Anand Urban Co.-Op. Bank Ltd., Anand V. The Income Tax Officer, Ward-1, Anand

ITA 102/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6120 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 11-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Difference of opinion; Change of opinion; Liquidation
• Section: 143(3); 142(1); 148

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIPKUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO.101 AND 102/AHD/2017 [ASSTT.YEAR: 2009-10 AND 2012-13] ITA NO.1991/AHD/2017 ASSTT.YEAR : 2014-15 ANAND URBAN COOPERATIVE BANK LTD. URBAN CHAMBER URBAN BANK ROAD ANAND 388 001 PAN : AADFA 3041 J VS. ITO, WARD-1 ANAND. ( APPLICANT ) (RESPONDENT) ASSESSEE BY : SMT.ARTI N. SHAH, AR REVENUE BY : SHRI S.K. DEV, SR.DR ! '#$ % &' / DATE OF HEARING : 05/08/2019 ()* % &' / DATE OF PRONOUNCEMENT: 7 /08/2019 +, / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT THREE APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST SEPARATE ORDERS OF THE LD.CIT(A) D ATED 23.9.2016, 23.9.2016, 25.6.2017 PASSED FOR THE ASST T.YEAR 2009- 10, 2012-13 AND 2014-15. 2. COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS, THEREFORE, WE HEARD THEM TOGETHER AND DEEM IT APPROPRIATE TO D ISPOSE OF ALL THESE APPEALS BY THIS COMMON ORDER. WE TAKE GROUNDS OF APPEAL ITA NO.101/AHD/2017 AND 2 OTHERS 2 RAISED BY THE ASSESSEE IN ALL THESE THREE YEARS IN SERIATIM AS UNDER: ITA NO.101/AHD/2017: [ASSTT.YEAR 2009-10] 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-1. VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN NOT GRANTING DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT , 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CA SE IN TREATING INTEREST RECEIPT OF RS.68,02,038/- AS INCO ME FROM OTHER SOURCES AND NOT ALLOWING SET OFF OF EARNED FO RWARD LOSS U/S.72(1) OF THE I.T. ACT, 1961 AND CARRIED FORWARD DEPRECIATION. 3. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CA SE IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER IN RESPECT OF DICGC INTEREST PAYABLE OF RS. 14,95,276/ -. 4. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CA SE IN CONFIRMING THE ADDITION OF RS.12,65,852/- BEING PRO FIT ON SALE OF LOCKERS AND VAULT AS INCOME FROM OTHER SOUR CES THOUGH THE SAME IS BUSINESS INCOME U/S.50 OF THE I. T. ACT, 1961. ITA NO.102/AHD/2017 [ASSTT.YEAR 2012-13] 1. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN TREATING GROSS INCOME OF INTEREST OF RS . 1,37,00,110/- AS INCOME FROM OTHER SOURCES. 2. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE HI NOT ALLOWING BROUGHT FORWARD LOSSES AGA INST THE INCOME. ITA NO.101/AHD/2017 AND 2 OTHERS 3 3. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT, 1961. ITA NO.1991/AHD/2017 : [ASSTT.YEAR 2014-15] 1. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN REOPENING THE ASSESSMENT U/S. 148 OF THE I. T. ACT, 1961 THOUGH THE ORIGINAL ASSESSMENT WAS MADE U/S. 1 43(3) DULY CONSIDERING THE FACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN TREATING GROSS INCOME OF INTEREST OF RS.19, 19,493/- AS INCOME FROM OTHER SOURCES. 3. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN NOT ALLOWING BROUGHT FORWARD LOSSES AGAINST THE INCOME. 4. THE LEARNED COMMISSIONER OF INCOME TAX, (APPEALS)-4, VADODARA HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT, 1961. 3. IN THE ASSTT.YEAR 2009-10, UNDER GROUND NO.1, TH E ASSESSEE HAS CHALLENGED REOPENING OF THE ASSESSMENT. BRIEF F ACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 12.9.2011 DECLARING NEGATIVE INCOME OF RS.5,169/-. AN ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) ON 12.9.2011 WHEREBY THE LD.AO HAS ACCEPTED THE RETURN DECLARED BY THE ASSESSEE. SUBSEQUENTLY, IT CAME TO THE NOTICE OF T HE AO THAT THE ASSESSEE WAS ENGAGED IN BANKING BUSINESS, BUT ITS L ICENCE TO CARRY ON BUSINESS WAS CANCELLED AND IT WAS UNDER LIQUIDAT ION. THEREFORE, NO BANKING ACTIVITIES HAVE BEEN CARRIED OUT BY THE ITA NO.101/AHD/2017 AND 2 OTHERS 4 ASSESSEE, AND THE INCOME COULD NOT BE ASSESSED AS I NCOME FROM BUSINESS. THE AO FOUND THAT NO SUCH DETAILS WERE P LACED ON RECORD BY THE ASSESSEE NOR HAS BEEN EXAMINED BY THE AO IN THE SCRUTINY ASSESSMENT, THEREFORE, HE PROPOSED TO REOP EN THE ASSESSMENT OF THE ASSESSEE. HE ISSUED NOTICE UNDER SECTION 148 ON 21.3.2014. IN RESPONSE TO THE NOTICE, THE ASSES SEE HAS STATED THAT THE RETURN FILED ORIGINALLY BE TREATED AS RETU RN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148. COPY OF THE REASONS WAS SUPPLIED TO THE ASSESSEE. IT HAS FILED AN OBJE CTION ON SUCH NOTICE. COPY OF THE OBJECTION HAS BEEN FILED ON PA GE NO.25 TO 28 OF THE PAPER BOOK. THE LD.AO HAS CONSIDERED THIS OB JECTION, BUT REJECTED THEM VIDE HIS ORDER DATED 21.5.2014. COPY OF SUCH ORDER IS FILED ON PAGE NO.29 OF THE PAPER BOOK. THEREAFT ER, THE LD.AO HAS PASSED AN ASSESSMENT ORDER ON 10.3.2015 UNDER S ECTION 143(3) R.W.S. 1247. AGAINST THIS ASSESSMENT, ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A) AND TOOK ONE OF THE GROUNDS CHALLENGING REOPENING OF THE ASSESSMENT. THE LD.CI T(A) HAS GONE THROUGH THE REASONS AS WELL AS THE ORDER OF THE AO, VIDE WHICH OBJECTION OF THE ASSESSEE HAS BEEN REJECTED. THE L D.CIT(A) HAS UPHELD THE REOPENING OF THE ASSESSMENT. 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. BEFORE US, THOUGH TH E COPY OF REASONS HAVE NOT BEEN PLACED ON RECORD, BUT WITH HE LP OF OBJECTIONS FILED BY THE ASSESSEE VIS--VIS ORDER OF THE AO VIDE WHICH ITS OBJECTION AGAINST THE REOPENING HAS BEEN REJECTED. IT WAS CONTENDED THAT ASSESSMENT HAS BEEN REOPENED MER ELY ON THE BASIS OF CHANGE OF OPINION. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHETHER INCOME OF THE ASSESSEE IS T O BE ASSESSED AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES, WA S THE ITA NO.101/AHD/2017 AND 2 OTHERS 5 PRIMARY ISSUE IN THE ORIGINAL ASSESSMENT PROCEEDING S ALSO. THE AO HAS ACCEPTED THAT ITS INCOME DESERVED TO BE ASSE SSED AS BUSINESS INCOME. THERE WAS NO NEW INFORMATION WITH THE AO, AND THEREFORE, ASSESSMENT OUGHT NOT TO HAVE BEEN REOPEN ED. 5. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF AO AND CONTENDED THAT ALL THESE ASPECTS HAVE BEEN CONSIDER ED BY THE AO IN THE ORDER DATED 21.5.2014. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE FIND THAT ORIGINAL ASSESSMENT ORDER IS TO TALLY SILENT WHETHER ANY INQUIRY WAS CONDUCTED BY THE AO OR NOT. THE ASSESSEE FAILED TO PLACE ON RECORD QUESTIONNAIRE IF ANY ISSUED UNDER SECTION 142(1) WHEREBY IT WAS BROUGHT TO THE NOTICE OF THE AO THAT IT HAS CEASED TO CARRY OUT BUSINESS OF BANK ING. THE LD.COUNSEL FOR THE ASSESSEE, THOUGH POINTED OUT THA T SPECIFIC QUESTIONNAIRE MAY NOT HAVE BEEN ASKED, BUT THIS FAC T WAS IN THE KNOWLEDGE OF THE AO, BECAUSE HE HAS NOTICED THAT TH E BANK IS UNDER LIQUIDATION. FOR THIS PURPOSE, SHE BROUGHT T O OUR NOTICE THE ASSESSMENT ORDER DATED 12.9.2011. HOWEVER, NO DETA ILS HAVE BEEN PLACED BEFORE US POINTING OUT THE FACT THAT TH E AO HAS CALLED FOR SPECIFIC DETAILS AND APPLIED HIS MIND. THEREFO RE, THE ALLEGATION AGAINST THE AO THAT HE HAS REOPENED THE ASSESSMENT ON THE BASIS OF CHANGE OF OPINION IS NOT SUSTAINABLE. THE LD.RE VENUE AUTHORITES HAVE CONSIDERED THIS ASPECT ELABORATELY. WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS REJECTED. 6. GROUND NO.2 IS INTER-CONNECTED WITH GROUND NO.1 IN THE ASSTT.YEAR 2012-13 AND GROUND NO.2 AND 3 IN THE ASS TT.YEAR 2014- 15. ITA NO.101/AHD/2017 AND 2 OTHERS 6 7. THE CORE ISSUE IN ALL THESE GROUNDS IS WHETHER T HE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 80P(2)(A)(I ) OF THE ACT ON INTEREST INCOME EARNED FROM THE DEPOSITS WITH THE B ANK. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT THOUGH I NITIALLY THE ASSESSEE WAS WORKING AS COOPERATIVE BANK, BUT IS LI CENCE TO CARRY OUT BANKING BUSINESS HAS BEEN CANCELLED BY THE RBI. THEREAFTER, ITS STATUS REMAINED AS COOPERATIVE CREDIT SOCIETY, WHICH PROVIDES CREDITS TO ITS MEMBERS. HENCE, EVEN IF IT CEASED T O CARRY ON BANKING BUSINESS, IT IS STILL ENTITLED TO EXEMPTION UNDER SECTION 80P(2)(A)(I) OF THE ACT BEING A COOPERATIVE SOCIETY . SHE POINTED OUT THAT ANY SURPLUS FROM ITS ACTIVITIES AS A COOPE RATIVE SOCIETY, IF DEPOSITED IN THE NATIONALIZED BANKS, THEN INTEREST INCOME REQUIRE TO BE CONSIDERED ELIGIBLE FOR EXEMPTION UNDER SECTI ON 80P(2)(A)(I). IN HER ALTERNATIVE CONTENTIONS, SHE SUBMITTED THAT IN CASE IT IS NOT ADMISSIBLE ON GROSS BASIS, THEN ONLY NET INTEREST I NCOME BE EXCLUDED FROM THE GRANT OF EXEMPTION UNDER SECTION 80P(2)(A)(I). 8. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORD ER OF THE REVENUE AUTHORITIES. HE POINTED OUT THAT THE ASSES SEE HAS STOPPED BANKING BUSINESS DUE TO LIQUIDATION, AND TH EREFORE, WHATEVER INTEREST INCOME IT HAS EARNED, IT IS TO BE TREATED AS INCOME FROM OTHER SOURCES. 9. WE HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GO NE THROUGH THE RECORD CAREFULLY. NO DOUBT THE STATUS OF THE A SSESSEE AS A COOPERATIVE CREDIT SOCIETY IS INTACT. IT HAS BEEN PROHIBITED TO CARRY OUT THE BANKING BUSINESS. IN SUCH SITUATION, INHER ENTLY, IT IS ENTITLED FOR EXEMPTION UNDER SECTION 80P(2)(A)(I) B EING A COOPERATIVE CREDIT SOCIETY. BUT SUCH EXEMPTION WILL BE ONLY ON THE ACTIVITIES CONFINED TO A COOPERATIVE CREDIT SOCIETY VIZ. IF AN ITA NO.101/AHD/2017 AND 2 OTHERS 7 ASSESSEE HAS EARNED INTEREST INCOME FROM ITS MEMBER S, IT MAY QUALIFY FOR GRANT OF EXEMPTION UNDER SECTION 80P(2) (A)(I). IF IT HAS EARNED ANY OTHER INCOME FROM ITS ACTIVITIES AS A CO OPERATIVE SOCIETY, FOR WHICH IT EXISTED, THEN THE INCOME ON S UCH ACTIVITY WOULD ALSO QUALIFY. IN THE PRESENT YEARS, THE ASSE SSEE HAS ONLY INTEREST INCOME FROM THE DEPOSITS MADE WITH NATIONA LIZED BANK. SUCH INTEREST INCOME DOES NOT QUALIFY FOR GRANT OF EXEMPTION UNDER SECTION 80P(2)(A)(I) AS HELD BY THE HONBLE J URISDICTIONAL HIGH COURT IN THE CASE OF SBI EMPLOYEES CO-OP. CREDI T & SUPPLY SOCIETY VS. CIT, 389 ITR 0578 THAT IT IS THE ONLY I NTEREST DERIVED FROM THE CREDIT PROVIDED TO ITS MEMBERS, WHICH IS D EDUCTION UNDER SECTION 80P(2)(A)(I), AND THE INTEREST DERIVED BY D EPOSITING SURPLUS WITH NATIONALIZED BANKS NOT BEING ATTRIBUTA BLE TO THE BUSINESS CARRYING ON BY THE ASSESSEE, COULD NOT BE DEDUCTED UNDER SECTION(2)(A) OF THE ACT. IN VIEW OF THE DECI SIONS OF HONBLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL, BUT WE ACCEPT ALTERNATIVE CONTENTION THA T ONLY NET INTEREST INCOME BE EXCLUDED FROM THE COMPUTATION OF 80P(2)(A)(I). ANY EXPENDITURE INCURRED BY THE ASSESSEE IN RELATIO N TO EARNING OF SUCH INTEREST INCOME BE SET OFF AGAINST THE INTERES T INCOME, AND THEREAFTER IT IS EXCLUDED FROM THE COMPUTATION. 10. IN THE ASSTT.YEAR 2009-10, THE ASSESSEE HAS SHO WN GROSS INTEREST INCOME OF RS.19,19,493/-. NO OTHER INTERE ST INCOME HAS BEEN SHOWN. THEREFORE, ONLY NET INTEREST INCOME BE EXCLUDED FROM COMPUTATION OF EXEMPTION UNDER SECTION 80P(2)( A)(I). 11. IN THE ASSTT.YEAR 2012-13, IT HAS GROSS INTERES T INCOME OF RS.1,37,00,110/-. AGAIN HERE, NET INTEREST IS TO B E EXCLUDED. ITA NO.101/AHD/2017 AND 2 OTHERS 8 12. IN THE ASSTT.YEAR 2014-15, THE ASSESSEE HAS INT EREST RECEIPT OF RS.68,02,038/- FROM THE BANKS. SIMILARLY, IT HA S INTEREST RECEIPT OF RS.14,95,276/- ALLEGED TO HAVE BEEN ACCR UED FROM THE CANARA BANK. THE LD.AO SHALL VERIFY THESE AMOUNTS A ND DETERMINE WHETHER THIS INTEREST INCOME FROM DEPOSITS COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF SBI EMPLOYEES CO-OP. CREDIT & SUPPLY SOCIETY VS. CIT (S UPRA) IF NOT, THEN HE SHALL RE-ADJUDICATE THIS ISSUE AFRESH, WHET HER IT QUALIFY FOR GRANT OF EXEMPTION UNDER SECTION 80P(2)(A)(I). 13. NEXT ISSUE IS, WHETHER THE ASSESSEE IS ENTITLED FOR CARRY FORWARD OF UNABSORBED LOSS. WITH REGARD TO THIS AS PECT, WE FIND THAT THE ASSESSEE HAS ALREADY DISCONTINUED ITS BANK ING BUSINESS IN WHICH IT HAS SUFFERED LOSS. THEREFORE, IT IS NOT E NTITLED FOR CARRY FORWARD OF SUCH BUSINESS LOSS. THE AUTHORITIES HAV E RIGHTLY REJECTED ITS CLAIM. 14. IN THE ASSTT.YEAR 2014-15 UNDER GROUND NO.4, TH E ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRM ING THE ADDITION OF RS.12,65,852/-. 15. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S SHOWN THE ABOVE AMOUNT AS PROFIT ON SALE OF LOCKER AND VAULT INCOME. ACCORDING TO THE ASSESSEE IT IS A BUSINESS INCOME A ND NOT TO BE ASSESSED AS INCOME FROM OTHER SOURCES. BEING A CRED IT SOCIETY, ITS ACTIVITY OUGHT TO BE CONFINED TO ITS MEMBERS. IF A NY ACTIVITY CARRIED OUT BEYOND THE SCOPE OF SOCIETY, THE INCOME FROM THAT ACTIVITY WILL NOT QUALIFY FOR EXEMPTION UNDER SECTI ON 80P(2)(A)(I). EVEN IF THIS PROFIT ON SALE OF LOCKER AND VAULT IS TO BE TREATED AS BUSINESS INCOME UNDER SECTION 50 OF THE ACT, THEN A LSO NOTHING ITA NO.101/AHD/2017 AND 2 OTHERS 9 WOULD CHANGE. IT WILL NOT QUALIFY FOR EXEMPTION UN DER SECTION 80P(2)(A)(I) OF THE ACT. IT IS TO BE ASSESSED AS A SEPARATE INCOME. THE ASSESSEE FAILED TO DEMONSTRATE THAT IT WAS CARR YING ON AN ORGANIZED ACTIVITY IN THE NATURE OF BUSINESS, AND T HEREFORE, THE LD.REVENUE AUTHORITIES HAVE RIGHTLY TREATED THE INC OME FROM OTHER ACTIVITIES AS INCOME FROM OTHER SOURCES. IN VIEW O F THE ABOVE, WE DO NOT FIND ANY ERROR IN THIS ORDER ON THIS ISSUE. IT IS UPHELD. 16. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 7 TH AUGUST, 2019. SD/- SD/- (PRADIPKUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER