Shri Mahatma Basaveshwar Co-op. Credit Society Ltd., Nipani V. Income Tax Officer, Ward-1, Nipani

ITA 143/PAN/2014

• Counselvise Citation: 14324114 RSA 2014
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 1 43 /PNJ/201 4 : (ASST. YEAR :200 8 - 09 ) SHR I M AHATMA BASAVESHWAR CO - OPERATIVE SOCIETY LTD, CHIKODI ROAD, NIPANI . PAN : AAA AS2281C (APPELLANT) VS. INCOME TAX OFFICER, WARD 1, NIPANI . (RESPONDENT) A PPELLANT BY : NONE ( WRITTEN SUBMISSION ) . RE SPONDENT BY : SHRI NISHANT K. , LD. D.R. DATE OF HEARING : 0 4 /0 9 /2014 D ATE OF PRONOUNCEMENT :26 /0 9 2014 O R D E R PER P.K. BANSAL THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), BELGAUM DTD. 1 0 .0 2 .201 4 FOR THE ASSESSMENT YEAR 200 8 - 09 BY TAKING THE FOLLOWING GROUNDS OF APPEAL : - 1. THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS) BELGAUM IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN COMING TO THE CONCLUSION THAT THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF THE TOTGARS CO - O P. SALE SOCIETY LTD., VS ITO IS APPLICABLE TO THE CASE OF THE APPELLANT AND BASED ON THE SAID CONCLUSION, HE FURTHER ERRED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION CLAIMED BY THE APPELLANT U/S 80P(2)(A)(I) IN RESPECT OF FOLLOWING ITEMS OF INCOME : A. LOCKER RENT RS. 8,350 B. INTEREST ON GOVT. SECURITIES RS.14,42,733 C. INCOME ON BANK OF INDIA CD PLUS A/C RS. 79,707 D. INCOME FROM SALE OF UNITS OF MUTUAL FUNDS(STCG) RS. 6,51,409 2 I TA NO. 1 43/ PNJ/201 4 (ASST. YEAR: 200 8 - 09 ) THE REASONS STATED FOR THE SAME ARE NOT AS PER LAW AND FACTS OF THE CASE. HENCE, IT IS PRAYED THAT THE DEDUCTION AS CLAIMED BY THE APPELLANT BE ALLOWED. 3. THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF THE TOTGARS CO - OP. SALE SOCIETY LTD., IS DISTINGUISHABLE AS FAR AS THE FACTS OF THE APPELLANT A RE CONCERNED AND AS SUCH THE SAME IS NOT APPLICABLE TO THE APPELLANT S CASE. HENCE, IT IS PRAYED THAT THE CLAIM MAY KINDLY BE ALLOWED. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT IS A CO - OP. SOCIETY ENGAGED IN CARRYING BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, WHEREAS THE TOTGARS CO - OP. SALE SOCIETY LTD., WAS AN AGRICULTURAL PRODUCE MARKETING SALE SOCIETY AND WAS NOT ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE LEARNED CIT (A) SHOULD HAVE TAKEN THIS DISTINGUISHING FACT INTO CONSIDERATION AND SHOULD HAVE REFRAINED FROM APPLYING THE RATIO OF THE TOTGARS CO - OP. SALE SOCIETY LTD. AS GIVEN BY THE KARNATAKA HIGH COURT. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE NATURE OF BUSINESS IN THE CASE OF THE APPELLANT AND IN THE CASE OF THE TOTGARS CO - OP. SALE SOCIETY LTD WAS DIFFERENT AND THAT THE APPELLANT HAS INVESTED DURING CARRYING ON ITS REGULAR BUSINESS, WHEREAS, IN THE CASE OF TOTGARS CO - OP. SALE SOCIETY LTD., THE INVESTMENT WAS MADE OUT OF SURPLUS FUNDS POSSESSED BY THE SAID SOCIETY . 6. THE LEARNED CIT(A) OUGHT TO HAVE TAKEN INTO CONSIDERATION THE DECISION GIVEN BY THE HONBLE ITAT PANAJI - GOA IN THE CASE OF SAMARTH URBAN CO - OP. CREDIT SOCIETY LTD., BELGA UM WHICH WAS BASED ON THE RATIO OF NILESWAR CO - OP. BANK LTD., VS CIT IN ITA NO. 138/2000, DATED 06.03.2002 (KERALA HIGH COURT) BEFORE CONFIRMING THE ACTION OF THE LOWER AUTHORITIES. 7. WITHOUT PREJUDICE THE CLAIM OF THE APPELLANT FOR ALLOWING THE EXPENDITURE PROPORTIONATELY ON PRO RATA BASIS BE ALLOWED AS AN ALTERNATIVE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE BEING A CO - OPERATIVE SOCIETY ENGAGED IN PROVIDING THE CREDIT FACILITIES TO ITS MEMBERS. IT CLAIMED DEDUCTION U/S 80P(2)( A)(I). THE ASSESSING OFFICER NOTED ASSESSEE HAS EARNED INCOME FROM LOCKER RENT RS.8350/ - FROM INTEREST ON INVESTMENT IN BANK OF INDIA DEPOSIT ACCOUNT, RS.79,707/ - , SHORT TERM CAPITAL GAIN RS.6,51,409/ - AND RS. 14,42,733/ - BY WAY OF MUTUAL FUND REDEMPTION PROFIT AND INCOME FROM INTEREST ON GOVT. SECURITIES. SINCE THIS INCOME DOES NOT RELATE TO CARRY ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE CO - 3 I TA NO. 1 43/ PNJ/201 4 (ASST. YEAR: 200 8 - 09 ) OPERATIVE SOCIETY, THE ASSESSING OFFICER DISALLOWED THE DEDUCTION U/S 80P(2)( A)(I). THE ASSESSEE WENT IN APPEAL. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 2.1 THE ASSESSE E FILED THE WRITTEN SUBMISSIONS. THE LD. D.R ON THE OTHER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 3. WE CAREFULLY CONSIDERED THE WRITTEN SUBMISSIONS AS WELL AS SUBMISSION MADE BY LD. D.R ALONGWITH THE ORDER OF THE TAX AUTHORITIES BELOW AS WELL AS THE DECISIONS AND THE ENTIRE MATERIAL AND CASE LAWS REFERRED TO BEFORE US. THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) ON THE INCOME RELATING TO RENT FOR LOCKER, INTEREST INCOME FROM INVESTMENT FROM BANK AND GOVT. SECURITIES AND SHORT TERM CAPITAL GAINS. THE RELEVANT PROVISIONS OF SECTION 80P ARE RE - PRODUCED FOR OUR READY REFERENCE AS UNDER : - 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO - OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB - SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIE D IN SUB - SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING, NAMELY : (A) IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS, OR THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. FROM THE PLAIN READING OF SEC. 80P(2)(A)(I) , IT IS APPARENT THAT IF THE CO - OPERATIVE SOCIETY IS EN GAGED IN CARRYING OF BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE CO - OPERATIVE SOCIETY IS ENTITLED FOR DEDUCTION ON WHOLE OF THE INCOME ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH BUSINESS. 4 I TA NO. 1 43/ PNJ/201 4 (ASST. YEAR: 200 8 - 09 ) 4. IN OUR OPINION, SEC. 80P(2)(A)(I) PRO VIDES TWO TYPES OF ACTIVITIES IN WHICH THE CO - OPERATIVE SOCIETY MUST BE ENGAGED TO BE ELIGIBLE FOR DEDUCTION UNDER SUB - CLAUSE (I). THESE TWO ACTIVITIES ARE NOT ALTERNATE ONES BECAUSE THE SECTION ALLOWS DEDUCTION TO THE CO - OPERATIVE SOCIETY ON THE WHOLE OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. THIS PRE - SUPPOSES THAT ELIGIBLE CO - OPERATIVE SOCIETY CAN CARRY ON EITHER ONE OF THESE TWO BUSINESSES OR CAN CARRY BOTH THESE BUSINESSES FOR THE MEMBERS. IF THE ASSESSEE CO - OPERATIVE SOCIETY CARRIES ON ONE OR BOTH OF THE ACTIVITIES, IT WILL BE ELIGIBLE FOR DEDUCTION. THESE TWO ACTIVITIES ARE (A) CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR (B) CO - OPERATIVE SOCIETY ENGAGED IN PR OVIDING CREDIT FACILITIES TO ITS MEMBERS. BOTH THE ACTIVITIES CAN BE CARRIED ON BY THE CO - OPERATIVE SOCIETY FOR ITS MEMBERS. IF A CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING ON THESE ACTIVITIES/FACILITIES FOR THE PERSONS OTHER THAN ITS MEMBERS, THE CO - OP ERATIVE SOCIETY, IN OUR OPINION, WILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) ON THE INCOME WHICH IT DERIVES FROM CARRYING ON THE ACTIVITIES NOT RELATING TO ITS MEMBERS. THEREFORE, WHERE A CO - OPERATIVE SOCIETY IS ENGAGED IN CARRYING ON BUSINESS OF BANKING FACILITIES TO ITS MEMBERS AND TO THE PUBLIC OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR TO THE PUBLIC, THE INCOME WHICH RELATES TO THE BUSINESS OF BANKING FACILITIES TO ITS MEMBERS OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS WILL ONLY BE ELI GIBLE FOR DEDUCTION U/S 80P(2)(A)(I). THE WORD PROFIT AND GAINS OF BUSINESS ATTRIBUTABLE TO ANYONE OR MORE TO SUCH ACTIVITIES ARE WIDER THAN THE WORD DERIVED FROM . T H E S ECTION DOES NOT STATE THAT THE INCOME MUST HAVE BEEN RECEIVED DIRECTLY BY PROVIDIN G BANKING OR CREDIT FACILITIES TO ITS MEMBERS. PROVIDING THE LOCKER ON RENT TO THE MEMBERS IN THE COURSE OF CARRYING ON THE BANKING BUSINESS TO THE MEMBERS IN OUR OPINION IS INTRICASELY CONNECTED WITH BUSINESS OF BANKING FACILITIES AND THEREFORE, IF THE LOCKERS HAVE BEEN PROVIDED ONLY TO THE MEMBERS, THE DEDUCTION U/S 80P(2)(A)(I) CANNOT BE DENIED. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION U/S 80P(2)(A)(I) ON THE INCOME RENT FOR LOCKER 5 I TA NO. 1 43/ PNJ/201 4 (ASST. YEAR: 200 8 - 09 ) 5. IT IS NOT DENIED THAT ASSESSEE IS A CO - OP ERATIVE SOCIETY AND ACCEPTS DEPOSITS FROM ITS MEMBERS, THESE DEPOSITS ARE ALSO LENT TO ITS MEMBERS AS LOANS. THIS ACTIVITY IS APPROVED BY THE CO - OPERATIVE DEPARTMENT OF GOVT. OF KARNATAKA. THE ASSESSEE IS REQUIRED TO MAINTAIN A SPECIFIC LEVEL OF SLR WHICH WILL ASSIST IT IN RE - PAYMENT OF THE DEPOSITS AS AND WHEN DEMANDED BY THE MEMBERS. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE NOT DENIED BY THE LD. D.R THAT SOCIETY IS REQUIRED TO MAINTAIN 30% OF THE DEPOSITS IN LIQUID ASSETS AND THERE IS RESTRICTION IN L ENDING 60% OF THE WORKING CAPITAL. THE SOCIETY HAS MADE DEPOSITS IN GOVT. SECURITIES, BANK DEPOSITS AND MUTUAL FUNDS. THIS INCOME IN OUR OPINION IS INCIDENTAL TO THE BUSINESS OF BANKING CARRIED OUT BY THE SOCIETY TO ITS MEMBERS. THE INTEREST INCOME SO AR ISING SINCE THE WORD U/S 80P(2) IS ATTRIBUTABLE CANNOT BE REGARDED TO BE GIVEN WHICH DOES NOT FORM PART OF PROFIT AND GAINS OF THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES BY THE SOCIETIES TO ITS MEMBERS. BUT WE NOTED THAT HONBLE KARNATAKA HIG H COURT IN THE CASE OF TOTGARS CO - OPERATIVE SALE SOCIETY VS ITO, 322 ITR 272 (KAR.) RESTRICTED THE ALLOWANCE U/S 80P(2)(A)(I) ONLY IN RESPECT TO THE INTEREST EARNED ON STATUTORY DEPOSIT, WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS IS SUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL RE - DECIDE THIS ISSUE AND TO THE EXTENT THE ASSESSEE HAS EARNED THE INTEREST INCOME ON THE DEPOSITS WHICH HE IS REQUIRED TO MAINTAIN STATUTORILY, THE ASSESSEE BE AL LOWED DEDUCTION U/S 80P(2)(A)(I). THUS, THESE GROUNDS ARE PARTLY ALLOWED. 6. COMING TO THE LAST ISSUE CLAIMING THE DEDUCTION U/S 80P(2)(A)(I) ON SHORT TERM CAPITAL GAIN AMOUNTING TO RS.6,51,409/ - . SINCE THE CONTENTION OF THE ASSESSEE IS THAT THIS GAIN H AS ARISEN ON THE MUTUAL FUNDS WHICH ASSESSEE WAS HOLDING DUE TO STATUTE REQUIREMENT, WE THEREFORE RESPECTFULLY FOLLOWING THE FINDING GIVEN UNDER PARA 5 OF THIS ORDER, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF IER WITH THE DIRECTION THAT THE ASSESSING OFFICER SHALL RE - DECIDE THIS ISSUE AFRESH AND ALLOW THE DEDUCTION TO THE 6 I TA NO. 1 43/ PNJ/201 4 (ASST. YEAR: 200 8 - 09 ) ASSESSEE U/S 80P(2)(A)(I) ON THE CAPITAL GAIN WHICH HAS ARISEN ON THE SALE OF INVESTMENT WHICH THE ASSESSEE WAS REQUIRED TO HOLD DUE TO STA TUTORY REQUIREMENT. THUS THIS GROUND ALSO STAND ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . 8. ORDER PRONOUNCED IN THE OPEN COURT ON 26 .0 9 .2014. SD/ - SD/ - (D.T.GARASIA) JUDICIAL MEMBER (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 26 .0 9 .2014 *A* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRU E COPY, BY ORDER ASSISTANT REGISTRAR ITAT, PANAJI, GOA