ITO Ward 2, Cuddalore V. NLC Employees Co.Op. Thirft and Credit Society Ltd., Neyveli

ITA 1045/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2767 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 27-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBASHRI
• Assessee Lawyers: N V LAKSHMI
• Keywords: Co-operative Credit Society
• Section: 80(P)

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I T.A. NOS. 1045, 1046/CHNY/2018 / ASSESSMENT YEARS:2013-14 & 2014-15 THE INCOME TAX OFFICER, WARD 2, CUDDALORE. VS. M/S. NLC EMPLOYEES CO-OP. THRIFT AND CREDIT SOCIETY LTD., 12, NORRTH PROMANADE STREET, NEYVELI 607 801. [PAN:AAAAN5694C] ( /APPELLANT ) ( / RESPONDENT) ./ I T.A. NOS. 1844, 735 &1782/CHNY/2018 / ASSESSMENT YEARS:2013-14,2014-15 & 2015-16 M/S. NLC EMPLOYEES CO-OP. THRIFT AND CREDIT SOCIETY LTD., 12, NORRTH PROMANADE STREET, NEYVELI 607 801. VS. THE INCOME TAX OFFICER, WARD 2, CUDDALORE. ( /APPELLANT ) ( / RESPONDENT) DEPARTMENT BY : MS. SUBASHRI, JCIT ASSESSEE BY : MS. N.V. LAKSHMI, C.A. / DATE OF HEARING : 25.02.2019 /DATE OF PRONOUNCEMENT : 27.02.2019 / O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: BOTH THE CROSS APPEALS FILED BY THE REVENUE AS WELL AS ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - PUDUCHERRY, PUDUCHERY DATED 20.12.2017 AND 22.12.2017 RELEVANT TO THE I.T.A. NOS. 1045 & 1046, 1844, 735 & 1782/CHNY/18 2 ASSESSMENT YEARS 2013-14 AND 2014-15 RESPECTIVELY. THE ASSESSEE ALSO FILED APPEAL FOR THE ASSESSMENT YEAR 2015-16 AGAINST THE ORDER OF THE LD. CIT(A), PUDUCHERRY DATED 15.03.2018. FIRST, WE SHALL TAKE THE APPEALS FILED BY THE ASSESSEE. I.T.A. NOS. 1844, 735 & 1782/CHNY/2018 [A.Y. 2013-14, 14-15 & 15-16] 2. THE ONLY EFFECTIVE GROUND RAISED IN ALL THE APPEALS OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE TOWARDS INTEREST INCOME EARNED BY THE ASSESSEE AND CLAIMED DEDUCTION UNDER SECTION 80(P)(2) OF THE INCOME TAX ACT, 1961 [ACT IN SHORT]. 2. 1 THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2013-14 IS DELAYED BY 91 DAYS, FOR WHICH, THE ASSESSEE HAS FILED A PETITION FOR CONDONATION OF THE DELAY IN THE FORM OF AFFIDAVIT, TO WHICH; THE LD. DR HAS NOT RAISED ANY SERIOUS OBJECTION. CONSEQUENTLY, THE DELAY OF 91 DAYS IN FILING OF THE APPEAL STANDS CONDONED AND THE APPEAL IS ADMITTED FOR ADJUDICATION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY WHICH EXTENDS CREDIT TO ITS MEMBERS. CERTAIN SURPLUS FUNDS WERE PARKED FOR LIQUIDITY IN ANOTHER BANKS AND EARNED INTEREST INCOME AND CLAIMED DEDUCTION UNDER SECTION 80(P)(2) OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER STATED THAT SINCE THE ASSESSEE IS A CREDIT SOCIETY, ONLY THE I.T.A. NOS. 1045 & 1046, 1844, 735 & 1782/CHNY/18 3 INTEREST INCOME EARNED FROM THE CREDIT FACILITIES PROVIDED TO ITS MEMBERS ALONE QUALITY FOR DEDUCTION UNDER SECTION 80(P)(2) OF THE ACT AND ACCORDINGLY, THE INTEREST INCOME CLAIMED AS DEDUCTION WAS BROUGHT TO TAX. 4. ON APPEAL, AFTER CONSIDERING THE SUBMISSIONS AS WELL AS DISTINGUISHING THE CASE LAW RELIED UPON BY THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS INTEREST INCOME EARNED BY THE ASSESSEE FROM THE DEPOSITS MADE WITH SBI, NEYVELI AND DELETED THE ADDITION MADE TOWARDS INTEREST INCOME EARNED BY THE ASSESSEE WITH CUDDALORE DISTRICT CENTRAL CO-OPERATIVE BANK. 5. ON BEING AGGRIEVED AGAINST THE CONFIRMATION OF ADDITION TOWARDS INTEREST INCOME EARNED FROM THE SBI, NEYVELI, THE ASSESSEE IS IN APPEAL FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 6. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY WHICH EXTENDS CREDIT FACILITY TO ITS MEMBERS. THEREFORE, THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME EARNED FROM THE CREDIT FACILITIES PROVIDED TO ITS MEMBERS ALONE QUALIFY FOR DEDUCTION UNDER SECTION 80(P)(2) OF THE ACT. IT WAS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE INTEREST INCOME EARNED FROM THE SBI NEYVELI IS INCIDENTAL AND ATTRIBUTABLE TO THE CREDIT BUSINESS ACTIVITY OF THE I.T.A. NOS. 1045 & 1046, 1844, 735 & 1782/CHNY/18 4 SOCIETY. WHILE DELETING THE ADDITION MADE TOWARDS INTEREST INCOME EARNED FROM ANOTHER COOPERATIVE BANK, THE LD. CIT(A) HAS HELD THAT WHEN THE ASSESSEE SOCIETY PARKED ITS FUNDS TEMPORARILY IN ANOTHER CO-OPERATIVE SOCIETY AND EARNED INTEREST WHICH WAS ULTIMATELY USED FOR PROVIDING CREDIT TO MEMBERS THE ACTIVITIES ARE RELATED AND ARE IN THE SPIRIT OF ENCOURAGING THE CO-OPERATIVE SECTOR. SINCE THE DEPARTMENT ALSO ACCEPTED THE OBSERVATIONS OF THE LD. CIT(A) AND NOT DISPUTED IN APPEAL BEFORE THE TRIBUNAL, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. WHEREAS, SINCE THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTION ON THE INTEREST INCOME EARNED FROM THE INVESTMENTS MADE IN THE SCHEDULED BANK, THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION OF INTEREST INCOME EARNED FROM SBI, NEYVELI. THUS, THE GROUND RAISED BY ASSESSEE STANDS DISMISSED FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. I.T.A. NOS. 1045 & 1046/CHNY/2018 [AY: 2013-14 & 2014-15] 7. BOTH T HE APPEALS FILED BY THE REVENUE ARE DELAYED BY 17 DAYS, FOR WHICH, THE REVENUE HAS FILED PETITIONS FOR CONDONATION OF THE DELAY, TO WHICH; THE LD. COUNSEL FOR THE ASSESSEE HAS NOT RAISED ANY SERIOUS OBJECTION. CONSEQUENTLY, THE DELAY OF 17 DAYS IN FILING OF BOTH THE APPEALS STAND CONDONED AND THE APPEALS ARE ADMITTED FOR ADJUDICATION. 8. THE ONLY EFFECTIVE GROUND RAISED IN BOTH THE APPEALS OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING I.T.A. NOS. 1045 & 1046, 1844, 735 & 1782/CHNY/18 5 OFFICER FOR THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80(P)(2)(A)(I) OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT THE ACTIVITIES OF THE ASSESSEE ARE SIMILAR TO THAT OF A CO- OPERATIVE BANK AND THEREFORE THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 80(P) OF THE ACT SINCE THE PROVISIONS OF SUB-SECTION 4 TO SECTION 80(P) OF THE ACT ATTRACTS. ON APPEAL, BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS, THE LD. CIT(A) DELETED THE ADDITION. 9. WE HAVE HEARD THE RIVAL CONTENTIONS. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80(P)(2)(A)(I) OF THE ACT IS SQUARELY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN TAX CASE APPEAL NOS. 786 TO 789 OF 2015 DATED 10.08.2016 BY FOLLOWING ITS OWN DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2007-08 TO 2010-11 IN TCA NOS. 735, 755 OF 2014 AND 460 OF 2015 DATED 05.07.2016 . WE HAVE PERUSED THE JUDGEMENT OF THE HONBLE HIGH COURT, WHEREIN, IT WAS HELD THAT THE LD. CIT(A) AS WELL AS COORDINATE BENCHES OF THE TRIBUNAL HAVE CLEARLY HELD THAT THE ASSESSEE IS NOT A CO-OPERATIVE BANK AND THE PROVISIONS OF SECTION 80(P)(4) OF THE ACT ARE NOT ATTRACTED. THEREFORE, THE HONBLE HIGH COURT HAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 80(P)(2)(A)(I) OF THE ACT. THE LD. DR COULD NOT CONTROVERT THE I.T.A. NOS. 1045 & 1046, 1844, 735 & 1782/CHNY/18 6 ABOVE DECISION OF THE HONBLE HIGH COURT. HOWEVER, THE LD. DR RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CITIZEN CO-OPERATIVE SOCIETY LTD. V. ACIT 397 ITR 1. THE SAID CASE LAW RELIED ON BY THE LD. DR HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE BECAUSE, THE ASSESSEE SOCIETY IS NOT GRANTING ANY LOAN TO GENERAL PUBLIC AND ONLY EXTENDING CREDIT FACILITY TO ITS MEMBERS. THUS, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A). HENCE, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE AS WELL AS ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON THE 27 TH FEBRUARY, 2019 AT CHENNAI. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 27.02.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.