Railwaymens Co. Op. Credit Society Limited, Vadodara V. ITO, Ward-3(1)(3), Vadodara

ITA 1491/AHD/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5712 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 06-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALIT P. JAIN
• Section: 56; 142(1); 80P; 64; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 1491/AHD/2018 (ASSESSMENT YEAR: 2015-16) RAILWAYMENS CO.OP. CREDIT SOCIETY LTD. RAM NIVAS, R.V. DESAI ROAD, VADODARA-390001 V/S INCOME TAX OFFICER, WARD- 3(1)(3), VADODARA (APPELLANT) (RESPONDENT) PAN: AACAR1582K APPELLANT BY : NONE RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. ( )/ ORDER DATE OF HEARING : 30 -11-201 8 DATE OF PRONOUNCEMENT : 30-11-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-3, VADODARA DATED 19.03.2018 PERTAINING TO A.Y. 2015-1 6 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 1491 /AHD/2018 . A.Y. 2015-16 2 1. THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) - 3, VADODARA ['THE CIT(A)'] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF DY. COMMISSIONER OF INCOME TAX, CIRCLE-3(1), BARODA ['THE AO'] IN NOT AL LOWING THE DEDUCTION U/S 80P(2)(A)(I) OF RS. 41,35,350/-CLAIMED BY THE APPEL LANT. 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO HOLDING THAT THE INTEREST EARNED BY THE APPELLAN T FROM DEPOSITS MADE WITH NATIONALIZED BANKS IS ASSESSABLE U/S 56 AND NOT ELI GIBLE FOR DEDUCTION U/S.80P(2)(A)(I) AS IT IS NOT RELATED TO THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE APPELLANT. 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN IGNORING THE PROVISIONS OF SECTION 80P(2)(A)(I) WITH CLEARLY PROVIDES THAT THE DEDUCTION IS AVAILABLE TO A CO OPERATIVE SOCIETY WHICH IS ENGAGED IN CARRYING ON T HE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 4. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGING INTEREST U/S. 234BOFTHE ACT. 5. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN C ONFIRMING THE ACTION OF THE AO IN INITIATING PENALTY PROCEEDING U/S 271(L)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS SEEN ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE THAT THE ASSESSEE HAD EARNED INTEREST INCOME TOTALING TO RS.41,35,346/- FROM NATIONALIZED BANK. IT IS ALS O SEEN FROM THE RETURN OF INCOME FILED THAT THE ASSESSEE HAS CLAIMED DEDUCTIO N UNDER CHAPTER VIA OF THE ACT I.E. U/S SOP OF THE ACT OF RS. RS.41,35,346/-. THE SAID INTEREST INCOME OF RS.41,35,346/- IS EARNED FROM SURPLUS FUNDS INVESTE D IN BANK DEPOSITS/SB ACCOUNTS WITH NATIONALIZED BANKS. THEREFORE, THE AS SESSEE WILL NOT BE LIABLE FOR DEDUCTION U/S80P(2)(A)(I) ON THE INTEREST INCOME OF RS.41,35,346/-. THE INCOME OF RS.41,35,346/- IS THEREFORE, REQUIRED TO BE ASSESSED U/S.56 AS INCOME FROM OTHER SOURCES. 3. IN RESPONSE THE NOTICE U/S. 142(1) DATED 20.07.201 7, THE ASSESSEE SUBMITTED ITS REPLY VIDE LETTER DATED 09.08.2017. THE RELEVANT PO RTION OF THE SAME IS REPRODUCED HERE AS UNDER: ITA NO. 1491 /AHD/2018 . A.Y. 2015-16 3 'THE LARGE DEDUCTION CLAIMED UNDER CHAPTER VI A IS O N ACCOUNT OF DEDUCTION OF RS. 41,35,346/- CLAIMED UNDER SECTION 80P (2) OF THE IN COME TAX ACT, 1961' 4. THE SUBMISSION MADE BY THE ASSESSEE WAS DULY EXAMIN ED AND THE CONTENTIONS OF THE ASSESSEE ARE NOT FOUND ACCEPTABLE. PROVIDING CREDIT FACILITIES TO THE MEMBERS OF THE CO-OPERATIVE SOCIETY IS A SEPARATE A ND DISTINCT ACTIVITY FROM THE BUSINESS OF BANKING ACTIVITY. ITS MAIN AND SOLE PUR POSE IS TO MEET THE FINANCIAL NEEDS OF ITS MEMBERS. FOR THIS THE COOPERATIVE SOCI ETY ACCEPTS DEPOSITS FROM ITS MEMBERS ON INTEREST AND ADVANCES LOAN AS AND WH EN REQUESTED BY CHARGING INTEREST. THE DIFFERENCE OF INTEREST RATE WHILE ACC EPTING THE LOAN AND ADVANCING THE LOAN IS THE GAINS OF CO-OPERATIVE SOCIETY ENGAG ED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 5. AS MENTIONED ABOVE, DURING THE YEAR UNDER CONSIDERA TION, THE ASSESSEE EARNED INTEREST INCOME OF RS.41,35,346/- FROM NATIONALIZED BANKS. THE ASSESSEE HAS CLAIMED THE ENTIRE PROFIT OF RS.41,35,346/- AS DEDU CTION U/S 80P OF THE ACT. AS PER THIS SECTION IN THE CASE OF A COOPERATIVE SOCIE TY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE WHOLE OF THE PROFIT AND GAINS OF BUSINESS ATTRIBUTABLE TO SU CH ACTIVITIES WOULD BE DEDUCTIBLE UNDER THE SECTION. THE SECTION IMPLIES T HAT WHOLE .OF THE PROFIT AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF P ROVIDING CREDIT FACILITIES TO ITS MEMBERS WOULD ONLY BE DEDUCTIBLE. EARNING OF INTERE ST INCOME FROM BANKS IS NOT THE ACTIVITY FOR WHICH INCOME WOULD BE DEDUCTIB LE. THE ABOVE FACT IS SUPPORTED BY THE DETAILS FURNISHED BY THE ASSESSEE CREDIT SOCIETY AS IT IS CLEARLY STATING ITS ACTIVITIES AS 'PROVIDING CREDIT FACILIT IES TO MEMBERS ONLY'. HENCE, THE INTEREST INCOME EARNED FROM THE MEMBERS ONLY IS ELI GIBLE FOR DEDUCTION -U/S 80P OF THE ACT. ITA NO. 1491 /AHD/2018 . A.Y. 2015-16 4 6. IN ADDITION TO THIS, MEMBERS OF CO-OPERATIVE SOCIET Y MAY REQUIRE MONEY FOR THEIR INSTANT AND IMMEDIATE NEEDS, HENCE THERE SHOU LD BE READY AVAILABILITY OR SURPLUS AVAILABILITY OF FUNDS WITH CO-OPERATIVE SOC IETY TO MEET THE NEEDS OF THE MEMBERS OF SOCIETY AND IT CANNOT BE ALLOWED TO BE D IVERTED IN THE FORM OF INVESTMENTS WHICH MAY HAVE HIGHER RATES OF INTEREST BUT HAVE A LOCK-IN-PERIOD. IN THE INSTANT CASE THE ASSESSEE HAS INVESTED IN FI XED DEPOSITS THEREFORE THE IMMEDIATE NEEDS OF THE MEMBERS OF THE COOPERATIVE S OCIETIES ARE KEPT ON HOLD FOR THE RESPECTIVE TERM. HENCE, THE INCOME HAS BEEN EARNED FROM THE DIFFERENT SOURCES WITH ACTIVITIES DIFFERENT FROM ACTIVITIES P ROVIDED IN THE SECTION 80P(2)(A)(I) OF THE ACT. 7. NOTWITHSTANDING TO THE ABOVE, IF THE INTENTION OF T HE LEGISLATURE IS TO GRANT DEDUCTION TO THE INTEREST INCOME EARNED FROM ALL KI ND OF ACTIVITIES BY THE CO- OPERATIVE SOCIETY, WHOSE ACTIVITIES ARE COVERED UND ER THE PROVISIONS OF SEC 80P(2)(A)(I) OF THE ACT, THEN THE PROVISIONS OF SEC TION 80P(2)(D) WOULD NOT HAVE INTRODUCED AS ONE OF THE SUB-SECTIONS AS PART OF TH E SECTION 80P OF THE I.T.ACT. AS PER SECTION 80P(2)(D), ANY ASSESSEE BEING A CO-O PERATIVE SOCIETY IS ENTITLED FOR DEDUCTION ON INTEREST INCOME EARNED FROM INVEST MENT WITH ANY OTHER CO- OPERATIVE SOCIETY. FROM THE ABOVE, IT IS CLEAR THAT THE INTENTION OF THE LEGISLATURE IS NOTHING BUT ONLY TO GIVE TAX INCENTIVES TO CO-OP ERATIVE SOCIETIES BY WAY OF DEDUCTION U/S80P OF THE ACT WITH A CLEAR OBJECTIVE OF STRENGTHENING THE CO- OPERATIVE SECTOR AND THEREBY TO PROMOTE THEIR ACTIV ITIES AMONG THE PUBLIC. IN THIS PROCESS, IF AT ALL THERE IS ANY SURPLUS FUNDS WITH THE ASSESSEE CO-OPERATIVE, THE SAME CAN BE DEPOSITED WITH ANOTHER CO-OPERATIVE SOCIETY WHICH WILL IN TURN HELP OTHER CO-OPERATIVE SOCIETIES TO BOOST THEIR BA NKING ACTIVITIES AND ACCORDINGLY THE OBJECTIVE OF THE LEGISLATURE FOR IN TRODUCING SECTION 80P OF THE ITA NO. 1491 /AHD/2018 . A.Y. 2015-16 5 I.T.ACT STANDS FULFILLED. BUT LD. A.O. WAS NOT AGRE ED WITH THE CONTENTION OF THE ASSESSEE AND MADE ADDITION OF RS. 41,35,346/-. 8. AGAINST THE SAID ADDITION, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) BUT TO NO AVAIL. 9. NOW APPELLANT IS BEFORE US. 10. WE HAVE GONE THROUGH THE RELEVANT AND IMPUGNED ORDE R. AS WE CAN SEE, ASSESSEE HAS EARNED INTEREST INCOME OF RS. 41,35,34 6/- PARKING ITS SURPLUS FUNDS INVESTED IN BANK DEPOSIT/SAVING BANK ACCOUNT WITH N ATIONALIZED BANK AS HAS BEEN HELD IN THE CASE OF STATE BANK OF INDIA EMPLOY EES CO-OP CREDIT & SUPPLY SOCIETY LTD. VS. CIT WHEREIN IT IS HELD: 5.6 FURTHER, IT IS IMPORTANT TO MENTION HERE THAT H ON'BLE HIGH COURT OF GULARAT IN ITS RECENT DECISION IN THE CASE OF STATE BANK OF IN DIA EMPLOYEES CO-OP CREDIT & SUPPLY SOCIETY LTD VS COMMISSIONER OF INCOME TAX IN TAX APPEAL NO.486 & 487 DATED,25.04.2016 [20161 72 TAXMANN.COM 64 (GUTARAT) BY DISTINGUISHING ITS EARLIER DECISION IN THE CASE OF CJT V. JAFARI MOMIN VIKAS CO-OP, CREDIT SOCIETY LTD. [20141 362 ITR 331/227 TAXMAN 59/49 TAXMANN.COM 571 (GUJ.) HAS HELD THAT INTEREST INCOME EARNED FROM DEPOSITS FROM BANKS IS NOT EXEMPT U/S80P(2)(A)(I) OF THE INCOME TAX ACT AND THEREBY FOLLOWED THE ORDER O F HON,BLE APEX COURT IN THE CASE OF TOTGAR CO-OP SALE SOC LTD VS ITO (SO 322 IT R 283: 35DTR25. 6 FROM THE ABOVE IT CAN BE SEEN THAT SUBSEQUENT TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TOTGAR CO-OP SALE SOC LTD VS ITO (SC) 322 ITR 283: 35DTR25, THERE WERE NUMBER OF DECISIONS ON THIS ISS UE BY VARIOUS HIGH COURTS AND TRIBUNALS IN DIFFERENT CASES BY DISTINGUISHING THE ABOVE JUDGMENT IN FAVOUR OF THE ASSESSEE AND REVENUE. HOWEVER, BY THE RECENT DECISION OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO-OP CREDIT & SUPPLY SOCIETY VS COMMISSIONER OF INCOME TAX AS DIS CUSSED ABOVE, THE ISSUE OF DISPUTE HAS BEEN SETTLED AT LEAST IN THE STATE OF GUJARAT AND THEREFORE, IT IS JUST AND FAIR TO TREAT THE INTEREST INCOME EARNED FROM CO-OPERATIVE SOCIETIES, WHOSE BUSINESS ACTIVITIES ARE COVERED UNDER THE PROVI SIONS OF SECTION 80P(2)(A)(I) OF THE IT. ACT, AS INCOME FROM OTHER SOURCES U/S 56 OF THE ACT. IN THE SAID CASE LAWS, ITA NO. 1491 /AHD/2018 . A.Y. 2015-16 6 BOTH THE HON'BLE APEX COURT AND HON'BLE HIGH COURT OF GUJARAT HAVE CATEGORICALLY HELD THAT INTEREST INCOME EARNED ON S URPLUS FUNDS IN BANK DEPOSITS IS INCOME FROM OTHER SOURCES OF THE ASSESSEE LIABLE TO BE ASSESSED U/S56 OF THE I.T.ACT. SINCE, THE FACTS IN THE PRE SENT CASE IS QUITE SIMILAR TO THE FACTS IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO-OP CREDIT &. SUPPLY SOCIETY LTD/THE RATIO OF STATE BANK OF INDIA EMPLOYEES CO-OP CREDIT & SUPPLY SOCIETY LTD VS COMMISSIONER OF INCOME TAX ( G UJ HIGH COURT) IS SQUARELY APPLICABLE IN THE INSTANT CASE . HENCE, IN THE INST ANT CASE, BY RESPECTFULLY FOLLOWING THE RATIO OF CASE LAWS IN THE CASE OF TOT GAR CO-OP SALE SOC LTD VS ITO (SC) AND STATE BANK OF INDIA EMPLOYEES CO-OP CREDIT & SUPPLY SOCIETY LTD VS COMMISSIONER OF INCOME TAX IN TAX APPEAL NO.486 & 4 87 DATED 25.04.2016 OF HON'BLE HIGH COURT OF GUJARAT , INTEREST INCOME OF RS. 29,02,430/- EARNED BY THE ASSESSEE FROM INVESTMENTS WITH BANK IS HELD TO BE N OT ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE I.T. ACT AND ACCORDINGLY IT IS TO BE TAXED UNDER THE NORMAL PROVISIONS OF THE ACT. 11. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT AND W E HOLD INTEREST EARNED FROM BANK/NATIONALIZED BANK AMOUNTING TO RS. 41,35, 346/- IS TREATED AS INCOME FROM OTHER SOURCES U/S. 56 OF INCOME TAX ACT . THUS, WE DISMISS THE APPEAL OF THE ASSESSEE. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 11- 2018 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 30/11/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED.