The Surat District Co.Op.Milk Producers Union Ltd., Surat V. The ACIT, Circle-9, Surat

ITA 1211/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2151 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Additional evidence; Rule 8D
• Section: 14A; 80P; 208; 13

Judgement Text

ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 1 OF 14 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER S . N O INCOME TAX APPEAL NO. APPELLANT /RESPONDENT 1 & 2 1498/AHD/2012/S RT FOR A.Y. 2009-10 1076/AHD/2015/S RT FOR A.Y. 2010- 11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-9, SURAT. V S . THE SURAT DIST. CO - OP. MILK PRODUCERS UNION LTD., P.B.NO.501, SUMUL DAIRY ROAD, SURAT 395004. [PAN: AAAAS3450M] 3 1211/AHD/2015/S RT FOR A.Y.2010- 11 THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD., P.B.NO.501, SUMUL DAIRY ROAD, SURAT 395004. [PAN: AAAAS3450M] V S . THE SURAT DIST. CO - OP. MILK PRODUCERS UNION LTD., P.B.NO.501, SUMUL DAIRY ROAD, SURAT 395004. [PAN: AAAAS3450M] /ASSESSEE BY SHRI MITISH S. MODI CA /REVENUE BY SHRI DILEEP KUMAR SR.DR / DATE OF HEARING 05 .0 7 .2018 /PRONOUNCEMENT ON 03 .0 8 .2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THESE APPEALS FILED BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDER OF LEARNED COMMISSIONER OF ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 2 OF 14 INCOME TAX (APPEALS)V, SURAT(IN SHORT THE CIT (A)) DATED 30.03.2012 PERTAINING TO ASSESSMENT YEAR 2009-10 AND COMMON ORDER OF LD.CIT(A)-3, SURAT DATED 04.02.2015 PERTAINING TO ASSESSMENT YEAR 2010-11. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE LD.CIT(A) HAS ERRED IN LAW AND OR FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.2,04,008,629/- ON ACCOUNT OF DISALLOWANCE U/S.14A(3) DESPITE THE FACT THAT THE A.O. HAS CORRECTLY MADE THE ADDITION. 2. THE LD.CIT(A) HAS ERRED IN LAW AND OR ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.2,04,08,629/- ON ACCOUNT OF DISALLOWANCE U/S.14A(3) DESPITE THE FACT THAT ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE INCURRED FOR EARNING OF INCOME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. THE ASSESSEE IS THE SURAT DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LTD. (SDCMPUL) IS A CO-OPERATIVE ORGANISATION REGISTERED UNDER THE BOMBAY SOCIETIES ACT 1952. THE ASSESSEE IS IN THE BUSINESS OF PROCURING THE MILK, PRODUCING THE MILK MANUFACTURING PRODUCTS AND DISTRIBUTION OF MILK IN SURAT DISTRICT. THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80P(2)(D) OF THE INCOME TAX ACT UNDER THE FOLLOWING HEADS. I) INTEREST INCOME FROM CO-OPERATIVE BANKS RS.1,67,97,785/-. II) DIVIDEND INCOME RECEIVED DURING THE YEAR RS.58,61,754/- TOTAL CLAIMED U/S.80P(2)(D) RS.2,26,59,539/-. ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 3 OF 14 4. THE ASSESSEE HAS CLAIMED IN EXPENDITURE INCURRED FOR EARNING THE ABOVE INCOME WHICH IS NOT PART OF HIS TOTAL INCOME. THE AO REFERRED THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S.14A OF THE ACT AS PER RULE 8D SHOULD NOT BE MADE FOR EARNING THE INCOME WHICH IS NOT INCLUDABLE IN TOTAL INCOME. IT WAS EXPLAINED VIDE LETTER DATED 30.11.2011 THAT THE DIVIDEND INCOME OF RS.58,61,754/- CLAIMED U/S.80P(2)(D) IS NOT EXEMPTED UNDER THE ACT AND DOES NOT FALL UNDER CHAPTER 3 OF THE ACT. BUT DEDUCTION HAS BEEN CLAIMED UNDER CHAPTER VI-A OF THE ACT. AS A MATTER OF FACT, THERE IS NO DIRECT OR DEFINITE OR SPECIFIC EXPENDITURE INCURRED TO EARN THE INCOME OF INTEREST FROM DIVIDEND FROM THE INVESTMENTS MADE WITH OTHER CO- OPERATIVE SOCIETIES, MORE SO WHEN, THE SAID INVESTMENTS WERE MADE IN THE EARLIER YEARS IN COMPLIANCE TO THE RELEVANT PROVISIONS OF SECTION 71 OF THE ACT GUJARAT CO-OPERATIVE SOCIETIES ACT. THEREFORE, IT WAS CLAIMED THAT THE PERUSAL OF PROFIT AND LOSS ACCOUNT WILL SHOW THAT NO SUCH EXPENDITURE HAVING DIRECT NEXUS OR CO-RELATION HAS BEEN INCURRED FOR EARNING INTEREST AND /OR DIVIDEND INCOME FROM INVESTMENTS FROM OTHER CO-OPERATIVE SOCIETIES. IT WAS FURTHER SUBMITTED THAT PROVISIONS OF SECTION 80P(2)(D) OF THE ACT DOES NOT MAKE ANY DISTINCTION WITH REGARD TO THE SOURCE OF ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 4 OF 14 INVESTMENT AND THEREFORE IT IS ALSO NOT PERMISSIBLE TO MAKE ANY PROPORTIONATE DISALLOWANCE OF EXPENDITURE WHICH IS NOT LIABLE LINK WITH THE EARNING OF INTEREST AND DIVIDEND FROM INVESTMENT WITH OTHER CO-OPERATIVE SOCIETIES. THE ASSESSEE HAS ALSO RELIED IN THE CASE OF CIT VS. UP RAJYA SAHAKARI BHUMI VIKAS BANK LTD. [1994] 208 ITR 758 (ALL) AND CIT VS HARYANA STATE CO-OPERATIVE SOCIETY [1998] 234 ITR 71 (P & H). HOWEVER, THE AO WAS OF THE VIEW THAT SECTION 14A IS APPLICABLE IN SUCH CASES WHERE PART OF THE INCOME IS NOT INCLUDED IN THE TOTAL INCOME. SECTION 14A DOES NOT SPEAK OF INCOME WHICH IS EXEMPTED FROM TAXATION. ON THE OTHER HAND, IT SPEAKS OF INCOME WHICH IS NOT INCLUDED IN THE TOTAL INCOME. THE GROSS TOTAL INCOME IS DEFINED U/S.80B OF THE ACT TO MEAN THAT INCOME AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT BEFORE MAKING ANY DEDUCTION UNDER CHAPTER VI-A. THE AO, THEREFORE, REFERRING TO VARIOUS CASE LAWS WORKED OUT DISALLOWANCE U/S.14A READ WITH RULE 8D AT RS.2,04,08,629/- AS AGAINST THE EXEMPT INCOME OF RS.2,26,539/- SHOWN DURING THE YEAR UNDER CONSIDERATION AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED, THE ASSESSEE HAS FILED APPEAL BEFORE THE LD.CIT(A), WHEREIN IT WAS CLAIMED THAT INTEREST INCOME IS EARNED ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 5 OF 14 WITH OTHER CO-OPERATIVE SOCIETIES WERE MADE SINCE LONG BACK FROM THE YEAR 1951 - 1952 AND 2002-03 OUT OF OWN FUNDS OF THE APPELLANT SOCIETY SHOWN YEAR TO YEAR IN OTHER WORDS, THE INCOME BY WAY OF DIVIDEND OR INTEREST EARNED DURING THE YEAR, AND ELIGIBLE FOR DEDUCTION U/S.80P(2)(D) OF THE ACT HAS NOT BEEN RESULTED OUT OF INVESTMENTS MADE DURING THE YEAR NEITHER BY MAKING ANY DIRECT OR INDIRECT EXPENDITURE FOR EARNING SUCH INCOME. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80P(2)(D) OF RS.58,61,754/- BEING DIVIDEND INCOME AND RS.1,67,97,758/- BEING INTEREST INCOME FROM DEPOSITS WITH THE SURAT DISTRICT CO-OPERATIVE BANK LTD. THE APPELLANT HAS CITED VARIOUS CASE LAWS AS NOTED BY THE CIT(A) IN THE APPELLATE ORDER. AFTER GOING THROUGH THE SAME, THE LD.CIT(A) OBSERVED THAT THERE IS CLEAR DISTINCTION BETWEEN THE EXEMPT INCOME U/S.10 AND THE DEDUCTION ALLOWABLE UNDER CHAPTER VI-A . THE AO HAS FAILED TO UNDERSTAND THE DISTINCTION BETWEEN THE EXEMPT INCOME WHICH COVERED BY CHAPTER 3 OF THE ACT BEING NOT SHOWN PART OF TOTAL INCOME AND THE DEDUCTION UNDER CHAPTER VI-A WHICH ARE AVAILABLE FROM GROSS TOTAL INCOME AS COMPUTED IN THE MANNER LAID DOWN IN THE ACT. IT IS UNDISPUTED FACT THAT INTEREST AND DIVIDEND EARNED BY THE APPELLANT CO-OPERATIVE SOCIETY FROM INVESTMENT MADE YEAR TO ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 6 OF 14 YEAR WITH OTHER CO-OPERATIVE SOCIETIES ARE ALREADY CREDITED AS INCOME IN ITS PROFIT AND LOSS ACCOUNT WHICH HAS FORMED PART OF THE GROSS TOTAL INCOME AND NOT FOUND CLAIM AS EXEMPT INCOME. THE LD.CIT(A) HAS HELD AS UNDER :- 6. I HAVE CAREFULLY GONE THROUGH THE ORDER OF THE A.O. AND THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT. I AM INCLINED TO AGREE WITH THE A.R. THAT THERE IS A CLEAR DISTINCTION BETWEEN THE EXEMPT INCOME U/S.10 AND THE DEDUCTIONS ALLOWABLE UNDER CHAPTER VIA. THE A.O. HAS FAILED TO UNDERSTAND THE DISTINCTION BETWEEN THE EXEMPT INCOME WHICH GOVERNED BY CHAPTER III OF THE BEING NOT FROM PART OF TOTAL INCOME AND THE DEDUCTION UNDER CHAPTER VI-A WHICH ARE AVAILABLE FROM GROSS TOTAL INCOME AS COMPUTED IN THE MANNER LAID DOWN IN THE ACT. IT IS AN UNDISPUTED FACT THAT INTEREST AND DIVIDEND EARNED BY THE APPELLANT CO-OPERATIVE SOCIETY FROM INVESTMENT MADE YEAR TO YEAR WITH OTHER CO-OPERATIVE SOCIETIES ARE ALREADY CREDITED AS INCOME IN ITS PROFIT AND LOSS A/C AND IN THAT WAY, FORM PART OF THE GROSS TOTAL INCOME NOT FOUND CLAIMED AS EXEMPT INCOME. THE LEARNED PERSPECTIVES AND UNWARRANTEDLY APPLIED RULE 8D READ WITH SECTION 14A OF THE ACT. IN MY CONSIDERED VIEW, THERE IS NO LAWFUL GROUND TO APPLY RULE 8D READ WITH SECTION 14A OF THE ACT IN THE PRESENT CASE WHERE THERE IS NO ELEMENT OF EXEMPT INCOME, BUT THE INTEREST AND DIVIDEND INCOME MADE FROM THE YEARS INVESTMENTS IN OTHER CO-OPERATIVE SOCIETIES ELIGIBLE FOR DEDUCTION U/S 80P(2)(B) OF THE ACT. IT IS ALSO FOUND FROM THE SUBMISSIONS MADE BY THE AR THAT THE APPELLANT SOCIETY HAS NOT CLAIMED THE DEDUCTION U/S.80P(2)(A)(I) OF THE ACT BUT CLAIMED DEDUCTION U/S.80P(2)(D) OF THE ACT ONLY. THE AR HAS ALSO RELIED UPON SEVERAL JUDGMENTS INCLUDING THE RECENT JUDGMENT OF ITAT DELHI ACIT VS. KRISAK BHARTI CO-OPERATIVE LTD. AND ALSO JUDGMENT OF GUJARAT HIGH COURT CIT VS. SUMMERSIBLES LTD. WHICH ARE FOUND SQUARELY COVERING ISSUE IN THE CASE OF THE APPELLANT. THE APPEALS FILED BEFORE ME FOR THE EARLIER ASSTT. YEARS 2006-07, 2007- 08 & 2008-09 HAVING THE IDENTICAL ISSUES HAD ALREADY BEEN DECIDED IN FAVOUR OF THE APPELLANT SOCIETY. IN VIEW THE IDENTICAL SET OF FACTS AND CIRCUMSTANCES OF THE CASE AS IN THE EARLIER YEARS, THE ADDITION MADE ON THIS ACCOUNT IS HEREBY DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 6. BEING AGGRIEVED, THE REVENUE HAS FILED APPEAL BEFORE THIS TRIBUNAL. 7. THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND SUBMITTED THAT THE AO HAS ELABORATELY DISCUSSED THE REASONS FOR NOT ACCEPTING THE CONTENTION OF THE ASSESSEE. THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE INCURRED FOR EARNING FOR EARNING THE DIVIDEND INCOME WHICH IS NOT PART OF THE TOTAL INCOME. SECTION 14A DOES NOT SPEAK OF INCOME ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 7 OF 14 WHICH IS EXEMPT FROM TAXATION. ON THE OTHER HAND, IT SPEAKS OF INCOME WHICH IS NOT INCLUDED IN THE TOTAL INCOME. THE LD.CIT(A) HAS NOT APPRECIATED THE FACT THAT THE TOTAL INCOME IS DEFINED U/S.2(45) OF THE ACT AND THERE IS DISTINCTION BETWEEN THE GROSS TOTAL INCOME AND THE TOTAL INCOME. THE GROSS TOTAL INCOME IS DEFINED U/S.80AB OF THE ACT TO MEAN THAT THE INCOME AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT BEFORE MAKING ANY DEDUCTIONS UNDER CHAPTER VI-A. 8. ON THE OTHER HAND, TOTAL INCOME MEANS THE TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5 COMPUTED IN THE MANNER LAID DOWN IN THE ACT. SINCE THE DEDUCTION U/S.80P IS MADE OUT OF THE GROSS TOTAL INCOME, THE QUANTUM OF DEDUCTION IS NOT INCLUDED IN THE TOTAL INCOME AS DEFINED U/S.2(45), THEREFORE, PROVISIONS OF SECTION 14A ARE CLEARLY ATTRACTED IN THIS CASE. THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE FURTHER RELIED IN THE CASE OF PUNJAB STATE CO- OPERATIVE MILK PRODUCERS FEDERATION LTD. VS. ITO 104 ITD 408 ITAT (CHANDIGARH) WHEREIN IT IS HELD THAT SECTION 14A IS APPLICABLE EVEN IN RESPECT OF INCOME WHICH ARE EXCLUDED FROM TOTAL INCOME BY VIRTUE OF CHAPTER VI-A. THEREFORE, IT IS SUBMITTED THAT THE ORDER OF THE AO MAY PLEASE BE RESTORED. ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 8 OF 14 9. PER CONTRA, THE LD.AR OF THE ASSESSEE SOCIETY SUBMITTED THAT THE PRESENT CASE IS PERTAINS TO DISALLOWANCE/DENIAL OF THE DEDUCTION CLAIM U/S.80P(2)(D) OF THE ACT TO THE EXTENT OF RS.2,04,08,629/- AS AGAINST THE DEDUCTION CLAIMED FOR RS.2,26,59,539/- U/S.80P(2)(D) OF THE ACT IN THE RETURN OF INCOME FILED IN THE RELEVANT YEAR BY WRONGLY APPLYING THE PROVISIONS OF SECTION 14A OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE ISSUE HAS ALREADY BEEN DECIDED BY THE ITAT IN FAVOUR OF ASSESSEE SOCIETY IN THE EARLIER YEAR I.E. APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEARS 2006-07, 2007-08 AND 2008-09 IN ITA NOS.367 & 3386/AHD/2010 AND IN ITA NO.1739/AHD/2011 CONSOLIDATED ORDER DATED 02.08.2013 [PAPER BOOK PAGE NO.70 TO 90] OF D BENCH, AHMEDABAD. THEREFORE, IT WAS CONTENDED THAT THE PRESENT APPEAL IS SQUARELY COVERED AND ALSO TO BE DECIDED IN FAVOUR OF THE ASSESSEE SOCIETY. IN SUPPORT OF HIS CONTENTIONS THE LD.AR HAS ALSO RELIED ON THE FOLLOWING CASES CIT VS KRIBHCO [2012] 252 ITR (DEL) 374, CIT VS. KINGS EXPORT [2009] 318 ITR 100 (P & H), ACIT VS. OSMANABAD JANTA BANK LTD. [2013] 152 TTJ (PUNE) [UO-1, JCIT VS. AMERICAN EXPRESS BANK LTD. [2012] 149 TTJ 683 MUMBAI. IT WAS FURTHER SUBMITTED THAT DECISION OF PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION LTD. VS. ITO, ITAT CHANDIGARH (SUPRA) IS NOT APPLICABLE. ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 9 OF 14 AS IN THIS CASE SHARES AND DEPOSITS ARE PERMITTED U/S.71 OF THE GUJARAT CO-OPERATIVE SOCIETIES ACT 1961 WITH OTHER CO-OPERATIVE SOCIETIES. THE ASSESSEE HAS CLAIMED THE DEDUCTION ON THE INCOME EARNED BY WAY OF INTEREST AND DIVIDEND U/S.80P(2)(D) OF THE ACT. THUS, SUCH INVESTMENT MADE WITH OTHER CO-OPERATIVE SOCIETIES AND CO-OPERATIVE BANKS ARE NOT THE MEMBER OF THE ASSESSEE SOCIETY NOR THERE IS A CASE OF EARNING OF INTEREST ON ADVANCES TO THE MEMBER CO-OPERATIVE SOCIETIES FOR THE PURPOSE OF PROCUREMENT OF MILK ETC., THEREFORE, THE ACTIVITIES OF THE SOCIETY IS PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE SOCIETY, WHICH FALLS WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 80P (2)(A)(I) OF THE ACT WHEREAS IN THE CASE OF PUNJAB STATE CO-OPERATIVE MILK PRODUCERS FEDERATION LTD. ADVANCES MADE BY THE ASSESSEE TO ITS MEMBER CO-OPERATIVE SOCIETIES FOR THE PURPOSE OF PROCUREMENT OF MILK ETC., IN THE COURSE OF ITS BUSINESS AND THE SAME HAS BEEN TREATED AS INVESTMENT FOR THE DEDUCTION U/S.80P(2)(D) INSTEAD OF 80P 2(A)(I) OF THE ACT. THUS, FACTS ARE DISTINGUISHABLE, HENCE THE AO HAS ERRONEOUSLY APPLIED THE SAID JUDGMENT. IT WAS FURTHER SUBMITTED THAT CIT(A) HAS FULLY ALLOWED DEDUCTION U/S.80P(2)(D) IN THE SUCCEEDING YEAR I.E. ASSESSMENT YEAR 2011-12, 2013-14. IT WAS ALSO SUBMITTED THAT THE DEPARTMENT HAS LAWFULLY ACCEPTED AND ALLOWED THE DEDUCTION ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 10 OF 14 CLAIM U/S.80P(2)(D) OF THE ACT WHILE PASSING REGULAR ASSESSMENT U/S.143(3) DATED 07.12.2016 FOR THE ASSESSMENT YEAR 2014-15. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE SOCIETY HAD EARNED INCOME BY WAY OF DIVIDEND AND INTEREST FROM INVESTMENT MADE WITH OTHER CO-OPERATIVE SOCIETIES AS PROVIDED IN SECTION 71 OF GUJARAT CO-OPERATIVE SOCIETIES ACT. THIS INVESTMENT HAD BEEN MADE SINCE LONG BACK FROM THE YEAR 1951 1952 TO MARCH 2006 OUT OF SURPLUS FUND OF THE SOCIETY. THUS, THE DIVIDEND AND INTEREST INCOME HAS NOT BEEN RESULTED OUT OF INVESTMENT MADE DURING THE YEAR NEITHER BY MAKING ANY DIRECT OR INDIRECT EXPENDITURE FOR EARNING SUCH INCOME. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07, 207-08 AND 2008-09 IN A CONSOLIDATED ORDER IN ITA NO.367 & 3386/AHD/2010 AND 1739/AHD/2011 DATED 02.08.2013 AS HELD IN PARA 5 AS UNDER : 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE APPELLANT HAD INVESTED SURPLUS FUND RIGHT FROM 1951 WITH OTHER CO- OPERATIVE SOCIETY. ON SUCH INVESTMENT THE APPELLANT HAD BEEN RECEIVING INTEREST AND DIVIDEND WHICH HAD BEEN CLAIMED AS DEDUCTION 80P(2)(D). IT IS NOT A CASE THAT APPELLANT HAD EITHER EARNED INCOME OR BORROWED FUND AND INVESTED IN THIS INVESTMENT AND DEPOSITS. AS CLAIMED BY THE LD.SR.D.R THAT THESE DETAILS WERE SUBMITTED BEFORE LD.CIT(A) NOT BEFORE THE A.O. IS NOT ACCEPTABLE. THE APPELLANT HAD GIVEN ALL THE DETAILS BEFORE THE A.O. ON WHICH LD.A.O. CONCLUDED OTHERWISE. THE BALANCE SHEET AS WELL AS P&L ACCOUNT WERE AVAILABLE IN ALL THE YEARS THAT THE A.O. GAVE THESE FIGURES ON WHICH THE LD.CIT(A) RELIED UPON, HAD TAKEN FROM EITHER BALANCE SHEET OR P&L ACCOUNT. THUS, THERE IS NO ADDITIONAL EVIDENCE SUBMITTED BY THE APPELLANT BEFORE THE CIT(A) IN A.Y. 2006-07. WE DISMISS THE APPEAL ON GROUND NO.1 IN A.Y.06-07. FURTHER THE A.O. CONSIDERED HON'BLE SUPREME COURT DECISION IN DISTRIBUTORS (BARODA) P. LTD. VS. UNION OF INDIA [1985] 155 ITR 120 (SC), WHEREIN, IT WAS HELD THAT DEDUCTION U/S.80M IS TO BE CALCULATED WITH REFERENCE TO AMOUNT ON DIVIDEND COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 11 OF 14 FORMING ON THE GROSS TOTAL INCOME AND NOT WITH REFERENCE TO FULL AMOUNT OF DIVIDEND RECEIVED BY THE ASSESSEE. THE HON'BLE SUPREME COURT DECISION IS SQUARELY APPLICABLE ON DEDUCTION UNDER ANY SECTION IN CHAPTER VIA AND IS TO BE ALLOWED ON THE NET INCOME. HOWEVER, IN THE ASSESSEES CASE, INTEREST EXPENSES WERE INCURRED FOR ACQUIRING DEBENTURE, DEPOSIT WITH MEMBER SOCIETY, FIX DEPOSIT OF MEMBER SOCIETY, EMPLOYEE SAVING ACCOUNTS, INTEREST ON OVER DRAFT FACILITATE FROM BANK AND BANK COMMISSION, WHICH WAS CLAIMED BY THE APPELLANT U/S.80P(2)(D)(A)(I). FOR THE SAKE OF CONVENIENCE, WE ARE REPRODUCING SECTIONS AS UNDER: SECTION 80P(2)(A)(I)- CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. SECTION 80P(2)(D)- IN RESPECT OF ANY INCOME BY WAY INTEREST OR DIVIDENDS DERIVED BY THE CO- OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME. AFTER CONSIDERING THE FACTUAL AS WELL AS LEGAL POSITION ON THIS ISSUE, THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE ON THE EARNING OF THE DIVIDEND AND INTEREST FROM OTHER CO-OPERATIVE SOCIETY AS THIS INVESTMENT WAS MADE LONG BACK. NO NEW INVESTMENT HAD BEEN MADE BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. THUS, WE CONFIRM THE ORDER OF THE CIT(A) IN ALL THE YEARS. 11. IN THE LIGHT OF ABOVE, IT IS SEEN THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY DECISION OF TRIBUNAL IN THE APPELLANTS OWN CASE. THE LD.AR PLACED RELIANCE IN THE CASE OF CIT VS KRIBHCO [2012] 349 ITR 618 (DEL) WHEREIN IT WAS HELD THAT NO DISALLOWANCE CAN BE MADE U/S.14A IN RESPECT OF INCOME ON WHICH DEDUCTION IS ALLOWED U/S.80P. SECTION 14A IS NO APPLICABLE IN CASE OF SPECIAL DEDUCTION GIVEN UNDER CHAPTER VI-A. IT HAS BEEN FURTHER RELIED THAT IN THE CASE OF PUNJAB STATE FEDERATION CO-OPERATIVE HOUSING BUILDING SOCIETIES LTD. VS. ITO [1982] 2 ITD 617 (CHD) WHEREIN IT WAS HELD THAT INTEREST RECEIVED ON SAVING BANK DEPOSITS THAT ANOTHER CO-OPERATIVE SOCIETIES HAVE QUALIFIED FOR DEDUCTION AS INCOME FROM INVESTMENT AS CONTEMPLATED IN SECTION 80P(2)(D) HELD YES. IN VIEW OF THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE AO HAS ERRONEOUSLY APPLIED THE PROVISIONS OF SECTION 14A ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 12 OF 14 FOR MAKING DISALLOWANCE OUT OF INCOME WHICH ELIGIBLE FOR DEDUCTION U/S.80P(2)(D) OF THE ACT. 12. IT IS ALSO SEEN THAT THE DEPARTMENT HAS NOT MADE ANY DISALLOWANCE U/S.14A FOR THE ASSESSMENT YEAR 2013-14 & 2014-15 IN THE ASSESSMENT MADE U/S.143(3) DATED 22.03.2016 AND DATED 07.12.2016 RESPECTIVELY. 13. IN THE LIGHT OF THE ABOVE FACTS AND POSITION OF LAW, THE APPEAL OF THE REVENUE IS THEREFORE DISMISSED. ITA NO.1076/AHD/2015/SRT FOR A.Y. 2010-11 (BY REVENUE) : 14. THE GROUND NO.(I TO IV) RELATES TO DELETION OF ADDITION OF RS.1,91,58,728/- MADE BY THE AO U/S.14A OF THE ACT AND OTHERWISE CONFIRMING THE SAME TO A REDUCED AMOUNT OF RS.1,44,03,457/- U/S.80P(2)(D) OF THE ACT. 15. SINCE THE ABOVE GROUND OF APPEAL ARE RELATED TO DISALLOWANCE 14A DELETED BY THE CIT(A), HENCE, THESE ARE BEING CONSIDERED TOGETHER. 16. BOTH PARTIES HAVE AGREED THAT THE FACTS OF DISALLOWANCE FOR THIS YEAR ARE ALSO SAME AS IN THE ASSESSMENT YEAR 2009-10. THEREFORE, THE FINDINGS GIVEN FOR A.Y. 2009-10 IN THE REVENUES ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 13 OF 14 APPEAL WOULD APPLY MUTATIS-MUTANDIS TO THIS YEAR ALSO. THEREFORE, FOLLOWING THE SAME, THE APPEAL OF THE REVENUE IS DISMISSED FOR THE REASONS AS DISCUSSED BY US IN THE ITA NO.1498/AHD/2012 FOR A.Y. 2009-10 IN THIS ORDER AS MENTIONED IN ABOVE PARAS. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO.1211/AHD/2015 FOR A.Y.2010-11 (BY ASSESSEE): 18. THE GROUND NO.1 TO 5 RELATES TO CONFIRMING THE ORDER OF DENYING THE DEDUCTION CLAIM U/S.80P(2)(D) OF THE ACT TO THE EXTENT OF RS.1,44,03,457/- AND RESULTING ARBITRARY AND PERVERSE OBSERVATIONS, HENCE, THE ORDER PASSED BY THE CIT(A), SURAT LIABLE TO STRUCK DOWN. FURTHER, THE AUTHORITIES HAVE CONVENIENTLY IGNORED THE ORDER OF ITAT, AHMEDABAD IN ITA NO.367 & 3386/AHD/2010 AND 1739/AHD/2010 DECIDING SAME AN IDENTICAL ISSUE OF DEDUCTION U/S.80P(2)(D) OF THE ACT ON THE SAME SET OF FACTS IN FAVOUR OF APPELLANT SOCIETY IN APPEALS FILED BY THE DEPARTMENT FOR THE ASSESSMENT YEAR 2006-07, 2007-08 AND 2008-09 AND THEREFORE, THE ACTION OF BOTH THE LOWER AUTHORITIES IN DENYING THE DEDUCTION U/S.80P(2)(D) OF THE ACT PURELY ON ESTIMATIONS, IMAGINATIONS AND BEING RESULTED INTO JUDICIAL INDISCIPLINE LIABLE TO BE NULLIFIED. ACIT VS. THE SURAT DIST. CO-OP. MILK PRODUCERS UNION LTD.,/I.T.A. NOS.1498, 1076, 1211/AHD/201, 2015 PAGE 14 OF 14 19. WE HAVE HEARD BOTH THE PARTIES AND FIND THAT THE ISSUES ARE IDENTICAL THAT OF FOR A.Y. 2009-10 IN THE REVENUES APPEAL WHICH WE HAVE DISMISSED IN ITA NO.1498/AHD/2012 FOR A.Y. 2009-10, THEREFORE, DETAILS DISCUSSED THEREIN THE ADDITION SUSTAINED AT RS.1,44,03,457/- FOR A.Y. 2010-11 IS DELETED. THIS GROUND IS THEREFORE, ALLOWED. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 21. FINALLY, TWO APPEALS OF THE REVENUE ARE DISMISSED FOR THE A.Y. 2009-10 & 2010-11 AND APPEAL OF THE ASSESSEE IS ALLOWED FOR THE A.Y.2010-11. 22. THE ORDER PRONOUNCED IN THE OPEN COURT ON 03-08-2018. SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED: 3 RD AUGUST , 2018 COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT