Erode Cooperative Housing Society Ltd., Erode V. ACIT, Erode

ITA 1214/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8510 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 04-05-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: S SRIDHAR ERODE
• Keywords: Corroborative evidences
• Section: 80C; 142(1); 14A

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1 2 14 /MDS/201 6 / ASSESSMENT YEAR :20 12 - 13 ERODE COOPERATIVE HOUSING SOCIETY LTD., 54, BALASUBRAYALU STREET, ERODE 638 001. [PAN:A AAAT7731N ] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX , CIRCLE 1 , ERODE . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE, ERODE / RESPONDENT BY : SHRI S HIVA SRINIVAS , JCIT / DATE OF HEARING : 20 . 0 7 .201 6 / DATE OF P RONOUNCEMENT : 28 . 0 9 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3 , C OIMBATORE , DAT ED 29 . 0 2 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 13. THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE INCOME TAX ACT, 1961 [ ACT IN SHO RT] . I.T.A. NO . 1214 /M/ 16 2 2. THE ASSESSEE IS AN AOP, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 ON 24.09.2012 ADMITTING A TOTAL INCOME OF . NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND DULY SERVED ON 22.08.2013. THEREAFTER, A NOTICE UNDER SECTION 142(1) OF THE ACT WAS ALSO ISSUED ON 20.06.2013 ON THE ASSESSEE ALONG WITH QU ESTIONNAIRE. IN RESPONSE THERETO, THE BOOKS OF ACCOUNTS AND SUPPORTING EVIDENCES PRODUCED BY THE ASSESSEE WERE VERIFIED. AFTER VERIFICATION OF THE DETAILS FURNISHED AND THE EXPLANATIONS OFFERED BY THE ASSESSEE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 14 3(3) OF THE ACT BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT .69,14,632/ - AFTER MAKING DISALLOWANCE OF INTEREST UNDER SECTION 14A OF THE ACT FOR INCOME EARNED AND EXEMPT UNDER THE PROVISIONS OF SECTION 80P(2)(D) OF THE ACT. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING ON THE DECISION IN THE CASE OF CIT V. KRIBHCO 349 I.T.A. NO . 1214 /M/ 16 3 ITR 618 (DEL), THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE ACT IN RESPECT OF THE INCOME ON WHICH DEDUCTION IS ALLOWED UNDER SECTION 80P OF THE ACT. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS CLAIMED THAT SECTION 14A OF THE ACT IS NOT APPLICABLE IN THE CASES WHERE THE INCOME IS EX EMPT UNDER CHAPTER III ONLY AS THE SECTION STARTS WITH WORDS NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE ON INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. THE ASSESSEE ALSO CLAIMED THAT THE INCOME ON WHI CH DEDUCTION IS CLAIMED UNDER SECTION 80P(2)(D) OF THE ACT IS UNDER CHAPTER VI AND HENCE SECTION 14A OF THE ACT IS NOT APPLICABLE. HOWEVER, BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT, T HE ASSESSING OFFICER MADE THE ADDITION OF THE INTEREST INCOME NOT PART OF TOTAL INCOME BY APPLYING RULE 8D. THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER SINCE THE ADDITION WAS MADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14 R.W.R. 8D. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SU BMITTED THAT BY AFFIRMING THE I.T.A. NO . 1214 /M/ 16 4 ORDER OF THE TRIBUNAL IN THE CASE OF ACIT V. KRIBHCO [2010] 6 ITR (TRIB) 686 (DELHI), THE HON BLE DELHI HIGH COURT HAS HELD THAT NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE ACT IN RESPECT OF THE INCOME ON WHICH DEDUCT ION IS ALLOWED UNDER SECTION 80P OF THE ACT BY OBSERVING AS UNDER: SECTION 14A OF THE INCOME - TAX ACT, 1961, STATES THAT FOR THE PURPOSE OF COMPUTING TOTAL INCOME UNDER CHAPTER IV, NO DEDUCTION SHALL BE ALLOWED ILL RESPECT OF EXPENDITURE INCURRED IN RELAT ION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IT DOES NOT STATE THAT INCOME WHICH IS ENTITLED TO DEDUCTION UNDER CHAPTER VI - A HAS TO BE EXCLUDED FOR THE PURPOSE OF THE SECTION. THE WORDS 'DO NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT' ARE SIGNIFICANT AND IMPORTANT. BEFORE ALLOWING DEDUCTION UNDER CHAPTER VI - A INCOME HAS TO BE COMPUTED AND INCLUDED IN THE TOTAL INCOME. IN THIS MANNER, THE INCOME WHICH QUALIFIES FOR DEDUCTIONS UNDER SECTIONS 80C TO 80U HAS TO BE FIRST INC LUDED IN THE TOTAL INCOME OF THE ASSESSEE. IT, THEREFORE, BECOMES PART OF THE INCOME, WHICH IS SUBJECTED TO TAX. THEREAFTER, DEDUCTION IS TO BE ALLOWED IN ACCORDANCE WITH AND SUBJECT TO THE FULFILMENT OF THE CONDITIONS OF THE RESPECTIVE PROVISIONS. THIS IS ALSO SUBJECT TO SECTIONS 80AB AND 80A(L) AND (2). CHAPTER VI - A DOES NOT POSTULATE OR STATE THAT THE INCOMES WHICH QUALIFY FOR DEDUCTION WILL BE EXCLUDED AND NOT FORM PART OF THE TOTAL INCOME. THEY FORM PART OF THE TOTAL INCOME BUT ARE ALLOWED AS A DEDUCTION AND REDUCED. THE ASSESSEE, A CO - OPERATIVE SOCIETY, CLAIMED DEDUCTION UNDER SECTION 80P(2)(D) ON DIVIDEND RECEIVED AND INTEREST ON DEPOSITS. THE ASSESSING OFFICER DID NOT DISTURB THE CLAIM/DEDUCTION UNDER SECTIO N 80P(2)(D) BUT RELYING UPON SECTION 14A HELD THAT THESE INCOMES WERE NOT INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AND, THEREFORE, EXPENDITURE UNDER THE HEAD 'INTEREST' AMOUNTING TO RS. 1,15,45,579 AND ONE - EIGHTH OF THE EMPLOYEE BENEFITS AND REMUNERATI ON SHOULD BE DISALLOWED. THE COMMISSIONER (APPEALS) SET ASIDE THE DISALLOWANCE AND THIS WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HIGH COURT: HELD, THAT THE TRIBUNAL WAS CORRECT IN LAW IN HOLDING THAT NO DISALLOWANCE COULD BE MADE AGAINST INCOME WHICH WAS NOT SPECIFICALLY EXEMPT UNDER THE ACT. I.T.A. NO . 1214 /M/ 16 5 6. THE LD. DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE HON BLE DELHI HIGH COURT AND OR FILED HIGHER COURT S DECISION HAVING MODIFIED OR REVERTED THE ABOVE ORDER. RESPECTIVELY FOLLOWING THE ABOVE DECISIO N OF THE HON BLE DELHI HIGH COURT, WE SET ASIDE THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 28 TH SEPTEMBER , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 0 9 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.