ITO Corporate Ward 3(2), CHENNAI V. Chennai Teachers Guild Co-Operative Society Ltd., CHENNAI

ITA 1379/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4142 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 06-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Set aside
• Section: 80P; 251; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , , ! ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 1379/CHNY/2019 / ASSESSMENT YEAR : 2016-17 INCOME TAX OFFICER, CORPORATE WARD 3(2), CHENNAI 600 034. VS. M/S. CHENNAI TEACHERS GUILD CO- OPERATIVE SOCIETY LTD., NO. 37, OLD NO. 19, B V NAICKEN STREET TRIPLICANE, CHENNAI 600 005. [PAN: AAAAT 8690A] ( / APPELLANT) ( #$%& /RESPONDENT ) %& ' ( / APPELLANT BY : SHRI. AR.V. SREENIVASAN, JCIT #$%& ' ( / RESPONDENT BY : SHRI. B. SURESH, CA * '+! /DATE OF HEARING : 26.11.2019 ,-. '+! /DATE OF PRONOUNCEMENT : 20.02.2020 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI IN ITA NO. 43/18- 19 DATED 21.02.2019 FOR THE ASSESSMENT YEAR 2016-17 . :-2-: ITA NO.1379/CHNY/2019 2. THE REVENUE FILED THIS APPEAL WITH 3 DAYS DELAY. AN AFFIDAVIT WAS FILED STATING THAT THE DELAY WAS CAUSED BECAUSE THE REGULAR OFFICER WAS ON ELECTION DUTY AND THE DELAY INCLUDED EVEN WEEKEN D. THEREFORE, IT WAS PLEADED THAT IT IS NEITHER WANTON NOR WILFUL AN D HENCE PRAYED FOR CONDONATION OF DELAY. 3. WE HEARD THE RIVAL PARTIES AND CONDONE THE DELAY . 4. THE LD. DR SUBMITTED THAT THE ASSESSEE, M/S. C HENNAI TEACHERS GUILD CO-OPERATIVE SOCIETY LTD., A CO-OPERATIVE CRE DIT SOCIETY FOR THE TEACHERS OF SCHOOLS AND COLLEGES IN CHENNAI, DERIVE D ITS INCOME FROM INTEREST RECEIVED FROM THE CREDIT FACILITIES TO THE MEMBERS OF THE SOCIETY AND INTEREST RECEIVED FROM THE DEPOSITS MADE WITH C HENNAI CENTRAL COOPERATIVE BANK LTD. WHILE MAKING THE ASSESSMENT FOR ASSESSMENT YEAR 2016-17, THE AO HELD THAT THE INTEREST RECEIPT S FROM THE DEPOSITS MADE WITH THE CHENNAI CENTRAL COOPERATIVE BANK IS N OT PERMISSIBLE AS A DEDUCTION U/S. 80P FOR THE REASON THAT THE ASSESSEE SOCIETY IS NOT IN THE BUSINESS OF LENDING TO BANKS AND EARNING INTEREST T HEREFROM. AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). TH E LD. CIT(A) RELYING ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SALEM AGRICULTURAL PRODUCERS COOPERATIVE MARKETING SOCIETY IN TCA NO. 5/2015 DATED 10.08.2016 ALLOWED THE APPEAL. AGGRIE VED AGAINST THAT :-3-: ITA NO.1379/CHNY/2019 ORDER OF THE LD. CIT(A), THE REVENUE IS ON APPEAL W ITH THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANC E MADE BY THE AO BY NOT CONSIDERING THE FACT THAT THE ASSESSEE HAD R ECEIVED INTEREST RECEIPT FORM SURPLUS FUNDS DEPOSITED WITH CHENNAI CENTRAL C OOP. BANK WHICH IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P. 3. THE CIT(A) OUGHT TO HAVE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CITIZEN CO-OPERATIVE S OCIETY LTD., VS ACIT, CIRCLE 9(1), HYDERABAD (2017) 84 TAXMAN.COM 114 (SC ). 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. AND PRESENTED THE CASE ON THE ABOVE LINES AND PLEAD ED TO RESTORE THE ORDER OF THE AO. 5. PER CONTRA, THE LD. AR SUBMITTED THAT THE FACTS IN THIS CASE IS DIFFERENT FROM THE FACTS OF THE CASE RELIED ON BY T HE REVENUE. IN THIS CASE, THE ISSUE IS WHETHER THE RECEIPT OF THE ASSES SEE, CO-OPERATIVE SOCIETY FROM A DISTRICT CO-OPERATIVE BANK, ARISING OUT OF SURPLUS OR OTHERWISE PLACED WITH THE CO-OPERATIVE BANK AS REQU IRED BY THE STATUTE IS ELIGIBLE FOR DEDUCTION U/S. 80P OR NOT. IN THIS REGARD, ON THE FACTS, THE LD. CIT(A) APPLYING THE JURISDICTIONAL HIGH COURTS DECISION IN A HOST OF CASES HELD THAT THE INTEREST RECEIVED BY A CO-OPERA TIVE SOCIETY FROM INVESTING ITS SURPLUS IN ANY DISTRICT CO-OPERATIVE BANK IS ELIGIBLE FOR :-4-: ITA NO.1379/CHNY/2019 DEDUCTION U/S. 80P(2). THE HONBLE HIGH COURTS DE CISIONS HAVE EQUATED THESE CO-OPERATIVE BANKS WITH CO-OPERATIVE SOCIETIES AND HENCE, THE LD. CIT(A) HAS CORRECTLY ALLOWED THE ASS ESSEES APPEAL. THEREFORE, THE LD. AR SUPPORTED AND RELIED ON THE O RDER OF THE LD. CIT(A). 6. WE HEARD THE RIVAL SUBMISSIONS, GONE THROUGH THE RELEVANT MATERIAL AND FIND MERIT IN THE SUBMISSIONS OF THE L D. AR. THE FACT REMAINS THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY . IT HAS EARNED THE IMPUGNED INTEREST FROM CHENNAI CENTRAL CO-OPERATIVE BANK LTD, WHICH IS ALSO A CO-OPERATIVE SOCIETY ENGAGED IN BANKING BUSI NESS. THE RELEVANT PORTION OF THE ORDER OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS SALEM AGRICULTURAL PRODUCERS COOPERATIVE MARKET ING SOCIETY IN TCA NO. 5/2015 DATED 10.08.2016 IS EXTRACTED AS UNDER: 6. ADDRESSING THE SAID ISSUE, AT PARAGRAPH NO.8, I N I.T.A.NO.732/MDS/2014 DATED 30/6/2014, THE TRIBUNAL HAS ORDERED AS HEREUNDER:- THE CASE OF THE ASSESSEE IS THAT THE INCOME BY WAY OF INTEREST AND DIVIDEND EARNED BY THE ASSESSEE SOCIETY ARE FROM IN VESTMENTS MADE IN SALEM DISTRICT CENTRAL CO-OPERATIVE BANK, WHICH IS ALSO ADMITTEDLY, A CO- OPERATIVE SOCIETY AND ARE ALLOWABLE DEDUCTION. THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS MADE ONLY WITH SALEM DIS TRICT CENTRAL CO- OPERATIVE BANK AND THEREFORE, THE INCOME FROM INVES TMENT WITH THE BANK IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80 P (2 ) (D) OF THE ACT. ON APPEAL, THE ID.CIT (APPEALS CONFIRMED THE ORDER PAS SED BY THE ID.CIT (APPEALS). WE FIND THAT IN THE CASE OF CIT VS. KANG RA CO-OPERATIVE BANK LTD. [2009] 309 ITR 106 (HP), THE HON'BLE HIMACHAL PRADESH HIGH COURT :-5-: ITA NO.1379/CHNY/2019 HAS CONSIDERED SECTION 80 P (2) (D) OF THE ACT. THE INTEREST EARNED BY THE ASSESSEE CO-OPERATIVE BANK ON FIXED DEPOSITS WITH H IMACHAL PRADESH STATE CO-OPERATIVE BANK IN COMPLIANCE WITH THE PROV ISIONS OF SECTION 57 OF THE HIMACHAL PRADESH CO-OPERATIVE SOCIETIES ACT, 1968, THE INCOME DERIVED FROM BANKING BUSINESS IS ELIGIBLE FOR DEDUC TION UNDER SECTION 80 P (2) (A) (I) OF THE ACT. EXEMPTION IS ALSO AVAILABLE UNDER SECTION 80 P (2) (D) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE I S AN AGRICULTURAL PRODUCERS CO-OPERATIVE MARKETING SOCIETY LTD., REGI STERED UNDER TAMIL NADU CO-OPERATIVE SOCIETIES ACT AND ESTABLISHED FOR THE BENEFIT OF THE AGRICULTURAL PRODUCERS AND THE INTEREST OR DIVIDEND EARNED BY THE ASSESSEE WILL BE BENEFICIAL TO THE MEMBERS ALONE. T HEREFORE, KEEPING IN VIEW OF THE DECISION, IN THE CASE OF CIT VS. KANGRA CO-OPERATIVE BANK LTD., (SUPRA), WE HOLD THAT THE ASSESSEE IS ELIGIBL E FOR BENEFIT UNDER SECTION 80 P (2) (D) OF THE ACT AND ALSO THIS BEING A BENEFICIAL SECTION TO THE CO-OPERATIVE SOCIETIES. 7. LET US CONSIDER THE DECISION IN KANGRA CO-OPERAT IVE BANK LTD'S CASE REFERRED TO BY THE TRIBUNAL. THE QUESTION OF L AW FRAMED THEREIN IS AS FOLLOWS:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE INCOME-TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN HOLDING THAT THE INTEREST INCOME EARNED BY THE ASSESSEE ON DEPOSITS MADE WITH H.P.ST ATE CO-OPERATIVE BANK IN THE SHAPE OF F.D.RS. IS INCOME DERIVED FROM BANKING BUSINESS AND THEREFORE, ELIGIBLE FOR DEDUCTION UNDER SECTION 80 P (2) (A) (I) OF THE INCOME TAX ACT ? 8. AFTER CONSIDERING THE DECISIONS IN CIT VS. KARNA TAKA STATE CO-OPERATIVE APEX BANK REPORTED IN [2001] 251 ITR 194, CIT VS. R AMANATHAPURAM DISTRICT CO-OPERATIVE CENTRAL BANK LTD REPORTED IN [2002] 255 ITR 423 (SC), A DIVISION BENCH OF THE HIMACHAL PRADESH HIGH COURT, AT PARAGRAPH NOS.10 AND 11 HELD THUS:- THE KARNATAKA HIGH COURT IN CIT VS. SRI RAM SAHAKA RI BANK LTD., [2004] 266 ITR 632, HELD THAT THE INTEREST ON INVESTMENTS AND SHORT-TERM FIXED DEPOSITS IN BANKS WAS ENTITLED TO BE DEDUCTED UNDER SECTION 80 P (2) (A) (I) OF THE ACT. IN FACT, IN CIT VS. NAWANSHAHAR CEN TRAL CO-OPERATIVE BANK LTD., [2007] 289 ITR 6, THE APEX COURT HAS HELD THA T WHERE UNDER THE PROVISIONS OF THE CO-OPERATIVE SOCIETIES ACT , THE CO-OPERATIVE BANK IS :-6-: ITA NO.1379/CHNY/2019 STATUTORILY REQUIRED TO PLACE PART OF ITS FUNDS IN APPROVED SECURITIES, THE INCOME ATTRIBUTABLE THERETO IS NOT TAXABLE UNDER SE CTION 80 P (2) (A) (I) OF THE INCOME-TAX ACT , 1961. IN THE PRESENT CASE, WE HAVE NOTED ABOVE THAT UNDER SECTION 57 , EVERY CO-OPERATIVE SOCIETY INCLUDING THE ASSESSEE IS REQU IRED BY LAW TO KEEP A PERCENTAGE OF ITS PROFITS IN RESERVE FUNDS. THESE R ESERVE FUNDS CAN ONLY BE INVESTED OR DEPOSITED IN A CERTAIN MANNER. APPLY ING THE RATION OF THE JUDGMENT IN NAWANSHAHAR CENTRAL CO-OPERATIVE BANK L TD'S CASE [2007] 289 ITR 6, IT IS APPARENT THAT ANY INTEREST ON SUCH INVESTMENTS IS REQUIRED TO BE DEDUCTED UNDER SECTION 80 P (2) (A) (I) OF TH E ACT. AT PARA 12 OF THE JUDGMENT, FURTHER REITERATED THAT .... FURTHERMORE, THE INVESTMENTS HAVE BEEN MADE IN THE H.P.STATE CO-OPERATIVE BANK WHICH IS ALSO A CO- OPERATIVE SOCIETY AND, THEREFORE, EVEN UNDER SECTIO N 80 P (2) (D) OF THE ACT, INTEREST INCOME FROM INVESTMENTS MADE IN ANY C O-OPERATIVE SOCIETY WOULD ALSO BE ENTITLED FOR DEDUCTION. 9. THOUGH MR.J.NARAYANASAMY, LEARNED SENIOR STANDIN G COUNSEL FOR INCOME TAX DEPARTMENT SUBMITTED THAT THE TRIBUNAL W AS NOT RIGHT IN HOLDING THAT THE INTEREST EARNED FROM THE SALEM AGR ICULTURAL PRODUCERS CO-OPERATIVE MARKETING SOCIETY LTD., FOR REDUCTION UNDER SECTION 80 P (2(A) (I) OF THE INCOME TAX ACT , WE ARE NOT INCLINED TO ACCEPT THE SAID CONTENTIONS. FOR THE REASON THAT A DISTRICT CENTRAL CO-OPERATIVE BANK, IS ALSO A SOCIETY, IN WHICH EVENT, THE INCOME BY WAY O F INTEREST AND DIVIDEND EARNED BY THE ASSESSEE/RESPONDENT SOCIETY FROM THE INVESTMENTS MADE IN SALEM DISTRICT CENTRAL CO-OPERATIVE BANK, WHICH IS ALSO A CO-OPERATIVE SOCIETY IS ENTITLED FOR DEDUCTION UNDER SECTION 80 P (2) (A) (I) OF THE INCOME TAX ACT . DECISION RELIED ON BY THE ASSESSEE AND CONSIDERED BY THE TRIBUNAL SQUARELY APPLIES TO THE FACTS ON HAND. QUESTION OF LAW, FIGURING AS 4, IS NEGATIVED AS AGAINST THE APPELLAN T. FROM THE ABOVE IT IS CLEAR THAT, ON THE ABOVE FACT S, THE LD. CIT(A) HAS CORRECTLY APPLIED THE DECISION OF THE JURISDICTIONA L HIGH COURT, SUPRA, AND HENCE WE DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LD. CIT(A). THEREFORE, WE DISMISS THE REVENUES APPEAL . :-7-: ITA NO.1379/CHNY/2019 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED ON THURSDAY, 20 TH FEBRUARY, 2020 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ! ) (S. JAYARAMAN) ' /ACCOUNTANT MEMBER /CHENNAI, / /DATED: 20 TH FEBRUARY, 2020 JPV '#+0121.+ /COPY TO: 1. %& / APPELLANT 2. #$%& /RESPONDENT 3. * 3+ ) ( /CIT(A) 4. * 3+ /CIT 5. 14#+ /DR 6. 567 /GF