Deputy Commissioner of Income Tax, Bangalore V. Sri Jhiveshwara Credit Co-Operative Society Ltd., Bangalore

ITA 1033/BANG/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1479 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 06-10-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2014
• Court: TRIBUNAL
• Assessee Lawyers: SHI SIDDA REDDY
• Keywords: Rectification of order; Opportunity of being heard; Bad and doubtful debts
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE C BENCH, BANGALORE BEFORE SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1033(BNG.)/2014 (ASSESSMENT YEAR : 2010-11) THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-5(1), 6 TH FLOOR, UNITY BUILDING ANNEXE, KALINGA RAO ROAD, BANGALORE APPELLANT PAN NO.AABAS7092Q VS M/S SRI JIHVESHWARA CREDIT CO-OPERATIVE SOCIETY LTD . NO.125, SWAKULA SALI SANGHA BUILDING, HURIOPET MAIN ROAD, BVK IYENGAR ROAD, BANGALORE-560 053 RESPONDENT REVENUE BY : SHRI SUNIL KUMAR AGARWALA , JCIT ASSESSEE BY : SHI SIDDA REDDY, ADVOCAT E DATE OF HEARING : 06-10-201 5 DATE OF PRONOUNCEMENT : 09-10-2015 O R D E R PER SMT ASHA VIJAYARAGHAVAN, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II, BANGALORE DATED 24-04-2014 FOR THE ASSES SMENT YEAR 2010-11. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTE RED UNDER THE PROVISIONS OF KARNATAKA STATE CO-OPERATIVE ACT, WHI CH RENDERS FINANCIAL SERVICES TO ITS MEMBERS HAD FILED ITS RETURN OF INC OME FOR THE ASSESSMENT 2 ITA NO.1033(B)/2014 YEAR 2010-11 ON 28-09-2010, WHEREIN IT HAD DECLARED THE TOTAL INCOME AT NIL AFTER CLAIMING DEDUCTION IN A SUM OF RS.15,86,079/ - U/S 80P(2)(A)(I) OF THE ACT. IN THE ASSESSMENT CONCLUDED U/S 143(3 ) OF THE ACT, VIDE ORDER DATED 23-11-2012, THE AO HAD DISALLOWED THE ASSESSE ES CLAIM FOR DEDUCTION U/S 80P(2)(A)(I)OF THE ACT AND DETERMINED THE TOTAL INCOME AT RS.15,86,079/-. 2.1 SUBSEQUENTLY, THE AO NOTICED THAT THE ASSESSEE S CLAIM FOR DEDUCTION FOR THE PROVISION OF RS.10.00 LAKHS FOR BAD DEBTS AND VIDE ORDER U/S 154 OF THE ACT, DATED 01-07-2013 THE AO H AD DISALLOWED THE SAME AND RE-DETERMINED THE TOTAL INCOME AT RS.10.00 LAKHS AND RAISED AN ADDITIONAL DEMAND OF RS.4,11,959/-. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 2.2 IN THE GROUNDS OF APPEAL, BEFORE THE CIT(A) IT IS CONTENDED THAT THE ORDER IS OPPOSED TO THE PROVISIONS OF THE IT AC T, SINCE THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY OF BEING HEARD AND THE DISALLOWANCE OF BAD DEBTS IS NOT JUSTIFIED AS IT IS DEBATABLE ISSUE. 2.4 IN THE WRITTEN SUBMISSIONS, THE ASSESSEE CONTE NDED THAT EVEN IF THE DISALLOWANCE OF PROVISIONS FOR BAD DEBTS IS JUS TIFIED, THE INCOME ENHANCED IS ALSO ELIGIBLE FOR DEDUCTION U/S 80P(20( A)(I) OF THE ACT, AS THE 3 ITA NO.1033(B)/2014 AMOUNT REPRESENTS INTEREST DUE FROM CREDITS GIVEN T O THE MEMBERS OF THE ASSESSEE. 3. THE CIT(A HELD AS UNDER; I HAVE CAREFULLY CONSIDERED THE ASSESSEES SUBMISSIONS. IN MY APPELLATE ORDER IN ITA NO.68/DC- 5(2)CIT(A)-II/12-13 DATED 02-12-2013 ON THE ASSESSE ES APPEAL AGAINST THE ASSESSMENT ORDER FOR THE ASSESSM ENT YEAR 2010-11, I HAD DELETED THE DISALLOWANCE OF RS.15,86,079/- BROUGHT TO TAX BY THE AO ON THE GROU ND THAT THE SAID AMOUNT REPRESENTED INTEREST EARNED BY IT FROM CREDITS GIVEN TO ITS MEMBERS AND, CONSEQUENTLY , QUALIFIED FOR DEDUCTION U/S 80P(2)(A)(I) OF THE AC T. KEEPING ASIDE GROUNDS RAISED BY THE ASSESSEE AGAINST THE VA LIDITY OF THE ORDER U/S 154 OF THE ACT, UNDER APPEAL, I HO LD THAT THE AMOUNT OF RS.10.00 LAKHS BROUGHT TO TAX BY THE AO BY DISALLOWING THE PROVISION FOR BAD DEBTS ALSO REPRESENTS INTEREST EARNED BY THE ASSESSEE FROM CRE DITS GIVEN TO ITS MEMBERS AND IS, THEREFORE, ELIGIBLE FO R DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. I, THEREFOR E, DIRECT THE AO TO GIVE THE ASSESSEE THE BENEFIT OF DEDUCTIO N U/S 80P(2)(A)(I) OF THE ACT, IN RESPECT OF THE AMOUNT O F RS.10.00 LAKHS BROUGHT TO TAX IN THE RECTIFICATION ORDER U/S 154 UNDER APPEAL. 4 ITA NO.1033(B)/2014 4. AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE US AND HAD RAISED THE FOLLOWING GROUNDS; 1. THE ORDER OF THE LEARNED CIT(A) IS CLEARLY OPPO SED TO LAW AS FAR AS THE FINDINGS ARE PERVERSE, CONTRARY T O THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE NOT SUSTAINABLE. 2. THE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS.10.00 LAKHS MADE BY THE AO BY DISALLOWING THE PROVISION FOR BAD DEBTS AND HOLDING THAT IT REPRESE NTS INTEREST EARNED BY THE ASSESSEE FROM CREDITS GIVEN TO ITS MEMBERS AND THEREFORE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I)OF THE IT ACT. 3. THE CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSE SSEE BASED ON THE FRESH EVIDENCE PRODUCED BY THE ASSESSE E WITHOUT GIVING AN OPPORTUNITY TO THE AO FOR CROSS EXAMINATION AS PER RULE 46A. 5. WE FIND THAT FOR THE ASSESSMENT YEAR 2010-11, R EVENUE HAD COME UP ON APPEAL AGAINST THE ORDER OF THE CIT(A)-II, BA NGALORE DATED 02-12- 2013 IN ITA NO.347(B)/2014. THE TRIBUNAL HAD PASSE D THE ORDER AND WHILE DOING SO HELD AT PARA-4 AS FOLLOWS; 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS A CREDIT CO- OPERATIVE SOCIETY CARRYING ON BANKING ACTIVITY ONLY FOR ITS MEMBERS. THIS IS ALSO EVIDENT FROM THE CORRIGENDUM ISSUED 5 ITA NO.1033(B)/2014 BY THE CIT(A) CITED SUPRA. THE HONBLE HIGH COURT O F KARNATAKA IN A NUMBER OF CASES, INCLUDING THE CASE OF M/S VASAVI CREDIT CO-OPERATIVE SOCIETY LTD., CITED SUPR A, HAS HELD THAT IF THE ASSESSEE IS NOT A CO-OPERATIVE BAN K CARRYING EXCLUSIVELY BANKING BUSINESS AND IT DOES NOT POSSES S A LICENSE FROM THE RESERVE BANK OF INDIA TO CARRY ON BANKING BUSINESS, THEN IT IS NOT A CO-OPERATIVE BANK BUT A CO- OPERATIVE SOCIETY WHICH CARRIES ON BUSINESS OF MONE Y LENDING TO ITS MEMBERS WHO IS COVERED U/S 80P(2)(A) (I) OF THE ACT AND THEREFORE, IS ELIGIBLE FOR DEDUCTION U/S 80 P(2)(A)(I) OF THE ACT. THE FACTS AND CIRCUMSTANCES OF THE CASE B EFORE US, BEING SIMILAR, WE HOLD THAT THERE IS NO MERIT IN TH E APPEAL OF THE REVENUE. ACCORDINGLY, THE REVENUES APPEAL IS DISMISSED. 6. IN THE PRESENT APPEAL BEFORE US, THE AO SUBSEQUE NT TO PASSING OF THE ORDER U/S 143(3) DATED 23-11-2012, NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION FOR THE PROVISIONS OF RS.10.00 LA KHS FOR BAD DEBTS WHICH WAS NOT TAKEN INTO ACCOUNT AND VIDE ORDER U/S 154 OF THE ACT, DATED 01-07-2013, THE AO DISALLOWED THE SAME AND RE -DETERMINED THE TOTAL INCOME AT RS.10.00 LAKHS AND RAISED AN ADDITI ONAL DEMAND OF RS.4,11,959/-. 7. IN APPEAL, ASSESSEES CONTENTION WAS THAT EVEN I F DISALLOWANCE PROVISION FOR BAD DEBTS IS JUSTIFIED, THE INCOME EN HANCED IS ALSO ELIGIBLE 6 ITA NO.1033(B)/2014 FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT, AS THE A MOUNT REPRESENTS INTEREST DUE FROM CREDITORS GIVEN TO THE MEMBERS OF THE ASSE SSEES SOCIETY. THE CIT(A) THEREFORE, DIRECTED THE AO TO GIVE THE ASSES SEE BENEFIT OF DEDUCTION U/S 80P(A)(I) OF THE ACT, IN RESPECT OF RS.10.00 LA KHS BROUGHT TO TAX IN THE RECTIFICATION ORDER U/S 154 OF THE IT ACT, 1961 . 8. WE HAVE HEARD BOTH PARTIES. 9. WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A ) IN HOLDING THAT THE AMOUNT OF RS.10.00 LAKHS REPRESENTS INTEREST EA RNED BY THE ASSESSEE FROM CREDIT GIVEN TO ITS MEMBERS AND THEREFORE, ELI GIBLE OR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT, 1961. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH OCTOBER, 2015. SD/- (JASON P BOAZ) SD/- (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE: BANGALORE: D A T E D : 09-10-2015 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE