Deputy Commissioner of Income Tax, Shimoga V. M/s. Malanad Areca Marketing Co-op Society (MAMCOS), Shimoga

ITA 1487/BANG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5281 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS
• Assessee Lawyers: S KRISHNA SWAMY
• Keywords: Business income; Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1487 /BANG/2016 (ASST. YEAR 2011-12) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 1, SHIVAMOGGA. . APPELLANT VS. M/S MALNAD ARECA MARKETING CO-OP SOCIETY (MAMCOS), APMC YARD, SHIVAMOGGA. . RESPONDENT REVENUE BY : SMT. SWAPNA DAS, JCIT ASSESSEE BY : SHRI S KRISHNASWAMY, C.A DATE OF HEARING : 30-5-2017 DATE OF PRONOUNCEMENT : 07-6-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), DAVANGERE DA TED 31/1/2016 FOR THE ASSESSMENT YEAR 2011-12. ITA NO.1487/B/16 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS UND ER:- 2.1 THE ASSESSEE, A CO-OPERATIVE SOCIETY DEALING AS COMMISSION AGENT IN ARECANUT AND OTHER ALLIED AGRICULTURAL GOO DS FILED ITS RETURN FOR ASST. YEAR 2011-12 ON 24/9/2011 DECLARING INCOME OF RS.37,45,500/-. THE ASSESSEES MAIN SOURCE OF INCOME IS BUSINESS FR OM MARKETING OF AGRICULTURAL PRODUCE MAINLY GROWN BY ITS MEMBERS AN D APART FROM THIS, IT ALSO EARNED INTEREST INCOME OF RS.62,01,83 9/- FROM DEPOSITS MADE WITH OTHER CO-OPERATIVE SOCIETIES WHICH IT CLA IMED AS EXEMPT AS PRE SEC. 80P(2)(D) OF THE ACT AND ALSO INTEREST INC OME OF RS.53,60,281/- FROM OTHER NON-COOPERATIVE INSTITUTI ONS WHICH IT OFFERED FOR TAX. THE CASE WAS TAKEN UP FOR SCRUTIN Y. WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT VID E ORDER DATED 27/3/2014, THE ASSESSING OFFICER (AO) DISALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80P(2)(D), OF THE INTEREST I NCOME EARNED FROM DEPOSITS WITH OTHER CO-OPERATIVE BANKS/SOCIETIES, O N THE GROUND THAT THE SAID SURPLUS FUNDS NOT REQUIRED FOR THE BUSINES S IMMEDIATELY WOULD FALL UNDER THE CATEGORY OF INCOME FROM OTHER SOURCES AND BROUGHT THE AFORESAID INTEREST INCOME OF RS.62,01,8 39/- TO TAX IN THE ITA NO.1487/B/16 3 ASSESSEES HANDS BY VIRTUE OF THE PROVISION OF SEC. 80P(4) OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 27/ 3/2014 FOR ASST. YEAR 2011-12, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A), DAVANGERE CHALLENGING THE AOS ORDER IN DENYING EXE MPTION/ DEDUCTION U/S 80P(2)(D) OF THE ACT IN RESPECT OF IN TEREST INCOME EARNED BY IT FROM OUT OF DEPOSIT OF SURPLUS FUNDS W ITH OTHER CO- OPERATIVE BANKS/SOCIETIES CARRYING ON THE BUSINESS OF BANKING. IT WAS SUBMITTED THAT THE PROVISIONS OF SEC. 80P(2)(D) ARE APPLICABLE ON SUCH INTEREST INCOME EARNED ON DEPOSITS FROM OTHER CO-OP ERATIVE BANKS SOCIETIES AND, THEREFORE, THE SAME BE EXCLUDED FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME. THE ASSESSEE, INTER A LIA, PLACED RELIANCE ON THE DECISION OF A CO-ORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF MENASI SEEMEYA GROUP GRAMAGALA SEVA SAHAKARI SANGA NIYAMITHA IN ITA NOS. 609 & 610/BANG/2014 DAT. 6/2/2015, WHER EIN IT WAS HELD THAT RESTRICTING THE SCOPE OF 80P(2)(D) OF THE ACT ONLY TO CO-OPERATIVE SOCIETY OTHER THAN CO-OPERATIVE BANK IS NOT IN ACCO RDANCE WITH LAW. ACCORDING TO THE ASSESSEE, THERE IS NOTHING IN THE SECTION THAT WOULD ITA NO.1487/B/16 4 WARRANT EXCLUSION OF CO-OPERATIVE BANK FROM THE GEN RE OF THE TERM CO- OPERATIVE SOCIETY. THE LD CIT(A) IN THE IMPUGNED O RDER DATED 31/3/2016 ALLOWED THE ASSESSEES CLAIM U/S 80P(2)(D ) OF THE ACT FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF MENASI SEEMEYA GROUP GRAMAGALA SEVA SAHAKARI SANGA NIYAMIT HA (SUPRA). 3.2.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CIT(A), DAVANAGERE DATED 31/3/2016 FOR ASST. YEAR 2011-12, HAS PREFERRED THIS APPEAL WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS: - 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS), DAVANGERE, IS OPPOSED TO THE LAW AND NOT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEAL) IS NOT RIGHT IN HOLDING THAT THE INTEREST INCOME FROM INVESTMENTS MADE IN CO-OP BANK IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE I.T.ACT.? 3. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UPON, THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT ASSESSMENT ORDER BE RESTORED. ITA NO.1487/B/16 5 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OTHER GROUNDS ON OR BEFORE HEARING OF THE APPEAL. 3.1.2 BEFORE US, THE LD DR SUBMITTED THAT THE INTER EST INCOME EARNED BY THE ASSESSEE FROM OUT OF DEPOSITS MADE IN CO-OPE RATIVE BANKS DOES NOT FALL WITHIN THE AMBIT OF THE PROVISIONS OF SEC. 80P(2)(D) OF THE ACT; BUT RATHER IS EXIGIBLE TO TAX UNDER THE HEAD INCOM E FROM OTHER SOURCES AS HELD BY THE AO. IN SUPPORT OF THIS CON TENTION, RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE APEX COUR T IN THE CASE OF TOTGARS, CO-OPERATIVE SALE SOCIETY LTD. (322 ITR 383) WHEREIN THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. 3.2 PER CONTRA, THE LD AR FOR THE ASSESSEE SUBMITS THAT THE ISSUE BEFORE THE HONBLE APEX COURT IN THE ABOVE REFERRE D CASE (SUPRA) WAS THE ALLOWABILITY OF DEDUCTION U/S 80P(2)(A)(I) AND NOT U/S 80P(2)(D) OF THE ACT. IN THIS REGARD THE LD AR REF ERRED TO PARA 3 OF THE JUDGMENT OF THE HONBLE APEX COURT AND SUBMITTED TH AT THE SUBSTANTIAL QUESTION OF LAW THAT AROSE FOR CONSIDER ATION OF THEIR LORDSHIPS WAS WHETHER SUCH INTEREST WOULD QUALIFY FOR DEDUCTION AS BUSINESS INCOME U/S 80P(2)(A)(I) OF THE ACT AND, TH EREFORE, THE ISSUE ITA NO.1487/B/16 6 FOR CONSIDERATION IN THE CASE OF HAND IS ENTIRELY DIFFERENT AS IT PERTAINS TO THE DEDUCTION CLAIMED U/S 80P(2)(D) OF THE ACT. IT WAS FURTHER SUBMITTED THAT AN IDENTICAL ISSUE HAS BEEN CONSIDE RED BY THE CO- ORDINATE BENCHES OF THIS TRIBUNAL IN THE CASES OF S HRI MARIKAMBA MAHILA CO-OPERATIVE CREDIT SOCIETY LTD, IN ITA NO.6 17/BANG/2014 AND MENASI SEEMEYA GROUP GRAMAGALA SEVA SAHAKARI S ANGA NIYAMITHA (SUPRA). IN VIEW OF THE FACT THAT THE AS SESSEES CLAIM IS UNDER SEC. 80P(2)(D) OF THE ACT IN RESPECT OF INTER EST INCOME EARNED ON DEPOSITS MADE WITH CO-OPERATIVE BANKS, THEREFORE, T HE SAME CANNOT BE CONSIDERED AS INCOME FROM OTHER SOURCES FOR THE P URPOSE OF DISALLOWANCE WHEN THE INTEREST INCOME FROM DEPOSITS AND WITH CO- OPERATIVE BANKS IS ELIGIBLE FOR DEDUCTION U/S 80P(2 )(D) OF THE ACT. 3.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE ONLY ISSUE IN DISPUTE, F OR CONSIDERATION BEFORE US, IS THE DISALLOWANCE IN RESPECT OF THE IN TEREST INCOME ON DEPOSITS MADE BY THE ASSESSEE WITH CO-OPERATIVE BAN KS. FROM AN APPRECIATION OF THE FACTS ON RECORD, IT IS CLEAR TH AT THE INTEREST INCOME IN QUESTION WAS EARNED BY THE ASSESSEE ON DEPOSITS MADE WITH CO- ITA NO.1487/B/16 7 OPERATIVE BANKS. THE AO WAS OF THE VIEW THAT SINCE CO-OPERATIVE BANKS ARE NOT CO-OPERATIVE SOCIETIES, THEREFORE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT ON THIS AMOUNT. THE SHORT POINT ON THIS ISSUE IS WHETHER FOR THE PURPOS E OF SEC. 80P(2)(D) OF THE ACT, A CO-OPERATIVE BANK IS CONSIDERED AS A CO-OPERATIVE SOCIETY. ON APPEAL, THE LD CIT(A) ALLOWED THE ASSE SSEES CLAIM FOLLOWING VARIOUS DECISIONS OF THE TRIBUNAL, INTER ALIA, THE DECISION IN THE CASE OF MENASI SEEMEYA GROUP GRAMAGALA SEVA SA HAKARI SANGA NIYAMITHA ITA NO.609 & 610/BANG/2014 DATED 6/2/2015 , HOLDING THAT THE CO-OPERATIVE BANK CANNOT BE EXCLUDED FROM THE CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING FOR THE PURPOSES OF SEC. 80P(2)(D) OF THE ACT. SIMILAR VIEW WAS TAKEN BY AN OTHER CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI MARIKAMB A MAHILA CO- OPERATIVE SOCIETY LTD. (SUPRA) 3.3.2 WE ALSO FIND THAT ANOTHER CO-ORDINATE BENCH O F THIS TRIBUNAL IN THE CASE OF ITO VS. THE TOTGARS O-OPERATIVE SALE SOCIETY LTD., IN ITA NOS.704 TO 709/BANG/2015 FOR ASST. YEARS 2007-0 8 TO 2012-13, TO WHICH ONE OF US IS PARTY, WHILE CONSIDERING THE VE RY SAME ISSUE OF DEDUCTION U/S 80P(2)(D) OF THE ACT ON ACCOUNT OF DE POSITS MADE BY THE ITA NO.1487/B/16 8 ASSESSEE WITH CO-OPERATIVE BANKS, HAS DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE AND AGAINST REVENUE. IN DOING SO, THE CO-ORDINATE BENCH FOLLOWED THE DECISION OF OTHER BENCHES OF THIS TRIB UNAL, INTER ALIA, IN THE CASES OF MENASI SEEMEYA GROUP GRAMAGALA SEVA SA HAKARI SANGA NIYAMITHA (SUPRA) AND SHRI MARIKAMBA MAHILA CO-OPER ATIVE CREDIT SOCIETY LTD. FOLLOWING THE AFORESAID DECISIONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD., (SUPRA), MENASI SEEMEYA GROUP GRAMAGA LA SEVA SAHAKARI SANGA NIYAMITHA (SUPRA) AND SHRI MARIKAM BA MAHILA CO- OPERATIVE CREDIT SOCIETY LTD., (SUPRA), WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST REVENUE AND, THEREFORE, SE E NO REASON TO INTERFERE WITH THE FINDING OF THE LD CIT(A) IN THE IMPUGNED ORDER OF THE LD CIT(A) WHO HAS FOLLOWED SOME OF THE DECISIO NS OF THE CO- ORDINATE BENCH REFERRED TO (SUPRA) WHILE COMING TO THIS FINDING. CONSEQUENTLY, FINDING NO MERIT IN THE GROUNDS RAISE D BY REVENUE, THE SAME ARE DISMISSED. 4. IN THE RESULT, REVENUES APPEAL FOR ASST. YEAR 2 011-12 IS DISMISSED. ITA NO.1487/B/16 9 ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2017 . SD/- SD/- (VIJAYPAL RAO) (JASON P BO AZ) JUDICIAL MEMBER ACCOUNTANT M EMBER BANGALORE DATED : 7/6/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.