M/s West Godavari Dist Coop Mrktg Society Ltd, Eluru V. The ITO, Ward-2., Eluru

ITA 117/VIZ/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0117 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 19-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: J RADHAKRISHNA
• Section: 80P

Judgement Text

PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.117/VIZAG/2007 ASSESSMENT YEAR: 2003-04 WEST GODAVARI DISTRICT COOPERATIVE MARKETING SOCIETY LTD., ELURU VS. ITO WARD-2, ELURU (APPELLANT) (RESPONDENT) PAN NO. T-1/AAAAT 7717Q APPELLANT BY: SHRI J. RADHAKRISHNA, CA RESPONDENT BY: SHRI DS SUNDER SINGH, DR ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22-2- 2007 PASSED BY THE LD CIT (A) RAJAHMUNDRY AND IT RE LATES TO THE ASSESSMENT YEAR 2003-04. 2. THE ASSESSEES CLAIM FOR DEDUCTION OF FOLLOWING INCOME U/S 80P OF THE ACT, HAVING BEEN REJECTED BY THE TAX AUTHORITIES, T HE ASSESSEE IS IN APPEAL BEFORE US. A NET INTEREST RECEIVED ON FD WITH DIST. COOP. CENTRAL BANK LTD. 50,558 B INTEREST ON STAFF LOAN 19886 C INTEREST RECEIVED ON GROUP GRATUITY INVESTMENT 4763 D MISCELLANEOUS INCOME I) SALE OF OLD GUNNY BAGS 63532 II) INSPECTION CHARGES FROM RYOTS 42357 III) INTEREST RECEIVED FROM EID (P) INDIA 38562 E INTEREST ON SBI BONDS 1185 TOTAL 220843 PAGE 2 OF 5 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS AN APEX LEVEL COOPERATIVE MARKETING SOCIETY HAVING JUR ISDICTION OVER A DISTRICT AND IT IS REGISTERED UNDER THE COOPERATIVE SOCIETY ACT. ITS CLAIM FOR DEDUCTION U/S 80P(2)(A)(IV) OF THE ACT WAS ALLOWED BY THE AO EXCEPT FOR THE ITEMS MENTIONED IN PARA 2 SUPRA. THE ASSESSING OFFICER R EJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THEY DO NOT RELATE TO T HE COOPERATIVE BUSINESS ACTIVITY. THE LD CIT (A) ALSO CONFIRMED THE ACTION OF THE AO. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE PROCEEDING FURTHER, IT IS APPROPRIATE TO EXTRACT THE RELEVANT PORTIONS OF SECTION 80P. 80P (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE T HE FOLLOWING NAMELY:- (A) IN THE CASE OF A COOPERATIVE SOCIETY ENGAGED IN- (I) (II) (III) (IV) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS , LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PUR POSE OF SUPPLYING THEM TO ITS MEMBERS, OR.. (V) (VI). (VII).. THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. (B) (I)..(II)..(III).. (C).. (I).(II) (D) IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE COOPERATIVE SOCIETY FROM I TS INVESTMENTS WITH ANY OTHER COOPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME. 5. LD AR SUBMITTED THAT THE NET INTEREST OF RS.50,5 58/- HAS BEEN RECEIVED FROM THE DISTRICT COOPERATIVE CENTRAL BANK LTD., EL URU, WHICH IS A COOPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS. ACCORDINGLY LD AR CONTENDED THAT THE SAME IS EXEMPT U/S 80P(2)(D). HOWEVER, WE NOTICE F ROM THE ORDER OF THE LD PAGE 3 OF 5 CIT (A), THE FIRST APPELLATE AUTHORITY REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE SOCIETY DID NOT ESTABLISH THAT THE SAID INCOME WAS EARNED FROM INVESTMENT IN ANOTHER COOPERATIVE SOCIE TY. 5.1 THE FACTS ARE THAT THE ASSESSEE HAS MADE TH E FIXED DEPOSIT WITH DISTRICT COOPERATIVE CENTRAL BANK LTD. THERE CANNO T BE ANY DISPUTE THAT FIXED DEPOSITS MADE WITH A BANK IS A TYPE OF INVESTMENT. THE ASSESSEE HAS SUBMITTED THAT THE DISTRICT COOPERATIVE CENTRAL BAN K LTD., IS A COOPERATIVE ENGAGED IN BANKING BUSINESS, WHICH CLAIM DOES NOT R AISE ANY DOUBT. IN VIEW OF THE ABOVE, IN OUR OPINION, THE SAID INTEREST INC OME IS ELIGIBLE FOR EXEMPTION U/S 80P(2)(D) OF THE ACT. ACCORDINGLY WE REVERSE TH E ORDER OF THE LD CIT (A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO A LLOW DEDUCTION ON THE INTEREST RECEIVED FROM DISTRICT COOPERATIVE CENTRAL BANK LTD., 6. THE LD AR SUBMITTED THAT THE ASSESSEE IS ELIGIBL E FOR EXEMPTION U/S 80P(2)(A) (IV) OF THE ACT IN RESPECT OF THE WHOLE O F THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ITS ACTIVITIES. BY PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF AS HOK LEYLAND LTD., VS. CIT(224 ITR 122) LD AR SUBMITTED THAT THE EXPRESSIO N ATTRIBUTABLE TO IS WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. ACCORDINGLY LD AR SUBMITTED THAT ALL OTHER INCOME ARE ATTRIBUTABLE TO THE ACTIVITIES OF THE ASSOCIATION AND HENCE THEY ARE DEDUCTIBLE U/S 80P. 6.1 WE NOTICE THAT THE HONBLE SUPREME COURT I N THE CASE OF PANDIAN CHEMICALS LTD.,VS. CIT (262 ITR 278) HAS HELD THAT THE WORDS DERIVED FROM MUST BE UNDERSTOOD AS SOMETHING, WHICH HAS A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSEES INDUSTRIAL UNDERTAKING. THE HON BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. MADURAI DISTRICT CENTRAL COOPER ATIVE BANK LTD., (148 ITR 196) HAS HELD THAT THE EXPRESSION ATTRIBUTABLE TO HAS TO BE UNDERSTOOD IN A BROAD SENSE. ACCORDINGLY ANY INCOME RECEIVE BY THE ASSESSEE, WHICH HAS SOME NEXUS WITH THE ACTIVITIES CARRIED ON BY IT OR WHICH CAN BE BROADLY LINKED PAGE 4 OF 5 TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE, CAN B E SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE. 7. HAVING UNDERSTOOD THE MEANING OF THE TERM ATTRI BUTABLE TO, LET US ANALYSE THE NATURE OF RECEIPTS LISTED ABOVE. THE E MPLOYEES OF THE ASSESSEE FORM INTEGRAL PART OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE. HENCE THE INTEREST ON STAFF LOAN AND INTEREST RECEIVED ON GRO UP GRATUITY INVESTMENT ARE INCIDENTAL TO THE CARRYING ON ACTIVITIES OF THE ASS ESSEE AND HENCE BOTH TYPE OF INCOME ARE ATTRIBUTABLE TO THE ACTIVITIES OF THE AS SESSEE. SIMILARLY SALE OF OLD GUNNY BAGS AND INSPECTION CHARGES RECEIVED FROM RYO T ARE ALSO CONNECTED WITH THE ACTIVITIES OF THE ASSESSEE. HENCE, IN OUR OPINION, THESE FOUR TYPES OF ACCOUNT ARE ATTRIBUTABLE TO THE ACTIVITIES OF THE B USINESS AND ACCORDINGLY DIRECT THE AO TO ALLOW DEDUCTION U/S 80P ON THESE I NCOME. 8. IN RESPECT OF INTEREST RECEIVED FROM EID (P) INDIA LTD., THE SUBMISSION OF THE ASSESSEE IS THAT IT HAD ACTUALLY RECEIVED RS .1,48,590/- FROM THE SAID COMPANY. HOWEVER, AT THE TIME OF ACCOUNTING THE REC EIPT OF INTEREST, A SUM OF RS.1,10,028/- WAS ACCOUNTED AS INTEREST ON INVESTME NT AND THE SAME WAS GRANTED DEDUCTION U/S 80P(2)(A). THE REMAINING AMOU NT OF RS.38,562/- WAS INADVERTENTLY CREDITED UNDER THE HEAD MISCELLANEOU S INCOME. SINCE A PART OF INTEREST RECEIVED FROM EID (P) INDIA LTD., HAS A LREADY BEEN GRANTED DEDUCTION U/S 80P(2)(A), IN OUR OPINION, THE SAME T REATMENT SHOULD BE GRANTED TO THE REMAINING AMOUNT OF RS.38,562/- ALSO , WHICH WAS CREDITED UNDER THE HEAD MISCELLANEOUS INCOME. WHAT IS REQU IRED TO BE SEEN IS THE NATURE OF RECEIPTS AND NOT THE HEAD UNDER WHICH THE SAME WAS ACCOUNTED. ACCORDINGLY, WE DIRECT THE AO TO ALLOW DEDUCTION U/ S 80P ON THE INTEREST INCOME OF RS.38,562/- ALSO. 9. THE LAST ITEM RELATES TO THE INTEREST ON SBI BON DS. THE SUBMISSION OF THE ASSESSEE IS THAT THE INVESTMENT IN SBI BOND WAS MADE OUT OF ITS WORKING FUNDS AND HENCE THE SAME IS ELIGIBLE FOR EXEMPTION U/S 80P. IN OUR OPINION WHAT IS TO BE SEEN AS BUSINESS NECESSITY IS THE NEX US BETWEEN INVESTMENT PAGE 5 OF 5 AND THE ACTIVITIES CARRIED ON BY THE ASSESSEE. IN TH IS CASE, THE ASSESSEE HAS NOT ESTABLISHED THE BUSINESS COMPULSION UNDER WHICH IT HAS MADE INVESTMENT IN THE SBI BONDS. HENCE, IN OUR OPINION, IT WILL NOT FALL UNDER THE CATEGORY O INCOME ATTRIBUTABLE TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE. ACCORDINGLY WE AFFIRM THE ORDER OF THE TAX AUTHORITIES IN RESPE CT OF INTEREST OF RS.1185/- RECEIVED ON SBI BONDS. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 16.9.2009 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, 16 TH SEPTEMBER, 2009. COPY TO 1 THE WEST GODAVARI DISTRICT COOPERATIVE MARKETING SOCIETY LIMITED, ELURU 2 THE ITO WARD-2, ELURU 3 THE CIT, RAJAHMUNDRY 6 THE CIT(A), RAJAHMUNDRY 7 THE DR, ITAT, VISAKHAPATNAM. 8 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM