Prathamika Krishi Pattin Shakari Bank Niyamith, Vijayapur V. ITO, Vijayapur

ITA 1089/BANG/2015

• Counselvise Citation: 108921114 RSA 2015
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 23-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Question of law
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1089/BANG/2015 ASSESSMENT YEAR : 2012-13 PRATHAMIKA KRISHI PATTIN SAHAKARI BANK NYT., AT POST TIKOTA, VIJAYAPURA. PAN: AAAAP 3459P VS. THE INCOME TAX OFFICER, WARD 1, VIJAYAPUR. APPELLANT RESPONDENT APPELLANT BY : SHRI S RAMASUBRAMANIAN, CA RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT.CIT(DR) DATE OF HEARING : 30.11.2015 DATE OF PRONOUNCEMENT : 28.12.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 11.05.2015 OF THE CIT(APPEALS), BELAGAVI FOR THE AS SESSMENT YEAR 2012- 13. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES AND SUPPLYING FERTILIZE RS TO ITS MEMBERS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 20 12-13 ON 26.09.2012 ITA NO.1089/BANG/2015 PAGE 2 OF 8 DECLARING TOTAL INCOME AS NIL AFTER CLAIMING DEDUCT ION OF RS.27,40,084 U/S. 80P(2)(A)(I) OF INCOME-TAX ACT. 1961 (ACT). THE APP ELLANTS CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) WAS ISS UED AND SERVED. 3. THE ASSESSEE DURING THE YEAR HAS RECEIVED INTERE ST INCOME FROM DEPOSITS MADE IN VARIOUS CO-OPERATIVE BANKS AND NAT IONALIZED BANKS. IT CLAIMED THE INTEREST INCOME FROM SUCH DEPOSITS U/S. 80P(2)(A)(I) OF THE ACT. THE DETAILS OF THE INTEREST INCOME ARE AS FOLLOWS; 4. THE ASSESSING OFFICER DENIED THE DEDUCTION OF RS .79,47,916/- U/S. 80P(2)(A)(I) SINCE THE INTEREST INCOME IS FROM INVE STMENTS/DEPOSITS MADE WITH OTHER BANKS AND NOT ELIGIBLE FOR DEDUCTION. TH E AO ALSO HELD THAT THE INTEREST INCOME IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2)(D) OF THE ACT SINCE THE INVESTMENT IS NOT MADE IN COOPERATIVE SOCIETY A S MENTIONED IN THE INCOME-TAX ACT. 5. AGGRIEVED BY THE AFORESAID ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). ITA NO.1089/BANG/2015 PAGE 3 OF 8 6. THE CIT(APPEALS) OBSERVED THAT THE FACTS IN THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF SRI RENUKA DEVI URBAN CREDIT CO.OP. SOCIETY LTD. V. CIT (ITA NO.5008/2009) ARE DIFFERENT FROM THE ASSESSEES CASE. IT WAS POINTED OUT B THE CIT(A) THAT THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V. GRAIN MERCHANTS CO-OP. BANK LTD. REPORTED IN 267 ITR 742 (KAR) WHEREIN IT WAS HELD THAT INTEREST EARNED ON THE DEPOSITS MADE BY THE ASSESSEE ENGAGED IN ANY BANKIN G ACTIVITY IS EXEMPT U/S. 80P OF THE ACT. THE CIT(A) WAS OF THE VIEW TH AT IN THE INSTANT CASE THE FACTS ARE DIFFERENT AS THE ASSESSEE IS NOT ENGAGED IN BANKING ACTIVITY AND IT IS ONLY A CREDIT SOCIETY OFFERING CREDIT FACILITIES AND AGRICULTURAL INPUTS TO ITS MEMBERS. THE CIT(A) OBSERVED THAT IN THE OTHER TWO CASES RELIED UPON BY THE ASSESSEE, DEDUCTION CLAIMED WAS U/S. 80P(2)(A)( I) OF THE ACT AND THE ASSESSEES WERE CARRYING ON THE BUSINESS OF BANKING ACTIVITY AND HENCE THE FACTS WERE DIFFERENT FROM THE ASSESSEES CASE. 7. THE CIT(A) FURTHER HELD AS FOLLOWS:- 7. UNDER THE CIRCUMSTANCES THE APPELLANT IS NOT ENT ITLED TO DEDUCTION U/S. 80P(2)(A) & (D). RELIANCE CAN ALSO BE PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOTGARS CO-OPERATIVE SALE S O CIETY LTD., VS. ITO (322 ITR 272] WHEREIN THE ASSESSEE WAS DENIED THE BENEFIT OF DEDU CTION U/S.80P(2)(A)(I) ON THE GROUND THAT THE ASSESSEE WA S NOT DOING ANY BANKING ACTIVITY. IN THAT CASE THE HONBLE HIGH COU RT OF KARNATAKA HAS OBSERVED AS UNDER:- THE ASSESSEE WAS NOT A CO-OPERATIVE BANK AND WAS N OT DOING ANY BANKING BUSINESS AND ADMITTEDLY, THE ACTIVITIES OF THE ASSESSEE FELL WITHIN THE AMBIT OF SECTION 80P(2)(A)(I) AND (III) OF THE ACT. NOR WERE STATUTORY DEPOSITS REQUIRED TO BE MADE BY THE ASSESSEE AS ITA NO.1089/BANG/2015 PAGE 4 OF 8 REQUIRED BY A SOCIETY DOING BANKING BUSINESS IN WHI CH CASE ALSO THE INTEREST EARNED FROM THE DEPOSITS COULD BE ATTR IBUTABLE TO THE BUSINESS OF BANKING. NO MATERIAL WAS PRODUCED TO SH OW THAT THE ASSESSEE SOCIETY WAS AUTHORIZED TO ACCEPT DEPOSITS UNDER THE CO- OPERATIVE SOCIETIES ACT. WHAT WAS INVESTED IN SECUR ITIES AND TERM DEPOSITS WITH BANK WERE THE SURPLUS FUNDS. THE INTE REST RECEIVED FROM SECURITIES AND DEPOSITS EXCEPT DEPOSITS WITH B ANKS OTHER THAN CO-OPERATIVE BANKS OTHER THAN CO-OPERATIVE BAN KS WAS NOT RELATABLE TO THE BUSINESS OF THE ASSESSEE AND CONSE QUENTLY, IT DID NOT QUALIFY FOR DEDUCTION SECTION 80P OF THE ACT. SINCE EARNING OF INTEREST WAS NOT A BUSINESS ACTIVITY OF THE ASSE SSEE IT WAS ASSESSABLE AS INCOME FROM OTHER SOURCES. 7.1 THE APPELLANT HAS ALSO NOT BEEN ABLE TO PRO VE THAT SUCH AN ACTIVITY IS COVERED BY THE BYE LAWS OF THE SOCIETY AND IT IS PERMITTED TO DO UNDER THE KARNATAKA CO-OP. SOCIETY ACT. 7.2 THE FACTS OF THE TOTGARS CO-OPERATIVE SAL E SOCIETY LTD. SUPRA ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AS IN BOTH THE CASES, THE ASSESSEES ARE NOT DOING BANKING BUSINES S. ACCORDINGLY, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80P(2)( D) OF THE ACT AND THE TREATMENT OF INTEREST AND DIVIDEND INCOME ON INVEST MENTS WITH BANKS BY THE AO AS INCOME FROM OTHER SOURCES IS UPHELD. 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US AND HAS RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. V. ITO, ITA NO.307 OF 2014 DATED 28.01.2014 , WHEREIN IT WAS HELD AS UNDER:- 8. THEREFORE, THE WORD ATTRIBUTABLE TO IS CERTAI NLY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING, TH EY HAVE USED THE EXPRESSION DERIVED FROM. THE EXPRESSION ATTR IBUTABLE TO BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIP TS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINE SS. A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS P ROFITS AND GAINS ITA NO.1089/BANG/2015 PAGE 5 OF 8 OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS M EMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT I MMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEE P THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIE S TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE B USINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABL E TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTI ON 80P OF THE ACT. 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S. TOTGARS CO-OPERATIVE SALE SOCIETY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE-COOPERATIVE SOCIETY, APAR T FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALS O IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKE TING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS M EMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT-TE RM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE-SOCIETY WAS A LIABILITY AND IT WAS SHOWN I N THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXT ENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UND ER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS O F THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVE STED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILIT Y IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFI TS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LE NDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTERES T. THE SAID ITA NO.1089/BANG/2015 PAGE 6 OF 8 INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED I N TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORD ER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCOR DINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW I S ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HEN CE, WE PASS THE FOLLOWING ORDER: 9. WE FIND THAT IDENTICAL ISSUE CAME UP FOR CONSID ERATION BEFORE THIS TRIBUNAL IN ITA NOS. 816 & 817/BANG/2015 IN THE CAS E OF ASHWATHPURA PATHINA SOUHARDA SAHAKARAI NIYAMITHA . THE TRIBUNAL BY ITS ORDER DATED 10.11.2015, FOLLOWING THE JUDGMENT OF HONBLE JURIS DICTIONAL HIGH COURT IN TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) ALLOWED THE CLAIM OF ASSESSEE FOR DEDUCTION U/S. 80P IN RESPECT OF INTEREST ON FIXED DEPOSITS HOLDING AS FOLLOWS:- 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD, WE NOTE THAT THE CIT(A) HAS DENIED THE C LAIM OF DEDUCTION U/S. 80P(2)(A)(I) IN RESPECT OF INTERES T EARNED ON FIXED DEPOSITS BY PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA) . IT IS PERTINENT TO NOTE THAT THERE IS NO DISPUTE AS REGARDS THE FACT THAT THE ASSESSEE IS A CO-OPERATIV E SOCIETY AND THE INTEREST EARNED BY THE ASSESSEE IS FROM THE FIXED D EPOSITS WHICH IS THE DISPUTE IN THE PRESENT APPEALS. THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE ON THE ALLOWABILITY OF DEDUCTION U/ S. 80P IN RESPECT OF INTEREST ON DEPOSITS. THE HONBLE HIGH COURT H AS DECIDED THE ISSUE IN PARAS 8 TO 10 .. ITA NO.1089/BANG/2015 PAGE 7 OF 8 .. 10. IT IS CLEAR THAT THE HONBLE JURISDICTIONAL HIG H COURT HAS DECIDED THIS ISSUE AFTER CONSIDERING THE JUDGMENT O F THE HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA) . RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) , WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CONSEQUENTLY THE CLAI M OF DEDUCTION U/S. 80P IS ALLOWED IN RESPECT OF INTEREST ON FIXED DEPOSITS. 10. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) AND DECISION OF THE COORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF ASHWATHPURA PATHINA SOUHARDA SAHAKARAI NIYAMITHA (S UPRA) , WE ALLOW THE APPEAL OF THE ASSESSEE. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF DECEMBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 28 TH DECEMBER, 2015. /D S/ ITA NO.1089/BANG/2015 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.