is held that the appellant's case is not covered by section 80P(4) as it is not a 'co-operative bank' and therefore, it is entitled to the exemption u/s 80P(2)(a)(i) of the IT Act.”

5. The Departmental Representative relied on the order of the Assessing Officer. He could not point out any specific error in the above quoted order of the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act by following the decisions of the Hon’ble Karnataka High Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot (supra) and in the case of General Insurance Employees Cooperative Credit Society Ltd. (supra). No contrary decision could be cited by the Departmental Representative. We, therefore, do not find any good and justifiable reason to interfere with the order of the Commissioner of Income Tax (Appeals), which is hereby confirmed and the ground of appeal of the Revenue is dismissed.

6. In the result, appeal of the Revenue is dismissed.

Order Pronounced in the Court at the close of the hearing on Monday, the 05th day of October, 2015 at Goa.