M/s. Cooperative Cane Development Union Ltd., Muzaffarnagar V. JCIT, Muzaffarnagar

ITA 1299/DEL/2014

• Counselvise Citation: 129920114 RSA 2014
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 23-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 06-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN COMMISSIONER
• Assessee Lawyers: PREM PRAKASH; MASHKOOR AHMED
• Keywords: Opportunity of being heard; Additional evidence

Judgement Text

1 ITA 1299/D/14 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER ITA NO. 1299/DEL/2014 ASSTT. YRS: 2010-11 COOPERATIVE CANE DEVELOPMENT VS. JCIT, RANGE-1, UNION LTD., MUZAFFARNAGAR. C/O MASHKOOR AHMED (ADV.) 10, DR. SURESH MARKET COMPLEX, BHAGAT SINGH ROAD, MUZAFFARNAGAR. PAN: AAEFC 0580 D ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI MASHKOOR AHMED ADV. & SHRI PREM PRAKASH, ADV. RESPONDENT BY : SHRI S.K. JAIN ADDL. COMMISSIONER (DR) DATE OF HEARING : 23/07/2015. DATE OF ORDER : 08/10/2015. O R D E R PER S.V. MEHROTRA, A.M.. : THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIRECT ED AGAINST THE ORDER DATED 22-11-2013, PASSED BY THE LD. CIT(A), MUZAFF ARNAGAR IN APPEAL NO. 146/12-13/MZR/1515, RELATING TO A.Y. 2010-11. 2. THE ASSESSEE, A SOCIETY, REGISTERED UNDER CO-OPE RATIVE SOCIETIES ACT, 1965, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN MARKETING OF SUGAR 2 ITA 1299/D/14 CANE GROWN BY ITS MEMBERS AND PURCHASE OF FERTILIZE RS, AGRICULTURE IMPLEMENTS, PESTICIDES, SEEDS AND OTHER ARTICLES IN TENDED FOR AGRICULTURE PURPOSE OR SUPPLY TO ITS MEMBER AS LOAN. IT HAD FIL ED ITS RETURN AT NIL INCOME. THE AO NOTICED THAT ASSESSEE HAD EARNED INTEREST FR OM VARIOUS BANK ACCOUNTS. HE SHOW CAUSED THE ASSESSEE AS TO WHY THE INTEREST EARNED BE NOT BROUGHT TO TAX IN VIEW OF JUDGMENT OF HONBLE SUPRE ME COURT IN THE CASE OF M/S TOTGARS COOPERATIVE SOCIETY VS. ITO 3. THE ASSESSEE EXPLAINED THAT IN THE CASE OF M/S TOTGARS COOPERATIVE SOCIETY (SUPRA), THE HON'BLE SUPREME COURT HAS HELD THAT THE INTEREST EARNED BY THE COOPERATIVE SOCIETY BY INVESTING SURPLUS FUN DS IN SHORT TERM DEPOSITS AND GOVERNMENT SECURITIES FELL UNDER THE HEAD 'INC OME FROM OTHER SOURCES' AND THESE WERE TAXABLE UNDER SEC. 56. ACCORDINGLY, THE INTEREST INCOME DID NOT QUALIFY FOR DEDUCTION UNDER S 80P(2)(A)(I). 4. THE ASSESSEE FURTHER POINTED OUT THAT THE HONBL E SUPREME COURT HAD ONLY LAID DOWN THE PRINCIPLE AND RESTORED THE MATTE R TO THE FILE OF HONBLE HIGH COURT FOR CONSIDERING THE ALLOWABILITY OF EXPE NDITURE U/S 57. THE ASSESSEE FURTHER POINTED OUT THAT UNDER THE BYE LA WS IT WAS TO PROVIDE LOAN TO ITS MEMBERS AND TO ARRANGE FUNDS AND FINANCE FOR AC TIVITIES OF THE SOCIETY. FOR THIS PURPOSE THE SURPLUS FUNDS WERE PARTED WITH THE BANK TO EARN INTEREST INCOME. 5. THE ASSESSEES FURTHER CONTENTION WAS AS UNDER: 3 ITA 1299/D/14 DETAILS OF INTT. EARNED: 1. DIVIDEND RS. 24,600/- 2. FROM LEFT OVER BALANCES IN SB A/C RS.3,13,160/- 3. INTT ON FDR RS. 1,80,994/- TOTAL: RS. 5,18,754/- DIVIDEND IS EXEMPT U/S 80P(2)(D). INTT ON LEFT OVER BALANCES IN SB A/CS IS RELATED TO THE ACTIVITY OF PROVIDING CRE DIT FACILITIES AS PER OBJECTS OF THE ASSESSEE SOCIETY. APROPOS FDR, I T WAS MADE FOR RS 50,00,000/- IN WHICH THE RATE OF INTEREST CO MES APPROXIMATELY 3.61% IN PROPORTIONATE TO THE INTERES T INCOME ON FDR I.E. RS 1,80,994/-. THE CALCULATION REVEALS THA T THE INVESTMENT IN FDR HAS BEEN FOR 3 TO 4 MONTHS ASSUM ING THE RATE OF INTEREST 9 TO 10% P.A. . THE INTEREST EARNED ON FDR WITH THE BANK IS INCIDEN TAL AND HAS PROXIMATE CONNECTION TO THE BUSINESS OF THE ASSESS EE SOCIETY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. WHILE D ECIDING TAXABILITY ONE HAS TO SEE WHAT IS THE INTENTION AND CIRCUMSTANCES BEHIND INVESTING SURPLUS FUNDS. THE INVESTMENT OF R S. 50,00,000/- IN FDR HAS BEEN WITHDRAWN WITHIN 3 TO 4 MONTHS, THAT SHOWS THAT THE INTENTION OF THE ASSESSEE BEHIN D INVESTING SURPLUS FUNDS WAS NOT FOR THE PURPOSE OF INVESTMENT BUT TO PART THE SURPLUS FUNDS WITH THE BANK WHICH WAS NOT IMMED IATE REQUIRED. 6. THE ASSESSEE ALSO SUBMITTED THAT EVEN IF THE INT EREST ON FDR OF RS. 1,80,994/- WAS TAXABLE U/S 56, THE INTEREST PAID ON AMOUNT OF PF OF RS. 4,03,677/- WAS ALLOWABLE U/S 57. THE AO, HOWEVER, DID NOT ACCEPT THE 4 ITA 1299/D/14 ASSESSEES CONTENTION AND TREATED THE INTEREST INCO ME OF RS. 1,80,994/- AS INCOME FROM OTHER SOURCES, INTER ALIA, OBSERVING AS UNDER: IN THE INSTANT CASE THE ASSESSEE IS A COOPERATIVE SOCIETY. DURING THE RELEVANT ASSESSMENT YEARS IN QUESTION, IT HAD S URPLUS FUNDS WHICH IT HAS INVESTED IN SHORT-TERM DEPOSITS WITH ' THE BANK IN THE FARM OF FDRS, AS SUBMITTED BY THE ASSESSEE, THA T THE SOCIETY HAS INVESTED RS 50,00,000/- IN FDRS AS THE SAME W ERE NOT REQUIRED FOR THE BUSINESS PURPOSE AT THE GIVEN POIN T OF TIME, HENCE IT IS EVIDENT FROM THE ABOVE THAT THE INTERES T INCOME SO EARNED DOES NOT FORM PART OF THE OPERATIONAL INCOME OF THE SOCIETY AS IS RELIED IN THE CASE OF M/S TOTGAR COOP ERATIVE SOCIETY. THE INCOME OF RS 1,80,994/- IS TREATED AS INCOME FROM OTHER SOURCES IN VIEW OR THE AFORESAID DECISION AN D ACCORDINGLY DEDUCTION U/S 80(P) THE INCOME TAX ACT IS NOT ALLO WABLE ON THE ABOVE INCOME. 7. HE ALSO DID NOT ACCEPT THE ASSESSEES CONTENTION REGARDING THE ALLOWABILITY OF EXPENSES OF RS. 4,03,677/- AGAINST THE INTEREST INCOME OF RS. 1,80,994/-, INTER ALIA, OBSERVING THAT PAYMENT OF I NTEREST ON THE AMOUNT OF PF OF EMPLOYEES WAS RETAINED BY THE ASSESSEE SOCIETY U NDER THE PF TRUST FUND RULES 1979. HE POINTED OUT THAT ASSESSEE HAD NOT PR OVED THAT THE AMOUNT OF PF RETAINED BY IT UNDER PF TRUST ACT, 1979 HAD BEEN INVESTED IN FDRS AND CONSEQUENTLY INTEREST HAD BEEN EARNED. THUS, THE AO HELD THAT ASSESSEE FAILED TO ESTABLISH THE NEXUS BETWEEN THE INTEREST INCOME AND THE INTEREST PAYMENT TO EMPLOYEES UNDER P.F. TRUST FUND. HE, ACC ORDINGLY, MADE ADDITION OF RS. 1,80,994/- DISALLOWING THE DEDUCTIO N CLAIMED U/S 80P(2)(A). 5 ITA 1299/D/14 8. BEFORE LD. CIT(A), THE ASSESSEE HAD FILED APPLIC ATION UNDER RULE 46A, INTER ALIA, ON THE GROUND THAT INCOME TAX HAD BEEN IMPOSED UPON THE ASSESSEE AT RS. 65,530/- BECAUSE OF THE MISCONCEPTION ABOUT THE TRUE FACTS WITHOUT ANY FAULT OF THE ASSESSEE, POSSIBLY DUE TO THE INADVERT ENCE OF ITS ADVOCATES. THE ASSESSEE FURNISHED FOLLOWING EVIDENCES BEFORE THE L EARNED CIT(A): (I) COPY OF WORKING STATEMENT REGARDING AMOUNT OF RESER VE FUND & PF (II) COPY OF RESOLUTIONS OF AGM OF THE ASSESSEE SOCIETY REGARDING RESERVE FUND 9. THE ASSESSEES CONTENTION WAS THAT CONSIDERATION OF THIS EVIDENCE IS NECESSARY IN ORDER TO ESTABLISH THAT THE AMOUNT OF PF RETAINED BY IT UNDER PF TRUST RULES, 1979 HAD BEEN INVESTED IN FDRS AGGREGA TING TO RS. 50,00,000/-. THUS, THE MAIN CONTENTION OF ASSESSEE WAS THAT ADDI TIONAL EVIDENCE ADDUCED BEFORE LD. CIT(A) WAS NECESSARY TO BE CONSIDERED IN ORDER TO ESTABLISH THE NEXUS BETWEEN THE INTEREST RECEIVED AND INTEREST PA YMENT. HOWEVER, LD. CIT(A) DID NOT ADMIT THE ADDITIONAL EVIDENCE 10. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. THE ASSESSEES CONT ENTION IS THAT FDRS HAD BEEN MADE OUT OF LOAN IN RESPECT OF PF AMOUNTING T O RS. 53,04,893/-. THE ASSESSEES DETAILED SUBMISSIONS HAVE BEEN REPRODUCE D AT PAGES 5 TO 9 OF LD. CIT(A)S ORDER WHICH CAN PROPERLY BE EXAMINED ONLY AFTER CONSIDERATION OF THE ADDITIONAL EVIDENCE PRODUCED BEFORE LD. CIT(A). CONSIDERING THE FACT THAT THE ASSESSEES PLEA HAS NOT PROPERLY BEEN ADDR ESSED ON FACTUAL ASPECTS, IT IS NECESSARY THAT THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE LD. 6 ITA 1299/D/14 CIT(A) BE ADMITTED AND THEN AFTER PROPER APPRECIATI ON OF ALL THE FACTS THE ISSUE BE ADJUDICATED. ACCORDINGLY, I SET ASIDE TH E ORDER OF LD. CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF AO TO ADJUDI CATE THE ISSUE AFRESH AFTER TAKING INTO ACCOUNT THE ADDITIONAL EVIDENCE FILED B Y THE ASSESSEE IN ACCORDANCE WITH LAW, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 11. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN OPEN COURT ON 08/10/2015. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 08/10/2015. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. 7 ITA 1299/D/14 -+ DATE INITIAL 1. DRAFT DICTATED ON -10.2015 PS 2. DRAFT PLACED BEFORE AUTHOR .10.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.