ITO, WD-32(2), KOLKATA, Kolkata V. M/s National Coal Development Corporation Staff Co-Operative Credit Society Ltd., Kolkata

ITA 1244/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0651 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-10-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARAINDAM BHATTACHARJEE
• Assessee Lawyers: SUBASH AGARWL
• Keywords: Business income; Opportunity of being heard; Retrospective amendment; Bad and doubtful debts
• Section: 143(3); 63

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1244/KOL/2015 ASSESSMENT YEAR:2012-13 INCOME TAX OFFICER, WARD-32(2),PR. COMMISSIONER OF INCOME TAX, 10- B,MIDDLETON ROW, 3 RD , FLOOR, KOLKATA-71 / V/S . M/S NATIONAL COAL DEVELOPMENT CORPORATION STAFF CO-OPERATIVE CREDIT SOCIETY LTD., THAPAR HOUSE, 5 TH FLOOR, 25, BOABOUNE ROAD, KOLKATA- 001 [ PAN NO.AAALN 0409 N ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI ARAINDAM BHATTACHARJEE, ADDL. CIT-DR /BY RESPONDENT SHRI SUBASH AGARWL, ADVOCATE /DATE OF HEARING 03-11-2017 /DATE OF PRONOUNCEMENT 15-12-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-9, KOLKATA DATED 23.07.2015. ASSESSME NT WAS FRAMED BY ITO WARD- 32(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 30.09.2014 FOR ASSESSMEN T YEAR 2012-13. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER:- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SANCTION OF THE AO IN HOLDING THAT THE INTEREST INCOME EARNED BY THE ASSESSEE-CREDIT SOCIE TY AMOUNTING TO RS.40,76,664/- ON ACCOUNT OF FIXED DEPOSITS DOES N OT QUALIFY FOR DEDUCTION U/S 80P. ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 2 2. FOR THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE JUDGMENT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. V. ITO 322ITR 283 (SC) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE PROPORTIONATE DEDUCTION I N RESPECT OF INTEREST PAID / PAYABLE TO THE MEMBERS OUT OF THE INTEREST INCOME. 4. FOR THAT THE LD. CIT(A) HAS ERRED IN NOT ADJUDIC ATING GROUND NO. (VI) RAISED IN THE MEMORANDUM OF APPEAL. 5. FOR THAT THE LD. CIT(A) HAS ERRED IN NOT GIVING ANY FINDING/DIRECTION TO THE AO IN RESPECT OF GROUND NOS. (I) (VI) AND (VII). 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. SHRI ARINDAM BHATTACHARJEE, LD. DEPARTMENTAL REPRES ENTATIVE APPEARED ON BEHALF OF REVENUE AND SHRI SUBASH SAGARWAL , LD. ADVOCATE APP EARED ON BEHALF OF ASSESSEE. 2. THE GROUND NO. 1, 4 & 5 ARE INTER-RELATED AND TH EREFORE BEING TAKEN UP TOGETHER. THE ISSUED RAISED BY REVENUE IN THIS APPEAL IS THAT LD CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 80P(2)(A )(I) OF THE ACT ON ACCOUNT OF INTEREST INCOME EARNED ON THE SURPLUS FUND I.E. INT EREST ON RESERVE, BAD DEBT, MSSS & 5% ON THE FD GENERAL. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A CO-OPERATIVE SOCIETY AND ENGAGED IN THE ACTIVITY OF PROVIDING LO AN TO ITS MEMBERS. THE ASSESSEE IS ALSO CLAIMING DEDUCTION IN RESPECT OF ITS PROFIT UN DER SECTION 80P(2)(A)(I) OF THE ACT. THE ASSESSEE IN ITS PROFIT & LOSS ACCOUNT HAS SHOWN INTEREST INCOMES AS DETAILED UNDER:- 1. INTEREST ON LONG TERM LOAN RS. 1,45,08,490.00 2. INTEREST ON MID TERM LOAN RS. 41,52,295.00 3. INTEREST ON EDUCATION LOAN RS. 90,971.00 4. INTEREST ON EMERGENCY LOAN RS. 1,77,275.00 BESIDES THE ABOVE, THE ASSESSEE IN ITS PROFIT & LOS S ACCOUNT HAS ALSO SHOWN OTHER INTEREST INCOMES AS DETAILED UNDER : I. INTEREST ON MSSS (NET) RS. 20,33,844.00 II. INTEREST ON FDS RS. 40,76,664.00 ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 3 III. INTEREST ON RESERVE FUND RS. 3,66,436.00 IV. INTEREST ON BAD DEBTS RS. 2,62,408.00 IN ADDITION TO ABOVE THE ASSESSEE HAS ALSO SHOWN TH E OTHER INCOME AS DETAILED UNDER:- A) SUBSIDY 24,000.00 B) MISC RECEIPT 3,650.00 C) GUEST HOUSE INCOME (2,44,240.00) (2,16,590.00) THE ASSESSEE HAS CLAIMED THE DEDUCTION UNDER SECTIO N 80P(2)(A)(I) OF THE ACT IN RESPECT OF THE ABOVE INCOMES. HOWEVER THE AO WAS OF THE VIEW THAT THE INCOME EARNED BY THE ASSESSEE IN THE COURSE OF PROVIDING C REDIT FACILITIES TO THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) O F THE ACT. ACCORDINGLY, THE AO CALLED UPON THE ASSESSEE FOR SE EKING EXPLANATION IN CONNECTION WITH THE CLAIM MADE UNDER SECTION 80P(2)(A)(I) OF T HE ACT IN RESPECT OF ITS INCOME FROM THE SOURCES AS DISCUSSED HEREUNDER : 1) INTEREST ON MSSS (NET) RS. 20,33,844.00 2) INTEREST ON FDS RS. 40,76,664.00 3) INTEREST ON RESERVE FUND RS. 3,66,436.00 4) INTEREST ON BAD DEBTS RS. 2,62,408.00 5) SUBSIDY RS. 24,000.00 6) MISC RECEIPT RS. 3,650.00 7) GUEST HOUSE INCOME RS. (2,44,240.00) THE ASSESSEE IN COMPLIANCE THERETO SUBMITTED THAT I T IS ENGAGED IN PROVIDING LOAN FACILITIES TO ITS MEMBERS, ENCOURAGING THRIFT AMONG THEM THROUGH VARIOUS SAVINGS SCHEMES AND RUNNING A GUEST HOUSE IN VELLORE FOR US E BY MEMBERS AS AND WHEN THEY VISIT THE CITY FOR MEDICAL TREATMENT. THE ASSESSEE UNDER THE MSSS SCHEME COLLECTS THE MON THLY CONTRIBUTION WHICH IS REFUNDED TO HIM WITH INTEREST @ 7.5% PER ANNUM ON H IS RETIREMENT. IN CASE OF DEATH, A FIXED SUM OF RS. 30,000.00 IS PAID TO THE DECEASED EMPLOYEES NOMINEE OUT OF THIS FUND. IT THEREFORE BECOMES NECESSARY TO ENSURE THAT THIS FUND EARNS INTEREST SO THAT INTEREST MAY IN TURN BE PAID TO THE MEMBERS WHEN TH EY RETIRE OR PAYMENTS MAY BE MADE WHEN THEY DIE. ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 4 SIMILARLY THE RESERVE FUND IS MAINTAINED AS PER THE STATUTORY PROVISION. THE FUND IS INTENDED TO PROVIDE A CUSHION AGAINST LOSSES SUSTAI NED BY THE BUSINESS OF PROVIDING LOANS. THE BALANCE OF THE FUND THAT REMAINS INVESTE D IN FIXED DEPOSITS DOES NOT CONSTITUTE A SURPLUS. IT CANNOT BE DEALT WITH FREEL Y AND IT IS CERTAINLY IS NOT OUT OF A SURPLUS FUND. THE FUND IS EARMARKED FOR A CERTAIN P URPOSE AND THEREFORE IT CANNOT BE UNDER ANY CIRCUMSTANCES BE DEEMED TO BE A SURPLUS. THE FUND IS SET ASIDE TO PROVIDE FOR CONTINGENCIES WHICH CANNOT BE PREDICTED. THUS T HE RESERVE FUND IS INTENDED TO PROVIDE AGAINST LOSSES ARISING FROM THE BUSINESS OF PROVIDING CREDIT AND THEREFORE THE INTEREST EARNED FROM INVESTING SUCH FUND IS ATTRIBU TABLE TO THAT SAME BUSINESS. THE BAD DEBTS FUND IS ANOTHER FUND CREATED BY THE S OCIETY FOR ITS SPECIFIC PURPOSE TO PROVIDE SAFEGUARD AGAINST LOSSES ARISING FROM DEFAU LT IN PAYMENT OF LOANS BY MEMBERS. THE SUBSIDY WAS RECEIVED FROM THE COMPANY THAT EMPL OYS THE MEMBERS OF THE APPELLANT SOCIETY NAMELY NATIONAL COAL DEVELOPMENT CORPORATION LTD. THIS HAS BEEN GIVEN BECAUSE THE APPELLANT CARRIED ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS EMPLOYEES. THEREFORE IT IS UNQUESTIONABLY ATTRIBUTA BLE TO THAT BUSINESS AND WAS NOT RECEIVED IN THE COURSE OF PROVIDING CREDIT FACILITI ES. FURTHER VIDE IN THE INCOME TAX APPELLATE TRIBUNAL B ENCH- C KOLKATA VIDE NO. ITA NO.1564/KOL/2011 DATED 13.043.2012 HAS GIVEN IN THE ORDER THAT INTE REST ON RESERVE FUND, SBF LOAN MSSS LOAN ALL ARE MAIN ACTIVITY OF T HE BUSINESS. THE ASSESSEE ALSO FURNISHED THE OBJECTS OF IT AS SP ECIFIED IN THE BYE LAWS WHICH READS AS UNDER: (A) PRIMARY TO CREATE FUNDS TO BE LENT TO (B) TO PROVIDE FACILITIES FOR THE EXERCISE OF THRIFT AN D SAVINGS AND (C) GENERALLY TO ENCOURAGE SELF-HELP AND MUTUAL AID AMO NG MEMBERS THE ASSESSEE IN FURTHERANCE OF THE ABOVE OBJECTS TH E SOCIETY SHALL BE AT LIBERTY:- (A) TO RECEIVE MONEY BY WAY OF LOANS (B) TO ESTABLISH A PROVIDENT FUND FOR MEMBERS AND TO MA KE SUITABLE CONTRIBUTION TO SUCH FUND OUT OF PROFIT (C) ANY MOVABLE OR IMMOVABLE PROPERTY NECESSARY FOR THE BUSINESS OF THE SOCIETY; AND ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 5 (D) GENERALLY TO DO ALL SUCH OTHER THINGS AS ARE INCIDE NTAL OR CONDUCIVE TO THE ATTAINMENT OF ITS OBJECTS. IN VIEW OF ABOVE, THE AO OBSERVED THAT AS PER THE A IMS & OBJECTS SPECIFIED IN THE BYE LAWS OF THE SOCIETY THE ASSESSEE IS ENGAGED IN PROV IDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THEREFORE THE DEDUCTION AS PER THE PROVISION S OF SECTION 80P(2)(A)(I) OF THE ACT IS LIMITED TO THE INTEREST INCOME EARNED BY IT FROM THE BUSINESS OF PROVIDING THE CREDIT FACILITIES TO ITS MEMBERS. ACCORDINGLY THE INTEREST INCOME EARNED ON THE SURPLUS FUND IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE DETAILS OF THE INTEREST INCOME NOT QUALIFIED FOR THE DEDUCTION UNDER SECTION 80P(2 )(A)(I) OF THE ACT STAND AS UNDER : (1) INTEREST ON FIXED DEPOSIT RS.40,76,664/- (2) INTEREST ON RESERVE FUND RS. 3,66,436/- (3) INTEREST ON BAD DEBTS FUND RS. 2,62,408/- (4) INTEREST ON MSSS (NET) RS.20,33,844/- ACCORDINGLY THE AO MADE THE DISALLOWANCE OF DEDUCTI ON CLAIMED BY THE ASSESSEE U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF ABOVE STATED INTEREST INCOME FOR RS. 67,39,352.00 ONLY AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD CI T(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE AO FAILED TO APPRECIA TE THAT THE AFORESAID INCOME EARNED BY THE ASSESSEE WERE IN THE COURSE OF ITS BU SINESS OF CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND WERE INEXTRICABLY LINKED TO AND PART AND PARCEL OF ITS ACTIVITIES. THE AO WRONGLY APPLIE D THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD., VS. ITO (2010) 188 TAXMANN 282 (SC), WHICH WAS RENDERED ON ENTIRELY ON DIFFERENT FACTS INASMUCH AS THE SAID SOCIETY WAS NOT SOLELY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS BUT HAD EARNED SUR PLUS FROM THE SALE OF THE PRODUCE OF ITS MEMBERS. THE LD. CIT(A) AFTER CONSIDERING THE S UBMISSION OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER:- 4- GROUND NO.(I) RELATES TO CONTENTION OF THE APPEL LANT AGAINST NOT ALLOWING DEDUCTION THE FACT OF THE CASE IS THAT THE INTERES T INCOME SHOWN BY THE APPELLANT AGGREGATING TO RS.64,88,318/- WAS CLAIMED AS DEDUCT ION U/S.80P WHICH WAS DISALLOWED BY THE AO. THE INTEREST INCOME INCLUDES INTEREST FROM FIXED DEPOSITS, RESERVE FUND, BAD DEBT FUND AND MSSS ACCOUNT. THIS ISSUE WAS ADJUDICATED BY MY ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 6 PREDECESSOR IN THE APPELLANTS ON CASE FOR THE ASSE SSMENT YEAR 2011-12 BY WHICH HE DIRECTED THE AO TO ALLOW DEDUCTION U/S. 80P ON THE AMOUNT PERTAINING TO RESERVE FUND, BAD DEBT FUND AND MSSS ACCOUNT BUT THE INTERE ST INCOME EARNED ON FIXED DEPOSITS DOES NOT QUALIFY FOR DEDUCTION U/S 80P OF THE IT ACT. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 6. THE LD DR BEFORE US SUBMITTED THAT THE IMPUGNED INTEREST INCOME EARNED BY THE ASSESSEE IS ARISING OUT OF THE SURPLUS FUND DEP OSITED IN THE FORM OF FIXED DEPOSIT WITH THE BANK. THEREFORE SUCH INTEREST INCOME ON TH E SURPLUS FUND IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. TH E LD. DR IN SUPPORT OF HIS CLAIM HAS RELIED ON THE ORDER OF CO-ORDINATE BENCH OF THIS TR I IN THE CASE OF ITO VS. BAKSAR CO- OPERATIVE CREDIT SOCIETY LTD IN ITA NO. 1890/KOL/2012 DATED 18.11.2015 FOR A.Y. 2009-10, WHEREIN IT WAS HELD AS UNDER :- KEEPING IN VIEW THESE FACTS AND FIGURES, WE ARE OF THE VIEW THAT THE ISSUE AS TO WHETHER THE RELEVANT INVESTMENT IS MADE BY THE ASSE SSEE OUT OF ITS OWN SURPLUS FUNDS OR OUT OF THE AMOUNT PAYABLE TO ITS MEMBERS, WHICH REPRESENT ITS LIABILITY, REQUIRES, VERIFICATION IN ORDER TO DETERMINE THE EXACT HEAD O F INCOME UNDER WHICH THE INTEREST ON SUCH INVESTMENT IS CHARGEABLE TO TAX IN THE HAND S OF THE ASSESSEE BY APPLYING THE RELEVANT CASE LAW. WE, THEREFORE, SET ASIDE THE IMP UGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE RELEVANT FACTUAL PO SITION FORM RECORD AND AFTER GIVING THE ASSESSEE PROPER AND SUFFICIENT OPPORTUNITY OF B EING HEARD. GROUND NO. 2 OF THE REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 6.1 SIMILARLY THE LD. DR ALSO RELIED ON THE JUDGMEN T OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SOUTH EASTERN RAILWAY EMPLOYEES CO-OP CREDIT SOCIETY LTD. IN ITA 484 OF 2007, WHERE THE FOLLOWING QUESTI ON OF LAW WAS FRAMED. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE INCOME TAX APPELLATE TRIBUNAL BY ALLOWING DEDUCTION ON INCOME EARNED BY THE ASSESSEE FROM INVESTMENT IN BANKS AND OTHER FINANCIAL INSTITUTION S HAS RENDERED THE PROVISIONS OF SECTION 80P(2)(A)(I) NUGATORY AS THE SAID SECTIO N OF THE ACT ALLOWS DEDUCTION TO A COOPERATIVE SOCIETY ENGAGED IN CARRY ING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS? THE RELEVANT FINDING OF THE HONBLE COURT READS AS UNDER : WE ARE NOT ABLE TO AGREE WITH MR. KHAITAN THA T THE REST OF THE INTEREST EARNED BY THE ASSESSEE FROM THE INVESTMENTS IS ALSO ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. WE H AVE NOT BEEN IMPRESSED BY THE JUDGMENTS CITED BY MR. KHAITAN. ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 7 ON THE OTHER HAND, THE LD. AR BEFORE US SUBMITTED T HAT THE ASSESSEE HAS EARNED INTER ALIA INTEREST INCOME ON THE MONEY DEPOSITED WITH TH E BANK WHICH WAS CLAIMED AS DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. T HE NECESSARY DETAILS OF SUCH INTEREST INCOME STAND AS UNDER:- (1) INTEREST ON FIXED DEPOSIT (GENERAL) RS.40,76,664/- (2) INTEREST ON RESERVE FUND RS. 3,66,436/- (3) INTEREST ON BAD DEBTS FUND RS. 2,62,408/- (4) INTEREST ON MSSS (NET) RS.20,33,844/- THE INTEREST INCOME EARNED BY THE ASSESSEE ON THE F IXED DEPOSITS (GENERAL) MADE WITH THE BANK FOR RS. 67,39,352.00 WAS DISALLOWED BY THE AO ON THE GROUND THAT IT DOES NOT ARISE FROM THE BUSINESS OF PROVIDING CREDIT TO THE MEMBERS. HOWEVER THE LD CIT(A) WAS PLEASED TO DELETE THE ADD ITION TO THE TUNE OF 5% OF THE INTEREST INCOME EARNED ON THE FD (GENERAL). AGAINST THE ORDER OF LD CIT(A) ASSESSEE PREFERRED AN APPEAL BEFORE THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 1249/KOL/2015 FOR THE ASSESSMENT YEAR 2012-13 ON THE FOLLOWING G ROUNDS OF APPEAL:- 1.FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A.O. IN H OLDING THAT THE INTEREST INCOME EARNED BY THE ASSESSEE-CREDIT SOCIETY AMOUNTING TO RS. 40, 76,664/- ON ACCOUNT OF FIXED DEPOSITS DOES NOT QUALIFY FOR DEDUCTION U/S.80P. 2. FOR THAT THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE JUDGMENT IN THE CASE OF TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO 32 2 ITR 283 (SC) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE PROPORTIONATE DEDUCTION IN RESPECT OF INTEREST PAID / PAYABLE TO THE MEMBERS OUT OF THE INTEREST INCOME. 4. FOR THAT THE LD. CIT(A) HAS ERRED IN NOT ADJUDIC ATING GROUND NO. (VI) RAISED IN THE MEMORANDUM OF APPEAL. 5. FOR THAT THE LD. CIT(A) HAS ERRED IN NOT GIVING ANY FINDING/DIRECTION TO THE A.O. IN RESPECT OF GROUND NOS. (I) (VI) AND (VII). 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. 6.2 THE HON'BLE ITAT WAS PLEASED TO RESTORE THE IMP UGNED ISSUED TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW B Y OBSERVING AS UNDER:- ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 8 8. AT THE TIME OF HEARING BOTH THE PARTIES AGREE D THAT SIMILAR TREATMENT OF INTEREST INCOME AS INCOME FROM OTHER SOURCES IN ASSESSEES O WN CASE FOR A.Y.2006-07, 2007-08 AND 2009-10 CAME UP FOR CONSIDERATION BEFORE THE CO -ORDINATE BENCH OF THIS TRIBUNAL AND IN ITA NOS. 1792 TO 1794/KOL/2012 BY ITS ORDER DATED 02.03.2016 SET ASIDE THE ISSUE TO THE AO FOR FRESH CONSIDERATION. THE FOLLOW ING WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL :- 6. AS REGARDS THE COMMON ISSUE INVOLVED IN THE CR OSS OBJECTIONS OF THE ASSESSEE RELATING TO ASSESSEE'S CLAIM FOR DEDUCTION UNDER SE CTION 80P(2)(A)(I) IN RESPECT OF INTEREST ON BANK FIXED DEPOSITS (GENERAL), THE ID. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT EVEN THOUGH THE SAME HAS BEEN DECIDE D BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2008-09 BY RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS' CO-OPERATIVE SALE SOCIETY LIMITED (SUPRA), THE HON'BLE KARNATAKA HIGH COURT IN THE DECISION RENDER ED SUBSEQUENTLY IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. - VS- ITO [2015] 55 TAXMANN.COM 447 HAS DISTINGUISHED THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF TOTGARS' CO-OPERATIVE SALE SOCIETY LIMITED (SUPRA) ON CERTAIN SPECIFIC ASPECTS AND AFTER TAKING INTO CONSIDERATION THIS DISTINCTIO N POINTED OUT BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANT S SOUHARDA CREDIT COOPERATIVE LTD. (SUPRA), THE TRIBUNAL IN THE CASE OF ITO-VS- THE BASKARA COOPERATIVE CREDIT SOCIETY LTD. DECIDED VIDE ITS OR DER DATED 18TH NOVEMBER, 2015 PASSED IN ITA NO.1890/KO1/2012 HAS RESTORED THE SIMILAR ISSUE TO THE FILE OF THE AO AFTER RECORDING ITS OBSERVATIONS IN PARAGRAPH NOS. 11 AND 12 AS UNDER : 11. WE HAVE CONSIDERED THE. RIVAL SUBMISSIONS AND C AREFULLY PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN THE CASE OF TOTGAR'S COOPERATIVE SALE SOCIETY LIMITED (SUPRA) CITED BY THE LD. D.R. IN SUPPORT OF THE REVENUES CASE .ON THE ISSUE UNDER CONSIDERATION, THE ASSESSE E SOCIETY BESIDES CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO I TS MEMBERS WAS ALSO MARKETING ITS AGRICULTURAL PRODUCE. THE SALE PROCEE D OF SUCH AGRICULTURAL PRODUCE, WHICH WAS PAYABLE TO ITS MEMBERS, IN MANY CASES-WAS RETAINED BY THE ASSESSEE-SOCIETY AND THE SAME WAS INVESTED-IN S HORT-TERM DEPOSITS/SECURITIES. IN THESE FACTS AND CIRCUMSTANC ES OF THE CASE, INTEREST INCOME RECEIVED ON SHORT-TERM DEPOSITS/SECURITIES W AS HELD TO BE CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES' B Y THE HON'BLE SUPREME COURT OBSERVING THAT THE AMOUNT INVESTED BY THE ASS ESSEE WAS A LIABILITY PAYABLE TO ITS MEMBERS, AND, THEREFORE, THE INTERES T INCOME COULD NOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITY MENTIONED IN SEC TION 80P(2) (A) (I). IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIV E LIMITED (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASSESSEE, THE AMOUNT, WH ICH WAS INVESTED IN BANK TO EARN INTEREST, WAS NOT AN AMOUNT DUE TO ANY MEMBER AND WHICH WAS NOT THE LIABILITY SHOWN IN THEIR ACCOUNTS. IN FACT, THE SAI D AMOUNT, WHICH WAS IN THE NATURE OF PROFIT AND GAINS, WAS NOT IMMEDIATELY REQ UIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKER S AND THE SAME, THEREFORE, HAD BEEN DEPOSITED IN A BANK SO AS TO EA RN INTEREST. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, AS INVOLVED IN THE C ASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED (SUPRA), THE DE CISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF TOTGAR'S COOPERATIVE S ALE SOCIETY LIMITED WAS FOUND TO BE DISTINGUISHABLE ON FACTS BY THE HON'BLE KARNATAKA HIGH COURT AND THE INTEREST INCOME RECEIVED BY THE ASSESSEE-SOCIET Y ON BANK DEPOSITS WAS ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 9 HELD TO BE ITS BUSINESS INCOME BEING ATTRIBUTABLE T O CARRYING ON THE BUSINESS OF BANKING ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) (A)(I) OF THE ACT. 12. KEEPING IN VIEW THE DECISION OF THE HON 'BLE SU PREME COURT IN THE CASE OF TOTGAR'S COOPERATIVE SALE SOCIETY LIMITED (SUPRA) CITED BY T HE ID. D.R. AND THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED (SUPRA) CITED BY THE LD. COUNSE L FOR THE ASSESSEE, THE QUESTION THAT ARISES IN THE CASE ON HAND, IS WHETHER THE INV ESTMENT, WHICH IS MADE BY THE ASSESSEE-SOCIETY AND WHICH HAS FETCHED INTEREST INC OME IN QUESTION, IS MADE OUT OF ITS OWN SURPLUS FUND, AS WAS THE CASE IN TUMKUR MERCHAN TS SOUHARDA CREDIT COOPERATIVE LIMITED (SUPRA) OR THE SAME IS MADE OUT OF THE AMOUNT PAYABLE BY THE ASSESSEE-SOCIETY TO ITS MEMBERS, WHICH REPRESENT IT S LIABILITY AS WAS THE CASE IN TOTGAR'S COOPERATIVE SALE SOCIETY LIMITED. IN THIS REGARD, IT IS OBSERVED THAT THIS ASPECT HAS NOT BEEN SPECIFICALLY CONSIDERED EITHER BY' THE ASSESSING OFFICER OR BY OR BY THE LD. CIT(APPEALS) IN THEIR RESPECTIVE ORDERS AND, THEREFORE, THERE IS NO FINDING SPECIFICALLY GIVEN BY THEM ON THIS RELEVANT ASPECT. IN THIS REGARD, A PERUSAL OF THE RELEVANT BALANCE-SHEET OF THE ASSESSEE AS ON 31.03. 2009 (COPY OF WHICH AT PAGES 67 & 68 OF THE PAPER BOOK), SHOWS THAT. THE TOTAL INVEST MENT MADE BY THE ASSESSEE- SOCIETY WAS RS.22.08 CRORES AS ON 31.03.2009, WHEREAS THE R ESERVES & SURPLUS AND PROFIT & LOSS ALC. BALANCE AS ON THE SAID DATE WERE RS.1.76 CRORES AND 1.73 CRORES RESPECTIVELY. THE MAJOR AMOUNT APPEARING ON THE LIA BILITY SIDE OF THE BALANCE-SHEET AS ON 31.03.2009 WAS DEPOSIT AND OTHER ACCOUNT AGGREGA TING TO RS.28.89 CRORES, WHICH COMPRISED OF VARIOUS FUNDS AND DEPOSITS. KEEPING IN VIEW THESE FACTS AND FIGURES, WE ARE OF THE VIEW THAT THE ISSUE AS TO WHETHER THE RE LEVANT INVESTMENT IS MADE BY THE ASSESSEE OUT OF ITS OWN SURPLUS FUNDS OR OUT OF THE AMOUNT PAYABLE TO ITS MEMBERS, WHICH REPRESENT ITS LIABILITY, REQUIRES VERIFICATIO N IN ORDER TO DETERMINE THE EXACT HEAD OF INCOME UNDER WHICH THE INTEREST ON SUCH INVESTME NT IS CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEE BY APPLYING THE RELEVANT CASE LAWS. WE, THEREFORE, SET ASIDE THE' IMPUGNED ORDER OF THE ID. CIT(APPEALS) ON THIS ISSU E AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRE SH AFTER VERIFYING THE RELEVANT FACTUAL POSITION FROM RECORD AND AFTER GIVING THE A SSESSEE PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD. GROUND NO. 2 OF THE REV ENUE'S APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES.' 7. RELYING ON THE DECISION OF THE TRIBUNAL IN THE C ASE OF BAKSARA COOPERATIVE CREDIT SOCIETY LTD. (SUPRA), THE ID. COUNSEL FOR THE ASSES SEE HAS CONTENDED THAT THE SIMILAR ISSUE INVOLVED IN THE CASE OF THE ASSESSEE FOR ALL THE THREE YEARS UNDER CONSIDERATION MAY ALSO BE RESTORED TO THE FILE OF THE AO AND SINCE TH E ID. DR HAS NOT RAISED ANY OBJECTION IN THIS REGARD, WE SET ASIDE THE IMPUGNED ORDERS OF THE ID. CII(A) ON THIS ISSUE AND RESTORE THIS MATTER TO THE FILE OF THE AO FOR DECID ING THE SAME AFRESH AS PER THE SAME DIRECTION AS GIVEN IN THE CASE OF BAKSARA COOPERATI VE CREDIT SOCIETY LTD. (SUPRA). THE CROSS OBJECTIONS FILED BY THE ASSESSEE THUS ARE TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. RESPECTFULLY FOLLOWING THE DECISION IN ASSESSEE S OWN CASE WE REMAND THE ISSUE FOR A DECISION AFRESH FOR AO AS WAS DONE IN A.Y. 2006-07, 2007-08 AND 2009-10. THUS GROUNDS NO.1 TO 3 ARE TREATED AS ALLOWED FOR STATIS TICAL PURPOSES. ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 10 ACCORDINGLY, THE LD AR BEFORE US PRAYED TO RESTORE THE IMPUGNED ISSUED TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LA W. 7. FOR THE OTHER ISSUE OF INTEREST INCOME AS DISCUS SED ABOVE, THE LD AR BEFORE US SUBMITTED THAT THE SOCIETY WAS REGISTERED UNDER THE WEST GOVERNMENT CO-OPERATIVE SOCIETIES ACT 1983 AS EVIDENT FROM SECTION 3 OF THE WEST GOVERNMENT CO-OPERATIVE SOCIETIES ACT 1983 WHICH READS AS UNDER : 3.(1) THE WEST BENGAL CO-OPERATIVE SOCIETIES ACT, 1 973, IS HEREBY REPEALED. (2) NOTWITHSTANDING SUCH REPEAL, ANYTHING DONE OR S UFFERED OR ANY ACTION TAKEN (INCLUDING ASSESSMENT YEAR RULE MADE ANY TRANSACTIO N ENTERED INTO, ANY NOTIFICATION OR NOTICE ISSUED WITH PROSPECTIVE OR RETROSPECTIVE EFFECT, ANY ORDER PASSED, ANY APPOINTMENT OR REGISTRATION MADE, ANY SUIT OR PROCE EDING COMMENCED, ANY DISPUTE DECIDED OR REFERRED TO ARBITRATION, ANY RIGHT OR TI TLE ACCRUED, OR ANY LIABILITY OR OBLIGATION OR PENALTY INCURRED) UNDER THE CO-OPERAT IVE SOCIETIES ACT, 1912 OR THE BENGAL CO-OPERATIVE SOCIETIES ACT 1940 OR THE WEST BENGAL CO-OPERATIVE SOCIETIES AT, 1973 SHALL BE DEEMED TO HAVE BEEN DONE OR SUFFERED OR TAKEN UNDER THIS ACT, IF THE PROVISIONS OF THIS ACT WERE IN FORCE AT ALL MATERIA L TIMES WHEN SUCH THING WAS DONE OR SUFFERED OR SUCH ACTION WAS TAKEN. (3) EVERY CO-OPERATIVE SOCIETY EXISTING AT THE COMM ENCEMENT OF THIS ACT WHICH HAS BEEN REGISTERED OR DEEMED TO HAVE REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT,1912 OR THE BENGAL CO-OPERATIVE SOCIETIES ACT,1 940 OR THE WEST BENGAL CO- OPERATIVE SOCIETIES ACT,1973 SHALL BE DEEMED TO HAV E BEEN REGISTERED UNDER THIS ACT, AND ITS BY-LAWS SHALL, IN SO FAR AS THEY ARE NOT IN CONSISTENT WITH THE PROVISIONS OF THIS ACT, CONTINUE IN FORCE UNTIL ALTERED OR RESCINDED A ND SHALL TO SUCH EXTENT BE DEEMED TO BE REGISTERED UNDER THIS ACT. AS PER THE PROVISIONS OF SECTION 63 TO 66 OF THE WE ST GOVERNMENT CO-OPERATIVE SOCIETIES ACT 1983, THE ASSESSEE WAS REQUIRED TO CR EATE CERTAIN FUNDS AS DETAILED UNDER:- 63. (1) THERE SHALL BE A FUND TO BE CALLED THE CO-O PERATIVE EDUCATION FUND TO BE ADMINISTERED BY SUCH AUTHORITY AND IN SUCH MANNER A S MAY BE PRESCRIBED. EVERY CO- OPERATIVE SOCIETY SHALL CONTRIBUTE TO THE CO-OPERAT IVE EDUCATION FUND SUCH PORTION OF ITS NET PROFIT IN ANY CO-OPERATIVE YEAR AS MAY BE P RESCRIBED. (2) ALL REFERENCES TO THE CO-OPERATIVE DEVELOPMENT FUND ESTABLISHED UNDER THE WEST BENGAL CO-OPERATIVE SOCIETIES ACT, 1973 SHALL BE CO NSTRUED AS REFERENCES TO THE CO- OPERATIVE EDUCATION FUND ESTABLISHED UNDER THIS ACT . 64. EVERY CO-OPERATIVE SOCIETY SHALL CREATE A BAD D EBT FUND BY TRANSFER OF NOT LESS THAN FIFTEEN PERCENT OF ITS NET PROFIT IN A CO-OPER ATIVE YEAR AND SHALL UTILIZE IT IN ANY ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 11 BUSINESS IF IT HAS NO OUTSIDE LIABILITY IN THE FORM BAD DEBT CERTIFIED BY THE AUDIT OR IN SUCH OTHER MANNER AS MAY BE PRESCRIBED. 65. EVERY CO-OPERATIVE SOCIETY SHALL TRANSFER IN EV ERY CO-OPERATIVE YEAR NOT LESS THAN TEN PERCENT, OF ITS NET PROFIT TO A RESERVE FUND: PROVIDED THAT THE RESERVE FUND SHALL BE INVESTED I N A GOVERNMENT SAVING BANK INCLUDING NATIONALISED BANKS AND REGIONAL RURA L BANKS OR IN ANY SECURITY SPECIFIED IN SECTION 20 OF THE INDIAN TRUS TS AT, 1882 OR IN THE BUSINESS OF THE CO-OPERATIVE SOCIETY IN SUCH MANNER AS MAY B E PRESCRIBED. 66. A CO-OPERATIVE SOCIETY MAY, NOTWITHSTANDING ANY THING CONTAINED IN THE EMPLOYEES PROVIDENT FUNDS AND MISCELLANEOUS PROVIS IONS ACT, 1952, ESTABLISH A PROVIDENT FUND FOR THE BENEFIT OF IT WHOLE-TIME EMP LOYEES WITH THE CONTRIBUTIONS OF SUCH EMPLOYEES AND MAY MAKE CONTRIBUTION TO THE FUN D AT THE PRESCRIBED RATE AND THE FUND SHALL BE ADMINISTERED IN SUCH MANNER AS MAY BE PRESCRIBED. THUS ALL THE FUNDS AS DISCUSSED ABOVE WERE CREATED TO MEET THE PROVISIONS OF WEST GOVERNMENT CO-OPERATIVE SOCIETIES ACT 1983. THEREFO RE THE INTEREST INCOME EARNED BY THE ASSESSEE ON SUCH FUNDS SHOULD BE ELIGIBLE FO R DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE LD AR IN SUPPORT OF HIS CLAIM HAS ALSO RELIED O N THE OWN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 1564/KOL/2011 WHERE THE HONBLE ITAT WAS PLEASED TO DELETE THE ADDITION MADE BY THE AO. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW: IN RESPECT OF DISALLOWANCE OF THE INTEREST ON RESERVE FUND, BAD DEBT FUNDS, SBF LOAN, MSS LOAN, WE ARE OF THE VIEW THAT ALL THESE INCOMES ARE RELATING TO THE MAIN ACTIVITY OF THE ASSESSEE. THER EFORE THEY WILL NOT FALL WITHIN THE MISCHIEF OF THE HON'BLE APEX COURTS DIRECTION. IN VIEW OF ABOVE THE LD. AR PLEADED BEFORE US TO DE LETE THE ADDITION AS MADE BY THE AO ON ACCOUNT INTEREST INCOME EARNED ON MSSS, RESER VE FUND & ON BAD DEBTS FUNDS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE HAS SHOWN INCOME FROM THE FIXED DEPOSITS MAINTAINED WITH THE BANK AS DISCUSSED IN THE PRECED ING PARAGRAPH. ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 12 THE ABOVE INTEREST INCOME WAS DISALLOWED BY THE AO ON THE GROUND THAT IT IS NOT ARISING FROM THE CREDIT FACILITIES PROVIDED TO THE MEMBERS THEREFORE IT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER AT THE OUTSET IT WAS NOTICED THAT THE AO HA S MADE THE DISALLOWANCE OF INTEREST INCOME ON THE FIXED DEPOSITS (GENERAL) FOR RS. 40,7 6,664.00 BUT THE LD CIT(A) HAS DELETED THE ADDITION MADE BY THE AO TO THE TUNE OF 5% OF THE INTEREST INCOME. BOTH THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF LD CI T(A) PREFERRED AN APPEAL BEFORE THE HONBLE ITAT VIDE ITA NO. 1249/KOL/2015 AND 124 4/KOL/2015 RESPECTIVELY. IN THIS REGARD, WE NOTICED THAT HONBLE ITAT HAS RESTO RED THE ISSUE RAISED BY THE ASSESSEE IN ITA 1249/KOL/2015 TO THE FILE OF AO FOR FRESH ADJUDICATION FOR THE S AME ASSESSMENT YEAR. THE RELEVANT EXTRACT OF THE ORDER HAS ALREADY BEEN PRODUCED IN THE PRECEDING PARAGRAPH. AS THE PRESENT ISSUE OF INTERE ST IS COMMON WITH THAT OF THE ASSESSEE, THEREFORE WE ARE INCLINED TO RESTORE THE SAME ISSUE TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH THE LAW. 9. NOW COMING TO THE ISSUE OF OTHER INTEREST INCOME AS DISCUSSED ABOVE, WE NOTICE THAT THESE FUNDS WERE CREATED TO MEET THE REQUIREME NT OF THE PROVISIONS OF WEST GOVERNMENT CO-OPERATIVE SOCIETIES ACT 1983 AS DISCU SSED ABOVE. THEREFORE IN OUR CONSIDERED VIEW THE IMPUGNED INTEREST INCOME IS ELI GIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. MOREOVER, WE FIND THAT THE IMPUGNED ISSUE HAS ALREADY BEEN DECIDED BY THE HONBLE ITAT IN THE OWN CASE OF THE ASSESSEE FOR THE AY 2008-09 IN ITA NO.1564/KOL/2011 WHERE THE CO-ORDINATE BENCH OF THIS TRIBUNAL WAS P LEASED TO DELETE THE ADDITION MADE BY THE AO. THE RELEVANT EX TRACT OF THE ORDER HAS ALREADY BEEN PRODUCED IN THE PRECEDING PARAGRAPH. THE CASE LAW I.E. CIT VERSUS SOUTH EASTERN RAILWAY EMPLOYEES CO-OP CREDIT SOCIETY LTD. (SUPRA) AS RELIED UPON BY THE LD DR IS DISTING UISHABLE IN TERMS OF ITS FACTS. IN THAT CASE THERE WAS NO STATUTORY REQUIREMENT TO CREATE T HE FUNDS WHEREAS IN THE INSTANT CASE IT WAS THE REQUIREMENT TO CREATE THE FUNDS UNDER TH E PROVISIONS OF SECTION 63 TO 66 OF THE WEST GOVERNMENT CO-OPERATIVE SOCIETIES ACT 1983 AS DISCUSSED ABOVE. THUS, WE HOLD THAT THE IMPUGNED INTEREST INCOME EARNED ON MS SS, RESERVE FUND & ON BAD ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 13 DEBTS FUNDS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THUS, THE GROUND RAISED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. THE 2 ND ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS THAT LD CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF SUBSIDY RECEIVED BY THE ASSESSEE. 11. THE ASSESSEE DURING THE YEAR HAS RECEIVED THE S UBSIDY OF RS.24,000 FROM NATIONAL COAL DEVELOPMENT CORPORATION LTD WHICH WAS CLAIMED AS DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. HOWEVER, THE AO DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80P(2)(A)(I) OF THE ACT BY O BSERVING THAT THE SAME IS NOT ARISING FROM THE ACTIVITIES OF PROVIDING CREDIT FACILITIES TO THE MEMBERS. THUS, THE DEDUCTION OF RS.24,000 WAS ADDED TO THE TOTAL INCOME OF THE ASSE SSEE. 12. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD CI T(A), WHO HAS DELETED THE ADDITION MADE BY THE AO. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 13. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET WE NOTE THAT IMPUGNED ISSUED HAS ALREADY BEEN DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR THE AY 2008- 09 IN ITA NO. 1564/KOL/2011 WHERE THE CO-ORDINATE B ENCH OF THIS TRIBUNAL WAS PLEASED TO DELETE THE ADDITION MADE BY THE AO. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW : IN RESPECT OF THE SUBSIDY AMOUNTING TO RS.33,000/- SINCE IT IS OF NON-CAPITAL IN NATURE THE SAME CANNOT BE DISALLOWED BY APPLYING TH E RATIO LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF THE TOTGARS CO-OPERAT IVE SALES SOCIETY LTD. VS. ITO (SUPRA) ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 14 WE RESPECTFULLY FOLLOWING THE CONSISTENT VIEW DECLI NE TO INTERFERE WITH THE ORDER PASSED BY THE LD CIT(A) ON THIS ACCOUNT AND ACCORDI NGLY THE GROUND TAKEN BY THE REVENUE IS REGRETTED. CONSEQUENTLY, THE GROUND OF A PPEAL RAISED BY THE REVENUE IS DISMISSED. 15. THE NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LEARNED CIT-A ERRED IN ALLOWING THE DEDUCTION UNDER SECTION 80P(2)(A)(I) O F THE ACT ON ACCOUNT OF THE PROVISION FOR EX-GRATIA. 16. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HA S DEBITED A SUM OF RS. 1.50 LACS UNDER THE HEAD PROVISION FOR EX-GRATIA. HOWEVER THE AO WAS OF THE VIEW THAT THE PROVISIONS CANNOT BE ALLOWED AS DEDUCTION. THEREFOR E THE SAME WAS DISALLOWED BY THE AO AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 17. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD CIT(A) WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER :- 7- GROUND NO.(VI) AND (VII) RELATE TO DISALLOWANCE MADE BY THE AO OF RS.1,50,000/- ON ACCOUNT OF PROVISION FOR EX-GRATIA. THOUGH, THE APPELLANT SUBMITTED THAT THE AO HAD DISALLOWED THE AMOUNT BUT THEY ARE ENTITLED TO DEDUCTION U/S. 80P(2)(A)(I) ON THE ENHANCED AMOUNT OF INCOME AROSE DUE TO DISALLOWANCE OF THE SAID AMOUNT. THIS ISSUE WAS ADJUDICATED BY MY PREDECESSOR IN THE APPELLANT S ON CASE FOR THE ASSESSMENT YEAR 2011-12 BY WHICH HE DIRECTED THE AO TO ALLOW DEDUCT ION U/S. 80P AS PER LAW. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFORE U S. 18. BEFORE US BOTH THE PARTIES RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO IN THE INSTANT CASE HAS MADE THE DIS ALLOWANCE OF RS.1.50 LACS CLAIMED BY THE ASSESSEE UNDER THE HEAD PROVISION FOR EX-GRA TIA. IT IS UNDISPUTED FACT THAT THE PROVISIONS UNDER THE INCOME TAX ACT ARE NOT ALLOWAB LE AS DEDUCTION. HOWEVER, IT IS ALSO UNDISPUTED THAT IN THE INSTANT CASE THE ASSESS EE IS CLAIMING DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THEREFORE, THE DISALLOWANC E OF EX-GRATIA WILL RESULT INTO HIGHER ITA NO.1244/KOL/2015 A.Y. 2 012-13 ITO WD-332(2) KOL. VS. M/S N.C.D.C OR.STAFF CO-OP CREDIT SO. LTD. PAGE 15 DEDUCTION TO THE ASSESSEE U/S 80P(2)(A)(I) OF THE A CT. THUS, THERE WILL NO EFFECT ON THE TAX LIABILITY OF THE ASSESSEE EVEN AFTER MAKING THE ADDITION OF THE PROVISION FOR EX- GRATIA EXPENSE. IN THE LIGHT OF ABOVE REASONING, WE HOLD THAT THE ORDER OF THE OF LD CIT(A) IS CORRECT AND IN ACCORDANCE WITH LAW AND NO INTERFERENCE IS CALLED FOR. THUS THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMI SSED. 20. IN THE RESULT, REVENUES APPEAL STANDS ALLOWED PART LY FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 15/12/2017 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 15/12/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-32(2), 10-B,MIDDLETON ROW, 3 RD FLOOR,KOLKATA-71 2. /RESPONDENT-M/S NATIONAL COAL DEVELOPMENT CORPN. ST AFF CO-OP CREDIT SOCIETY, THAP AR HOUSE, 5 TH FLOOR, 25, BRABOURNE ROAD,KOL-001 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,