The Citizens Co-Operative Society Ltd., Hyd, Hyderabad V. DCIT, Circle-9(1), Hyd, Hyderabad

ITA 1295/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5987 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-02-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 16-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SRINIVAS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER A ND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1295/HYD/2015 : ASSESSMENT YEARS 2012- 13 CITIZENS CO-OPERATIVE SOCIETY, LTD., HYDERABAD (PAN - AAAAT 3952 F) V/S DY. COMMISSIONER OF INCOME-TAX CIRCLE 9(1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.L.NARASIMHA RAO RESPONDENT BY : SHRI D.SRINIVAS DR DATE OF HEARING 2 4 . 2 .201 6 DATE OF PRONOUNCEMENT 04.03.2016 O R D E R PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) 7, HYDERABAD DATED 15.9.2015 FOR THE ASSESSMENT YEAR 2012-13. 2. THOUGH AS MANY AS EIGHT GROUNDS HAVE BEEN URGED , THE ONLY EFFECTIVE GRIEVANCE OF THE ASSESSEE IN THIS AP PEAL RELATES TO DISALLOWANCE OF THE ASSESSEES CLAIM FOR EXEMPTION UNDER S.80P(2)(I)(A) OF THE INCOME TAX ACT,1961, AND THE RELEVANT GROUND OF THE ASSESSEE, BEING GROUND NO.7, READS AS UNDER- ALSO TAKING COGNIZANCE OF THE JUDICIAL PRECEDENTS EXISTED ON THE ISSUE, THE LD. CIT(A) OUGHT TO HAVE ORDERED RELI EF U/S. 80P(2)(A)(I) OF THE ACT TO THE TOTAL EXTENT OF RS.15 ,41,19,431 (INCLUSIVE OF THE PROVISION FOR TAX OF RS.1,75,22,54 1/- WHICH WAS BY INADVERTENCE NOT TAKEN INTO ACCOUNT BY THE A PPELLANT WHILE FILING THE ROI); 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS A COOPERATIVE SOCIETY DERIVING INCOME FROM BANKING. IT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 ON 29.9.2012 DECLARING NIL ITA NO.1295/HYD/2015 M/S. CITIZENS CO-OPERATIVE SOCIETY LTD., HYDERABAD 2 INCOME AFTER CLAIMING DEDUCTION OF RS.15,41,19,431 UNDER S.80P(2)(A)(I) OF THE ACT. THE ASSESSING OFFICER, REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER S.80P(2)(A)(I) OF THE ACT, COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.15,43,19,43 1, AFTER MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES- I) DISALLOWANCE OF DEDUCTION UNDER S.80P RS.13,66,68, 090 II) ADDITION PROVISIONS CLAIMED AS DEDUCTION RS. 1,75, 22,541 III) ADDITION TOWARDS DONATION RS. 1,28,8 00 4. ON APPEAL, THE CIT(A) TAKING NOTE OF THE DECIS ION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2006-07 TO 2008-09, WHEREIN IT WAS HELD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION UNDER S.80P(2)(A)(I) OF THE ACT, UPHELD T HE DISALLOWANCES MADE BY THE ASSESSING OFFICER AND DISMISSED THE APP EAL OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. WE HAVE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES. THOUGH THE ORDER OF THE TRIBUN AL DATED 3.7.2012 FOR ASSESSMENT YEARS 2007-08 AND 2008-09 (ITA NOS.1 003 &1004/HYD/2011) IN ASSESSEES OWN CASE ON THE ISSUE OF ASSESSEES ELIGIBILITY FOR DEDUCTION UNDER S.80P(2)(A)(I) IS A GAINST THE ASSESSEE, WE FIND THAT THE SAID DECISION OF THE TRIBUNAL HAS BEEN RENDERED WITHOUT TAKING INTO ACCOUNT THE DECISION OF THE AND HRA PRADESH HIGH COURT IN THE CASE OF CIT V/S. A.P. STATE COOPERATIV E BANK LTD.(2011) (336 ITR 516), WHICH IS IN FAVOUR OF THE ASSESSEE. IT IS ALSO NOTICED THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN ITS S UBSEQUENT DECISION IN THE CASE OF MAHAVEER CO-OP. UNION BANK LTD. (ITA LN O.1011/HYD/2013 FOR ASSESSMENT YEAR 2004-05) HAS, FOLLOWING THE DEC ISION OF THE ITA NO.1295/HYD/2015 M/S. CITIZENS CO-OPERATIVE SOCIETY LTD., HYDERABAD 3 DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT V/S. A.P. STATE COOPERATIVE BANK LTD. (SUPRA), HELD VIDE ITS ORDER DATED 1.10.2013, AS FOLLOWS- 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE FIND THE SAME ISSUE WAS CONSIDERED BY TH E ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. ANDHRA PRADESH ST ATE COOPERATIVE BANK LTD. (CITED SUPRA) WHEREIN THE HIGH COURT HELD AS UNDER- 'THE PROVISIONS OF SECTION 80P OF THE INCOME-TAX AC T, 1961 DO NOT MAKE ANY DISTINCTION BETWEEN THE INTEREST EARNE D BY DEPOSIT IN A BANK AND INTEREST EARNED ON THE COMPUL SIVE DEPOSIT MADE AS REQUIRED UNDER THE RELEVANT STATUTE . ALL THE INCOME FROM BANKING BUSINESS REFERRED TO UNDER SECT ION 80P(2)(A)(I) OF THE ACT WOULD QUALIFY FOR DEDUCTION UNDER THE ACT. THE INCOME EARNED BY THE CO-OPERATIVE BANK EIT HER BY DEPOSIT OF THE PRESCRIBED PERCENTAGE OF ITS RESERVE S OR BY DEPOSIT OF THEIR SURPLUS FUNDS IS EXEMPTED. THE INC OME FROM EITHER CATEGORY OF THE DEPOSITS IS CERTAINLY ATTRIB UTABLE TO THE BUSINESS OF BANKING. AS LONG AS THE DEPOSIT OF THE SURPLUS FUNDS IN OTHER BANKS FOR THE PURPOSE OF EARNING INTEREST IS NOT UNAUTHORIZED OR NOT BARRED BY ANY OF THE APPLICABLE STATUTES, THE INCOME IS CERTAINLY ATTRIBUTABLE TO THE BUSINES S OF BANKING. THERE IS NO CONCEPT OF VOLUNTARY OR NON-STATUTORY R ESERVES. WHEN THE RESERVE FUND OF THE SOCIETY EXCEEDS 25 PER CENT. OF ITS WORKING CAPITAL, THE EXCESS COULD BE UTILIZED IN TH E BUSINESS OF THE SOCIETY WITH THE SANCTION OF THE REGISTRAR OF C OOPERATIVE SOCIETIES. FURTHER, WHEN A SOCIETY IS PROHIBITED BY ITS BYE-LAWS FROM BORROWING EITHER FROM ITS MEMBERS OR OTHERS, T HE WHOLE OF ITS RESERVE FUND MAY BE UTILIZED IN ITS BUSINESS. I F A CO- OPERATIVE BANK DERIVES INCOME BY LENDING MONEY TO I TS MEMBERS, IT BEING BUSINESS OF BANKING, IS ELIGIBLE FOR DEDUCTION. THE STATUTORY LIQUIDITY RATIO, CASH RESE RVE OR RESERVE FUND REQUIRED TO BE MAINTAINED BY A SCHEDULED BANK OR A COOPERATIVE BANK UNDER THE PROVISIONS OF THE RESERV E BANK OF INDIA ACT, 193 4, OR THE BANKING REGULATION ACT, 19 49, ARE ALL ACTIVITIES WHICH ARE PART OF THE BUSINESS OF BANKIN G. IF SECTION 80P(2)(A) OF THE ACT IS GIVEN A RESTRICTIVE MEANING AS INCLUDING THE INTEREST EARNED ONLY ON THE STATUTORY DEPOSITS MADE BY A CO-OPERATIVE SOCIETY, IT WOULD AMOUNT TO SUPPLYING A CASUS OMISSUS AND HAS TO BE AVOIDED BY THE COURT. INVESTM ENT OF FUNDS BY BANKS INCLUDING THE NON-RESERVES IS PART O F BANKING ACTIVITIES SINCE NO BANK: WOULD LIKE ITS RESERVE FU NDS TO REMAIN IDLE AND NOT EARN ANY INTEREST. THEREFORE, THE INTE REST EARNED ON SUCH DEPOSITS IS DIRECTLY ATTRIBUTABLE TO THE BUSI NESS OF BANKING AND, THEREFORE, EXEMPT UNDER SECTION 80P(2)(A)(I) T HE ACT.' 7. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINE D TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE ORDER OF TH E CIT(A) IS CONFIRMED. ITA NO.1295/HYD/2015 M/S. CITIZENS CO-OPERATIVE SOCIETY LTD., HYDERABAD 4 THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THAT O F M/S. MAHAVEER CO- OPERATIVE URBAN BANK LTD., AND HENCE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THAT CASE, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER S.80P(2)(A)(I) OF THE ACT. APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED . 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 04.03.2016 SD/- SD/- (P.MADHAVI DEVI) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER. DT/- 04 TH MARCH, 2016 COPY FORWARDED TO: 1. CITIZENS CO-OPERATIVE SOCIETY LTD., 11-7-194, CI TIZEN HOUSE, HUDA COLONY, SAROORNAGAR, HYDERABAD 500 035. 2. DY. COMMISSIONER OF INCOME - TAX CIRCLE 9(1), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) 7 HYDERABAD 4. PR. COMMISSIONER OF INCOME - TAX 7 , HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.