M/s. The Puttur Primary Co-operative Agriculture And Rural Development Bank Limited, Dakshina Kannada V. The Income Tax Officer, Ward- 1, Puttur

ITA 1449/BANG/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3350 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-04-2021
• Assessment Year: 2016-2017
• Appeal Filed On: 18-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Set aside
• Section: 80P; 201

Judgement Text

ITA NO.1449/BANG/2019 THE PUTTUR PRIMARY CO-OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD., DAKSHINA KANNADA IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1449/BANG/2019 ASSESSMENT YEAR : 2016-17 THE PUTTUR PRIMARY CO-OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD. 01, PUTTUR PCARD BANK LTD. SANTHEKATTE PUTTUR DAKSHINA KANNADA 574 201 PAN NO : AAALT0387M VS. ITO WARD-1 PUTTUR APPELLANT RESPONDENT A PPELLANT BY : SMT. SHEETAL, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 20.04.2021 DATE OF PRONOUNCEMENT : 14.06.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27.03.2019 PASSED BY LD CIT(A), MANGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2016-17. THE GROUNDS URGED BY THE ASSESSEE GIVE RISE TO THE FOLLOWING TWO ISSUES:- (A) REJECTION OF DEDUCTION CLAIMED U/S 80P(2)(A)(I) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. (B) REJECTION OF DEDUCTION U/S 80P(2)(D) OF THE ACT IN RESPECT OF INTEREST INCOME EARNED ON FIXED DEPOSITS. ITA NO.1449/BANG/2019 THE PUTTUR PRIMARY CO-OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD., DAKSHINA KANNADA PAGE 2 OF 5 2. THE LD A.R SUBMITTED THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF ACCEPTING DEPOSITS FROM AND LENDING LOANS TO ITS MEMBERS. THE ASSESSEE FILED ITS RETURN OF I NCOME CLAIMING DEDUCTION U/S 80P OF THE ACT. THE AO REJECTED THE CLAIM ON THE REASONING THAT THE ASSESSEE HAS DEALT WITH NOMINAL/ ASSOCIATE MEMBERS WHO DO NOT HAVE RIGHT TO VOTE AND TO PARTIC IPATE IN THE SURPLUS, THUS FAILING IN MUTUALITY PRINCIPLES. THE ASSESSEE HAD EARNED INTEREST INCOME/DIVIDEND INCOME OF RS.38,62, 790/- FROM DEPOSITS/INVESTMENT KEPT WITH M/S SOUTH CANARA DIST RICT CO- OPERATIVE BANK/BHARATH CO-OP BANK LTD ETC. THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80P (2)(D) OF THE ACT IN RESPECT OF ABOVE SAID INCOME. IN THIS REGARD, THE AO PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE KARNAT AKA HIGH COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE S OCIETY LTD (395 ITR 611)(KAR). 3. THE LD A.R SUBMITTED THAT THE APPEAL FILED BY THE ASSESSEE BEFORE LD CIT(A) CHALLENGING THE ADDITIONS MADE BY THE AO WAS DISMISSED. HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD A.R SUBMITTED THAT BOTH THE ABOVE SAID ISSUES ARE C OVERED BY THE DECISION RENDERED BY THE CO-ORDINATE BENCH IN THE C ASE OF KARKALA CO-OP S. BANK LTD (ITA NOS.1288 & 1289/BANG/2019 RE LATING TO ASSESSMENT YEAR: 2015-16 & 2016-17 ORDER DATED 18 -02-2021. SHE SUBMITTED THAT THE CO-ORDINATE BENCH HAS RESTOR ED THE FIRST ISSUE TO THE FILE OF AO WITH THE DIRECTION TO APPLY THE D ECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MAVILAYI SERVI CE CO-OPERATIVE BANK LTD. VS.CIT (2021) 123 TAXMANN.COM 161 (SC). WITH REGARD TO THE SECOND ISSUE, THE CO-ORDINATE BENCH HAS DIRECTE D THE AO TO FOLLOW THE DECISION RENDERED BY THE JURISDICTIONAL HONBLE KARNATAKA HIGH COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCI ETY LTD. VS. ITO (2015) 58 TAXMANN.COM 35 (KARN). ACCORDINGLY, THE L D A.R SUBMITTED ITA NO.1449/BANG/2019 THE PUTTUR PRIMARY CO-OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD., DAKSHINA KANNADA PAGE 3 OF 5 THAT THE DECISION RENDERED BY THE CO-ORDINATE BENCH MAY KINDLY BE FOLLOWED IN THIS CASE ALSO IN RESPECT OF BOTH THE I SSUES. 4. WE HEARD LD D.R AND PERUSED THE RECORD. TH E FIRST ISSUE RELATES TO THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE A CT. WE NOTICE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO-OR DINATE BENCH IN THE CASE OF KARKALA CO-OP S BANK LTD (SUPRA), WHERE IN AN IDENTICAL ISSUE HAS BEEN RESTORED TO THE FILE OF AO FOR EXAMI NING IT AFRESH. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEV ANT OBSERVATIONS MADE BY THE CO-ORDINATE BENCH:- 4. THE LD. A.R. SUBMITTED THAT THE LAW ON DEDUCTIO N OF 80P(2)(A)(I) OF THE ACT AVAILABLE TO CREDIT CO-OPERATIVE SOCIETIES HAS SINCE BEEN SETTLED BY HONBLE SUPREME COURT IN THE CASE OF MAVILAYI SERVI CE CO-OPERATIVE BANK LTD. VS.CIT (2021) 123 TAXMANN.COM 161 (SC). HE SU BMITTED THAT THE HONBLE SUPREME COURT HAS HELD THAT THE EXPRESSION MEMBERS IS NOT DEFINED IN THE INCOME-TAX ACT. HENCE, IT IS NECESSA RY TO CONSTRUE THE EXPRESSION MEMBERS IN SECTION 80P(2)(A)(I) OF THE ACT IN THE LIGHT OF DEFINITION OF THAT EXPRESSION AS CONTAINED IN THE C ONCERNED CO-OPERATIVE SOCIETIES ACT. THE LD. A.R. SUBMITTED THAT THE HON BLE SUPREME COURT HAS CONSIDERED THE DECISION RENDERED BY IT IN THE CASE OF CITIZEN CO-OPERATIVE SOCIETY LTD. (SUPRA) AND OBSERVED THAT THE RATIO DE CIDENDI OF CITIZEN CO- OPERATIVE SOCIETY LTD. MUST BE GIVEN EFFECT TO. AC CORDINGLY, HE SUBMITTED THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S 80P(2) (A)(I) OF THE ACT. 5. THE LD. D.R., ON THE CONTRARY, SUBMITTED THAT TH E ISSUE OF DEDUCTION NEEDS TO BE EXAMINED AFRESH IN THE LIGHT OF DECISIO N RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MAVILAYI SERVICE CO-OP ERATIVE BANK LTD. (SUPRA). ACCORDINGLY, HE SUBMITTED THAT THIS ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. 6. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. WE FIND MERIT IN THE SUBMISSION MADE BY LD. D.R. SINCE THE HONBLE SUPREME COURT HAS SETTLED MANY ISSUES IN THE DECISION RENDERED BY IT IN THE CASE OF MAVILAYI SERVICE CO-OPERATIVE BANK LTD. (SUPRA) AND SINCE TH E FACTS PREVAILING IN THE INSTANT CASE NEEDS TO BE EXAMINED AFRESH IN THE LIG HT OF THE PRINCIPLES ENUNCIATED BY HONBLE SUPREME COURT IN THE ABOVE SA ID CASE, WE ARE OF THE VIEW THAT THE ISSUE OF DEDUCTION U/S 80P(2)(A)(I) O F THE ACT REQUIRES FRESH EXAMINATION AT THE END OF THE A.O. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE IN BOTH THE YEAR S UNDER CONSIDERATION AND RESTORE THEM TO THE FILE OF THE A.O. IN BOTH THE YE ARS FOR EXAMINING IT AFRESH AS DISCUSSED ABOVE. ITA NO.1449/BANG/2019 THE PUTTUR PRIMARY CO-OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD., DAKSHINA KANNADA PAGE 4 OF 5 5. SINCE THE FACTS ARE IDENTICAL, FOLLOWING THE DECISION RENDERED BY THE CO-ORDINATE BENCH, WE RESTORE THIS ISSUE TO THE FILE OF THE AO WITH SIMILAR DIRECTIONS. 6. THE NEXT ISSUE RELATES TO THE DEDUCTION CLA IMED BY THE ASSESSEE U/S 80P(2)(D) OF THE ACT IN RESPECT OF INTEREST INC OME. IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH IN THE CASE OF KARKALA CO-OP S BANK LTD (SUPRA). FOR THE SAKE OF CONVENIE NCE, WE EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE BY THE CO-ORDI NATE BENCH:- 7. THE NEXT COMMON ISSUE RELATES TO REJECTION OF D EDUCTION CLAIMED U/S 80P(2)(D) OF THE ACT IN RESPECT OF INTEREST INCOME EARNED FROM FIXED DEPOSITS KEPT WITH BANK. WE NOTICED EARLIER THAT THE A.O. H AS OBSERVED IN ASSESSMENT YEAR 2015-16 THAT THE INTEREST INCOME RECEIVED BY T HE ASSESSEE FROM DEPOSITS KEPT WITH BANKS IS NOT ELIGIBLE FOR DEDUCTION U/S 8 0P(2)(C) & 80P(2)(D) OF THE ACT SINCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTIO N U/S 80P(2)(A)(I) OF THE ACT. IN AY 2016-17, THE AO ASSESSED THE INTEREST INCOME RECEIVED ON BANK DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOURCES AND DENIED DEDUCTION CLAIMED U/S 80P(2)(D) OF THE ACT. THE LD CIT(A) CO NFIRMED THE ACTION OF THE AO ON THIS ISSUE. 8. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ALLOWABLE U/S 57 OF THE ACT IN RESPECT OF COST OF F UNDS AND PROPORTIONATE ADMINISTRATIVE AND OTHER EXPENSES. IN SUPPORT OF T HIS SUBMISSION, THE LD. A.R. PLACED RELIANCE ON THE DECISION RENDERED BY HO NBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (2015) 58 TAXMANN.COM 35 (KARN). THE LD. A.R. SUBM ITTED THAT THE ASSESSEE IN THE ABOVE SAID CASE HAD PUT FORTH IDENTICAL CLAI M CLAIM BEFORE HONBLE SUPREME COURT IN THE CASE REPORTED AS TOTGARS CO-OP ERATIVE SALE SOCIETY LTD. VS. ITO (2010) 188 TAXMANN.COM 282 AND THE HON BLE SUPREME COURT, VIDE 14 OF ITS ORDER, HAD RESTORED THE QUESTION RAI SED BY THE ASSESSEE TO THE FILE OF HONBLE HIGH COURT OF KARNATAKA. CONSEQUEN T THERETO, THE HONBLE HIGH COURT OF KARNATAKA HAS PASSED THE ORDER IN THE CASE REPORTED IN 58 TAXMANN.COM 35 AND HELD THAT THE TRIBUNAL WAS NOT R IGHT IN COMING TO THE CONCLUSION THAT THE INTEREST EARNED BY THE APPELLAN T IS AN INCOME FROM OTHER SOURCES WITHOUT ALLOWING DEDUCTION IN RESPECT OF PR OPORTIONATE COST, ADMINISTRATIVE EXPENSES INCURRED IN RESPECT OF SUCH DEPOSITS. ACCORDINGLY, THE LD. A.R. PRAYED THAT THE A.O. MAY BE DIRECTED T O ALLOW DEDUCTION OF PROPORTIONATE COST, ADMINISTRATIVE AND OTHER EXPENS ES, IF THE A.O. PROPOSES TO ASSESS THE INTEREST INCOME EARNED FROM BANK DEPO SITS AS INCOME UNDER THE HEAD OTHER SOURCES. 9. WE HEARD LD. D.R. ON THIS ISSUE. WE FIND MERIT IN THE PRAYER OF THE ASSESSEE, SINCE IT IS SUPPORTED BY THE DECISION REN DERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOTGARS CO-OPERAT IVE SALE SOCIETY LTD. VS. ITA NO.1449/BANG/2019 THE PUTTUR PRIMARY CO-OP AGRICULTURE AND RURAL DEVELOPMENT BANK LTD., DAKSHINA KANNADA PAGE 5 OF 5 ITO (2015) 58 TAXMANN.COM 35 (KARN). ACCORDINGLY, WE DIRECT THE A.O. TO ALLOW DEDUCTION OF PROPORTIONATE COST, ADMINISTRATI VE AND OTHER EXPENSES, IF THE A.O. PROPOSES TO ASSESS THE INTEREST INCOME EAR NED FROM BANK DEPOSITS AS INCOME UNDER THE HEAD OTHER SOURCES. 7. IN THE INSTANT CASE, THE ASSESSEE HAS EARNED B OTH INTEREST INCOME AND DIVIDEND INCOME. IN VIEW OF THE DECISION RENDE RED BY THE JURISDICTIONAL HONBLE HIGH COURT OF KARNATAKA, THE ASSESSEE IS ENTITLED FOR DEDUCTION OF PROPORTIONATE COST, ADMIN ISTRATIVE AND OTHER EXPENSES. ACCORDINGLY, WE SET ASIDE THE ORDER PASS ED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH SIMILAR DIRECTIONS. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 14 TH JUNE, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.