Appeal Details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 8361 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
02-01-2019
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
C
Assessment Year
2011-2012
Appeal Filed On
10-08-2018
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . , .. ', BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI DUVVURU R.L.REDDY, JUDICIAL MEMBER ./ ITA NOS.1136, 1137 & 1138/CHNY/2018 $% % /ASSESSMENT YEARS: 2010-11, 2011-12 & 2014-15 THE INCOME TAX OFFICER, NON-CORPORATE WARD-6(4), ROOM NO.421, BSNL BUILDING, IV FLOOR, 16, GREAMS ROAD, CHENNAI-600 006. VS. M/S.THE RAILWAY EMPLOYEES- CO-OP. CREDIT SOCIETY LTD., P.B.NO.259/LB, ASHOK VIHAR COMPLEX, OLD ZOO ROAD, NEAR CENTRAL RLY. STATION, CHENNAI-600 003. [PAN: AADAT 7303 F ] ( ( /APPELLANT) ( )*( /RESPONDENT) CR OSS OBJECTION NOS.94 & 95 / CHNY /20 18 [IN ITA NOS.1136 & 1137/CHNY/2018] $% % /ASSESSMENT YEARS: 2010-11 & 2011-12 M/S.THE RAILWAY EMPLOYEES- CO-OP. CREDIT SOCIETY LTD., P.B.NO.259/LB, ASHOK VIHAR COMPLEX, OLD ZOO ROAD, NEAR CENTRAL RLY. STATION, CHENNAI-600 003. VS. THE INCOME TAX OFFICER, NON-CORPORATE WARD-6(4), ROOM NO.421, BSNL BUILDING, IV FLOOR, 16, GREAMS ROAD, CHENNAI-600 006. [PAN: AADAT 7303 F ] ( ( /APPELLANT) ( )*( /RESPONDENT) ASSESSEE BY : MRS.S.SRINIRANJANI, ADV. DEPARTMENT BY : MR.R.CLEMENT RAMESH KUMAR, ADDL.CIT + /DATE OF HEARING : 05.12.2018 + /DATE OF PRONOUNCEMENT : 02.01.2019 ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 2 -: / O R D E R PER BENCH : ALL THE THREE APPEALS FILED BY THE REVENUE ARE DIRE CTED AGAINST THE DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI, ALL DATED 04.01.2018, RELEVANT TO THE AYS 2010-11, 2011 -12 & 2014-15. THE ASSESSEE ALSO FILED CROSS OBJECTIONS FOR THE AYS 20 10-11 & 2011-12. THE ONLY EFFECTIVE GROUND RAISED IN ALL THE THREE APPEALS FI LED BY THE REVENUE IS THAT THE LD.CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON ACCOUNT OF DEDUCTION CLAIMED UNDER SECTION 80P O F THE INCOME TAX ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS CO-OPERATIVE SOCIETY AND REGISTERED UNDER MULTI-STATE COOPERATIVE SOCIETIES ACT, 2002. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE FOR THE AYS 2010-11, 2011-12 AND 2014-15, THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS MADE DEPOSITS WITH NON-COOPERATIVE BAN KS, BESIDES, IT WAS MAINTAINING SB ACCOUNTS ALSO WITH THESE BANKS. THE ASSESSEE HAS CLAIMED INTEREST INCOMES FROM THE ABOVE INVESTMENTS AS WELL AS FROM THE SB ACCOUNTS AS DEDUCTION U/S.80P OF THE ACT ALONG WITH ITS PROF ITS FROM THE BUSINESS OF BANKING OR PROVIDING FACILITIES TO ITS MEMBERS. IT WAS ALSO NOTICED THAT THE ASSESSEE DID NOT FILE ANY RETURN PRIOR TO AY 2012-1 3. AS THE ABOVE INTEREST INCOMES ARE NOT COVERED BY EITHER SEC.80P(2)(A)(1) OR SEC.80P(2)(D) OF THE INCOME TAX ACT, A NOTICE U/S.148 WAS ISSUED ON 30.0 3.2015 CALLING FOR RETURN OF INCOME FOR THE AY 2010-11. IN RESPONSE THE NOTI CE ISSUED U/S.148, THE ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 3 -: ASSESSEE FILED ITS RETURN OF INCOME ON 26.06.2015 F OR THE AY 2010-11 ADMITTING NIL INCOME. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FOLLOWING THE VARIOUS DECISIONS, THE AO HAS HELD THAT AS THE INTEREST INCOME ON DEPOSITS AND IN THE SB ACCOUNTS WITH NON-COOPERATIVE BANKS I S NOT COVERED BY SEC.80P OF THE ACT, THE CLAIM MADE BY THE ASSESSEE AS EXEMP T U/S.80P IS NOT CORRECT AND DISALLOWED THE ENTIRE CLAIM OF THE ASSESSEE AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE CARRIED THE MATTER ON A PPEAL BEFORE THE LD.CIT(A). 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E AND FOLLOWING THE VARIOUS DECISIONS, THE LD.CIT(A) DELETED THE ADDITI ON MADE BY THE AO. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL BY RELYING ON THE VARIOUS DECISIONS AND THE LD.DR HAS PRAYED THAT THE DELETION MADE BY THE LD.CIT(A) SHOULD BE REVERSED. ON THE OTHER HAND, T HE LD.AR STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A). 5. THE LD.CIT(A) BY RELYING ON THE TRIBUNAL ORDERS IN THE ASSESSEES OWN CASE, PASSED ORDER IN FAVOUR OF THE ASSESSEE FOR TH E AYS 2008-09, 2009-10, 2012-13 & 2013-14. THE FINDINGS OF THE TRIBUNAL AR E AS UNDER: 6.1 A CO-OP. CREDIT SOCIETY, THOUGH NOT A CO-OPERA TIVE BANK, BUT ITS NATURE OF BUSINESS IS COUPLED WITH BANKING WITH ITS MEMBERS, AS IT ACCEPTS DEPOSITS FROM AND LENDS THE SAME TO ITS MEM BERS. TO MEET ANY EVENTUALITY, THE ASSESSEE SOCIETY IS REQUIRED TO MA INTAIN SOME LIQUID FUNDS. THAT IS WHY, GENERALLY, CREDIT SOCIETIES USE D TO INVEST IN FIXED DEPOSITS. FURTHERMORE, IN MANY CASES, CREDIT SOCIET IES MAINTAIN OVERDRAFT FACILITY WITH NATIONALIZED BANKS TO AUGM ENT ITS DAY TO DAY BUSINESS NEEDS. FURTHERMORE, TO SOME EXTENT, THE DE POSITS ARE ALSO ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 4 -: REQUIRED TO BE KEPT, OUT OF OPERATIONAL FUNDS, AS P ER EXTANT LEGISLATIVE REQUIREMENTS. NATURALLY, THIS ENTIRE ACTIVITY AND I NCOME ARISING THERE FROM IS NOTHING BUT ATTRIBUTABLE TO BUSINESS OF BAN KING. SECTION 80P READS AS FOLLOWS: [RELEVANT PART ONLY] [DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOC IETIES. 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 AN D SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN S UB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY : (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED I N (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS, OR THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. [NOTE: AS PER SECTION 2(19), CO-OPERATIVE SOCIETY MEANS A CO- OPERATIVE SOCIETY REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT, 1912 (2 OF 1912), OR UNDER ANY OTHER LAW FOR THE TIME BE ING IN FORCE IN ANY STATE FOR THE REGISTRATION OF CO-OPERATIVE SOCIETIE S]. 6.2 THE HONBLE SUPREME COURT IN CASE OF THE TOTGA RS COOPERATIVE SALE SOCIETY LTD. V. ITO, [322 ITR 283 (SC)] HELD T HAT, THE WORDS THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINES S IN SECTION 80P(2)(A) EMPHASIZES THAT THE INCOME IN RESPECT OF WHICH DEDUCTION IS SOUGHT MUST CONSTITUTE THE OPERATIONAL INCOME AND N OT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY. ACCORDINGLY, IT WAS H ELD THAT INTEREST EARNED BY APPELLANT COOPERATIVE SOCIETY ON SURPLUS FUNDS INVESTED IN SHORT-TERM DEPOSITS WITH BANKS AND IN GOVT. SECURIT IES IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. HOWEVER, IN THE PRESENT CASE, ADMITTEDLY, THE ASSESSEE IS A COOPERATIVE CREDIT SO CIETY AND THE ONLY ACTIVITY OF THE ASSESSEE SOCIETY WAS PROVIDING CRED IT FACILITY TO ITS MEMBERS AND NOWHERE THE ASSESSING OFFICER HAS DISPU TED IN THE ASSESSMENT ORDER THAT THE ASSESSEE SOCIETY HAS ENGA GED IN ANY OTHER ACTIVITY OTHER THAN PROVIDING CREDIT FACILITY TO IT S MEMBERS OR THE ASSESSEE EARNED INCOME OUT OF DEPOSITS OF OTHER ACT IVITIES OR DEPOSITED SURPLUS FUNDS WITH THE BANKS. 6.3 THE ABOVE JUDGEMENT WAS RENDERED ON THE CONTEX T THAT THE INTEREST INCOME ARISING ON THE SURPLUS INVESTED IN SHORT TERM DEPOSITS AND SECURITIES WHICH SURPLUS WAS NOT REQUIRED FOR B USINESS PURPOSES. ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 5 -: THE ASSESSEE, ADMITTEDLY A SALES SOCIETY, MARKETS T HE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT AS SUCH, THE SURPLUS FUNDS AROSE OUT OF THE AMOUNT RETAINED FROM MARKETING THE AGRICULTURAL PRODUCE OF THE MEMBERS AND INVESTED IN SHORT-TERM DEPOSITS/SECURITIES. SUCH AN AMOUNT, WHICH WAS RETA INED BY THE ASSESSEE-SOCIETY, WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE-SHEET ON THE LIABILITY-SIDE. THEREFORE, TO THAT EXTENT, S UCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACT IVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR IN SECTION 80P(2 )(A)(III) OF THE ACT. THEREFORE, LOOKING TO THE FACTS AND CIRCUMSTANCES O F THIS CASE, THE HONBLE SUPREME COURT HAS HELD THAT THE INTEREST IN COME IS SOUGHT TO BE TAXED UNDER SECTION 56 OF THE ACT AND THE SAME W OULD NOT QUALIFY FOR DEDUCTION AS BUSINESS INCOME UNDER SECTION 80P(2)(A )(I) OF THE ACT. FURTHER, IN THE CASE OF TOTGARS, THE HONBLE SUPREM E COURT HAD NOT SPELT OUT ANYTHING WITH REGARD TO OPERATIONAL FUNDS IN THE HANDS OF PURE CO-OPERATIVE CREDIT SOCIETIES AND THE RATIO WAS APP LICABLE TO CO- OPERATIVE SALE SOCIETIES ONLY. 6.4 THE ASSESSEE IN TOTGARS CASE CARRIED ON TWO AC TIVITIES, NAMELY, (I) ACCEPTANCE OF DEPOSIT AND LENDING BY WAY OF DEP OSITS TO THE MEMBERS; AND (II) MARKETING THE AGRICULTURAL PRODUC E; AND THAT THE SURPLUS HAD ARISEN EMPHATICALLY FROM MARKETING OF A GRICULTURAL PRODUCES. WHEREAS, IN THE CASE OF CO-OP. CREDIT SOC IETIES, GENERALLY, IT DOES NOT CARRY OUT ANY ACTIVITY EXCEPT IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THAT THE FUNDS ARE OPERATIONAL FUNDS. T HE ONLY FUND AVAILABLE WITH THE PURE CREDIT SOCIETIES IS DEPOSIT S FROM ITS MEMBERS AND, THUS, THERE ARE NO SURPLUS FUNDS AS SUCH. THER EFORE, WE ARE OF THE CONSIDERED OPINION THAT THE DEPARTMENT HAS BLATANTL Y APPLYING THE ABOVE DECISION OF THE HONBLE SUPREME COURT DISALLO WED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80P OF THE AC T AGAINST THE INCOME FROM INVESTMENTS, WHICH HAS NO APPLICATION T O THE FACTS OF THE PRESENT CASE. 6.5 BY CONSIDERING THE ABOVE CLINCHING DISSIMILARI TIES, THE AHMEDABAD BENCHES OF THE TRIBUNAL HAS CATEGORICALLY HELD IN THE CASE OF JAFARI MOMIN VIKAS CO-OP CREDIT SOCIETY LTD., VS . ITO IN ITA NO.1491/AHD/2012 FOR A.Y. 2009-10 THAT THE RATIO LA ID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP. SALE SOCIETY LTD (SUPRA) CANNOT BE APPLIED TO THE FACTS OF THE CREDI T SOCIETY AND ACCORDINGLY DEDUCTION UNDER SECTION 80P OF THE ACT HAS BEEN ALLOWED AGAINST INTEREST INCOME FROM DEPOSITS WITH NATIONAL IZED BANKSBY OBSERVING AS UNDER: 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE EITHER PARTY, PERUSED THE RELEVANT RECORDS AND ALSO THE CASE LAW ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 6 -: ON WHICH THE LEARNED AR HAD RESERVATION IN IT'S APP LICABLY IN THE CIRCUMSTANCES OF THE ASSESSEE'S CASE. 18. IT WAS THE STAND OF THE LEARNED CIT (A) THAT T HE ENTIRE INCOME WAS NOT EXEMPT AND THAT IT WAS TO BE EXAMINE D AS TO WHETHER THERE WAS ANY INTEREST INCOME ON THE SHORT TERM BANK DEPOSITS AND SECURITIES INCLUDED IN THE TOTAL INCOM E OF THIS SOCIETY WHICH HAS BEEN CLAIMED AS EXEMPT. ACCORDING TO THE CIT (A), A SIMILAR ISSUE TO THAT OF THE PRESENT ONE WAS DEALT WITH BY THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO -OP. SALE SOCIETY LTD V. ITO (SUPRA). THE ISSUE BEFORE THE HO N'BLE COURT FOR DETERMINATION WAS WHETHER INTEREST INCOME ON SH ORT TERM BANK DEPOSITS AND SECURITIES WOULD BE QUALIFIED AS BUSINESS INCOME U/S.80P (2)(A)(I) OF THE ACT. 19. THE ISSUE DEALT WITH BY THE HON'BLE SUPREME CO URT IN THE CASE OF TOTGARS (SUPRA) IS EXTRACTED, FOR APPRECIAT ION OF FACTS, AS UNDER: 'WHAT IS SOUGHT TO BE TAXED UNDER SECTION 56 OF THE ACT IS THE INTEREST INCOME ARISING ON THE SURPLUS INVESTED IN SHORT TERM DEPOSITS AND SECURITIES WHICH SURPLUS WAS NOT REQUI RED FOR BUSINESS PURPOSES? THE ASSESSEE(S) MARKETS THE PROD UCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT. IN THIS CASE, WE ARE CONCERNED WITH THE TAX TREATMENT OF SUCH AMOUNT. SINCE THE FUND CREATED BY SUCH BY SUCH RETE NTION WAS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SECURITIES. THE QUESTION, BEFORE US, I S-WHETHER INTEREST ON SUCH DEPOSITS/SECURITIES, WHICH STRICTL Y SPEAKING ACCRUES TO THE MEMBERS' ACCOUNT, COULD BE TAXED AS BUSINESS INCOME UNDER SECTION 28 OF THE ACT? IN OUR VIEW, SU CH INTEREST INCOME WOULD COME IN THE CATEGORY OF 'INCOME FROM O THER SOURCES', HENCE, SUCH INTEREST INCOME WOULD BE TAXA BLE UNDER SECTION 56 OF THE ACT, AS RIGHTLY HELD BY THE ASSES SING OFFICER...' 19.1 HOWEVER, IN THE PRESENT CASE, ON VERIFICATION OF THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2009, IT W AS OBSERVED THAT THE FIXED DEPOSITS MADE WERE TO MAINTAIN LIQUI DITY AND THAT THERE WAS NO SURPLUS FUNDS WITH THE ASSESSEE AS ATT RIBUTED BY THE REVENUE. HOWEVER, IN REGARD TO THE CASE BEFORE THE HON'BLE SUPREME COURT '(ON PAGE 286) 7............BEFORE THE ASSESSING OF FICER, IT WAS ARGUED BY THE ASSESSEE(S) THAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THE FUNDS WERE NOT REQUIRED IMMEDIATE LY FOR BUSINESS PURPOSES AND, CONSEQUENTLY, SUCH ACT OF IN VESTMENT ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 7 -: CONSTITUTED A BUSINESS ACTIVITY BY A PRUDENT BUSINE SSMAN; THEREFORE, SUCH INTEREST INCOME WAS LIABLE TO BE TA XED UNDER SECTION 28 AND NOT UNDER SECTION 56 OF THE ACT AND, CONSEQUENTLY, THE ASSESSEE(S) WAS ENTITLED TO DEDUCTION UNDER SEC TION 80P(2)(A)(I) OF THE ACT. THE ARGUMENT WAS REJECTED BY THE ASSESSING OFFICER AS ALSO BY THE TRIBUNAL AND THE H IGH COURT, HENCE, THESE CIVIL APPEALS HAVE BEEN FILED BY THE A SSESSEE(S).' 19.2 FROM THE ABOVE, IT EMERGES THAT (A) THAT ASSESSEE (ISSUE BEFORE THE SUPREME COURT) HAD ADMITTED BEFORE THE AO THAT IT HAD INVESTED SURPLUS FUNDS, W HICH WERE NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF ITS BUSINES S, IN SHORT TERM DEPOSITS; (B) THAT THE SURPLUS FUNDS AROSE OUT OF THE AMOUNT RETAINED FROM MARKETING THE AGRICULTURAL PRODUCE OF THE MEMBERS; (C) THAT ASSESSEE CARRIED ON TWO ACTIVITIES, NAMELY , (I) ACCEPTANCE OF DEPOSIT AND LENDING BY WAY OF DEPOSIT S TO THE MEMBERS; AND (II) MARKETING THE AGRICULTURAL PRODUC E; AND (D) THAT THE SURPLUS HAD ARISEN EMPHATICALLY FROM M ARKETING OF AGRICULTURAL PRODUCES. 19.3 IN THE PRESENT CASE UNDER CONSIDERATION, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THER E WERE NO SURPLUS FUNDS. 19.4 WHILE COMPARING THE STATE OF AFFAIRS OF THE P RESENT ASSESSEE WITH THAT ASSESSEE (BEFORE THE SUPREME CO URT), THE FOLLOWING CLINCHING DISSIMILARITIES EMERGE, NAMELY: (1) IN THE CASE OF THE ASSESSEE, THE ENTIRE FUNDS WERE UTILIZE D FOR THE PURPOSES OF BUSINESS AND THAT THERE WERE NO SURPLUS FUNDS; - IN THE CASE OF TOTGARS, IT HAD SURPLUS FUNDS, AS ADMITTED BEFORE THE AO, OUT OF RETAINED AMOUNTS ON MARKETING OF AGR ICULTURAL PRODUCE OF ITS MEMBERS; (2) IN THE CASE OF PRESENT ASSESSEE, IT DID NOT CAR RY OUT ANY ACTIVITY EXCEPT IN PROVIDING CREDIT FACILITIES TO I TS MEMBERS AND THAT THE FUNDS WERE OF OPERATIONAL FUNDS. THE ONLY FUND AVAILABLE WITH THE ASSESSEE WAS DEPOSITS FROM ITS MEMBERS AND , THUS, THERE WAS NO SURPLUS FUNDS AS SUCH; ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 8 -: - IN THE CASE OF TOTGARS, THE HON'BLE SUPREME COURT HAD NOT SPELT OUT ANYTHING WITH REGARD TO OPERATIONAL FUNDS ; 19.5 CONSIDERING THE ABOVE FACTS, WE FIND THAT THE RE IS FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE NOT A CO-OPERATIVE BANK, BUT ITS NATURE OF BUSINESS WAS COUPLED WITH B ANKING WITH ITS MEMBERS, AS IT ACCEPTS DEPOSITS FROM AND LENDS THE SAME TO ITS MEMBERS. TO MEET ANY EVENTUALITY, THE ASSESSEE WAS REQUIRED TO MAINTAIN SOME LIQUID FUNDS. THAT WAS WHY, IT WAS SU BMITTED BY THE ASSESSEE THAT IT HAD INVESTED IN SHORT-TERM DEP OSITS. FURTHERMORE, THE ASSESSEE HAD MAINTAINED OVERDRAFT FACILITY WITH DENA BANK AND THE BALANCE AS AT 31.3.2009 WAS RS.13 ,69,955/- [SOURCE: BALANCE SHEET OF THE ASSESSEE AVAILABLE ON RECORD] 19.6 IN OVERALL CONSIDERATION OF ALL THE ASPECTS, WE ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN BY THE HON 'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP SALE SOCIETY LTD (SUPRA) CANNOT IN ANY WAY COME TO THE RESCUE OF EITHER THE LD. CIT (A) OR THE REVENUE. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE FIRM VIEW THAT THE LEARNED CIT (A) WAS NOT JUSTIFIED IN COMING TO A CONCLUSION THAT THE SUM OF RS.9,40,639/- WAS TO BE TAXED U/S 56 OF THE ACT. IT IS ORDERED ACCORDINGLY. 19.7 BEFORE PARTING WITH, WE WOULD, WITH DUE REGAR DS, LIKE TO RECORD THAT THE RULING OF THE HON'BLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT V. MANEKBANG CO-OP HOUSING SOCIETY LTD REPORTED IN (2012) 22 TAXMANN.COM 220(GUJ) HAS BEEN KEPT IN VIEW WHILE DECIDING THE ISSUE. 20. IN THE RESULT (I) THE REVENUE'S APPEAL IS DISM ISSED; &(II) THE ASSESSEE'S CROSS OBJECTION IS ALLOWED. 6.6 BY FOLLOWING THE JUDGEMENT OF THE HONBLE JURI SDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, IN THE CASE OF S.E., S.E.C. & E. CO. RAILWAYS EMPLOYEES' COOP. CREDIT SOCIETY LTD., KOLK ATA FOR THE ASSESSMENT YEAR 2008-09 IN ITA.NO.1693/K/2012 VIDE ORDER DATED 30.10.2014, AND BY DISTINGUISHING THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE S ALE SOCIETY LTD. V. ITO (SUPRA), THE KOLKATA BENCHES OF THE TRIBUNAL HA S OBSERVED AND HELD AS UNDER: 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BEEN CONTINUOUSLY GRANTED EXEMPTION U/S 80P(2)(A)(I ) OF THE ACT IN THE PRECEDING ASSESSMENT YEARS. THE ITAT, KOLKAT A BENCHES HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AS WELL AS THE ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 9 -: HON'BLE JURISDICTIONAL HIGH COURT. IN THIS VIEW OF THE MATTER THE LD. COUNSEL OF THE ASSESSEE CLAIMED THAT ON THE BAS IS OF THE PRINCIPLE OF CONSISTENCY THE REVENUE CANNOT BE PERM ITTED TO TAKE A DIFFERENT STAND FOR THE CURRENT YEAR. THE LD. COU NSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IN THE SUBSEQUENT Y EAR THE AO HAS HIMSELF ACCEPTED THE ASSESSEE'S PLEA THAT THE I NCOME FROM BANK DEPOSITS HAS TO BE SEEN IN THE LIGHT OF THE CO ST THE ASSESSEE HAS TO INCUR IN GETTING THOSE FUNDS WHICH ARE IN TH E SHAPE OF INTEREST WHICH THE SOCIETY PAYS TO ITS MEMBERS. THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THE APEX COU RT'S DECISION IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LT D. VS. ITO AND THE DECISION OF HON'BLE PATNA HIGH COURT IN THE CAS E OF BIHAR RAJYA SAHKARI BHOOMI BIKASH CO-OP. BANK LTD. VS. CI T RELIED UPON BY THE LD. CIT(A) ARE NOT APPLICABLE TO THE FA CTS OF THE CASE. ACCORDINGLY THE LD. COUNSEL OF THE ASSESSEE CONTEND ED THAT THE ISSUE MAY BE DECIDED IN FAVOUR OF THE ASSESSEE AS I N THE PRECEDING AND SUBSEQUENT YEARS. 6. THE LD. DR, ON THE OTHER HAND, RELIED ON THE OR DERS OF THE AUTHORITIES BELOW. 7. UPON CAREFUL CONSIDERATION, WE FIND THAT THE IS SUE INVOLVED IN THE PRESENT CASE IS WHETHER THE INTERES T INCOME EARNED BY THE ASSESSEE SOCIETY FROM MAKING DEPOSITS IN SHORT TERM DEPOSIT IN BANKS WILL QUALIFY FOR EXEMPTION U/ S 80P(2)(A)(I) OF THE ACT. THE DEPOSITS WHICH ARE MADE BY THE ASSE SSEE ARE OUT OF THE DEPOSIT COLLECTED BY THE ASSESSEE FROM ITS M EMBERS. THE ASSESSEE SOCIETY ALSO PROVIDES LOAN AND CREDIT FACI LITIES TO ITS MEMBERS. WHEN THE FUNDS ARE LYING IDLE THEY ARE INV ESTED IN THE SHORT TERM IN BANK DEPOSITS. IN THIS VIEW OF THE MA TTER WE FIND THAT ASSESSEE'S CONTENTION IS COGENT THAT WHEN THE REAL INCOME FROM THE BANK DEPOSIT HAS TO BE CONSIDERED, IT IS T O BE SEEN IN THE LIGHT OF THE INTEREST WHICH THE ASSESSEE HAS TO PAY TO ITS MEMBERS ON ITS DEPOSITS AND ALSO THE ADMINISTRATION COST OF MAKING SUCH DEPOSITS. THIS CONTENTION OF THE ASSESSEE HAS DULY BEEN ACCEPTED BY THE REVENUE AS IS EMANATING FROM THE ORDER OF AO IN A.YR.2009-10. IN THE SAID ASSESSMENT ORDER THE AO H AD COMPUTED THE GROSS INTEREST ON BANK DEPOSIT AT RS.1 ,24,16,335/-. FROM THIS THE AO HAS ALLOWED THE INTEREST PAID BY T HE ASSESSEE TO ITS MEMBERS AMOUNTING TO RS.1,21,31,880/-. ONLY THE RESULTANT INCOME FROM BANK DEPOSITS AMOUNTING TO RS.2,84,445/ - WAS BROUGHT TO TAX. WE DO NOT FIND ANY REASON AS TO WHY THIS PRINCIPLE SHOULD NOT BE ADOPTED IN THE CURRENT YEAR . IN OUR CONSIDERED OPINION THE LD. CIT(A) HAS ERRED IN NOT ENTERTAINING THIS PLEA OF THE ASSESSEE. ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 10 -: 7.1. WE FURTHER FIND THAT THE ISSUE INVOLVED IS CO VERED IN FAVOUR OF THE ASSESSEE BY CATENA OF DECISIONS OF TH E TRIBUNAL IN ASSESSEE'S OWN CASE. THESE DECISIONS ARE ALSO AFFIR MED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN ITS ORDER FOR A.YR.2005-06. IN THIS ORDER THE HON'BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED ALL THE RELEVANT ORDERS AND HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE MAY GAINFULLY REPRODUCE THE OPERATIVE ORDER OF THE JURISDICTIONAL HIGH COURT WH ICH IS AS UNDER:- 'WE HAVE GONE THROUGH THE IMPUGNED JUDGMENT AND ORD ER OF THE LEARNED TRIBUNAL. IT APPEARS THAT THE POINT INVOLVE D .IS WHETHER INTEREST EARNED OUT OF THE INVESTMENT EARNED BY THE ASSESSEE COOPERATIVE CAN BE TREATED TO BE THE INCOME ARISING OUT OF BUSINESS ACTIVITY OR FROM OTHER SOURCES IN ORDER TO APPLY THE PROVISION OF SECTION 80P(2)(A)(I) OF THE I.T.ACT. I T IS AN UNDISPUTED FACTUAL POSITION THAT SIMILAR ISSUE AROS E BEFORE THE COMMISSIONER OF INCOME TAX (APPEAL) IN RELATION TO THE ASSESSMENT YEAR 1998-99 TO 2002-2003 AS ALSO FOR TH E ASSESSMENT YEAR 1995-96 AND 1996-97. THEN AGAIN IN RELATION TO THE ASSESSMENT YEARS 2003-04 AND 2004-05 A SIMILAR POINT AROSE. THE LEARNED TRIBUNAL IN RELATION TO THE ASSE SSMENT YEARS 1998-99 TO 2002-2003 BY ORDER DATED 10.11.2006 IN I TA NOS. 840 TO 844/KOL/2006 AND AGAIN BY ORDER DATED 29.12. 2006 IN RELATION TO ASSESSMENT YEARS 2003-04 AND 2004-05 HA S DELETED THE DISALLOWANCE MADE IN THOSE ASSESSMENT YEARS AND IT WAS HELD THAT THE INTEREST EARNED BY THE ASSESSEE COOPERATIV E SOCIETY FROM ITS SHORT TERM AND FIXED DEPOSITS WITH THE BANS AND OTHER INSTITUTIONS WERE DISALLOWED ON THE GROUND THAT THI S INCOME WAS NOT BUSINESS PROFIT OF THE ASSESSEE SOCIETY BUT WAS INCOME FROM OTHER SOURCES. THE LD. TRIBUNAL HAS ALSO HELD THAT INCOME FROM INVESTMENT IN BANKS AND OTHER FINANCIAL INSTITUTION S IS THE BUSINESS INCOME OF THE ASSESSEE SOCIETY AND IT IS E LIGIBLE TO GET DEDUCTION UNDER SECTION 80P(2)(A)(I). THE TRIBUNAL HAS OVERRULED THE DECISIONS RENDERED AGAINST THE ASSESS EE IN RELATION TO ASSESSMENT YEARS 1995-96 AND 1996-97 ON THE SAME ISSUE IN RELATION TO SUBSEQUENT YEARS. IT WAS FOUND BY THE TRIBUNAL WHILE AFFIRMING THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEAL) THAT THERE IS N O CHANGE IN THE FACTS AND CIRCUMSTANCES OF THIS CASE AND IT WAS HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 8 0P(2)(A)(I) ON INTEREST ON INVESTMENT AMOUNTING TO RS.1,18,07,6 45/- IN THIS ASSESSMENT YEAR ALSO. SINCE THE TRIBUNAL FOUND THAT THIS DECISION OF THE TRIBUNAL WAS FOLLOWED BY CIT(A) THERE IS NO REASON TO TAKE A DIFFERENT VIEW. ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 11 -: UNDER THESE CIRCUMSTANCES, WE FEEL THAT WHEN THE CO MMISSIONER OF INCOME TAX (A) AS WELL AS THE TRIBUNAL HAS FOLLO WED THE EARLIER UNCHALLENGED DECISION NO QUESTION OF LAW IS INVOLVED IN THIS MATTER. NOTHING HAS BEEN PRODUCED BEFORE US TO SHOW SUBSEQUENT DECISION OF THE TRIBUNAL IN RELATION TO THE ASSESSMENT YEARS 1998-99 TO 2002-03 AND 2003-04 HAVE BEEN CHAL LENGED BY ANY OF THE PARTIES BEFORE THIS COURT. IT IS SUBMITTED BY MR. BHOWMICK THAT THERE HAS BEEN CHALLENGE OF THE DECISION IN RELATION TO ASSESSMENT YEARS 1995-9 6, 1996-97 AND THE SAME IS PENDING BEFORE THIS COURT WE THINK THAT CHALLENGE OF THE ASSESSEE HAS NOW BECOME REDUNDANT AS THE EARLIER VIEW TAKEN IN BOTH THE ASSESSMENT YEARS HAV E BEEN REVERSED BY THE TRIBUNAL BY ITS SUBSEQUENT DECISION . HENCE, THE PENDENCY OF THAT EARLIER MATTER IS OF NO CONSEQUENC E IN THIS MATTER. HAD THERE BEEN A CHALLENGE OF THE DECISION OF THE TRIBUNAL IN RELATION TO THE ASSESSMENT YEARS 1998-9 9 TO 2002-03 AND ALSO 2003-04 TO 2004-05 THE MATTER WOULD HAVE B EEN DIFFERENT. THE REVENUE DID NOT TAKE ANY STEP WHATSO EVER. THEREFORE, WE PRESUME THE REVENUE HAS ACCEPTED THE SUBSEQUENT VIEW OF THE TRIBUNAL AND THE SAME NOW HOLD THE FIEL D RIGHT NOW.' 7.2. CONSIDERING THE ABOVE WE FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HO N'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE. IN THIS REGARD W E WOULD LIKE TO PLACE RELIANCE UPON THE DECISION OF THE HON'BLE APE X COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES 358 ITR 295 WHEREIN THE PRINCIPLE OF CONSISTENCY HAS BEEN REITERATED. HENCE WHEN THE ISS UE HAS BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT NO CONVINCING REAS ON HAS BEEN POINTED TO TAKE A DIFFERENT VIEW, ANY DEVIATION IS NOT PERMITTED. 7.3. NOW WE COME TO THE CASE LAWS RELIED UPON BY T HE LD. CIT(A). AS REGARDS THE DECISION OF THE HON'BLE APEX COURT IN T HE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) WE FIND THAT THE SAID DECISION IS NOT APPLICABLE IN THE FACTS OF THE CASE. WE FIND TH AT THE HON'BLE APEX COURT IN THE SAID DECISION IN PARA 11 HAS ITSELF ME NTIONED THAT 'WE ARE CONFINING THE JUDGMENT TO THE FACTS OF THE PRESENT CASE.' THE FACTS OF THE CASE WERE THAT ASSESSEE'S BUSINESS WAS TO PROVIDE C REDIT FACILITIES TO ITS MEMBERS AND TO MARKET THEIR AGRICULTURAL PRODUCE. I N MANY CASES ASSESSEE RETAINED SALE PROCEEDS OF MEMBERS WHOSE PR ODUCE WAS MARKETED BY IT AND SINCE FUNDS CREATED BY SUCH RETE NTION WERE NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT INVE STED SAME IN SPECIFIED SECURITIES AND EARNED INTEREST INCOME. IN THESE CIRCUMSTANCES THE HON'BLE APEX COURT HAD HELD THAT INTEREST EARNE D WOULD COME IN CATEGORY OF 'INCOME FROM OTHER SOURCES' TAXABLE U/S 56 OF THE ACT AND ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 12 -: WOULD NOT QUALIFY FOR DEDUCTION AS BUSINESS INCOME U/S 80P(2)(A)(I). FROM THE ABOVE IT IS AMPLY EVIDENT IN THE PRESENT C ASE THE ASSESSEE HAS NOT RETAINED ANY AMOUNT DUE TO ITS MEMBERS AND INST EAD OF PAYING THE SAME HAD INVESTED THE SAME AND EARNED INTEREST. THU S THIS CASE LAW IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. 7.4. AS REGARDS THE DECISION OF HON'BLE PATNA HIGH COURT IN THE CASE OF BIHAR RAJYA SAHKARI BHOOMI BIKASH CO-OP.BANK LTD . (SUPRA) THE SAME IS ALSO NOT APPLICABLE TO THE FACTS OF THE PRE SENT CASE. IN THAT CASE THE QUESTION WAS THE TREATMENT OF INTEREST EARNED O N PROVIDENT FUND AND RENTAL INCOME AS ATTRIBUTABLE TO BANKING BUSINESS A ND THIS QUALIFYING FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. 7.5. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT WE HOLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF THE TRIBUNAL AND THE JURISDICTIONAL HIG H COURT IN ASSESSEE'S OWN CASE. THE DECISION RELIED UPON BY THE LD. CIT(A ) ARE NOT APPLICABLE IN THE FACTS OF THE CASE. THE PRINCIPLE OF CONSISTE NCY AS CONVEYED BY THE HON'BLE APEX COURT MANDATES THAT THE REVENUE DOES N OT TAKE A DIFFERENT STAND. ACCORDINGLY WE SET ASIDE THE ORDER S OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSE E. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 6. IN PARA NO.2.3 OF THE GROUNDS OF APPEAL, THE DEP ARTMENT HAS STATED THAT HAVING REGARD TO THE HONBLE HIGH COURT CALCUTTA, V IDE ITS DECISION DATED 15.07.2016 IN GA NO.1446 OF 2015, THE LD.CIT(A) OUG HT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. IN THE ABOVE CASE REFERRED IN PARA NO.2.3, THE CALCUTTA BENCHES OF THE TRIBUNAL RESTORED REGISTRAT ION OF THE ASSESSEE INVALIDATING THE ORDER OF CANCELLATION, AGAINST WHI CH, THE DEPARTMENT PREFERRED FURTHER APPEAL BEFORE THE HONBLE HIGH COURT. WHAT WAY THE ABOVE SAID CASE IS RELEVANT TO THE CASE IN HAND IS BETTER KNOWN TO THE CONCERN ITO, NCW-6(4), CHENNAI. THUS, THE CASE LAW RELIED ON BY THE DEPAR TMENT HAS NO RELEVANCE TO THE FACTS OF THE PRESENT CASE. ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 13 -: 7. UNDER THE ABOVE FACTS AND CIRCUMSTANCES AND IN V IEW OF OVERWHELMING JUDGEMENTS, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTION CLAIMED UNDER SECTION 80P OF THE ACT TO THE ASSESSEE. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 8. COMING TO THE CROSS-OBJECTIONS OF THE ASSESSEE, BOTH THE COS ARE FILED WITH A DELAY OF 7 DAYS BEFORE THE TRIBUNAL. THE AS SESSEE HAS FILED CONDONATION PETITION IN SUPPORT OF THE AFFIDAVIT, TO WHICH, THE REVENUE HAS NOT RAISED ANY SERIOUS OBJECTION. CONSEQUENTLY, WE CONDONED THE DELAY OF 7 DAYS IN FILING OF THE COS. IN THE COS, THE ASSESSEE HAS PRAYED TO DECIDE THE ISSUE INVOLVED IN THE APPEALS FILED BY THE REVE NUE ON MERITS AND WE HAVE DECIDED THE APPEALS AGAINST THE REVENUE ON MERITS, THE COS FILED BY THE ASSESSEE ARE INFRUCTUOUS. 9. IN THE RESULT, THE APPEALS IN ITA NOS.1136-338/C HNY/2018 FILED BY THE REVENUE ARE DISMISSED AND THE CROSS-OBJECTIONS IN C O NOS.94 & 95/CHNY/2018 FILED BY THE ASSESSEE ARE DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED ON THE 2 ND DAY OF JANUARY, 2019, IN CHENNAI. SD/- ( . ) ( ABRAHAM P.GEORGE ) /ACCOUNTANT MEMBER SD/- ( .. ' ) ( DUVVURU R.L. REDDY ) $ /JUDICIAL MEMBER ITA NOS.1136-1138/CHNY/2018 & CO NOS.94 & 95/CHNY/2018 :- 14 -: /CHENNAI, 0 /DATED: JANUARY 02, 2019. TLN + )$12 32 /COPY TO: 1. ( /APPELLANT 4. 4 /CIT 2. )*( /RESPONDENT 5. 2 )$$ /DR 3. 4 ( ) /CIT(A) 6. % /GF
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