IN HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS 23RD DAY OF OCTOBER, 2017 PRESENT HON BLE MRS. JUSTICE S.SUJATHA AND HON BLE Dr. JUSTICE H. B. PRABHAKARA SASTRY INCOME TAX APPEAL NO.100056/2016 BETWEEN: 1. PRINCIPAL COMMISSIONER OF INCOME TAX, DR.B.R. AMBEDKAR VEEDHI, BELAGAVI. 2. INCOME-TAX OFFICER, WARD-2, BAGALKOT. ... APPELLANTS (BY SRI Y V RAVIRAJ, ADVOCATE) AND M/S. VIJAY SOUHARDA CREDIT SAHAKARI LTD., NIRANI SUGARS ENCLAVE, VIJAY NAGAR, TQ: MUDHOL, DIST: BAGALKOT. ... RESPONDENT (BY SRI SANGRAM S KULKARNI, ADVOCATE) THIS APPEAL IS FILED UNDER SECTION 260A OF INCOME TAX ACT, 1961, PRAYING TO ALLOW APPEAL AND SET ASIDE ORDERS PASSED BY INCOME TAX APPELLATE TRIBUNAL, BENGALURU BENCH C , BENGALURU, IN ITA NO.1162/BANG/2015, DATED 11.12.2015 AND CONFIRM ORDER PASSED BY INCOME TAX OFFICER, WARD-2, BAGALKOT. 2 THIS APPEAL COMING ON FOR ADMISSION THIS DAY, S.SUJATHA J., DELIVERED FOLLOWING: JUDGMENT Revenue has filed this appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred as Act for short). relevant substantial question of law raised is, Whether assessee respondent who is dealing with general public apart from its regular members is entitled for deduction under Section 80P(2) (a) (i) of Income Tax Act, 1961 considering law laid down by Hon ble Apex Court in case of Citizen Co-operative Society Limited V/s Assistant Commissioner of Income Tax, Circle-9(1), Hyderabad in Civil Appeal No.10245 of 2017 dated 08.08.2017 on availability of deduction under Section 80P(2)(a)(i) of Income Tax Act, 1961? 2. respondent-assessee filed its return of income for assessment year 2011-12 declaring total income after claiming deduction under Section 80P(2)(a)(i) of Act. Assessing Authority completed assessment under Section 143(3) of Act holding that respondent-assessee was not entitled to deduction as claimed in view of provisions of Section 80P(4) of Act. appeal filed by respondent-assessee before Commissioner of Income Tax 3 came to be allowed, against which revenue preferred appeal before Income Tax Appellate Tribunal. said appeal came to be dismissed placing reliance on judgment of jurisdictional High Court in case of CIT V/s Shri Biluru Gurubasava Pattina Sahakari Sangha Niyamita, Bagalkot in ITA No.5006/2013 dated 05.02.2014. Aggrieved by same, revenue is in appeal. 3. Learned counsel Sri Y.V.Raviraj appearing for revenue placing reliance on judgment of Hon ble Apex Court in case of Citizen Co-operative Society Limited V/s Assistant Commissioner of Income Tax, Circle-9(1), Hyderabad in Civil Appeal No.10245/2017 disposed of on 08.08.2017 would contend that definition of co-operative bank has to be construed in light of Section 80P(4) of Act, it is contended that activities of respondent- assessee are in nature of commercial transactions with motive to earn maximum returns. Considering activities of respondent-assessee, it can be held to be finance business and not to be construed as activities of co- operative society. Thus, learned counsel submits that 4 Assessing Officer has given clear finding to this effect, which has been totally lost sight of, by Commissioner of Income Tax as well as Income Tax Tribunal to full extent. Thus, learned counsel submits that benefit of Section 80P(4) of Act cannot be extended to respondent- assessee. 4. Learned counsel Sri Sangram S.Kulkarni appearing for respondent-assessee would contend that Division Bench of this Court in case of Shri Basaveshwar Urban Co-operative Credit Society Limited V/s Income Tax Officer in I.T.A.No.100066/2014 disposed of on 21.09.2015, has categorically held that whether co- operative society referred to in clauses (cciv), (ccv) and (ccvi) of Section 56 of Banking Regulation Act, is carrying on activities of co-operative society or co-operative bank requires to be determined by Reserve Bank of India, before authorities could term assessee as co- operative bank, for purpose of Section 80P of Act. In view of same, without there being any determination to said effect by authorities, stand taken by 5 department in this appeal proceedings based on judgment of Hon ble Apex Court in case of Citizen Co-operative Society Limited, supra, is wholly arbitrary and unjustifiable. Thus, learned counsel seeks for rejection of appeal as there is no substantial question of law arising for consideration before this Court. 5. We have heard learned counsel appearing for parties. Perused material on record. 6. sole substantial question of law raised by appellants requires to be answered on determination of crucial question whether respondent-assessee is co- operative society or co-operative bank. In judgment referred to by learned counsel for revenue in Citizen Co-operative Society Limited, supra, categorical finding was given by Assessing Officer that Reserve Bank of India has itself clarified that business of appellant does not amount to that of co-operative bank, appellants therefore would not come within mischief of sub-section (4) of Section 80P. It was held that activities 6 of appellants therein was to cater two distinct categories of people namely, nominal members and ordinary members. activities of assessee therein was construed to be financial business contrary to provisions of Co- operative Societies Act. As such, it was held that, said assessee was not entitled to deduction under Section 80P(2)(a)(i) of Act. 7. cursory view of order impugned herein would indicate that no finding is forthcoming regarding aspect of activities carried out by respondent- assessee, whether as co-operative society or not. In absence of such factual finding, legal propositions rendered by Hon ble Apex Court cannot be applied. As such, we are of considered opinion that matter requires reconsideration by Assessing Officer to effect whether respondent-assessee comes within realm of co-operative society to get entitlement of deduction under Section 80P(2)(a)(i) of Act. 7 8. Hence, we remand matter to Assessing Officer to answer this question and then decide matter in light of judgment of Hon ble Apex Court in case of Citizen Co-operative Society Limited, supra, as expeditiously as possible. Thus, without rendering any finding on substantial question of law raised, order of Income Tax Appellate Tribunal impugned herein, is set aside. We direct Assessing Officer to reconsider matter in light of observations aforesaid. Appeal stands disposed of accordingly. Sd/- JUDGE Sd/- JUDGE CLK/- Principal Commissioner of Income-tax, Belagavi / Income-tax Officer, Ward-2, Bagalkot v. Vijay Souharda Credit Sahakari Ltd