Bhagini N. Sahakari Bank Ltd., Pune V. TRO Range-1, Pune

ITA 1237/PUN/2010

• Counselvise Citation: 123724514 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 22-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO.1237/PN/2010 (ASSTT. YEAR : 2006-07) BHAGINI NIVEDITA SAHAKARI BANK LTD., ... APPELLANT RASHTRA BASHA BHAVAN, 387/388, NARAYAN PETH, PUNE - 411030 V. TRO RANGE - 1, INCOME TAX OFFICE, RESPONDENT PMT BUILDING, SWARGATE, PUNE 411037 APPELLANT BY : MS. DEEPA KHARE RESPONDENT BY : SHRI S.K. AMBASTHA DATE OF HEARING : 02/01/12 DATE OF PRONOUNCEMENT : 29 -2-12 ORDER PER I.C. SUDHIR, JM THE ASSESSEEE HAS QUESTIONED FIRST APPELLATE ORDER ON THE GROUND THAT THE LD CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 34,78,039/- TO THE INCOME OF THE ASSESSEE BY DENYIN G THE BENEFIT U/S. 80P(2)(A)(I) IN RESPECT OF THE INTEREST INCOME ON I NVESTMENTS FROM VOLUNTARY RESERVES. 2. AT THE OUTSET OF HEARING, THE LD. A.R. POINTED O UT THAT THE ISSUE RAISED IN THE GROUND IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR THE A.YS. 2003-04 (ITA NO. 846-A/PN/2006 ,ORDER DAT ED 14 TH NOVEMBER, 2007), A.Y. 2004-05 (ITA NO. 1423/PN/2007) AND A.Y. 2005-06 (ITA NO. 1256/PN/2008 ORDER DATED 31 ST DECEMBER 2008). SHE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COU RT ON THE ISSUE IN THE ITA . NO. 1237//PN/2010 BHAGINI NIVEDITA SAHAKARI BANK LTD. A.Y. 2006-07. PAGE OF 4 2 CASE OF CIT VS. SOLAPUR NAGARI AUDYOGIC SAHAKARI B ANK LTD. & OTHERS (2009), 26 DTR (BOM.) 67. SHE HAS ALSO PLACED REL IANCE ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE CO-OPERATIVE BANK LTD.( 2008), 304 ITR 113 (P UN & HAR.). 3. THE LD. D.R. DID NOT DISPUTE THE ABOVE SUBMISSIO N OF THE LD. A.R. HE, HOWEVER, PLACED RELIANCE ON THE ORDERS OF THE A UTHORITIES BELOW. 4. THE RELEVANT FACTS ARE THAT THE A.O. DISALLOWED THE CLAIMED DEDUCTION U/S. 80P(2)(A)(I) IN RESPECT OF INTEREST INCOME IN INVESTMENTS ON VOLUNTARY RESERVES RESULTING INTO ADDITION OF RS . 34,78,039/- TO THE INCOME OF THE ASSESSEE. THE A.O OBSERVED THAT THE ASSESSEE IN THE BANKING BUSINESS HAD VOLUNTARY RESERVES AND THE PRO FIT OF THE ASSESSEE INCLUDED THE INTEREST OF RS. 1,43,83,949/- FROM INV ESTMENTS MADE OUT OF SUCH VOLUNTARY RESERVES TO THE TUNE OF RS. 19,89,48 ,119/-. HE OBSERVED FURTHER THAT THE ASSESSEE BANK HAD EARMARKED AN AM OUNT OF RS. 61 LAKH TOWARDS THE DISTRIBUTION OF DIVIDEND OUT OF THE PRO FIT INCLUDING THE INTEREST EARNED OF VOLUNTARY RESERVES. THE A.O REMAINED OF THE VIEW THAT DISTRIBUTION OF DIVIDEND IS NOT A BANKING ACTIVITY AND SINCE THE PROFIT UTILIZED FOR DISTRIBUTION OF DIVIDEND ALSO INCLUDE INTEREST EARNED OF INVESTMENT IN VOLUNTARY RESERVES, SUCH INTEREST INC OME IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) IN VIEW OF THE RATIO OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MEHSANA DIST. CENTRAL CO-OPERATIVE BANK LTD., 251 ITR 522 (SC). THE LD CIT(A) HAS UPH ELD THIS ACTION OF THE ASSESSEE. 5. HAVING GONE THROUGH THE CITED DECISIONS BY THE LD. A.R, WE FIND THAT THE PUNE BENCH OF THE TRIBUNAL AS DECIDED AN IDENTI CAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF ASSESSEE ITSELF FOR THE A.Y. 2003-04, 2004-05 ITA . NO. 1237//PN/2010 BHAGINI NIVEDITA SAHAKARI BANK LTD. A.Y. 2006-07. PAGE OF 4 3 AND 2005-06(SUPRA). WE FURTHER FIND THAT THE ISSUE RAISED IS ALSO FULLY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS. SOLAPUR NAGRIK AUDYOGIC SAHAKARI BANK LTD. & O THERS (SUPRA) AND OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE CO-OPERATIVE BANK LTD. (SUPRA). WE FIND THAT IN BO TH THE DECISIONS, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ME HSANA DISTRICT CENTRAL CO-OPERATIVE BANK VS. ITO (SUPRA) RELIED UPON BY TH E AUTHORITIES BELOW HAS BEEN REFERRED. THE HONBLE JURISDICTIONAL BOMB AY HIGH COURT IN THE CASE OF SOLAPUR NAGARIK AUDYOGIC SAHAKARI BANK LTD. (SUPRA) HAS BEEN PLEASED TO HOLD THAT WHERE THE SURPLUS FUNDS NOT IM MEDIATELY REQUIRED FOR DAY TO DAY BANKING WERE KEPT IN VOLUNTARY RE SERVES AND INVESTED IN KVP/IVP, THE INTEREST INCOME RECEIVED FROM KVP/IVP WOULD BE INCOME FROM BANKING BUSINESS ELIGIBLE FOR DEDUCTION U/S. 8 0P(2)(A)(I). IT HAS BEEN FURTHER HELD THAT WHETHER THE INVESTMENTS HAVE BEEN MADE OUT OF STATUTORY RESERVES OR NON-STATUTORY RESERVES IS WHO LLY IRRELEVANT SO LONG AS THE FUNDS IN STATUTORY RESERVES OR NON- STATUTOR Y RESERVES ARE THE FUNDS GENERATED FROM THE BANKING BUSINESS. WE THUS RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL BO MBAY HIGH COURT IN THIS CASE DECIDE THE ISSUE RAISED IN THE PRESENT APPEAL BEFORE US, IN FAVOUR OF THE ASSESSEE WITH DIRECTION TO THE A.O TO ALLOW THE CLAIMED DEDUCTION AT RS. 34,78,039/- U/S. 80 P(2)(A)(I ) OF THE ACT. TH E RELATED GROUND INVOLVING THE ISSUE IS THUS ALLOWED. 6. IN RESULT, APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH FEBRUARY 2012. SD/- SD/- ( G.S. PANNU ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 29TH FEBRUARY, 2012 ITA . NO. 1237//PN/2010 BHAGINI NIVEDITA SAHAKARI BANK LTD. A.Y. 2006-07. PAGE OF 4 4 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT I, PUNE . THE CIT(A)- I,PUNE 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE