ITO, Bagalkot V. M/s Shri. Sangameshwar Primary Teachers Co-Op Society Ltd., Bagalkot

ITA 1212/BANG/2015

• Counselvise Citation: 121221114 RSA 2015
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 04-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 56

Judgement Text

ITA.1212/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.1212/BANG/2015 (ASSESSMENT YEAR : 2012-13) INCOME-TAX OFFICER, WARD -1, BAGALKOT ..APPELLANT V. M/S. SHRI SANGAMESHWAR PRIMARY TEACHERSCO-OP SOCIE TY LTD, NEAR LINGADAKATTI, HUNGUND DIST. BAGALKOT ..RESPOND ENT PAN : AAAAS0767R ASSESSEE BY : SHRI. SANDEEP C, CA REVENUE BY : SHRI. SANJAY KUMAR, CIT - III HEARD ON : 09.12.2015 PRONOUNCED ON : 11 .12.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE, ITS GRIEVANCE IS THAT CIT (A) ALLOWED THE CLAIM OF DEDUCTION U/S.80P(2)(A)(I) OF THE INCO ME-TAX ACT, 1961 (THE ACT IN SHORT), OF A SUM OF RS.26,74,624/- REL YING ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. SRI BILURU GURUBASAVA PATTIN SAHAKARI SANGH NIYAMIT [ITA NO.50 06/2013, ITA.1212/BANG/2015 PAGE - 2 DT.05.02.2004], THOUGH PANAJI BENCH OF THE TRIBUNAL HAD DISTINGUISHED THE ABOVE JUDGMENT IN A NUMBER OF CASES. 02. LD. DR SUBMITTED THAT ASSESSEE HAD CLAIMED DEDU CTION U/S.80P(2)(A)(I) OF THE ACT ON THE INTEREST EARNED BY IT. ASSESSEE IS REGISTERED AS A CREDIT COOPERATIVE SOCIETY UNDER TH E KARNATAKA COOPERATIVE SOCIETIES ACT. AO WAS OF THE OPINION THAT ASSESSEE WAS HIT BY SECTION 80P(4) OF THE ACT. AS PER THE AO IT WAS IN THE BUS INESS OF GIVING CREDITS AND SHOULD BE CONSIDERED AS A COOPERATIVE BANK. HE DISALLOWED THE CLAIM. 03. ASSESSEES APPEAL BEFORE THE CIT (A) WAS SUCCES SFUL. CIT (A) HELD THAT UNLESS A CREDIT COOPERATIVE SOCIETY IS CONSIDE RED AS A COOPERATIVE BANK, HOLDING A LICENCE FROM RBI, IT WOULD NOT BE HIT BY SECTION 80P(4) OF THE ACT. 04. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE OR DER OF CIT (A) SUBMITTED THAT ASSESSEE FELL WITHIN THE LIMITATION SPECIFIED IN SECTION 80P(4) OF THE ACT. ACCORDING TO THE LD. DR AO HAD MADE A DETAILED STUDY OF THE BANKING REGULATIONS ACT, 1949, AND CAME TO A CONCLUSION THAT ASSESSEE WAS HIT BY DEFINITION OF BUSINESS OF BANK ING AS PER RESERVE BANK REGULATIONS. ITA.1212/BANG/2015 PAGE - 3 05. PER CONTRA, LD. AR SUPPORTED THE ORDER OF CIT ( A). 06. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THERE IS NO DISPUTE THAT ONE OF THE MAIN OBJECT OF ASSESS EE SOCIETY WAS PROVIDING CREDIT FACILITY TO ITS MEMBERS. AO HIMSELF HAS MEN TIONED THAT THIS WAS THE PRIMARY OBJECT FOR WHICH ASSESSEE WAS INCORPORATED. NO DOUBT, OUT OF SUBSTANTIAL SUM RECEIVED AS DEPOSITS FROM THE MEMBE RS, ONLY SMALL PORTION WERE GIVEN BY ASSESSEE AS LOANS TO ITS MEMBERS. MA JOR PART OF THE FUNDS WERE PARKED IN FDS. HOWEVER, IT IS AN ADMITTED POS ITION THAT ASSESSEE WAS BOUND TO GIVE INTEREST TO ITS MEMBERS ON THE DEPOSI TS RECEIVED BY IT FROM THEM. THEREFORE, WHEN THERE WERE NO TAKERS FOR THE MONEY, WHICH ASSESSEE AS A PART OF ITS OBJECTS WANTED TO LEND, THE ONLY A VAILABLE CHOICE FOR ASSESSEE, IN ORDER NOT TO KEEP THE FUNDS IDLE, WAS TO PLACE IT IN BANKS FOR EARNING INTEREST. AFTER THE JUDGMENT IN SRI BILUR U GURUBASAVA PATTIN SAHAKARI SANGH NIYAMIT (SUPRA), HONBLE JURISDICTIO NAL HIGH COURT HAD IN THE CASE OF CIT V. TUMKUR MERCHANTS SOUHARDA CREDI T COOPERATIVE LTD (ITA.307 OF 2014, DT.28.10.2014), HELD AS UNDER IN RELATION TO A COOPERATIVE SOCIETY HAVING AS ITS OBJECT, BUSINESS OF PROVIDING BUSINESS CREDITS TO ITS MEMBERS, AT PARAS 3 TO 10 OF THE JUDGEMENT DT.28.10 .2014 : '4. THE LEARNED COUNSEL FOR THE ASSESSEE ASSA ILING THE IMPUGNED ORDER CONTENDED, THE INTEREST ACCRUED IN A SUM OF R S.1,77,305/- IS ITA.1212/BANG/2015 PAGE - 4 FROM THE DEPOSITS MADE BY THE ASSESSEE IN A NATIONA LIZED BANK OUT OF THE AMOUNTS WHICH WAS USED BY THE ASSESSEE FOR PROV IDING CREDIT FACILITIES TO ITS MEMBERS AND THEREFORE THE SAID IN TEREST AMOUNT IS ATTRIBUTABLE TO THE CREDIT FACILITIES PROVIDED BY T HE ASSESSEE AND FORMS PART OF PROFITS AND GAINS OF BUSINESS AND THEREFORE HE SUBMITS THE APPELLATE AUTHORITIES WERE NOT JUSTIFIED IN DENYING THE SAID BENEFIT IN TERMS OF SUB-SEC.(2) OF SECTION 80P OF THE ACT. IN SUPPORT OF HIS CONTENTIONS, HE RELIED ON SEVERAL JUDGMENTS AND POI NTED OUT THAT THE APEX COURT IN THE AFORESAID JUDGMENT HAS NOT LAID D OWN ANY LAW. 5. PER CONTRA, LEARNED COUNSEL FOR THE REVENUE STRO NGLY RELIED ON THE SAID JUDGMENT OF THE SUPREME COURT AND SUBMITTED, T HE CASE IS COVERED BY THAT JUDGMENT OF THE APEX COURT AND NO C ASE FOR INTERFERENCE IS MADE OUT. 6. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, THE UNDISPUTED FACTS WHICH EMERGES IS, THE SUM OF RS. 1,77,305/- R EPRESENTS THE INTEREST EARNED FROM SHORT-TERM DEPOSITS AND FROM S AVINGS BANK ACCOUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PROV IDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT CARRYING ON AN Y OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSESSEE BY PROVI DING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHET HER THIS INTEREST IS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELEVANT PROVISION O F LAW IE., SECTION 80P(2)(A)(I): DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOC IETIES: 80P (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A C O-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB- SECTION (2) , IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY: (A) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN ITA.1212/BANG/2015 PAGE - 5 (I) )CARRYING ON THE BUSINESS OF BANKING OR PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS, OR (II) XXX (III) XXX (IV) XXX (V) XXX (VI) XXX (VII) XXX THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. 7. THE WORD ATTRIBUTABLE USED IN THE SAID SECTION IS OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSI DER THE MEANING OF THE WORD ATTRIBUTABLE AS SUPPOSED TO D ERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN T HE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME-TAX, GUJARAT-LL REPORTED IN ITR VOL. 113 (1978) PAGE 842 AT PAGE 93 AS UNDER : AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION ATTRIBUTABLE TO OCCURRING IN THE PHRASE PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF THE SPECIFIED INDUS TRY HERE GENERATION AND DISTRIBUTION OF ELECTRICITY ON WHICH THE LEARNED SOLICITOR-GENERAL RELIED, IT WILL BE PERTIN ENT TO OBSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION ATTRIBUTABLE TO AND NOT THE EXPRESSION DERIVED FROM. I T CANNOT BE DISPUTED THAT THE EXPRESSION ATTRIBUTABLE TO IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. HAD THE EXPRESSION DERI VED FROM BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE OF OLD MACHINERY AND BUILDINGS CANNOT BE REGARDED AS P ROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. I N THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER ITA.1212/BANG/2015 PAGE - 6 SUGGESTED BY THE LEARNED SOLICITOR GENERAL, IT HAS USED THE EXPRESSION DERIVED FROM, AS, FOR INSTANCE, IN SEC TION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAM ELY, ATTRIBUTABLE TO, HAS BEEN USED, THE LEGISLATURE I NTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL C ONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRIC ITY. 8. THEREFORE, THE WORD ATTRIBUTABLE TO IS CERTAIN LY 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 ATTRIBUT ABLE TO BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOUR CES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A COOPERATIVE S OCIETY WHICH IS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILI TIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAI D INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUS INESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INC OME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAIN S OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUS INESS 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 SECTION 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 SOCIE TY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEA LING WITH A CASE WHERE THE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RE TAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM P RODUCE WAS BOUGHT, WAS INVESTED IN A SHORT-TERM DEPOSIT/SE CURITY. SUCH ITA.1212/BANG/2015 PAGE - 7 AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCO ME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY M ENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80 P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF THE SAID CASE, T HE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHE R 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 INVES TED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THE IR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND G AINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MO NEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HA D DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAI D INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF S ECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHR A PRADESH HIGH COURT IN THE CASE OF COMMISSIONER 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 ORDER PASSED BY THE APPELLATE AU THORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBS TANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AG AINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER. APPEAL IS ALLOWED.' 09. WE ARE OF THE OPINION THAT IN VIEW OF THE JUDGE MENT OF HONBLE JURISDICTIONAL HIGH COURT REPRODUCED ABOVE, WHERE I N AT PARA 10, IT HAS BEEN CLEARLY MENTIONED THAT THE MONEY MEANT FOR LEN DING, REMAINING ITA.1212/BANG/2015 PAGE - 8 SURPLUS, THERE BEING NO TAKERS, IF DEPOSITED IN BAN KS FOR EARNING INTEREST, SUCH INTEREST INCOME WOULD BE ATTRIBUTABLE TO THE B USINESS OF BANKING CARRIED OUT BY THE ASSESSEE. NATURAL COROLLARY IS THAT SECTION 80P(4) OF THE ACT IS NOT ATTRACTED UNLESS THE COOPERATIVE SOCIETY IS RECOGNISED BY RBI AS A COOPERATIVE BANK AS PER THE RULES MADE UNDER RESERV E BANK OF INDIA ACT. WE, THEREFORE, HOLD THAT ASSESSEE WAS ELIGIBLE FOR CLAIMING DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. WE DO NOT FIND IT NEC ESSARY TO INTERFERE WITH THE ORDER OF THE CIT (A). 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DAY OF DECEMBER, 2015. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE ITA.1212/BANG/2015 PAGE - 9 BY ORDER ASSISTANT REGISTRAR