M/s. Bharathi Credit Co-operative Society Limited, Bangalore V. Income tax Officer, Ward- 7(2)(1), Bangalore

ITA 1023/BANG/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8189 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 13-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B S BALACHANDRAN
• Keywords: Opportunity of being heard; Source of fund; TDS; Set aside
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : B , BANGALORE BEFORE SHRI J. SUDHAKAR REDDY, A M AND SMT.BEENA PILLAI, JM ITA NO1023 (BANG)/201 9 (ASSESSMENT YEAR : 201 4 - 15 ) M/S BHARATHI CREDIT CO - OP. SOCIETY LTD., 1718, 9 TH MAIN R O AD, 3 RD BLOCK, JAYANAGAR, BANGALORE - 560 011. PANNO.AA A LT0604R APPELLANT VS THE INCOME TAX OFFICER , WARD - 7 ( 2 )( 1 ) , BANGALORE RESPONDENT APPELLANT BY : S HRI B.S.BALACH A N DRAN, ADVOCATE REVENUE BY : S HRI R.N.SIDDAPPAJI, ADDL. CIT DATE OF HEARING : 1 6 - 0 7 - 2019 DATE OF PRONOUNCEMENT : O R D E R PER BEENA PILLAI, JUDICIAL MEMBER : PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 11 - 03 - 2019 PASSED BY LD. CIT (A) - 10 , BE NGAL URU FOR ASSESSMENT YEAR 201 4 - 15 ON FOLLOWING GROUNDS; . 1. THE ORDER OF AO IS BAD AND UNSUSTAINABLE IN LAW AS THE D ENI A L OF DEDUCTION U/S 80P(2) IS ARBITRARY AND WITHOUT PROPER APPLICATION OF MIND. 2. THE AO ERRED IN UPHOLDING THE ADDITION BY DENYING THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2) WHEN THE A PPELLANT HAD DEMONSTRATED THAT IT IS A CO - OP E RATIVE SOCIETY WHICH HAD ONLY TRANSACTED STRICTLY WITH THE REGULAR MEMBERS AND HENC E IT IS ERRONEOUS. 3. THE AO HAS GROSSLY ERRED BY ADDING INTEREST INCOME EARNED FROM FD MADE OUT OF OPERATIONAL F UNDS WHICH ITA NO. 1023 / BANG/201 9 PAGE 2 OF 6 WAS THE ONLY FUN D AVAILABLE FOR A SHORT PERIOD AND HENCE ELIGIBLE FOR DE D UCTION AS PER THE DECISION OF THE KARNATAKA HIGH COURT. 6. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING APPELLANT PRAYS THAT THE APPEAL MAY BE AL LOWED. 2. AT THE VERY BEGINNING, IT WAS SUBMITTED BY LD AR THAT ONLY GRIEVANCE IS REGARDING DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION U/S. 80P OF THE IT ACT. 3. BRIEF FACTS OF THE CASE ARE AS UNDER: (AY 20 1 4 - 15 ) : ASSESSEE IS A CO - OPERATIVE SOCIE T Y REGI S TER E D UNDER T HE KA RNATAKA CO - OPERATIVE SOCIETIES ACT, 1959. THE ASSESSEE IS A PRIM ARY CREDIT CO - OPERATIVE SOCIETY PROVIDING CREDIT F A CILITI E S TO ITS MEMBERS. ASSESSEE FILED RETURN OF INCOME ON 21 - 09 - 2014 FOR THE AY: 201 4 - 15 DECLARING NIL TOTAL INCOME AFTER CLAIMING DEDUCTION U/S 80P(2) OF THE IT ACT, 1961. 3.1 DURING THE COURSE OF SCRUTINY, IT W A S NOTICED BY THE AO THAT THE APPELLANT S OCI E TY WHICH WAS FORMED TO PROVIDE CREDIT FACILITIES TO ITS MEMBE R S OUT OF THE DEPOSITS COL L E CTED AND INCOME GENERATED THEREOF WAS INTO ACTIVITIES WHICH ARE IN THE NATURE OF BANKING. AS MENTIONED IN THE EXPLANATION TO SECTION 80P(4) OF THE ACT, THE AO EXAMINED THE CASE OF THE APPELLANT IN REFERENCE TO PART V OF THE BANKING REGULATION ACT, 1949. HE FOUND THAT ALL THE CONDITIONS MENTIONED IN THE SAID PROVISIONS ARE PRESENT IN THE CASE OF THE APPELLANT. ON THIS ISSUE HE CONFRONTED THE APPELLANT. THE APPELLANT SUBMITTED ITS REPLY TO THE AO BUT HE WAS NOT SATISFIED AND HENCE HE DISALLOW THE CLAIM OF DEDUCTION U/S 80P OF THE ACT MA D E BY THE APPELLANT IN THE RETURN OF INCOME THEREBY MAKING AN ADDITION OF RS.85,54,082/ - . ITA NO. 1023 / BANG/201 9 PAGE 3 OF 6 3. 2 I T WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ASSESSEE HAS EARNED SOME INTEREST INCOME FROM BANK WHICH HAS BEEN ASSESSED BY THE AO AS INCOME FROM OTHER SOURCES AND ASSESSEES CLAIM FOR DEDUCTION U/S. 80P OF THE IT ACT WAS DISALLOWED BY THE AO AND IT IS CONFIRMED BY CIT(A). HE SUBMITTED THAT BASIS OF DECISION OF AUTHORITIES BELOW IS BY FOLLOWING DECISION OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO - OPERATIVE SALE SOCIETY AS REPORTED IN 395 ITR 611 (KARN) . HE ALSO SUBMITTED THAT AN OTHER DECISION ON WHICH RELIANCE HAS BEEN PLACED BY AUTHORITIES BELOW , IS THE JUDGMENT OF HON BLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY LTD. VS. ACIT AS REPORTED IN 397 ITR 1 . 4. HE SUBMITTED THAT NONE OF THE AUTHORITIES BELOW HAS EXAMINED AND COMPARED THE FACTS OF THE PRESENT CASE WITH THE FACTS IN THE CASE OF THE C ITIZEN CO - OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA). RE FERRING TO THE DECISION OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO - OPERATIVE SALE SOCIETY (SUPRA), IT WAS SUBMITTED THAT FACTS OF THIS DECISION H ON'BLE KARNATAKA HIGH COURT IS NOT APPLICABLE INSTEAD DECISION RENDERED BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309 IS APPLICABLE . 5. AT THIS JUNCTURE, THIS PROPOSITION WAS PUT FORWARD BY THE BENCH THAT UNDER SIMILAR FACTS, THE TRIBUNAL IS RESTORING THE MATTER BACK TO THE FILE OF CIT(A) FOR FRESH DECISION AFTER EXAMINING FACTS OF PRESENT CASE IN LIGHT OF THESE TWO DECISIONS BEING PCIT AND ANOTHER VS. TOTAGARS CO - OPERATIVE SALE SOCIETY (SUPRA) AND TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) WITH A DIRECTION THAT , IF FACTS ITA NO. 1023 / BANG/201 9 PAGE 4 OF 6 ARE IN LINE WITH FACTS IN CASE OF PCIT AND ANOTHER VS. TOTAGARS CO - OPERATIVE SALE SOCIETY (SUPRA) , THEN THE ISSUE SHOUL D BE DECIDED AGAINST THE ASSESSEE. BUT IF FACTS OF PRESENT CASE ARE IN LINE WITH FACTS IN CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) , THEN ISSUE SHOULD BE DECIDED IN FAVOUR OF ASSESSEE. 6. THE B ENCH POINTED OUT THAT IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO - OPE RATIVE SALE SOCIETY (SUPRA) , AMOUNT DEPOSITED IN BANK ON WHICH INTEREST INCOME WAS EARNED WAS OUT OF THE LIABILITY OF THE ASSESSEE SOCIETY AND NOT OUT OF ITS OWN FUNDS AND FOR THIS REASON, IN THAT CASE OF PCIT A ND ANOTHER VS. TOTAGARS CO - OPERATIVE SALE SOCIETY (SUPRA), THE HON'BLE KARNATAKA HIGH COU RT DECIDED THE ISSUE AGAINST ASSESSEE. BUT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS . ITO (SUPRA), IT WAS FOUND THAT THE MONEY DEPOSITED IN BANK BY ASSESSEE WAS OUT OF ITS OWN FUNDS AND NOT OUT OF LIABILITY AND THEREFORE, THE ISSUE IN THAT CASE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 7. AS FACTS IN PRESENT CASE ARE NOT READILY AVAILABLE ON RECORD AND THERE IS NO FINDING OF AUTHORITIES BELOW ON THIS FACTUAL ASPECT REGARDING THE SOURCE OF FUNDS DEPOSITED ON BANK ON WHICH INTEREST INCOME WAS EARNED, THE ISSUE SHOULD GO BACK TO THE FILE OF CIT( A)M FOR FRESH DECISION. THE B ENCH ALSO PROPOSED THAT REGARDING THE APPLICABILITY OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO - OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA) ALSO, THE LD. CIT(A) SHOULD PASS SPEAKING AND REASONED ORDER AFTER COMPAR ING FACTS OF PRESENT CASE WITH TH AT OF THE CITIZEN CO - OPERATIVE SOCIETY ITA NO. 1023 / BANG/201 9 PAGE 5 OF 6 LTD VS ACIT (SUPRA) UNDER CO - OPERATIVE SOCIETY ACT, APPLICABLE IN S TATE OF KARNATAKA . 8. IN REPLY, THE LD. AR OF ASSESSEE AGREED WITH THIS PROPOSITION PUT FORWARD BY THE BENCH. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A). 9. WE HAVE C ONSIDERED THE RIVAL SUBMISSIONS AND WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE FOR FRESH DECISION IN L IGHT OF ABOVE DISCUSSION, BY WAY OF A SPEAKING AND REASONED ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. HE IS ALSO DIRECTED TO EXAMINE THE FACTS OF PRESENT CASE IN THE LIGHT OF THESE TWO JUDGMENTS OF HON'BLE KARNATAKA HIGH CO URT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA) AND PCIT AND ANOTHER VS. TOTAGARS CO - OPERATIVE SALE SOCIETY (SUPRA) AND PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER P RONOUNCED IN THE OPEN COURT ON (J. SUDHAKAR REDDY ) (BEENA PILLAI) ACCOUNTAN T MEMBER JUDICIAL MEMBER DATED: THE *AM ITA NO. 1023 / BANG/201 9 PAGE 6 OF 6 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FI LE BY ORDER ASST.REGISTRAR DATE 1. DRAFT DICTATED DIRECTLY ON COMPUTER SYSTEM 2. DRAFT PLACED BEFORE AUTHOR 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DRAFT DICTATION SHEETS ARE ATTACHED