ACIT, Nashik V. Janlaxmi Co-Op Bank Ltd, Nashik

ITA 1279/PUN/2013

• Counselvise Citation: 127924514 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 06-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Proportionate interest
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1279 / P N/ 20 1 3 ASSESSMENT YEAR : 20 06 - 07 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 1, NASHIK VS. JANLAXMI CO - OP BANK LTD. , SAMRUDDHI, GADKARI CHOWK, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AAAAT3312K APPELLANT BY: SHRI B.C. MALAKAR RESPONDENT BY: SMT. DEEPA KHARE DATE OF HEARING : 02 - 12 - 2014 DATE OF PRONOUNCEME NT : 15 - 12 - 2014 ORDER PER R.S . PADVEKAR , JM : - THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - I, NASHIK DATED 11 - 03 - 2013 FOR THE A.Y. 20 06 - 07. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND IN THE APPEAL: 1. WHE THER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - I, NASHIK WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S. 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961. 2. THE FACTS PERTAINING TO THE GROUND REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE IS A CO - OPERATIVE SOCIETY WHICH IS ENGAGED IN THE BUSINESS OF B ANKING. THE LD. CIT - I, NASHIK PASSED AN ORDER U/S. 263 OF THE I.T. ACT DATED 22 - 03 - 2011 AND SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION TO THE ASSESSING OFFI CER IN RESPECT OF INTEREST INCOME EARNED ON DIFFERENT INSTRUMENTS OF INVESTMENT S VALUED AS ON 31 - 03 - 2006 AT RS. 1,21,79,10,502/ - . IN THE OPINION OF THE LD. CIT - I, NASHIK THE PROPORTIONATE INTEREST INCOME EARNED BY THE ASSESSEE BANK FROM 2 ITA NO. 1 279/PN/2013, JANLAXMI CO - OP BANK LTD., NASHIK INSTITUTIONS OTHER THAN CO - OPERATIVE BANKS WAS REMAINED TO BE BROUGHT TO TAX AS NO PROPER ENQUIRIES WERE MADE BY THE ASSESSING OFFICER. 3. AS PER DIRECTIONS OF THE LD. CIT - I, NASHIK THE ASSESSING OFFICER COMPLETED THE ASSESSMENT VIDE ASSESSMENT ORDER DATED 26 - 12 - 2011. TH E ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE BIFURCATION OF INTER E ST EARNED BY THE ASSESSEE BANK DURING F.Y. 2005 - 06 WHICH WAS OF RS.10,76,64,210/ - . THE ASSESSING OFFICER HAS OBSERVED THAT ON VERIFICATION OF THE DETAIL FURNISHED BY THE ASSESSEE B ANK IT IS FOUND THAT THE ASSESSEE BANK HAS EARNED INTEREST OF RS.14,09,000/ - ON INVESTMENTS/DEPOSITS MADE WITH INSTITUTIONS OTHER THAN CO - OPERATIVE BANKS OF RS.2,10,00,000/ - I.E. IN STATE BANK OF INDIA, UNITED WESTERN BANK AND MSCB FDR . THE ASSESSING OFFI CER WAS OF THE OPINION THAT THE INTEREST EARNED TO THE EXTENT OF RS.14,09,000/ - CANNOT BE TREATED AS INCOME EARNED FROM THE BANKING ACTIVITIES. THE ASSESSING OFFICER ALSO SOUGHT THE EXPLANATION OF THE ASSESSEE. THE EXPLANATION FILED BY THE ASSESSEE IS RE PRODUCED IN THE ASSESSMENT ORDER. AS PER THE DETAILS GIVEN BY THE ASSESSEE THE INTEREST INCOME IS COMPRISED THE FOLLOWING SOURCES : A. INTEREST ON FIXED DEPOSIT WITH BANKS OTHER THAN CO - OP. BANKS RS.12,34,000/ - B. INTEREST ON FIXED DEPOSIT WITH MSEDCL (MSE B) RS.1,75,000/ - TOTAL RS.14,09,000/ - 4. THE ASSESSEE CONTENDED THAT THE ABOVE INCOME IS EARNED IN THE COURSE OF BANKING BUSINESS A S THE ASSESSEE BANK HAS MADE AN INVESTMENT IN THE FIXED DEPOSIT WITH THE OTHER BANKS IN ORDER TO GET THE INTEREST MORE THAN WITH THAT OF THE GOVT. SECURITIES. THE ASSESSEE ALSO PLACED HIS RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KARNATAKA STATE CO - OPERATIVE APEX BANK 251 ITR 194 (SC). THE ASSESSING OFFICER WAS NO T CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. HE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN 3 ITA NO. 1 279/PN/2013, JANLAXMI CO - OP BANK LTD., NASHIK THE CASE OF TOTAGARS COOPE RATIVE VS. ITO 322 ITR 283 (SC) AND HELD THAT THE INTEREST INCOME EARNED BY THE ASSESSEE BANK FROM INSTITUTIONS OTHER THA N CO - OPERATIVE BANKS WAS REMAINED TO BE BROUGHT TO TAX. H E ALSO OBSERVED THAT THE INTEREST INCOME EARNED FROM OTHER CO - OPERATIVE BANK IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFO RE THE LD. CIT(A) AND LD. CIT(A) DELETED THE ADDITION. NOW, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE ISSUE BEFORE US IS IN VERY NARROW COMPASS. THE ASSESSEE EARNED SOME INTERE ST FROM NON - CO - OPERATIVE BANK I.E. STATE BANK OF INDIA AND UNITED WESTERN BANK ADMITTEDLY, WHICH WAS ON THE FIXED DEPOSIT MADE ON THOSE BANKS. THE ASSESSING OFFICER RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTAGARS COOPE RATIVE VS . ITO (SUPRA). IN OUR OPINION THE SAID DECISION IS NOT APPLICABLE TO THE ASSESSEES CASE AS THE FACTS IN THE CASE OF TOTAGARS COOPE RATIVE VS. ITO (SUPRA) ARE TOTALLY DISTINGUISHABLE AS IT WAS NOT ENGAGED IN ANY BANKING BUSINESS. THE SAID SOCIETY WAS NOT CARRYING BUSINESS O F BANKING AND HA S MADE THE INVESTMENT IN THE TERM DEPOSITS AND SECURITIES OUT OF THE SALE PROCEEDS OF THE AGRICULTURAL PRODUCE OF ITS FARMERS. IN THE PRESENT CASE THERE IS NO DISPUTE IN RESPECT OF THE FACTS THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BANKING. THE LOT OF WATER IS FLOWN ON THE BRIDGE O N THIS ISSUE BY THE DIFFERENT JUDICIAL PRONOUNCEMENT S . THE CONSISTENT VIEW IS TAKEN THAT THE INTEREST ON SECURITIES HELD BY THE BANK AS A STOCK - IN - TRADE WHILE CARRYING ITS BANKING BUSIN ESS IS WHOLLY DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE ACT. 6. IN THE CASE OF CIT VS. NAWANSHAHAR CENTRAL CO - OPERATIVE BANK LTD. 249 ITR 689 (SC) IT IS HELD THAT THE INTEREST ON PSBB BONDS AND IDBI BONDS IS A PART OF THE ACTIVITY OF BUSINESS OF BANKING AND H ENCE, QUALIFY FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. WE ALSO FIND THAT THE 4 ITA NO. 1 279/PN/2013, JANLAXMI CO - OP BANK LTD., NASHIK ISSUE INVOLVE D IN THE PRESENT CASE IS NO MORE RES INTEGRA AND IS COVERED BY THE DECISION OF THE APEX COURT IN THE CASES OF CIT VS. KARNATAKA STATE CO - OP. APEX BANK 251 ITR 194 (SC), MEHSANA DISTRICT CENTRAL CO - OPERATIVE BANK LTD. 251 ITR 522 (SC) AND CIT VS. ANDHRA PRADESH STATE CO - OPERATIVE BANK LTD. 336 ITR 516 (AP). IN OUR OPINION NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, SAME IS CONFIRMED. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15 - 12 - 20 1 4 SD/ - SD/ - ( R . K . PAN DA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE , DATED : 15 TH DECEMBE R, 20 1 4 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, NASHIK 4 THE CIT - I, NASHIK 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE