Karkala Co-Operative Society Bank Limited, Karkala V. Income Tax Officer, Ward - 3, Udupi

ITA 1288/BANG/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1979 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-02-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 06-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Bad and doubtful debts; Set aside
• Section: 80P

Judgement Text

ITA NOS.1288 & 1289 /BANG/2019 KARKALA CO-OP. S BANK LTD., KARKALA IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NOS.1288 & 1289/BANG/2019 ASSESSMENT YEAR: 2015-16 & 2016-17 KARKALA CO-OP S. BANK LTD. NO.409/2, WARD-III, TOWN BANK ANANTHASHAYANA ROAD KARKALA 574 104 PAN NO : AAAAK3861G VS. ITO WARD-3 UDUPI APPELLANT RESPONDENT APPELLANT BY : SHRI RAVISHANKAR S.V., A.R. RESPONDENT BY : SHRI KANNAN NARAYANAN, D.R. DATE OF H EARING : 18.02.2021 DATE OF PRONOUNCEMENT : 18.02.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER DATED 12.06.2019 PASSED BY LD CIT(A), MANGALURU AND THEY RELATE TO THE ASSESSMENT YEAR 2015-16 AND 2016-17. SINCE CERTAIN COMMON ISSUES ARE URGED IN THESE TWO APPEAL S, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE FIRST COMMON ISSUE URGED BY THE ASSESSEE IN BOTH THE YEARS RELATE TO REJECTION OF CLAIM OF DEDUCTION UNDER 80P (2)(A)(I) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. ITA NOS.1288 & 1289 /BANG/2019 KARKALA CO-OP. S BANK LTD., KARKALA PAGE 2 OF 6 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING CRE DIT FACILITIES TO ITS MEMBERS. THE ASSESSEE CLAIMED DEDUCTION U/S 80P OF THE ACT IN BOTH THE YEARS UNDER CONSIDERATION. THE A.O. NOTICED TH AT THE ASSESSEE HAS EXTENDED CREDIT FACILITIES TO NOMINAL MEMBERS W HO HAVE NO ROLE IN THE MANAGEMENT OF THE SOCIETY AND ALSO DOES NOT HAVE ANY RIGHT TO VOTE. HE ALSO OBSERVED THAT MANY NOMINAL MEMBERS D ID NOT POSSESS ANY SHARE CERTIFICATE. ACCORDINGLY, THE A.O. TOOK THE VIEW THAT THE NOMINAL MEMBERS ARE NON-MEMBERS. HE ALSO OBSERVED THAT THE ASSESSEE HAS RECEIVED DEPOSITS AND LENT LOAN TO GEN ERAL PUBLIC AND NOMINAL MEMBERS. ACCORDINGLY, HE TOOK THE VIEW THA T THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) OF T HE ACT AS PER THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF CITIZEN CO-OPERATIVE SOCIETY LTD. (2017) 397 ITR 1. THE A. O. ALSO OBSERVED IN AY 2015-16 THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE FROM DEPOSITS KEPT WITH BANKS IS NOT ELIGIBLE FOR DEDUCT ION U/S 80P(2)(C) & 80P(2)(D) OF THE ACT SINCE THE ASSESSEE IS NOT ELIG IBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, THE A.O. DENIED DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN BOTH THE YEARS. TH E LD. CIT(A) ALSO CONFIRMED THE SAME. 4. THE LD. A.R. SUBMITTED THAT THE LAW ON DEDUCTION OF 80P(2)(A)(I) OF THE ACT AVAILABLE TO CREDIT CO-OPERATIVE SOCIETI ES HAS SINCE BEEN SETTLED BY HONBLE SUPREME COURT IN THE CASE OF MAV ILAYI SERVICE CO- OPERATIVE BANK LTD. VS.CIT (2021) 123 TAXMANN.COM 1 61 (SC). HE SUBMITTED THAT THE HONBLE SUPREME COURT HAS HELD T HAT THE EXPRESSION MEMBERS IS NOT DEFINED IN THE INCOME-T AX ACT. HENCE, IT IS NECESSARY TO CONSTRUE THE EXPRESSION MEMBERS I N SECTION 80P(2)(A)(I) OF THE ACT IN THE LIGHT OF DEFINITION OF THAT EXPRESSION AS CONTAINED IN THE CONCERNED CO-OPERATIVE SOCIETIES A CT. THE LD. A.R. SUBMITTED THAT THE HONBLE SUPREME COURT HAS CONSID ERED THE ITA NOS.1288 & 1289 /BANG/2019 KARKALA CO-OP. S BANK LTD., KARKALA PAGE 3 OF 6 DECISION RENDERED BY IT IN THE CASE OF CITIZEN CO-O PERATIVE SOCIETY LTD. (SUPRA) AND OBSERVED THAT THE RATIO DECIDENDI OF CI TIZEN CO-OPERATIVE SOCIETY LTD. MUST BE GIVEN EFFECT TO. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S 80P(2) (A)(I) OF THE ACT. 5. THE LD. D.R., ON THE CONTRARY, SUBMITTED THAT TH E ISSUE OF DEDUCTION NEEDS TO BE EXAMINED AFRESH IN THE LIGHT OF DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MA VILAYI SERVICE CO-OPERATIVE BANK LTD. (SUPRA). ACCORDINGLY, HE SU BMITTED THAT THIS ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. 6. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. WE FIND MERIT IN THE SUBMISSION MADE BY LD. D.R. SINC E THE HONBLE SUPREME COURT HAS SETTLED MANY ISSUES IN THE DECISI ON RENDERED BY IT IN THE CASE OF MAVILAYI SERVICE CO-OPERATIVE BAN K LTD. (SUPRA) AND SINCE THE FACTS PREVAILING IN THE INSTANT CASE NEED S TO BE EXAMINED AFRESH IN THE LIGHT OF THE PRINCIPLES ENUNCIATED BY HONBLE SUPREME COURT IN THE ABOVE SAID CASE, WE ARE OF THE VIEW TH AT THE ISSUE OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT REQUIRES FRES H EXAMINATION AT THE END OF THE A.O. ACCORDINGLY, WE SET ASIDE THE ORDE R PASSED BY LD. CIT(A) ON THIS ISSUE IN BOTH THE YEARS UNDER CONSID ERATION AND RESTORE THEM TO THE FILE OF THE A.O. IN BOTH THE YEARS FOR EXAMINING IT AFRESH AS DISCUSSED ABOVE. 7. THE NEXT COMMON ISSUE RELATES TO REJECTION OF DE DUCTION CLAIMED U/S 80P(2)(D) OF THE ACT IN RESPECT OF INTE REST INCOME EARNED FROM FIXED DEPOSITS KEPT WITH BANK. WE NOTICED EAR LIER THAT THE A.O. HAS OBSERVED IN ASSESSMENT YEAR 2015-16 THAT THE IN TEREST INCOME RECEIVED BY THE ASSESSEE FROM DEPOSITS KEPT WITH BA NKS IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(C) & 80P(2)(D) OF THE ACT SINCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF T HE ACT. IN AY 2016- ITA NOS.1288 & 1289 /BANG/2019 KARKALA CO-OP. S BANK LTD., KARKALA PAGE 4 OF 6 17, THE AO ASSESSED THE INTEREST INCOME RECEIVED ON BANK DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOURCES AND DENI ED DEDUCTION CLAIMED U/S 80P(2)(D) OF THE ACT. THE LD CIT(A) CO NFIRMED THE ACTION OF THE AO ON THIS ISSUE. 8. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ALLOWABLE U/S 57 OF THE ACT IN RESPECT OF COST OF FUNDS AND PROPORTIONATE ADMINISTRATIVE AND OTHER EXPENSES. I N SUPPORT OF THIS SUBMISSION, THE LD. A.R. PLACED RELIANCE ON THE DEC ISION RENDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOTG ARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (2015) 58 TAXMANN.COM 35 (KARN). THE LD. A.R. SUBMITTED THAT THE ASSESSEE IN THE ABOVE SAID CASE HAD PUT FORTH IDENTICAL CLAIM CLAIM BEFORE HONBLE SUPREME COURT IN THE CASE REPORTED AS TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (2010) 188 TAXMANN.COM 282 AND THE HONBLE SUPREME COURT, VIDE 14 OF ITS ORDER, HAD RESTORED THE QUESTION RAISED BY THE ASSE SSEE TO THE FILE OF HONBLE HIGH COURT OF KARNATAKA. CONSEQUENT THERET O, THE HONBLE HIGH COURT OF KARNATAKA HAS PASSED THE ORDER IN THE CASE REPORTED IN 58 TAXMANN.COM 35 AND HELD THAT THE TRIBUNAL WAS NOT RIGHT IN COMING TO THE CONCLUSION THAT THE INTEREST EARNED B Y THE APPELLANT IS AN INCOME FROM OTHER SOURCES WITHOUT ALLOWING DEDUC TION IN RESPECT OF PROPORTIONATE COST, ADMINISTRATIVE EXPENSES INCU RRED IN RESPECT OF SUCH DEPOSITS. ACCORDINGLY, THE LD. A.R. PRAYED TH AT THE A.O. MAY BE DIRECTED TO ALLOW DEDUCTION OF PROPORTIONATE COST, ADMINISTRATIVE AND OTHER EXPENSES, IF THE A.O. PROPOSES TO ASSESS THE INTEREST INCOME EARNED FROM BANK DEPOSITS AS INCOME UNDER THE HEAD OTHER SOURCES. 9. WE HEARD LD. D.R. ON THIS ISSUE. WE FIND MERIT IN THE PRAYER OF THE ASSESSEE, SINCE IT IS SUPPORTED BY THE DECIS ION RENDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOTG ARS CO-OPERATIVE ITA NOS.1288 & 1289 /BANG/2019 KARKALA CO-OP. S BANK LTD., KARKALA PAGE 5 OF 6 SALE SOCIETY LTD. VS. ITO (2015) 58 TAXMANN.COM 35 (KARN). ACCORDINGLY, WE DIRECT THE A.O. TO ALLOW DEDUCTION OF PROPORTIONATE COST, ADMINISTRATIVE AND OTHER EXPENSES, IF THE A.O . PROPOSES TO ASSESS THE INTEREST INCOME EARNED FROM BANK DEPOSIT S AS INCOME UNDER THE HEAD OTHER SOURCES. 10. THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS IN A SSESSMENT YEAR 2015-16 IN RESPECT OF DISALLOWANCE OF PROVISION FOR BAD DEBTS OF RS.1 LAKH AND PROVISION FOR CENTENARY FUND RS.3 LAKHS. WE NOTICE THAT THE A.O. HAD MADE THE ABOVE SAID DISALLOWANCES IN ASSES SMENT YEAR 2015-16, BUT THE ASSESSEE HAD OMITTED TO CHALLENGE THE ABOVE SAID ADDITIONS BEFORE LD. CIT(A). HENCE THE ASSESSEE H AS RAISED THE ABOVE SAID ISSUES BEFORE US BY WAY OF ADDITIONAL GROUNDS. WE ARE OF THE VIEW THAT BOTH THE ABOVE SAID ISSUES REQUIRE FRESH CONSIDERATION AT THE END OF THE A.O., SINCE THE MAIN ISSUES HAVE BEE N RESTORED TO THE FILE OF THE A.O. AND THE DECISION TAKEN ON THEM MAY HAVE IMPACT ON THE ABOVE SAID TWO ADDITIONS. ACCORDINGLY, WE REST ORE BOTH THE ABOVE SAID ISSUES TO THE FILE OF THE A.O. FOR EXAMINING T HEM AFRESH. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEB, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 18 TH FEB, 2021. VG/SPS ITA NOS.1288 & 1289 /BANG/2019 KARKALA CO-OP. S BANK LTD., KARKALA PAGE 6 OF 6 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.