ITO, Sunder Nagar V. M/s Gahar Gram Service Co-operative Society, Mandi

ITA 1223/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6548 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 11-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, SMC, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA NO 1223/CHD/2017 ASSESSMEN T YEAR: 2012-13 THE ITO, VS. M/S GAHAR GRAM SERVICE SUNDER NAGAR, CO-OPERATIVE SOCIETY, (H.P.) VPO GAHAR, TEH-SARKAGHAT, DISTT. MANDI. PAN NO. AAAJT1341F (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. CHANDER KANTA, SR.DR RESPONDENT BY : NONE DATE OF HEARING : 07.11.2017 DATE OF PRONOUNCEMENT : 12.12.2017 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILIN G THE CORRECTNESS OF THE ORDER DATED 19.05.2017 OF LD. CIT (APP EALS) PALAMPUR PERTAINING TO 2012-13 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CI T(A) HAS ERRED IN DELETING THE ADDITION OF RS. 36,18,785/- MAD E BY A.O. U/S 80 P(2)(A)(I) BY DISALLOWING THE INTEREST INCOME GENERATED BY THE SOCIETY BY INVESTI NG ITS SURPLUS FUNDS WHICH ARE NOT RELATED TO BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CI T(A) HAS ERRED IN PROVIDING, RELIEF TO THE ASSESSEE U/S 80P(2)(D) BY MISCONSTRUING THE SAID S ECTION AS THE SAME IS NOT APPLICABLE IN THIS CASE AS SOCIETY HAS INVESTED THE SURPLUS FUN DS IN HP STATE CO-OPERATIVE BANK WHICH IS A SCHEDULED BANK AS PER NOTIFICAT ION OF RBI DATED 15.12.2014. 3. THE LD.CIT(A) HAS ERRED BY GIVING RELIEF OF RS. 3 6,18,785/- TO THE ASSESSEE U/S 80P(2)(D ) WHICH WAS NOT CLAIMED BY THE ASSESSEE UNDER THE SAI D SECTION? 4. THE LD. CIT(A) HAS FURTHER ERRED BY NOT GIVING REAS ONABLE OPPORTUNITY TO THE ASSESSING OFFICER AS PER RULE 46A BEFORE A DJUDICATING THE ISSUE ON THE SECTION 80P(2)(D). 2. AT THE TIME OF HEARING, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE RESPONDENT, HOWEVER, SINCE PRESENT APPEAL CAN BE DECIDE D ON THE BASIS OF MATERIAL AVAILABLE ON RECORD, IT WAS DEEMED APPROPRIATE TO PROCEED WITH THE PRESENT APPEAL EX-PARTE QUA ASSESSEE RESPONDENT ON MERITS. 3. THE LD. DR RELIES UPON THE ASSESSMENT ORDER. 4. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESS EE SOCIETY HAD INVESTED SURPLUS FUNDS IN BANK DEPOSITS AND GOVERNMENT SECURITIES AND EARNED AN INTEREST OF RS. 36,23,538/-. THE ASSESSEE WAS REQUIRED TO EXPLAIN HOW THE INTEREST EARNED WAS ALLOWABLE U/S 80(P)(2)(D) OF THE INCOME TAX ACT. RELYING ITA 1223/CHD/2017 A.Y. 2012-13 PAGE 2 OF 3 UPON DECISION OF THE APEX COURT IN THE CASE OF TOTGARS C O-OP SALES SOCIETY LTD. VS ITO KARNATAKA (2010) 322 ITR 283, AO HELD THE INT EREST EARNED FROM THE DEPOSITS MAINTAINED IN HIMACHAL PRADESH STATE COOPERA TIVE BANK AMOUNTING TO RS. 36,23,538/- AS 'INCOME FROM OTHER SOURCE S' CONSIDERING FOLLOWING DETAILS GIVEN BY THE ASSESSEE SOCIETY : SR.NO. PARTICULAR AMOUNT INTEREST INCOME 1. INTEREST INCOME FROM MEMBERS ON LOANS RS. 6, 10,281/- 2. INTEREST INCOME FROM OTHER BANKS DEPOSITS RS. 36,23,538/- (FDRS)(H.P.STATE COOP BANK) INTEREST PAID 1. INTEREST PAID ON MEMBERS DEPOSITS RS. 32,23,80 2/- 2. INTEREST PAID ON DEPOSIT IN BANKS RS. 5, 753/- 5. IT IS SEEN THAT BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE SUBMITTED THAT THE FACTS AS TAKEN INTO CONSIDERATION BY THE APEX COURT WERE DIFFERENT IN THE CASE OF TOTGARS CO-OP SALES SOCIETY LTD., THE ASSESS EE SOCIETY MARKETED THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS WERE RE TAINED BY IT AND THE SURPLUS MONEY WAS INVESTED IN SPECIFIED SECURITIES. HOWEVER , IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS MARKETING THE PRODUC E OF ITS MEMBERS AND THE SURPLUS FUNDS RECEIVED FROM ITS MEMBERS ARE DEPOSITED BY THE ASSESSEE IN A COOPERATIVE BANK WHICH IS ALSO ENTITLED TO DEDUCTION U/S 80(P)(2)(D) OF THE INCOME TAX ACT,1961. THUS, THE ASSESSEE HAS INVESTED A ND RECEIVED INTEREST ONLY FROM H.P. COOPERATIVE STATE BANK ONLY AND IT HAS NO T RECEIVED ANY BANK INTEREST FROM ANY NATIONALIZED BANK. THE ASSESSEE SOCIET Y, IT WAS SUBMITTED, WAS A PRIMARY AGRICULTURE COOPERATIVE SOCIETY AND PROVIDE D CREDIT FACILITY TO MEMBERS FOR AGRICULTURAL PURPOSES AND THUS, WAS A PACS AS PER DEFINITION OF SCHEDULE-5 OF BANKING REGULATION ACT. 6. CONSIDERING THESE SUBMISSIONS, THE CIT(A) PROCEEDED TO GRANT RELIEF TO THE ASSESSEE HOLDING AS UNDER : 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. THE ASSESSEE IS A CO-OPERATIVE AGRICULTU RE SERVICE SOCIETY PROVIDING SHORT TERM AGRICULTURAL CREDIT TO ITS MEMBERS AND IS ALSO ENGAGED IN SUPPLY OF FOOD GRAINS UNDER THE PDS ON BEHALF OF THE H.P. GOVT. IT IS SUB MITTED BY THE APPELLANT IN ITS WRITTEN SUBMISSION THAT IT IS A PRIMARY AGRICULTURA L CO-OP. SOCIETY (PACS) AS PER DEFINITION GIVEN IN SCHEDULE-V OF THE BANKING REGUL ATION ACT. IT HAS BEEN FURTHER SUBMITTED THAT THE SOCIETY PROVIDES CREDIT M/S GAHA R GRAM SERVICE SOCIETY, APPEAL NO. CIT(A) PLP/ IT/13/2014-15, A.Y. 2012-13 FACILITY TO ITS MEMBERS FOR AGRICULTURAL PURPOSES ONLY. REGARDING THE INVESTMENT IN FDRS, IT HAS BEEN STATED THAT THE SOCIETY HAS INVESTED THE AMOUNT WITH H.P. STATE CO-OPERATIVE BA NK ONLY AND HAS NOT RECEIVED ANY BANK INTEREST FROM ANY NATIONALIZED OR PRIVATE BANK . LD. AO HAS MADE AN ADDITION OF BANK / FDR INTEREST OF RS. 36,18,785/- ON THE GROUND THAT THE INTEREST HAS BEEN EARNED ON THE SURPLUS FU NDS WHICH WERE NOT REQUIRED FOR BUSINESS PURPOSES 7 OBJECTIVES OF THE SOCIETY AT TH E GIVEN TIME OF INVESTMENT. IT HAS BEEN HELD THAT THE INTEREST IS NOT ELIGIBLE FOR DED UCTION U/S 80P(2)(A)(I) OF THE ACT. OUT OF THE ABOVE INTEREST FROM FDRS WITH BANKS, INT EREST PAID ON OTHER BANK LOANS OF RS. 5,753/- ONLY HAS BEEN ALLOWED AS DEDUCTION. ITA 1223/CHD/2017 A.Y. 2012-13 PAGE 3 OF 3 DURING APPEAL, THE APPELLANT FILED COPY OF ITS BALA NCE SHEET AND TRADING AND P & L ACCOUNT FOR THE YEAR ENDING 31.3.2012. UPON PERUSAL OF THE SAME, THE FOLLOWING PARTICULARS ARE SEEN : MEMBERS SHARE RS. 13,88,780/- MEMBERS DEPOSITS RS. 4,82,81,023/- LOANS TO MEMBERS RS. 56,80,170/- CASH AT BANK 7 FDRS RS. 4,49,02,269/-+RS. 3,45,0 00/- INTEREST RECEIVED ON MEMBER RS. 36,24,932/-+RS. 6 ,08,887/- LOANS AND BANK FDRS INTEREST PAID RS. 32,23,802/- AS ALSO MENTIONED IN THE ASSESSMENT ORDER, INTEREST OF RS. 36,23,538/- HAS BEEN EARNED ON FDRS MAINTAINED WITH FLP. STATE CO-OP BANK. AS T HE ENTIRE DEPOSITS RAISED FROM MEMBERS COULD NOT BE GIVEN AS LOANS TO MEMBERS, THE SURPLUS WAS KEPT WITH H.P. STATE CO-OP. BANK IN FDRS. ANYWAYS, THE INTEREST PAID TO MEMBERS OF RS. 32,23,802/- IS COST TO THE APPELLANTS SOCIETY. LD. A.O. WAS NOT JU STIFIED IN NOT ALLOWING THE SAME. NO DOUBT THE SOCIETY HAS SURPLUS FUNDS WHICH WERE N OT IMMEDIATELY REQUIRED FOR THE OBJECTIVES OF THE SOCIETY, I.E., PROVIDING CREDIT T O THE MEMBERS OF THE SOCIETY, AND HAVE BEEN INVESTED IN FIXED TERM DEPOSITS WITH THE BANK. HOWEVER, SINCE THESE ARE INVESTED WITH THE H.P. STATE COOP. BANK, THE INTERE ST ON FDRS M/S GAHAR GRAM SERVICE SOCIETY, APPEAL NO. CIT(A) PLP/IT/13/2014-1 5, A.Y. 2012-13 IS ALSO ELIGIBLE FOR DEDUCTION U/S 80P(2)(D)OF THE ACT WHIC H PROVIDES FOR DEDUCTION OF THE WHOLE OF INTEREST OR DIVIDEND DERIVED BY THE COOPER ATIVE SOCIETY FROM ITS INVESTMENT WITH ANY OTHER CO-OP SOCIETY. IN VIEW OF THE FOREGOING FACTS AND POSITION OF LAW, IT IS HELD THAT LD. AO WAS NOT JUSTIFIED TO MAKE AN ADDITION OF RS. 36,18,785/-. E VEN IF THE INTEREST ON SURPLUS FUNDS WERE HELD TO BE INCOME FROM OTHER SOURCES, IT WOULD STILL BE EXEMPT U/S 80P(2)(DEDUCTION) OF THE ACT. THE ADDITION OF RS. 3 6,18,785/- IS ACCORDINGLY DELETED. 7. THE LD. SR.DR WAS REQUIRED TO ADDRESS AS TO WHAT IS THE FRESH EVIDENCE FILED BY THE ASSESSEE AS AGITATED IN GROUND NO. 4 AS ADMIT TEDLY THE FACT THAT THE SURPLUS FUNDS NOT AVAILED OF BY THE MEMBERS WERE INVE STED IN H.P. STATE COOPERATIVE BANK WAS A FACT BEFORE THE AO ALSO. ACCORDIN GLY, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES AND THE POSITION OF LAW, I FIND NO INFIRMITY IN THE IMPUGNED ORDER. BEING SATISFIED BY THE EXPLANATION OFFER ED BY AND ON BEHALF OF THE ASSESSEE, THE IMPUGNED ORDER IS UPHELD. DEPAR TMENTAL GROUNDS ARE DISMISSED. SAID ORDER WAS PRONOUNCED IN THE OPEN CO URT AT THE TIME OF HEARING ITSELF. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12. 2017. SD/- (DIVA SINGH) JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.