Citizens Co. Op. Credit Society Ltd., Vadodara V. The DCIT,Circle-3(1), Vadodara

ITA 1316/AHD/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7818 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 19 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: 21-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 56; 143(3); 80P; 201; 143(2); 64; 72; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER CITIZENS CO - OP. CREDIT SOCIETY LTD. WADI, TAIWADA NAKA, VADODARA - 390001 PAN: AAAAC0414F (APPELLANT) VS THE DCIT, CIRCLE - 3(1) , 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 ASSESSEE S APPEAL FOR A.Y. 2015 - 16 , 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. ON THE FACTS AND CIRCUMSTA NCES OF THE CASE OF YOUR APPELLANT, THE LD. CIT(A) HAS ERRED IN TREATING THE BANK FD INTEREST EARNED BY A CO - OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS INCOME FROM OTHER SOURCES U/S 56 OF THE ACT AND THEREBY DISALLOWING DEDUCTION U/S 80P OF THE ACT ON THE SAID FD INTEREST. THEREFORE YOUR APPELLANT PRAYS YOUR GOODSELF TO CONSIDER THE INTEREST INCOME EARNED ON THE BANK FD AS THE BUSINESS INCOM E AND ALLOW THE DEDUCTION U/S 80 P OF THE ACT. 3. THE BRIEF FACT OF T HE ACT IS THAT ASSESSE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. NIL ON 31.08. 2015 . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER I T A NO . 1316 / A HD/20 18 A SSESSMENT YEAR 2015 - 16 I.T.A NO. 1 3 16 /AHD/20 18 A.Y. 2015 - 16 PAGE NO CITIZENS CO - OP. CREDIT SOCIETY LTD. VS. DCIT 2 SCRUTINY BY ISSUING OF NOTI CE U/S. 143(2) ON 19 - 09 - 2016 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EARNED INTEREST INCOME TOTALING TO RS . 24,41,860/ 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 INVESTMENT IN FIXED 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 SOCIE TY AND THE INTEREST EARNED ON THE FUND INVESTED WITH THE COMMERCIAL BANK IS NOT OPERATIONAL INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. CONSEQUENTLY, HE HAS TREAT ED THE INTEREST INCOME OF RS 24,41,860/ AS INCOME FROM OTHER SOURCES U/S. 56 OF TH E ACT AND DISALLOWED THE CLAIM 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 BL E HIGH COURT OF GUJARAT IN THE 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 NOTICED 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 BA NK. AS PER SECTION 80P(2)(A)(I) OF THE 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 INTEREST 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 I.T.A NO. 1 3 16 /AHD/20 18 A.Y. 2015 - 16 PAGE NO CITIZENS CO - OP. CREDIT SOCIETY LTD. VS. DCIT 3 REVENUE VIDE STATE BANK OF INDIA VS. CIT (2016) 72 TAXMANN.COM 64 (GU JARAT) WHEREIN IT IS HELD THAT 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 IS 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 DI RECT THE ASSESSING OFFICER TO 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 ASSESSE E. THEREFORE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 07 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER 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/ , / ,