ITO, Nanded V. Vijkamgar Co-Op Credit Society Ltd, Nanded

ITA 1247/PUN/2013

• Counselvise Citation: 124724514 RSA 2013
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 03-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT KUMAR C LUEVA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.1247/PN/2013 (A.Y: 2007-08) ITO, WARD 3(1), NANDED APPELLANT VS. VIJKAMGAR CO-OPERATIVE CREDIT SOCIETY LTD., VIDYUT NAGAR, TQ. NANDED, DIST. NANDED. PAN: AAAJV0065E RESPONDENT APPELLANT BY : SHRI HEMANT KUMAR C. LUEVA RESPONDENT BY : NONE DATE OF HEARING: 28.05.2014 DATE OF ORDER : 29.05.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL), [IN SHORT C IT(A)] AURANGABAD, DATED 26.03.2013 FOR A.Y. 2007-08 ON TH E FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT I NCOME EARNED BY THE SOCIETY FROM PROVIDING CREDIT FACILIT Y TO ITS MEMBERS ONLY. WHERE AS ASSESSING OFFICER RIGHTLY W ORKED OUT TO RS.9,31,471/- CREDIT FACILITIES GIVEN TO THE NON MEMBERS ALSO, WHICH ARE NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,74,516/- MADE ON ACCOUNT OF CASH COLLECTION COUNTER U/S 80P(2)(A)(I) OF THE I.T. ACT, 1961 IS N OT 2 APPLICABLE TO THE ASSESSEE SOCIETY, NOR THE SOCIETY CLAIMED DEDUCTION U/S 80P(2)(A)(I) AGAINST THIS INCOME IN H IS RETURN OF INCOME FILED. 3. THE ORDER OF CIT(A) BE VACATED AND THAT OF THE AO'S ORDER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO ADDITION, AMEND, ALTE R OR DELETE ANY GROUNDS OF APPEAL. 2. THE ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY, E NGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE AS SESSEE HAS FILED RETURN OF INCOME DECLARING THE TOTAL INCOME OF 78,950/- AFTER CLAIMING DEDUCTION U/S 80P(2)(A)(I). THE ASSESSING OFFICER HAS PARTLY DISALLOWED THE DEDUCTION U/S 80P(2)(A)(I) AN D ASSESSED THE INCOME OF ASSESSEE AT 10,55,987/-. THE ASSESSING OFFICER HAS SEPARATELY TAXED THE INCOME FROM CASH COLLECTION CO UNTER TOWARDS COLLECTION OF ELECTRICITY BILLS 1,74,516/-. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN THE VARIO US CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE REGARDING THE ALL OWABILITY OF DEDUCTION U/S 80P(2)(A)(I), WHO HAS ALLOWED THE ISS UE IN FAVOUR OF ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON B EHALF OF REVENUE, INTER ALIA, STATED THAT ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT INCOME EARNED BY THE SOCIETY FROM P ROVIDING CREDIT FACILITY TO ITS MEMBERS ONLY. WHEREAS, THE ASSESSING OFFICER RIGHTLY WORKED OUT TO 9,31,471/- CREDIT FACILITIES GIVEN TO THE NON MEMBERS ALSO, WHICH WERE NOT ELIGIBLE FOR D EDUCTION U/S 80P(2)(A)(I) OF THE I.T. ACT. SO, THE ORDER OF CIT (A) ON THE ISSUE BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED . ON THE OTHER HAND, NONE HAVE APPEARED ON BEHALF OF ASSESSEE. 3. AFTER GOING THROUGH THE ARGUMENTS OF LEARNED DEP ARTMENTAL REPRESENTATIVE AND THE MATERIAL PLACED ON RECORD, W E FIND THAT THE ASSESSEE HAS EARNED INCOME ON CREDIT FACILITY G IVEN TO ITS MEMBERS. THE ASSESSEE HAS BORROWED FUNDS ALSO FROM NDCC 3 BANK FOR ADVANCING CREDIT FACILITIES TO ITS MEMBERS . ON THESE FACTS, IN ORDER TO DETERMINE THE ISSUE AS TO WHETHE R THE ASSESSEE SOCIETY IS ELIGIBLE TO CLAIM DEDUCTION IN RESPECT O F INCOME EARNED ON LOANS ADVANCED TO MEMBERS, THE PROVISIONS OF SEC TION 80P(1) & (2)(A) HAS TO BE LOOKED INTO. THE RELEVANT PROVISI ONS READ AS UNDER: 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING CO- OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PRO VISIONS 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 BE THE FOLLOWING NAMELY:- (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN- (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR (III) THE MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS OR (IV) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTUR E FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS, OR (V) THE PROCESSING, WITHOUT THE AID OF POWER, OF THE AGRICULTURAL PRODUCE OF ITS MEMBERS, (OR) (VI) THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS, OR (VII) FISHING OR ALLIED ACTIVITIES, THAT IS TO SAY, THE CATCHING, CURING, PROCESSING, PRESERVING, STORING OR MARKETING OF FISH OR THE PURCHASE OF MATERIALS AND EQUIPMENT IN CONNECTION THEREWITH FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS,] THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES: 4 (PROVIDED THAT IN THE CASE OF A CO-OPERATIVE SOCIET Y FALLING UNDER SUB-CLAUSE (VI) OR SUB-CLAUSE (VII), THE RULES AND BYE-LAWS OF THE SOCIETY RESTRICT THE VOTI NG RIGHTS TO THE FOLLOWING CLASSES OF ITS MEMBERS, NAM ELY:- (1) THE INDIVIDUALS WHO CONTRIBUTE THEIR LABOUR OR, AS THE CASE MAY BE, CARRY ON THE FISHING OR ALLIED ACTIVITIES; (2) THE CO-OPERATIVE CREDIT SOCIETIES WHICH PROVIDE FINANCIAL ASSISTANCE TO THE SOCIETY; (3) THE STATE GOVERNMENT;] 3.1 FROM THE ABOVE, THE CIT(A) HAS OBSERVED THAT TH E INCOME EARNED BY CO-OPERATIVE SOCIETY, ENGAGED IN THE BUSI NESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS IS EXEMPT. THE ASSESSEE HAS EARNED INCOME FROM FACILITIES PROVIDED TO ITS M EMBERS. THE FACT THAT THE INCOME EARNED FROM MEMBERS FROM LOANS ADVANCED, WHICH WERE PARTIALLY SECURED OUT OF BORROWING FROM NDCC BANK, DOES NOT MAKE ANY DIFFERENCE. NOWHERE, IT HAS BEEN PROVIDED IN THE ABOVE SECTION THAT IN ORDER TO EARN INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS, AMOUNT USED FOR G IVING CREDIT FACILITIES TO ITS MEMBERS SHOULD NOT BE FROM BORROW ING FROM CO- OPERATIVE BANKS. IN VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN OBSERVING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTI ON U/S 80P(2)(A)(I) AND ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER OF 9,31,471/- WAS RIGHTLY DELETED BY THE CIT(A). WE UPHOLD THE SAME. 4. THE NEXT ISSUE IS WITH REGARD TO ADDITION OF 1,74,516/- ON ACCOUNT OF INCOME FROM CASH COLLECTION COUNTER. TH E ASSESSING OFFICER HAS MADE THIS DISALLOWANCE IN PARA 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS NOTICED THAT THE ASSESSEE HAS EARNED COMMISSION ON COLLECTION OF ELECTRICITY BILL S TO THE EXTENT OF 10,53,379/- AND IN RESPECT OF THE SAME, EXPENSES H AVE BEEN INCURRED TO THE EXTENT OF 8,78,863/- [ 8,35,234/- (+) 43,629/-] AND THE NET INCOME EARNED IS 1,74,516/-. THE 5 ASSESSING OFFICER HAS HELD THAT THE DEDUCTION U/S.8 0P(2)(A)(I) IS NOT ALLOWABLE IN RESPECT OF THIS ACTIVITY, HENCE, T REATED THE SAME AS TAXABLE INCOME. 4.1 IN APPEAL, THE CIT(A) HAS ALLOWED THE SAME FOLL OWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. AHMEDNAGAR DISTRICT CENTRAL CO-OPERATIVE BANK LTD. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. 4.2 WE FIND THAT THE BUSINESS ACTIVITY OF CREDIT CO -OPERATIVE SOCIETY AND CO-OPERATIVE BANKS ARE SIMILAR IN RESPE CT OF ACCEPTING DEPOSITS, PROVIDING CREDIT FACILITIES AND ALSO CARR YING ON ACTIVITY OF ELECTRICITY BILLS, TELEPHONE BILLS COLLECTION CENTR E. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AHMEDNAGAR DISTRICT CENTRAL CO-OPERATIVE BANK LTD. (2003) 264 ITR 38 (B OM) HAS LAID DOWN THAT THE ACTIVITY OF COLLECTING BILLS, DUES AN D CHARGES FOR AND ON BEHALF OF GOVERNMENT, LOCAL AUTHORITY, MTNL, BEST, MSEB, ETC. IS AKIN TO BANKING ACTIVITY AND IS ELIGI BLE FOR DEDUCTION U/S. 80P(2)(A)(I). IN VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALL OW THE DEDUCTION U/S. 80P(2)(A)(I) IN RESPECT OF THE SAID INCOME OF 1,74,516/-. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 29 TH OF MAY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 29 TH MAY, 2014 GCVSR 6 COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A), AURANGABAD 4) THE CIT, AURANGABAD 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE