The ACIT,B.K.Circle, Palanpur V. The Arbuda Credit Co.Op. Society Ltd., Banaskantha

ITA 1373/AHD/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1304 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 23-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Gift; Question of law
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.1373/AHD/2014 WITH CO NO.179/AHD/2014 / ASSTT. YEAR: 2010-2011 ACIT, B.K. CIRCLE PALANPUR. VS THE ARBUDA CREDIT CO - OP. SOCIETY LTD. AT-DHANERA DIST. BANASKANTHA. PAN : AAAAA 1251 A ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI DINESH SINGH, SR.DR ASSESSEE BY : SHRI MEHUL THAKKAR / DATE OF HEARING : 23/06/2016 / DATE OF PRONOUNCEMENT: 24/06/2016 $%/ O R D E R THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINS T THE ORDER OF THE LD.CIT(A)-XX, AHMEDABAD DATED 25.2.2014 PASSED FOR THE ASSTT.YEAR 2010- 11. ON RECEIPT OF NOTICE OF THE REVENUES APPEAL, T HE ASSESSEE HAS FILED CROSS OBJECTION BEARING NO.179/AHD/2014. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LD .CIT(A) IS ERRED IN DELETING THE ADDITION OF RS.36,06,470/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY. IT HAS FILED ITS RETURN OF INCOME ON 15.1 0.2010 DECLARING TOTAL INCOME AT NIL. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER S ECTION 80P OF THE INCOME TAX ACT. SUCH DEDUCTION WAS DENIED TO THE ASSESSEE BY THE AO THAT IT IS ITA NO.1373/AHD/2014 WITH CO 2 CARRYING OUT BUSINESS OF BANKING, AND THEREFORE, SU CH DEDUCTION IS NOT ADMISSIBLE TO THE ASSESSEE. 4. ON APPEAL, THE LD.CIT(A) DID NOT CONCUR WITH THE CONCLUSION OF THE AO AND HELD THAT ASSESSEES PRIMARY BUSINESS WAS OF PR OVIDING CREDIT FACILITIES TO ITS MEMBERS. 5. THE LD.COUNSEL FOR THE ASSESSEE, AT THE OUTSET S UBMITTED THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL IN THE ASSTT.YEAR 2010-11 AND 012-13. THE TRIBUNAL WHILE DECIDING THE APPEAL BEARING NOS.2400 & 2401/AHD/2015 HAS HELD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION UN DER SECTION 80P(2) OF THE INCOME TAX ACT. HE PLACED ON RECORD COPY OF THE TR IBUNALS ORDER. THE DISCUSSION MADE BY THE TRIBUNAL READS AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE BEFORE US IS WHETHER THE ASS ESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT AT RS. 55,731 /- AND RS.69,486/- FOR ASST. YEARS 2011-12 AND 2012-13 RESPECTIVELY FOR IN TEREST INCOME EARNED FROM DEPOSITS WITH THE BANK. LET US FIRST GO THROUGH THE FACTS OF THE OBJECTS OF ASSESSEE. FROM GOING THROUGH THE BYE -LAWS OF THE CO- OPERATIVE SOCIETY, WE FIND THAT ASSESSEE SOCIETY HA S GOT FOLLOWING OBJECTS AND RULES ABOUT FUNDS :- (2) OBJECTS (1) TO INCREASE THE SENSE OF THRIFT, SAVINGS AND M UTUAL COOPERATION AMONG THE MEMBERS AND ENCOURAGE IT. (2) TO COLLECT FUNDS, DEPOSITS FROM THE MEMBERS. (3) TO TAKE ON HAND THE DIFFERENT KIND OF SAVING SC HEMES TO COLLECT THE DEPOSITS. (4) TO PROVIDE LOANS TO NEEDY MEMBERS FOR BUSINESS , TRADE. INDUSTRY, EMPLOYMENT AND FOR OTHER PROPER OBJECTS. ITA NO.1373/AHD/2014 WITH CO 3 (5) TO OBTAIN CASH CREDIT FROM THE CENTRAL FINANCIA L INSTITUTION AND PROVIDE FACILITY OF LOAN TO THE MEMBERS. (6) IF NECESSARY, TO WORK AS INSURANCE AGENT OF THE MEMBERS FOR THEIR PERSONAL LIFE AND PROPERTY. (7) TO PURCHASE MOVEABLE, IMMOVEABLE PROPER TY FOR SOCIETIE'S WORK AND ADMINISTRATION, SALE, HIR E, DWELL, RAISE. (3) FUNDS (3) FUNDS WILL BE RAISED FROM THE FOLLOWING WAYS :- SHARE OBTAIN FUNDS. A. BY SHARE B. TO OBTAIN FUNDS I. FROM MEMBERS. K. BY TAKING AMOUNT ON LOAN. D. BY GIFT. E. BY ENTRANCE FEE. : (4) TO COLLECT FUND BY SELLING SHARES SHOULD NOT BE MORE THAN RS 50 00 000/- THE VALUE OF: EACH SHARE WILL REMAIN R S.100/-' (5) THE DEPOSITS AND LOANS FOR FIXED DEPOSIT IN CUR RENT OR SAVINGS ACCOUNT CAN BE TAKEN AT THE RATE OF INTEREST AND A MOUNT AS DECIDED BY THE MANAGING COMMITTEE. BUT THE TOTAL AM OUNT OF DEPOSITS / AND LOAN SHOULD NOT BE MORE THAN TWELVE TIMES OF ACCUMULATED LOSS AFTER DEDUCTION OF RECOVERED SHARE AMOUNT, RESERVE FUND AND BUILDING FUND BUT THIS LIMIT CAN B E ENHANCED WITH THE PERMISSION OF REGISTRAR FOR FIXED TIME AND CONDITIONS FROM TIME TO TIME (6) IF THE FUNDS OF SOCIETY IS NOT ENGAGED IN THE W ORKING OF SOCIETY THEN IT WILL BE INVESTED AS MENTIONED IN SECTION -7 1 OF COOPERATIVE RULES. BUT IN SPECIAL CIRCUMSTANCES INV ESTMENT CAN BE MADE AT ANY OTHER PLACE WITH PRIOR APPROVAL OF R EGISTRAR. ITA NO.1373/AHD/2014 WITH CO 4 7. FROM THE ABOVE WE FIND THAT THE ASSESSEES MAIN OBJECT IS TO TAKE DEPOSITS FROM ITS MEMBERS AND TO PROVIDE LOAN TO TH E NEEDY MEMBERS FOR VARIOUS BUSINESS AND PERSONAL PURPOSES AND AS R EGARDS OF FUNDS IT IS ALSO MENTIONED IN THE BYE-LAWS THAT IN ORDER TO GIVE OPTIMUM RETURN TO THE MEMBERS UNUTILIZED FUNDS MAY BE INVESTED FOR EARNING INTEREST INCOME BY DEPOSITS WITH BANKS OR OTHER CO-OP. SOCIE TY. 8. WE FURTHER FIND THAT THE INTEREST INCOME OF RS.5 5,731 AND RS.69,486/- FOR ASST. YEARS 2011-12 & 2012-13 RESPE CTIVELY HAVE BEEN EARNED FROM DEPOSITS WITH BANAS BANK. FURTHER SECTI ON 80P(2)(A)(I) OF THE ACT DEALS WITH DEDUCTION FOR INCOME EARNED BY A CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANK ING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND LOOKING TO THE OBJECTS OF THE SOCIETY IT CLEARLY FALLS IN THIS CATEGORY. NOW FURTHER WHET HER THE INTEREST RECEIVED FROM CO-OP. BANK CAN ALSO BE DEEMED AS AN INCOME EARNED BY CREDIT CO-OPERATIVE SOCIETY FROM ITS MEMBERS. WE FI ND THAT HON. KARNATAKA HIGH COURT HAS DEALT WITH SIMILAR ISSUE I N THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OP. LTD. VS. IT O (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER :- 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS IN VESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT, DUE TO ANY MEMBERS . IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE M EMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MO NEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRI BUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILA R VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITI ES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNS USTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER. 9. WE ALSO FIND THAT SIMILAR ISSUE WAS DEALT BY THE TRIBUNAL, DELHI BENCH IN ITA NO.2607/DEL/2012 FOR ASST. YEAR 2008-0 9 IN THE CASE OF ITA NO.1373/AHD/2014 WITH CO 5 ACIT VS. M/S JAWALA CO-OPERATIVE URBAN THRIFT & CRE DIT SOCIETY LTD. WHEREIN IT WAS OBSERVED AS UNDER :- 9. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT TOTAL INCOME EARNED BY THE ASSESSEE INCLUDED INCOME ON FIXED DEPOSITS PLACED WITH BOMBA Y MERCANTILE BANK, INTEREST, INCOME FROM A SCHEDULED BANK AND DI VIDEND INCOME FROM DELHI COOPERATIVE BANK. FROM THE CERTIFICATE A S PLACED AT PAPER BOOK PAGE 30, WE FIND THAT BOMBAY MERCANTILE COOPER ATIVE BANK IS A COOPERATIVE SOCIETY REGISTERED UNDER MAHARASHTRA CO OPERATIVE SOCIETIES ACT AND WE FURTHER FIND THAT THE SAID SOC IETY HAS BEEN ASSESSED U/S 143(3) AS A COOPERATIVE SOCIETY AND ITS INCOME WAS ALLOWED TO BE EXEMPT U/S 80P(2)(I) AS HELD BY MUMBAI TRIBUNAL IN I.T.A. NO. 4128 AND 4129 VIDE ITS ORDER DATED 30.11.2005, FOR ASSES SMENT YEAR 1990-91 AND 1991-92 AND FURTHER BY MUMBAI TRIBUNAL VIDE ORD ER DATED 07.09.2011 IN I.T.A. NO. 5292 FOR ASSESSMENT YEAR 1 997-98. THEREFORE IT IS HELD THAT FIXED DEPOSITS PLACED WITH BOMBAY M ERCANTILE BANK FALLS WITHIN' THE EXEMPTION GRANTED BY SECTION 80P(2)(D) OF THE ACT. THE ASSESSEE WAS ALSO ELIGIBLE UNDER THE PROVISIONS OF SECTION 80P(2)A(I) AS THE FUNDS PLACED BY ASSESSEE IN THE FORM OF FIXED D EPOSITS CAN BE SAID TO BE KEPT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AS THE ASSESSEE HAD AVAILED CREDIT FACILITIES ALSO AGAINST SUCH FIXED D EPOSITS WHICH WERE AGAIN USED FOR THE PURPOSE OF BUSINESS OF ASSESSEE. MOREOVER, UNDER SIMILAR CIRCUMSTANCES, CHANDIGARH BENCH IN I.T.A. N O. 996/2009 AS NOTED BY LD. CIT(A) HAS DECIDED IN FAVOUR OF ASSESS EE. THE DIVIDEND INCOME IS EXEMPT FOR ALL PERSONS INCLUDING ASSESSEE . THE INTEREST INCOME FROM BANK AMOUNTING TO RS.18,190/- IS THOUGH NOT EXEMPT U/S 80(P)(2)(D) BUT IS EXEMPT U/S 80P(2)(I) OF THE ACT. THE CASE LAW OF TOTGAR'S COOPERATIVE SOCIETY WAS RIGHTLY DISTINGUIS HED BY LD. CIT(A). THEREFORE, KEEPING IN VIEW ALL FACTS AND CIRCUMSTAN CES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). 10. IN VI EW OF ABOVE, APPEAL FILED BY REVENUE IS DISMISSED. 10. RESPECTFULLY FOLLOWING THE DECISIONS OF HON. KA RNATAKA HIGH COURTS DECISION AND THAT OF THE CO-ORDINATE BENCH DELHI IN THE CASES REFERRED ABOVE AND IN THE LIGHT OF THE FACTS OF THE CASE OF ASSESSEE, WE ARE OF THE VIEW THAT ASSESSEE IS ELIGIBLE FOR DEDUC TION U/S 80P(20(A)(I) OF THE ACT FOR THE INTEREST INCOME EARNED ON UNUTIL IZED IDLE FUNDS KEPT FOR BUSINESS PURPOSES OF THE SOCIETY BEING DEPOSITE D WITH BANAS BANK . IN THE RESULT, THE IMPUGNED ADDITIONS OF THE APPEAL S OF ASSESSEE ARE DELETED AND THE APPEALS ARE ALLOWED. ITA NO.1373/AHD/2014 WITH CO 6 6. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL , I DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. IT IS DISMISSED. 7. AS FAR AS CO IS CONCERNED, SUB-SECTION 4 OF SECT ION 253 OF THE INCOME TAX ACT, AUTHORIZE THE RESPONDENT TO FILE CO AGAINS T ANY PART OF THE ORDER OF THE APPELLATE AUTHORITY. SUCH OBJECTION IS TO BE VERIFIED IN PRESCRIBED MANNER. A PERUSAL OF THE CO WOULD INDICATE THAT THE ASSESSE E HAS NOT SHOWN ITS GRIEVANCE AGAINST ANY PART OF THE IMPUGNED ORDER. THE CO IS IN SUPPORT OF THE LD.CIT(A)S ORDER, AND AS SUCH, CO IS NOT MAINTAINA BLE, HENCE, DISMISSED. 8. IN THE RESULT, BOTH APPEAL OF THE REVENUE AND TH E CO OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 24 TH JUNE, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER