I.M.A. Vadodara Co.-Op. Credit Soc. Ltd., Vadodara V. The Income Tax Officer, Ward-3(1)(2), Vadodara

ITA 1297/AHD/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7812 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 18-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings
• Section: 56; 271(1)(c); 143(3); 80P; 201; 143(2); 64; 72; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER I.M.A. VADODARA CO - OP. CREDIT SOC. LTD. IMA BHAILAL AMIN HALL, SALATWADA MAIN ROAD, VADODARA - 390001 PAN: AAAFI9966M (APPELLANT) VS THE ITO, WARD - 3(1)(2), VADODARA (RESPONDENT) REVENUE BY : S H RI V.K . SINGH , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 27 - 06 - 2 018 DATE OF PRONOUNCEMENT : 10 - 07 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS A SSESSEE S APPEAL FOR A.Y. 2015 - 1 6, ARIS ES FROM ORDER OF THE CIT(A) - 3, VADODARA DATED 22 - 03 - 2018 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) - 3, VADODARA ['THE CIT(A)'] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF INCOME TAX OFFICER, WARD 3(1)(2), BARODA ['THE AO'] IN NOT ALLOWING THE DEDUCTION U/S 80P(2)(A)(I) OF RS. 10,20,4807 - CLAIMED BY T HE APPELLANT. 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO HOLDING THAT THE INTEREST EARNED BY THE APPELLANT FROM DEPOSITS MADE WITH NATIONALIZED BANKS IS ASSESSABLE U/S 56 AND NOT ELIGIBLE FOR DEDUCTION U/S.80P( 2)(A)(I) AS IT IS NOT RELATED TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE APPELLANT. 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN IGNORING THE PROVISIONS OF SECTION 80P(2)(A)(I) WITH CLEARLY PROVIDES THAT THE DEDUCTION IS AVAILABLE TO A CO OPERATIVE SOCIETY WHICH IS ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. I T A NO . 1297 / A HD/ 20 18 A SSESSMENT YEAR 2015 - 16 I.T.A NO. 1297 /AHD/20 18 A.Y. 2015 - 16 PAGE NO I.M.A. VADODARA CO - OP. CREDIT SOC. LTD. VS. ITO 2 4. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGING INTEREST U/S. 234 B OF THE ACT. 5. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INITIATING PENALTY PROCEEDING U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ('THE ACT). 3. THE BRIEF FACT OF THE ACT IS THAT ASSESSE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. NIL ON 15 - 12 - 2016. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) ON 26 - 07 - 2016. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EARNED INT EREST INCOME TOTALING TO RS. 16,09,463 ON SURPLUS FUNDS DEPOSITED WITH NATIONALIZED BANK . HE HAS FURTHER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER CHAPTER VIA OF THE ACT U/S. 80P(2)(A)(I) IN RESPECT OF AFORESAID INTEREST INCOME DERIVED FROM INVEST MENT IN FIXED DEPOSIT & OTHER DEPOSIT WITH COMMERCIAL B ANKS. THE ASSESSING OFFICER OBSERVED THAT EXEMPTION U/S. 80P(2)(A)(I) IS AVAILABLE ON INCOME WHICH IS ATTRIBUTABLE TO BUSINESS OPERATION OF THE ASSESSEE CO - OPERATIVE SOCIETY AND THE INTEREST EARNED O N THE FUND INVESTED WITH THE COMMERCIAL BANK IS NOT OPERATIONAL INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. CONSEQUENTLY, HE HAS TREATED THE INTEREST INCOME OF RS 16,0,9,463 AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT AND DISALLOWED THE CLA IM OF DEDUCTION U/S. 80P ON THE AFORESAID INTEREST INCOME. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE AFTER PLACING RELIANCE ON THE DECISION OF JURISDICTIONAL HON BLE HIGH COURT OF GUJARAT IN T HE CASE OF SBI VS. CIT (2016) 72 TAXMANN.COM 64 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER HAS NOTIC ED THAT IN ADDITION TO THE INTEREST INCOME EARNED ON LOAN AND ADVANCES TO ITS MEMBERS, THE ASSESSE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON INTEREST INCOME EARNED FROM FIXED DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. AS PER SECTION 80P(2)(A )(I) OF THE I.T.A NO. 1297 /AHD/20 18 A.Y. 2015 - 16 PAGE NO I.M.A. VADODARA CO - OP. CREDIT SOC. LTD. VS. ITO 3 ACT THE INTEREST INCOME EARNED ON PROVIDING CREDIT FACILITY TO ITS MEMBERS IS DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE ACT. AFTER PERUSAL OF THE AFORESAID PROVISION OF THE ACT WE OBSERVE THAT DEDUCTION U/S 80P(2)(A)(I) IS NOT AVAILABLE ON THE INTERE ST EARNED ON DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVENUE VIDE STATE BANK OF INDIA VS. CIT (2016) 72 TAXMANN.COM 64 (GUJARAT) WHEREIN IT IS HELD TH AT INTEREST INCOME ON DEPOSIT PLACED WITH THE COMMERCIAL BANKS IS NOT EXEMPT U/S. 80P(2)(A)(I) OF THE ACT. IN VIEW OF THE ABOVE FACTS AND LEGAL FINDINGS WE ARE INCLINED WITH THE DECISION OF THE LD. CIT(A) THAT INVESTING SURPLUS FUNDS IN A COMMERCIAL BANK I S NO PART OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS WHICH IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER AS DECIDED IN THE VARIOUS DECISION OF THE CO - ORDINATE BENCHES OF ITAT AHMEDABAD WE DIRECT THE ASSESSING OFFICER T O ALLOW PRO RATA EXPENSES IN RESPECT OF INTEREST EARNED FROM DEPOSIT HELD WITH NATIONALIZED BANK TO THE ASSESSEE FOR COMPUTING THE DEDUCTION U/S. 80P AFTER EXAMINING/VERIFICATION AND AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. ASSESSEE S GROUND OF APPEAL REGARDING LEVY OF INTEREST U/S. 234A/B/C IS OF GENERAL NATURE WHICH IS TO BE CHARGED MANDATORY AS PER PROVISION OF THE ACT. THEREFORE, THE SAME IS DISMISSED. THE OTH ER GROUND OF APPEAL AGAINST INITIATION OF PENALTY PROCEEDINGS U/S. 271C IS PREMATURE WHICH DO NOT REQUIRE ANY ADJUDICATION AT THIS STAGE , THEREFORE, THE SAME IS ALSO DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 07 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER I.T.A NO. 1297 /AHD/20 18 A.Y. 2015 - 16 PAGE NO I.M.A. VADODARA CO - OP. CREDIT SOC. LTD. VS. ITO 4 AHMEDABAD : DATED 10 /07 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,