The Agriculture Development Co.Op.Credit Society Ltd., Sidhpur V. The ITO, Patan Ward-4, , Unjha

ITA 1550/AHD/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2961 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 15-10-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: H V DOSHI
• Keywords: Set aside
• Section: 143(3); 201; 13; 56; 263

Judgement Text

- , - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER STAY PETITION NO.97 & 98/AHD/2020 WITH ITA NO.1550 & 1554/AHD/2019 / ASSTT.YEAR : 2013-14 AND 2014-15 THE AGRICULTURE DEVELOPMENT CO - OP CREDIT SOCIETY LTD. ZAPALI POLE, PATAN SIDDHPUR 384 151 GUJARAT. PAN : AAAAA 1055 C VS. ITO, PATAN WARD - 4 UNJA. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI H.V. DOSHI, AR REVENUE BY : SHRI DILEEPKUMAR, SR.DR / DATE OF HEARING : 13/03/2020 ! / DATE OF PRONOUNCEMENT: 13/03/2020 / O R D E R PER RAJPAL YADAV, VICE-PRESIDENT PRESENT TWO STAY PETITIONS ARE DIRECTED AT THE INST ANCE OF THE ASSESSEE FOR GRANT OF STAY ON THE OUTSTANDING DEMAND IN THE ASST T.YEAR 2013-14 AND 20-14- 15 AMOUNTING TO RS.16,98,590/- AND RS.15,07,970/- R ESPECTIVELY. 2. DURING THE COURSE OF HEARING OF THESE STAY PETIT IONERS, WE HAVE PROPOSED TO DISPOSE OF THE APPEALS ON MERIT TO BOTH THE LEARNED REPRESENTATIVES. AFTER DISCUSSING THE ISSUES ON ME RIT, BOTH HAVE AGREED THAT INSTEAD OF ADJUDICATING STAY PETITIONS, APPEALS ITS ELF CAN BE DISPOSED OFF. IN ITA NO.1559 &1554/AHD/2019 WITH SPS 2 VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THESE AP PLICATIONS BECAME REDUNDANT, AND DISMISS ACCORDINGLY. 3. THE ASSESSEE IS IMPUGNING SEPARATE ORDERS OF THE LD.CIT(A) DATED 19.9.2019 PASSED IN THE ASSTT.YEARS 2013-14 AND 201 4-15. THOUGH THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL IN EACH A SSESSMENT YEAR, HOWEVER, IN BRIEF ITS GRIEVANCE IS THAT THE LD.CIT(A) WHILE ADJUDICATING THE ISSUE REGARDING EXCLUSION OF INTEREST INCOME EARNED FROM NATIONALIZED BANKS, AND ASSESSABLE UNDER SECTION 56 OF THE INCOME TAX ACT, HAS ALLOWED ONLY 5% OF THE TAXABLE INCOME AS EXPENDITURE ATTRIBUTABLE TO E ARNING OF THIS INTEREST INCOME. IN OTHER WORDS, THE AO HAS EXCLUDED THE IN TEREST INCOME EARNED BY THE ASSESSEE IN BOTH THESE YEARS ON DEPOSITS MADE W ITH NATIONALIZED BANKS FROM CLAIM OF DEDUCTION ADMISSIBLE UNDER SECTION 80 P(2) OF THE ACT. THE ASSESSEE IS OF THE VIEW THAT THE EXPENDITURE RELATA BLE TO EARNING OF SUCH INTEREST INCOME DESERVES TO BE SET OFF AGAINST THIS INCOME, AND THEREAFTER NET INTEREST INCOME IS TO BE EXCLUDED FROM COMPUTATION OF DEDUCTION ADMISSIBLE UNDER SECTION 80P(2). THE ASSESSEE FAILED TO DEMON STRATE THE DIRECT EXPENDITURE RELATABLE TO EARNING OF THIS EXPENDITUR E, THEREFORE, IT CLAIMED PRO- RATA EXPENDITURE. HOWEVER, THAT ARGUMENT WAS NOT A LLOWED BY THE AO. ON APPEAL, THE LD.CIT(A) HAS ALLOWED 5% OF INTEREST IN COME AS EXPENDITURE FOR EARNING THIS INTEREST INCOME IN BOTH THESE YEARS. THE ASSESSEE IS AGGRIEVED QUA QUANTIFICATION OF THIS 5%, AND HENCE, IS IN APPEAL BEFORE THE TRIBUNAL IN BOTH THESE YEARS. 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS FILED ITS RETUR NS OF INCOME ON 11.9.2013 AND 18.11.2014 DECLARING TOTAL INCOME AT RS19,910/- AND RS.14,820/- IN THE ASSTT.YEARS 2013-14 AND 2014-15 RESPECTIVELY. ASSE SSMENT ORDERS UNDER SECTION 143(3) WERE PASSED ON 24.7.2015 AND 26.7.20 16 ASSESSING TOTAL ITA NO.1559 &1554/AHD/2019 WITH SPS 3 INCOME AT RS.15,01,920/- AND RS. 10,22,570/- IN THE ASSTT.YEARS 103-14 AND 2014-15. THESE ASSESSMENT ORDERS WERE SET ASIDE B Y THE LD.COMMISSIONER BY EXERCISING POWERS UNDER SECTION 263 VIDE ORDER DATE D 23.3.2018, THUS, IN PURSUANCE OF DIRECTIONS ISSUED UNDER SECTION 263 OF THE ACT, FRESH ASSESSMENT ORDERS HAVE BEEN PASSED BY THE AO IN BOTH THESE ASS ESSMENT YEARS ON 14.8.2018. THE LD.AO HAS NOTICED THE FOLLOWING INT EREST INCOME: ASSTT.YEAR 2013-14 S.NO. PARTICULARS AMOUNT (IN RS.) 1. MEHSANA DISTRICT CENTRAL CO-OP BANK 20,81,069 2. DEVELOPMENT COMMERCIAL BANK (FD) 40,38,081 3. CENTRAL BANK OF INDIA 24,786 4, STATE BANK OF INDIA 738 5. SARDAR SAROVAR NARMADA NIGAM 6,40,880 TOTAL 67,85,644/- ASSTT.YEAR 2014-15 S-.NO. PARTICULARS AMOUNT (IN RS.) 1. MEHSANA DISTRICT CENTRAL CO-OP :BANK 30,75,699 2. DEVELOPMENT COMMERCIAL BANK (FD) 32,46,699 3. SARDAR SAROVAR NARMADA/NIGAM 6,88,193 TOTAL 70,10,591/- ACCORDINGLY, THE LD.AO DISALLOWED INTEREST INCOME O F RS.67,85,644/- AND RS.70,10,591/- FOR THE ASSESSMENT YEARS 2013-14 AND 2014-15 RESPECTIVELY, WHICH WAS CONFIRMED THE LD.CIT(A) PARTLY, BUT ALLOW ED DEDUCTION OF PROPORTIONATE EXPENDITURE AT THE RATE OF 5% FOR EAC H ASSESSMENT YEAR. ITA NO.1559 &1554/AHD/2019 WITH SPS 4 5. BEFORE US, THE LD.COUNSEL COUNSEL FOR THE ASSESS EE REITERATED SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HOW EVER, THE LD.COUNSEL FOR THE ASSESSEE DOES NOT CONTEST JUDGMENT OF HONBLE G UJARAT HIGH COURT IN THE CASE OF STATE BANK OF INDIA EMPLOYEES COOPERATIVE C REDIT SOCIETY LTD. (SUPRA) RELIED ON BY THE LD.CIT(A) IN THE IMPUGNED ORDER, BUT SUBMITTED THAT IN CASE CLAIM OF THE ASSESSEE IS NOT FOUND TO BE AD MISSIBLE, THEN PROPORTIONATE ADMINISTRATIVE AND FINANCIAL EXPENSES INCURRED FOR EARNING SUCH INTEREST/INVESTMENT INCOME BE ALLOWED TO THE ASSESS EE. ON THE OTHER HAND, THE LD.DR SUPPORTED ORDERS OF THE REVENUE AUTHORITIES B ELOW. 6. A PERUSAL OF THE RECORD WOULD SHOW THAT THE LD.C IT(A) HAS MAINLY PUT RELIANCE UPON RECENT JUDGMENT OF HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO-OP CREDIT SOCIETY (SUPRA) WHEREIN THE HONBLE COURT HELD THAT IN CASE OF A SOCIETY EN GAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, INCOME FROM INVESTMENTS MADE IN BANKS NOT BEING A COOPERATIVE SOCIETY DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN SECTION 80P(2)(A). HOWEVER, SOCIETY WOULD BE ENTITL ED TO CLAIM EXEMPTION SECTION 80P(2)(D) TO THE EXTENT OF THE INTEREST EAR NED FROM INVESTMENTS MADE BY IT WITH ANY CO-OPERATIVE SOCIETY. 7. IN THE PRESENT CASE, THE ASSESSEE HAS EARNED INC OME FROM THE INVESTMENT MADE WITH NATIONALIZED BANKS. THEREFORE, SUCH INCO ME WILL NOT QUALIFY FOR GRANT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) AS WE LL AS UNDER SECTION 80P(2)(D) BECAUSE IT IS NOT FROM COOPERATIVE SOCIET Y, IN VIEW OF THE ABOVE JUDGMENT OF HONBLE GUJARAT HIGH COURT. HOWEVER, W E FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT EXPENDITURE SHOULD BE ALLOWED IN RESPECT OF INTEREST INCOME EARNED FROM THE INVESTMENTS. IF TH E COMPONENT OF INCOME DOES NOT QUALIFY FOR GRANT OF DEDUCTION UNDER SECTI ON 80P(2)(A)(I), THEN SUCH INCOME SHOULD BE COMPUTED ON NET BASIS; ANY EXPENDI TURE RELATABLE TO EARNING ITA NO.1559 &1554/AHD/2019 WITH SPS 5 OF SUCH INCOME IS TO BE ALLOWED BEFORE CALCULATING EXCLUSION OF SUCH AMOUNT FOR THE PURPOSE OF 80P(2)(A)(I) OF THE ACT. SINC E INTEREST INCOME EARNED BY THE ASSESSEE WAS TREATED TO BE INCOME FROM OTHER S OURCES UNDER SECTION 56, THEN, THE ASSESSEE CAN CLAIM DEDUCTION UNDER SECTIO N 57 OF THE ACT. THEREFORE, WE DIRECT THE AO TO ALLOW EXPENDITURE FOR EARNING S UCH INTEREST INCOME. IN OTHER WORDS, THE LD.AO HAS TO DETERMINE THE NET INT EREST INCOME EARNED BY THE ASSESSEE AFTER GIVING SET OFF EXPENDITURE, AND ONLY THEREAFTER THAT NET INCOME HAS TO BE EXCLUDED FROM THE ADMISSIBILITY OF DEDUCT ION UNDER SECTION 80P(2) OF THE ACT. GROUNDS OF APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR THE STATISTICAL PURPOSE. 8. IN THE RESULT, STAY PETITIONS ARE DISMISSED AS B EING REDUNDANT; AND APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STAT ISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 13 TH MARCH, 2020 AT AHMEDABAD. S D / - (WASEEM AHMED) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) VICE-PRESIDENT