ITO, Bangalore V. M/s supraja Souharda Credit Co-Op Ltd.,

ITA 1575/BANG/2012

• Counselvise Citation: 157521114 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR JT
• Assessee Lawyers: C R NULVI
• Keywords: Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI.JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1465/BANG/2012 ASSESSMENT YEAR :2009-10 M/S. SUPRAJA SOUHARDA CREDIT CO-OPERATIVE LTD., NO.658/2A, 2 ND FLOOR, SRI KRISHNA COMPLEX, BASSETTYPET, A.M. LANE, CHICKPET CROSS, BANGALORE 560 053. PAN : AACAS 6921M VS. THE INCOME TAX OFFICER, WARD 5(3), BANGALORE. APPELLANT RESPONDENT ITA NO.1575/BANG/2012 ASSESSMENT YEAR :2009-10 THE INCOME TAX OFFICER, WARD 5(3), BANGALORE. VS. M/S. SUPRAJA SOUHARDA CREDIT CO-OPERATIVE LTD., BANGALORE 560 053. PAN : AACAS 6921M APPELLANT RESPONDENT ASSESSEE BY : SHRI C.R. NULVI, CA REVENUE BY : SHRI P. DHIVAHAR, JT. CIT(DR) DATE OF HEARING : 22.4.2015 DATE OF PRONOUNCEMENT : 14.05.2015 ITA NO.1465 & 1575/BANG/2012 PAGE 2 OF 6 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE DIRECTED AGAINST THE ORDER DATED 24.9.2012 OF THE C IT(APPEALS)-II, BANGALORE, RELATING TO ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON BUSINESS OF ACCEPTANCE OF DEPOSITS AND LENDING LOANS TO ITS MEM BERS. THE ASSESSEE IS REGISTERED UNDER THE KARNATAKA STATE CO-OPERATIVE S OCIETIES ACT, 1959. UNDER SEC.80P(2)(I) OF THE ACT, A CO-OPERATIVE SOCI ETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACI LITIES TO ITS MEMBERS IS ENTITLED TO A DEDUCTION FROM THE GROSS TOTAL INCOME , THE WHOLE OF THE PROFITS ATTRIBUTABLE TO THE AFORESAID ACTIVITY. THE ASSES SEE DURING THE PREVIOUS YEAR RECEIVED A SUM OF RS.40,07,403 WHICH WAS INTER EST INCOME. 3. ACCORDING TO THE AO, WITH THE INTRODUCTION OF SE CTION 80P(4) OF THE ACT W.E.F. 1.4.2007, WHICH PROVIDES THAT PROVISIONS OF SECTION 80P SHALL NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK OTHER TH AN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTUR AL AND RURAL DEVELOPMENT BANK, THE BENEFIT OF DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT IS NO LONGER AVAILABLE TO THE ASSESSEE BECAUSE IT IS A CO-OPERAT IVE BANK, NOT FALLING WITHIN THE EXCEPTION IN SECTION 80P(4) OF THE ACT. 4. THE CIT(APPEALS), HOWEVER, FOUND THAT THE SUM OF RS.40,07,403 COMPRISED OF INTEREST EARNED BY THE ASSESSEE ON DEP OSITS WITH BANKS OR ITA NO.1465 & 1575/BANG/2012 PAGE 3 OF 6 ANY GOVERNMENT SECURITIES OF RS.12,47,648. THE CIT (A) HELD THAT THIS AMOUNT WAS TAXABLE IN VIEW OF THE DECISION OF THE H ONBLE SUPREME COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY, 322 ITR 283 (SC) . WITH REGARD TO THE REMAINING SUM OF RS.27,59,755, THE CIT(A) HE LD THAT THE SAME WAS INCOME EARNED BY THE ASSESSEE IN CARRYING ON THE BU SINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND WAS ELIGIBLE F OR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. IN SO FAR AS THIS FACTUM IS CONCERNED, THE CIT(A) HELD THAT ASSESSEE WAS A CO-OPERATIVE SOCIETY AND N OT A CO-OPERATIVE BANK FALLING WITHIN SECTION 80P(4) OF THE ACT. 5. AGGRIEVED BY THE RELIEF ALLOWED TO THE ASSESSEE BY THE CIT(APPEALS), THE REVENUE HAS PREFERRED THE APPEAL AND AGGRIEVED BY THE ACTION OF THE CIT(APPEALS) DENYING EXEMPTION OF A SUM OF RS.12,47 ,648 U/S. 80P(2)(A)(I) OF THE ACT, THE ASSESSEE HAS PREFERRED THE APPEAL B EFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS FAR AS THE APPEAL BY THE REVENUE IS CONCERNED, THE ISSUE IS NO LONGER RES INTEGRA AND HAS BEEN CONCLUDED IN THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANG HA NIYAMITHA, BAGALKOT, ITA NO.5006/2013 , WHEREIN IT HAS BEEN HELD THAT A CREDIT CO-OPERATIVE SOCIETY GIVING CREDIT TO ITS ME MBERS IS NOT HIT BY THE PROVISIONS OF SEC.80P(4) OF THE ACT AS IT DOES NOT POSSESS A LICENCE FROM RBI TO CARRY ON BUSINESS AND IS NOT A CO-OPERATIVE BANK. THE OBJECT OF INTRODUCING SEC.80P(4) OF THE ACT WAS NOT TO EXCLUD E THE BENEFIT EXTENDED ITA NO.1465 & 1575/BANG/2012 PAGE 4 OF 6 U/S.80P(1) TO CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 7. AS FAR AS THE APPEAL OF THE ASSESSEE IS CONCERNE D, IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA) THE HONBLE SUPREME COURT HELD THAT IF INTEREST EARNED DOES NOT HAVE ANY CONN ECTION WITH THE BUSINESS OF THE ASSESSEE, THEN THE SAME HAS TO BE ASSESSED U NDER THE HEAD INCOME FROM OTHER SOURCES. IF SO ASSESSED, THE A SSESSEE WOULD NOT BE ENTITLED TO DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. THE AFORESAID JUDGMENT OF THE HONBLE APEX COURT WAS CONSIDERED BY THE HONBL E HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. V. ITO, ITA NO.307/2014 DATED 28.10.2014. THE HONBLE HIGH COURT OF KARNATAKA FIRSTLY HELD THAT SECTION 80P(2)(A)(I) OF THE ACT USES THE EXPRESSION ATTRIBUTABLE TO AND THEREFORE THE RECE IPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS ARE SOUGHT TO BE BROUGHT IN THE AMBIT OF DEDUCTION. THEREFORE THE HONBLE HIGH COU RT HELD THAT INTEREST EARNED ON FUNDS INVESTED IN BANKS ARE ATTRIBUTABLE TO THE CARRYING ON OF BUSINESS OF BANKING AND THEREFORE ELIGIBLE FOR DEDU CTION U/S. 80P(2)(A)(I) OF THE ACT. 8. IN THE PRESENT CASE, THOUGH THE LD. CIT(APPEALS) HAS GIVEN A BIFURCATION OF THE INTEREST INCOME IN PARA 3.6 OF T HE IMPUGNED ORDER, THE DETAILS IN THIS REGARD ARE NOT AVAILABLE IN THE ORD ER OF THE ASSESSING OFFICER NOR HAS THE SOURCE OF FUNDS FOR MAKING THE DEPOSIT ANALYSED BY THE ITA NO.1465 & 1575/BANG/2012 PAGE 5 OF 6 CIT(APPEALS). IN THESE CIRCUMSTANCES, WE ARE OF TH E VIEW THAT IT WOULD BE JUST AND APPROPRIATE TO SET ASIDE THE ORDER OF THE CIT(APPEALS) AND REMAND THE ISSUE TO THE ASSESSING OFFICER FOR FRESH CONSID ERATION BY THE AO, AFTER CONSIDERING THE JUDGMENTS OF THE HONBLE SUPREME CO URT IN TOTGARS CO- OPERATIVE SALE SOCIETY (SUPRA) AND THE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT IN TUMKUR MERCHANTS SOUHARDA CREDIT CO- OPERATIVE LTD. (SUPRA) AND BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA (SUPRA) . THE ASSESSEE WILL GIVE THE NECESSARY PARTICULARS OF THE INTEREST INCOME AND ITS SOURCE A ND COMPLY WITH THE OTHER REQUIREMENTS OF THE ASSESSING OFFICER TO ENABLE HIM TO APPLY THE RULINGS GIVEN IN THE CASES REFERRED TO ABOVE. 9. FOR STATISTICAL PURPOSES, THE APPEAL OF THE ASSE SSEE AS WELL AS THE REVENUE IS TREATED AS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF MAY , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 14 TH MAY , 2015 . /D S/ ITA NO.1465 & 1575/BANG/2012 PAGE 6 OF 6 COPY TO: 1. ASSESSEE 2. REVENUE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.