The Pacca Kalan Multi Purpose Coop. Society, V. The Deputy Commissioner of Income tax, Bathinda

ITA 109/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5791 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SB
• Assessment Year: 2006-2007
• Appeal Filed On: 02-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDHIR K SEHGAL
• Section: 143(3); 234B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO.109(ASR)/2010 ASSESSMENT YEAR:2006-07 PAN :AAAAT4686N THE PACCA KALAN MULTIPURPOSE VS. DY. COMMR. OF INC OME-TAX, CO-OP. SOCIETY, CIRCLE II, PACCA KALAN. BHATINDA. (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. SUDHIR K. SEHGAL, ADV DEPARTMENT BY: SH. TARSEM LAL, DR ORDER PER MEHAR SINGH, AM, THE ASSESSEE FILED THE PRESENT APPEAL AGAINST THE ORDER OF THE CIT(A), BHATINDA, DATED 14.12.2009, PASSED UNDER SECTION 2 50(6) OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER REFERRED TO IN SHORT THE A CT) FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL: 1. THAT THE ORDER OF THE LD. CIT(A), BHATINDA IS A GAINST FACTS AND LAW. 2. THAT THE LD. CIT(A) ERRED ON FACTS AND LAW IN UP HOLDING THE ACTION OF THE A.O. OF DISALLOWING THE DEDUCTION UND ER SECTION 80P(2)(A)(IV) OF THE ACT. 3. THAT THE LD. CIT(A) ERRED ON FACTS AND LAW IN UP HOLDING THE ACTION OF THE A.O. OF NOT ALLOWING DEDUCTION ON IN TEREST INCOME FROM THE MEMBERS. 2 4. THAT THE LD. CIT(A) ERRED ON FACTS AND LAW IN UP HOLDING THE ACTION OF THE A.O. IN CONSIDERING OF THE INTEREST INCOME AS TAXABLE INCOME. 5. THAT THE LD. CIT(A) ERRED ON FACTS AND LAW IN UP HOLDING THE ACTION OF THE A.O. IN DISALLOWING PROPORTIONATE AMO UNT OF THE TOTAL EXPENSES DEBITED TO INCOME AND EXPENDITURE ST ATEMENT. 6. THAT THE LD. CIT(A) ERRED ON FACTS AND LAW IN UP HOLDING THE ACTION OF THE A.O. CHARGING OF INTEREST U/S 234B & 234D & 244A(3). 3. THE BRIEF AND NEAT FACTS OF THE CASE, AS CULLED OUT, FROM THE RELEVANT RECORDS ARE THAT THE ASSESSEE IS CO-OPERATIVE SOCIE TY REGISTERED WITH THE REGISTRAR OF CO-OPERATIVE. SOCIETIES ACT. THE MEMB ERS OF THE CO-OPERATIVE SOCIETY ARE FARMERS AND MAIN OBJECT OF THE CO-OPERA TIVE SOCIETY IS TO PROVIDE LOANS, FERTILIZERS, CATTLE FEED, PESTICIDES ETC. TO THE FARMERS ONLY ON SUBSIDIZED RATES. THE SOCIETY DERIVES ITS INCOME FR OM INTEREST ON THE LOANS GIVEN TO ITS MEMBERS AND ALSO FROM INTEREST ON THE CREDIT FACILITY PROVIDED TO THE MEMBERS ON ACCOUNT OF SUPPLY OF FERTILIZERS/PES TICIDES/SEEDS ETC. THE SOCIETY CLAIMED DEDUCTION UNDER SECTION 80P(2)(A)(I V) OF THE ACT. THE AO DISALLOWED INTEREST INCOME EARNED BY THE ASSESSEE, FROM PROVIDING CREDIT FACILITIES ON SUPPLY TO FERTILIZERS /PESTICIDES/SEE DS ETC. I) DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF KERALA CO-OPERATIVE CONSUMERS FEDERATION LTD. VS. C IT 170 ITR 455 (KER), WHEREIN IT HAS BEEN HELD AS UNDE R: THE ASSESSEE BEING A CO-OPERATIVE SOCIETY IN THIS CASE WAS ONLY CARRYING ON THE BUSINESS OF PURCHASE/SALE OF C ONSUMER GOODS ON CREDIT BASIS AND TRIED TO CLAIM THE DEDUCT ION U/S 80P(2)(A)(IV). THE DEDUCTION WAS DISALLOWED ONLY BE CAUSE AS PER THE FINDINGS OF THE HONBLE HIGH COURT, THE ASSESSEE CO-OPERATIVE SOCIETY ENGAGED IN PURCHASE/SALES OF C ONSUMER 3 GOODS EFFECTING CREDIT SALES TO ITS MEMBERS CANNOT SAID TO BE ENGAGED IN PROVIDING CREDIT FACILITIES. II) DECISION OF HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. CORAL MILLS WORKERS CO-OPERATIVE STORES LTD. (1977) 106 ITR 868 (MAD), WHEREIN IT HAS BEEN HELD AS UNDER: THE ASSESSEE CO-OPERATIVE SOCIETY WAS DEALING IN GROCERY ARTICLES AND PIECE GOODS AND IT WAS NEITHER CARRYIN G ON BUSINESS OF BANKING NOR PROVIDED CREDIT FACILITIES TO ITS ME MBERS BY WAY OF GIVING LOANS. THE HONBLE HIGH COURT REJECTED TH E CONTENTION OF THE ASSESSEE THAT IT SELLS GOODS ON C REDIT TO ITS MEMBERS AND IT SHOULD BE TREATED AS A SOCIETY PROV IDING CREDIT FACILITIES TO ITS MEMBERS FOR CLAIMING DEDUCTION U/ S 80P. III) DECISION OF HONBLE ALLAHABAD HIGH COURT IN TH E CASE OF ADDL. CIT VS. U.P. CO-OPERATIVE CANE UNION (1978) 114 ITR 70 (ALL) WHEREIN IT HAS BEEN HELD AS UNDER: THE ASSESSEE CO-OPERATIVE SOCIETY WAS RUNNING A PRINTING PRESS AND BUSINESS OF PURCHASES/SALES OF KOLHUS TO ITS MEMBERS THE HONBLE HIGH COURT HELD THAT A PERSON OR A SO CIETY MAY NOT BE BANKER IN THAT WIDE SSENSE YET HE MAY BE PRO VIDING CREDIT FACILITIES WHICH IS A PART OF A BANKING BUSI NESS. THE EXPRESSION PROVIDING CREDIT FACILITY THUS TAKES I TS COLOUR FROM THE ACTIVITY OF BANKING. IN ORDER THAT A BANKING O R PROVIDING OF CREDIT FACILITY MAY CONSTITUTE A BUSINESS, IT IS NE CESSARY THAT THESE ACTIVITIES MUST BE THE CHIEF SOURCE OF INCOME . THE DEDUCTION CLAIMED U/S 80P(2) WAS DISALLOWED BECAUSE THE INCOME WAS NOT COVERED BY THE SECTION. (IV) DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF RODIER MILL EMPLOYEES COOPERATIVE STORES LTD. VS. CIT (198 2) 135 ITR 355 (MAD), WHEREIN IT HAS BEEN HELD AS UNDER: THE HONBLE HIGH COURT HAS HELD THAT SECTION 80P( 2)(A)(I) REFERS TO A CO-OPERATIVE SOCIETY ENGAGED IN CARRYIN G ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BUT THE ASSESSEE WAS NEITHER ENGAGED IN THE BUSINES S OF BANKING OR PROVIDING LOANS TO ITS MEMBERS AND IT WAS ONLY S ELLING GOODS ON CREDIT TO ITS MEMBERS AND FURTHER THAT WHEN TH E SECTION REFERS TO A CO-OPERATIVE SOCIETY ENGAGED IN PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS IT REALLY REFERS TO A CR EDIT SOCIETY, 4 WHOSE PRIMARY OBJECT IS THE PROVISION OF LOANS OR O THER CREDIT FACILITIES TO ITS MEMBERS, IT DOES NOT INCLUDE ANY SOCIETY WHOSE PRIMARY SUBJECT IS SOMETHING OTHER THAN THE PROVISI ON OF LOANS OR OTHER CREDIT FACILITIES, SUCH AS, A CONSUMER CO- OPERATIVE . ON APPEAL, THE LD. CIT(A), DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE FINDINGS OF THE AO. NOW AGGRIEVED WI TH THE FINDINGS OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. COUNSEL FOR THE ASSESSEE TO SUPPORT THE ELIGIBILITY OF CLAIM U NDER SECTION 80P(2)(A)(IV), PLACED RELIANCE ON THE FOLLOWING DECISIONS: I) CIT VS. IQBALPUR CO-OPERATIVE CANE DEVELOPMENT U NION LTD. (2009) 315 ITR 441 DEDUCTION U/S 80P ALLOWABILITY-INTEERST FROM INVE STMENT WITH BANKS AND KISAN VIKAS PATRA EACH CATEGORY CONTAI NED IN CLAUSE (A) (B), (C) AND (D) OF SECTION 80P(2) COVER DIFFERENT KINDS OF CO-OPERATIVE SOCIETIES ASSESSEE CO-OPERA TIVE SOCIETY BEING ENGAGED NOT ONLY IN PROVIDING CREDIT FACILITY BUT ALSO IN MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMB ERS AND PROVIDING LOANS FOR PURCHASE OF AGRICULTURAL IMPLEM ENTS, SEEDS FOR AGRICULTURE ETC., AND THUS COVERED UNDER SUB CL S. (I), (III) AND (IV0 OF C. (A) OF SUB-S (2), WAS ENTITLED TO DEDUCT ION TO THE EXTENT OF WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSI NESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES- WHETHER SUCH SOCIETY EARNED ITS INCOME EARNED ITS INCOME IN THE FORM OF INTEREST ON FIXED DEPOSIT RECEIPTS OR KISAN VIKAS P ATRA MAKES NO DIFFERENCE. SUCH INTEREST IS ALSO PART OF AMOUNT OF PROFITS AND GAINS OF BUSINESS OR ACTIVITIES OF SUCH SOCIEITY. II) CIT VS. KRISHAK SAHKARI GANNA SAMITI LTD. (2002 ) 258 ITR 594 (ALL) THE HONBLE HIGH COURT HAS HELD IN THIS CASE THAT INTEREST EARNED BY THE ASSESSEE-CO-OPERATIVE SOCIETY FROM IT S FARMER MEMBERS ON LOANS ADVANCED TO THEM TO ENABLE THEM TO PURCHASE GOOD SEEDS OF SUGARCANE, FERTILIZERS, ETC. WAS EXEM PT UNDER 5 SECTION 80P(2)(A)(I), WHILE RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. CIT 113 ITR 84 (SC). III) CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. CIT 113 ITR 94 (SC) THE HONBLE SUPREME COURT HELD THAT THE EXPRESSION ATTRIBUTABLE TO SUGGESTS THAT THE LEGISLATURE INT ENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE WRONG BECAUSE THE JUDGMENTS ARE DISTINGUISHABLE ON FACTS. 4.1. THE LD. COUNSEL VEHEMENTLY CONTENDED THAT TH E AO IN THE ASSESSMENT YEARS 2003-04, 2004-05 AFTER MAKING DETA ILED ENQUIRY ALLOWED DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(IV) OF THE ACT. IT WAS ALSO CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT SUBSEQUEN T TO THE ASSESSMENT YEAR 2006-07, THE AO ALSO ALLOWED THE CLAIM OF THE ASSES SEE FOR THE ASSESSMENT YEAR 2009-10 VIDE ASSESSMENT ORDER DATED 15.03.2011 PASSED UNDER SECTION 143(3) OF THE ACT. THE AO ASSESSED THE INCOME OF TH E SOCIETY AT NIL. THE LD. COUNSEL, FURTHER, CONTENDED THAT PRINCIPLE OF C ONSISTENCY AND RES- JUDICATA, IS APPLICABLE TO THE FACT SITUATION OF TH E PRESENT CASE. AS MENTIONED EARLIER, THE AO HAS ALLOWED THE CLAIM OF THE ASSESS EE UNDER SECTION 80P(2)(A)(IV) UNDER SCRUTINY ASSESSMENT FOR THE ASS ESSMENT YEARS 2003-04, 2004-05 & 2009-10. THEREFORE, THE LD. COUNSEL ARGUE D VEHEMENTLY THAT UNDER IDENTICAL SET OF FACT SITUATION OF THE CASE O F THE ASSESSEE, IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2006-07, T HE CLAIM OF THE ASSESSEE CANNOT BE TREATED DIFFERENTLY, AS THE AO HAS ALLOW ED THE CLAIM OF THE ASSESSEE-SOCIETY, IN THE PREVIOUS ASSESSMENT YEAR A S WELL AS SUBSEQUENT TO THE ASSESSMENT YEAR 2006-07, AS INDICATED ABOVE. 5. THE LD. DR, ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 6 6. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE EN TIRE FACT SITUATION OF THE CASE AS WELL AS RIVAL SUBMISSIONS MADE BY THE C ONTENDING PARTIES. IT IS AN UNDISPUTED FACT THAT THE AO UNDER IDENTICAL SET OF FACTS AND CIRCUMSTANCES OF THE CASE, DULY CONSIDERED AND ACCEPTED THE CLAIM O F THE ASSESSEE FOR THE ASSESSMENT YEARS 2003-04, 2004-05 & 2009-10 UNDER S CRUTINY ASSESSMENT MADE UNDER SECTION 143(3) OF THE ACT. HOWEVER, DURI NG THE ASSESSMENT YEAR 2006-07, THE CLAIM WAS NOT ACCEPTED. IN VIEW OF TH IS, THE QUASI-JUDICIAL AUTHORITY LIKE A.O. CANNOT CHANGE HIS OPINION ON TH E FOUNDATION OF SUBJECTIVITY, ARBITRARINESS AND SURMISES WITHOUT BR INGING ON RECORD CLEARLY DIFFERENT SET OF FACTS AND CIRCUMSTANCES. IN THE AS SESSMENT YEAR UNDER CONSIDERATION, THIS BECOMES MORE IMPERATIVE AND RE LEVANT PARTICULARLY, WHEN THE AO HAS ACCEPTED THE CLAIM OF THE ASSESSEE UNDE R SCRUTINY ASSESSMENT, AS MENTIONED EARLIER. THEREFORE, THE CONCEPT OF CONSIS TENCY AND DOCTRINE OF RES- JUDICATA IS APPLICABLE TO THE FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE. IN THIS CASE, THE ASSESSEE PLACED RELIANCE ON THE FOLL OWING DECISIONS: I) BERGER PAINTS INDIA LTD. CIT, 266 ITR 99 (SC) II) RADHASOAMI SATSANG VS. CIT 193 ITR 321 (SC) 6.1 THE CASE OF THE ASSESSEE IS THAT THE APPELLANT IS CO-OPERATIVE CREDIT SOCIETY, WHEREAS THE CASE LAWS RELIED UPON BY THE A O PERTAIN TO CONSUMER CO-OPERATIVE SOCIETY. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE AO AND FOUND THE SAME ARE NOT APPLICABLE TO T HE FACT SITUATION OF THE PRESENT CASE, AS THE OBJECT OF THE ASSESSEE, IN SUC H A CASE IS DIAMETRICALLY OPPOSITE, TO THE OBJECT OF THE PRESENT ASSESSEE. T HE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE PHRASE ATTRIBUTA BLE IS APPEARING UNDER SECTION 80P, HAS WIDE AMBIT VIS--VIS, THE PHRASE D ERIVED FROM. HE SUBMITTED HIS CONTENTION ON THE BASIS OF THE DECISION OF CAMB AY ELECTRIC 7 SUPPLY INDUSTRIAL CO., LTD. VS. CIT 113 ITR 84 (SC) . WE ARE IN COMPLETE AGREEMENT WITH THE CONTENTION RAISED BY THE ASSESS EE AND FOUND THAT THE CONTENTION HAS MERIT BASED ON THE PHRASE USED UNDER SECTION 80P(2)(A)(IV) OF THE ACT. IN VIEW OF THIS, THE FINDINGS OF THE LD. C IT(A) ARE SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. THE LAST GROUND OF APPEAL RELATES TO UPHOLDING THE ACTION OF CHARGING OF INTEREST UNDER SECTION 234B & 234D & 244A(3). TH E LD. COUNSEL SUBMITTED THAT THIS GROUND IS CONSEQUENTIAL ONLY. THE AO IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF, IF ANY, AT THE TIME OF GIVING EFFECT TO THE ORDER. THIS GROUND OF APPEAL IS DISPOSED OF IN THESE TERMS . 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 10TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 10TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. PACCA KALAN MULTI-PURPOSE CO-OP. SOCIEITY, PACCA KALAN. 2. THE DCIT,CIR.II, BHATINDA. 3. THE CIT(A), BHATINDA. 4. THE CIT, BHATINDA. 5. THE SR DR ASR TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR. 8