Kolhapur Sahakari Majur and Hamal Sanstha Maryadit, Kolhapur V. Income-tax Officer, Ward - 2 (1), Kolhapur

ITA 1138/PUN/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8961 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 24-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Source of fund
• Section: 143(3); 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.1138/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year: 2013-14 Kolhapur Sahakari Majur and Hamal Sanstha Maryadit, Masjid Complex, 2 nd Floor, Office No.14, Hamal Bhavan, 439-E Ward, Station Road, Shahupuri, Kolhapur- 416001. PAN : AAAAP0326R Vs. ITO, Ward- 2(1), Kolhapur. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)- 2, Kolhapur [‘the CIT(A)’] dated 25.04.2019 for the assessment year 2013-14. 2. The appellant raised the following grounds of appeal :- “1) On the facts and circumstances of the case and in law and by order of the Hon'ble Tribunal 'A' Bench Pune in ITA No. 486/Pun/2012 for A. Y. 2012-13 which decision was rendered in favour of the assessee now the issue is a 'covered' in favour of the assessee. Following the Hon'ble Tribunal order (supra) the deduction of 82,78,245/- be allowed to the appellant. Assessee by : None Revenue by : Shri Ramnath P. Murkunde Date of hearing : 05.09.2022 Date of pronouncement : 08.09.2022 ITA No.1138/PUN/2019 2 2) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified to uphold order of the A. O. making addition of Interest of Rs. 82,78,245/- was only business income from interest earned on FD's with Bank. The logic applied by A. O. was not according to law. 3) On the facts and circumstances of the case and in law the small delay has occurred in filing of this appeal but the payment of appeal fees was made on 03-07-2019. The assessee society was prevented by sufficient cause. The application for condonation of delay supported by sworn affidavit will be submitted at the time of hearing. The delay be condoned and appeal be admitted for hearing in accordance with the provisions of law. 4) The appellant craves to leave, add/amend or alter any of the above grounds of appeal.” 3. Briefly, the facts of the case are as under :- The appellant is a cooperative society registered under the Maharashtra Co-operative Act, 1960 and formed for collective disposal of labour. The return of income for the assessment year 2013-14 was filed on 28.09.2013 declaring total income of Rs.5,65,301/- after claiming deduction u/s 80P(2)(a)(vi) of the Income Tax Act, 1961 (‘the Act’). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2(1), Kolhapur (‘the Assessing Officer’) vide order dated 21.03.2016 passed u/s 143(3) of the Act at a total income of Rs.91,89,670/-. While doing so, the Assessing Officer had denied the claim for exemption of interest on FDRs with Syndicate Bank as FDs were made as long term investments by the appellant society. 4. Being aggrieved by the above order of the assessment, an appeal was preferred before the ld. CIT(A), who vide impugned ITA No.1138/PUN/2019 3 order confirmed the addition in the absence of any material on record to say that the investments are made by the appellant society out of the business surplus generated through business activities. He further held that the FDs of only Rs.57 lakhs were made for the purpose of obtaining the bank guarantees, the balance FDRs of Rs.10 crores are made out of surplus income, should be assessed only under the head “income from other sources”. 5. Being aggrieved by the decision of the ld. CIT(A), the appellant society is in appeal before us. 6. When the matter was called on, none appeared on behalf of the appellant-assessee despite due service of notice of hearing. 7. At the outset, there is a delay in filing the present appeal by 21 days. The appellant filed an affidavit stating that the delay in filing the present appeal had occurred on account of serious illness of the Manager of the appellant society, who was looking after the income-tax matters. Thus, it is prayed that the delay had occurred on account of bona-fide reasons and delay in filing the appeal be condoned. 8. On the other hand, ld. CIT-DR has no serious objection in condoning the delay. 9. Considering the above submissions, we condone the delay and proceed to dispose the appeal on merits. ITA No.1138/PUN/2019 4 10. We heard the ld. CIT-DR and perused the material on record. The issue in the present appeal relates to the taxability of interest income earned by cooperative society from Syndicate Bank. During the previous year relevant to the assessment year under consideration, the appellant society earned interest income of Rs.82,78,245/- on FDs with Syndicate Bank. Admittedly, these fixed deposits were not made for the purpose of procurement of bank guarantee for its business purpose. The material on record clearly does not indicate the source of the investments. It is settled position of law that if the FDs are placed out of the surplus generated by the cooperative society, such interest income, partakes the same character as the business income of the cooperative society as held by the Co-ordinate Bench of this Tribunal in Nashik Road Nagari Sahkari Patsanstha Limited vs. ITO vide ITA No.1700/PUN/2017 for A.Y. 2013-14 order dated 27.12.2021, wherein the Tribunal held as under :- “9. We heard the rival submissions and perused the material on record. Admittedly, the appellant is a Cooperative society formed under the provisions of Maharashtra Cooperative Societies Act,1960 with the objective of accepting deposits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Baroda in the form of Fixed Deposit. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The AO as well as the CIT(A) were of the opinion that the interest earned from third parties or non- members does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as ‘income from other sources’ There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for ITA No.1138/PUN/2019 5 exemption u/s. 80P(2)(a)(i) of the Act. The Hon’ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon’ble Delhi High Court in the case of Mantola Co- operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon’ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon’ble Telangana and Hon’ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [(2017) 396 ITR took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s.80P(2)(a)(i) of the Act. The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12- 2018) has taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal No. 1 & 2 stands allowed.” 11. In the present case, the material on record does not indicate the source of funds for making FDs in Syndicate Bank. Therefore, we are of the considered opinion that the matter requires to be remanded to the file of the Assessing Officer to decide the issue of eligibility of the interest income for exemption under the provisions of section 80P of the Act in terms of the decision of this Tribunal referred (supra). Thus, the grounds of appeal filed by the assessee stands partly allowed. ITA No.1138/PUN/2019 6 12. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced on this 08 th day of September, 2022. Sd/- Sd/- (S. S. GODARA) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 08 th September, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-2, Kolhapur. 4. The Pr. CIT-2, Kolhapur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.