Shripatrao Dada Sahakari Bank Ltd, Kolhapur V. Income-tax Officer, Ward - 2(3), Kolhapur

ITA 1624/PUN/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0171 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 07-10-2018
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Capital receipt; TDS; Set aside
• Section: 234B; 40(a)(ia); 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, PUNE SHRI PARTHA SARATHI CHAUDHURY, JM AND DR. DIPAK P. RIPOTE, AM ITA No. 1624/PUN/2018 : A.Y. 2015-16 Shripatrao Dada Sahakari Bank Ltd., 573, E ward, Vyapari Peth, Shahupuri, Kolhapur PAN; AAAAS6828H Appellant Vs. The I.T.O. Ward 2(3), Kolhapur Respondent Appellant by : Shri M.K. Kulkarni and Mrs. J.R. Chandekar Respondent by : Shri S.P. Walimbe Date of Hearing : 25-07-2022 Date of Pronouncement : 27-07-2022 ORDER PER PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the assessee emanates from the order of the ld. CIT(A)-2, Kolhapur dated 08-08-2018 for A.Y. 2015-16 as per the following grounds of appeal. 1. On the facts and in the circumstances of the case and in law the Ld. CIT (A) was not justified in confirming the addition made by the A. o. of Rs. 91,150/- being admission fees received from Nominal Members admitted. They are capital receipts not taxable under any of the provisions of the Act. The addition be deleted. 2. On the facts and in the circumstances of the case and in law the Ld. CIT (A) was not justified in confirming the addition made by the A. O. of Rs. 2,21,022/- on account of short deduction (TDS) from the payments made to pigmy collectors even when TDS was not required to be made from such payments as the 'deductees' income were not taxable in their hands as their income did not exceed the maximum amount of income not chargeable to tax. The addition be deleted. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the addition of Rs. 21,20,000/- made by the A. O. or the parity of reasoning that there is no provision under the MSCS Act, 1960 for collection of building funds. Ss. 64 and 70 of MSCS Act of 1960 permit such creation of building fund out of Member's Contribution and allocation of profits of the Society. The addition confirmed by Ld. CIT(A) is unsustainable in law. It be deleted. 4. On the facts and circumstances of the case and in law the levy of interest u/s 234B and 234C is not justified. 2 ITA No. 1624/PUN/2018 Shripatrao Dada Sahakari Bank Ltd. A.Y. 2015-16 2. The first ground is that the ld. CIT(A) was not justified in confirming the addition made by the ld. A.O. of Rs. 91,150/- being admission fees received from nominal members admitted. The A.O has discussed this issue at para 5 of his order. On verification of the details furnished by the assessee, it was noticed by the ld. A.O that the assessee bank was in receipt of Rs. 91,150/- being fees received from nominal members. However, the assessee had credited the same into Balance sheet under the head “Reserve Fund’ and not credited to P & L account though it is of revenue nature. The assessee filed explanation before the ld. A.O and submitted their reasons for not crediting the said amount to the P & L account. The ld. A.O did not accept the contention of the assessee and opined that these receipts were received by the assessee during the course of banking business of the assessee. The said facilities were provided to these persons who required loans, etc. and for providing such banking facilities to them. Then membership fees were collected. Thereafter, the ld. A.O relied on CIT(A)’s order in assessee’s own case for A.Y. 2009-10 and 2010-11 as well as for A.Y. 2011-12 in which also it was held that these receipts are revenue in nature and were required to be credited in the P & L account. Accordingly, for this year also, the ld. A.O held the fees of Rs. 91,500/- received from nominal members were revenue in nature and was added to the total income of the assessee for the purpose of taxation. 3. The ld. CIT(A) has discussed this issue at para 5.1 of his order where he upheld the findings of the ld. A.O and has classified types of members of the assessee bank and the functions and the rights of each category of members has been discussed. However, we do not find any specific and categoric reasons given by the ld. CIT(A) for sustaining the addition of fees received from nominal members as compared with that 3 ITA No. 1624/PUN/2018 Shripatrao Dada Sahakari Bank Ltd. A.Y. 2015-16 of those ‘A’ class members who have voting rights and also contribute to the share capital of the assessee bank. The justification for which, the ld. CIT(A) is saying that such fees received from nominal members shall be subject to tax as being revenue in nature as compared to ‘A’ class members is not coming specifically from his order. In the interest of justice, therefore, considering the facts and circumstances, we set aside the findings of the ld. CIT(A) and remand the matter back to his file to re-adjudicate giving specific reasons as per law. Ground No. 1 of the assessee’s appeal is allowed for statistical purposes. 4. Ground No. 2 is with regard to the confirmation of addition by the ld. CIT(A) of Rs. 2,21,022/- on account of short deduction of TDS from the payment made to pigmy collectors. The ld. A.O has discussed this issue at para 6 of his order and the facts are that the assessee bank had debited pigmy commission of Rs. 8,76,151/- on which TDS was required to be made while making the payment or crediting the same in respect of payees account. That on verification, it was noticed that the assessee bank had failed to deduct TDS on this pigmy commission of Rs. 2,21,022/-. The ld. A.O invoked section 40(a)(ia) of the Act and disallowed and added back the amount of Rs. 2,21,022/- to the total income of the assessee. The fact that is generated as per the findings of the ld. CIT(A) at para 5.2 of his order is that there is an admission by the assessee that he has paid the commission but has not deducted TDS since they were below taxable limit. It is also clear from the findings of the ld. CIT(A) that there was no proper representation by the assessee before him and the submissions made were very much vague and unclear. The assessee has also not produced their Form 26A in the hands of the recipients to show that they have accounted the commission paid to them as their income. The assessee has also not 4 ITA No. 1624/PUN/2018 Shripatrao Dada Sahakari Bank Ltd. A.Y. 2015-16 filed list of persons to whom the commission was paid. Even their PAN, ITR details were also not filed. Therefore, the ld. CIT(A) was unable to ascertain whether the assessee has performed its legal duties and whether the interest of revenue was protected. Considering the totality of the facts and circumstances, we are of the considered view that the assessee did not substantially represent its case on merits before the ld. CIT(A) on this issue for proper adjudication . In view thereof, we set aside the order of the ld. CIT(A) on this issue and remand the matter back to his file for re-adjudication as per law. The assessee is also directed to submit the relevant details by representing its case on merits. Ground No. 2 of assessee’s appeal is allowed for statistical purposes. 5. In Ground No. 3 the assessee contends that the ld. CIT(A) was not justified in confirming the addition of Rs. 21,20,000/- made by the ld. A.O. The facts on this issue are that the ld. A.O noticed that there was closing balance in respect of building fund as on 31-03-2014 of Rs 1,54,45,623.75 which was increased to Rs. 1,75,65,683.75 and thus there was an increase in the building fund of Rs. 21,20,060/- during the F.Y. 2014-15 relevant to A.Y. 2015-16. In this regard, explanation was sought for from the assessee and he submitted written submissions which was considered by the ld. A.O. Thereafter, the ld. A.O observed at para 7.4 that for A.Y. 2009-10, 2010-11 and 2012-13 also this issue was confirmed and was held in favour of the revenue. Moreover, the ld. A.O even called for the bye-laws of the assessee bank and found that as per the bye-laws, the assessee bank was not authorized to collect building fund or any other fund. Further, the District Registrar for Co- operative Societies has also not accorded permission for collection of the building fund. The bank is collecting fund for the purposes of 5 ITA No. 1624/PUN/2018 Shripatrao Dada Sahakari Bank Ltd. A.Y. 2015-16 buildings to be constructed or acquired or for maintenance thereof as the case may be. The bank is also claiming deduction for depreciation in respect of building(s) constructed out of building funds collected from its members/non-members. Therefore, it was opined by the ld. A.O that the bank was claiming deduction of depreciation on the assets acquired out of money collected from its members/non-members. Therefore, it is a revenue receipt since it is collected on percentage basis of loan amount sanctioned. The addition on account of building fund of Rs. 21,20,060/- was therefore, added to the total income of the assessee. The ld. CIT(A) upheld the finding of the ld. A.O. At para 5.3 of his order it is clearly stated that these payments were received by the assessee as gratis and it was also equally true that the building would be acquired by the assessee as its own capital asset though it has been constructed from the money collected from the member/non-members. 6. The modus operandi is clear that the bank while giving loan to outsiders or non-members they collect the funds from them in the name of construction of the building(s) which is accumulated to the building fund account. The assessee bank as per its bye-laws is not authorized to collect any money from members or outsiders or non-members for the purposes of building construction. What the assessee bank has been doing is against such bye-laws and collecting money from the non- members/outsiders on percentage basis for giving loans to them. The assessee is also claiming depreciation on these capital assets which has been equally constructed from the money taken from outside members. Clearly this is an act violating the bye-laws of the assessee bank. The same issue has also been disallowed in A.Y. 2009-10, 2010- 11 and also A.Y. 2012-13 and the facts are absolutely identical and similar for this year also. Even at the time of hearing, the ld. A.R could 6 ITA No. 1624/PUN/2018 Shripatrao Dada Sahakari Bank Ltd. A.Y. 2015-16 not justify why money was collected against the bye-laws framed for by the assessee bank from the members/non-members. We are of the considered view therefore, there is no need to interfere with the findings of the ld. A.O as well as with the findings of the ld. CIT(A) which are hereby sustained. Ground No. 3 of the assessee’s appeal is dismissed. 7. Ground No. 4 of the assessee’s appeal is consequential. 8. In the combined result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 27 th day of July 2022. Sd/- sd/- (DR. DIPAK P. RIPOTE) (PARTHA SARATHI CHAUDHURY) ACCOUNTNT MEMBER JUDICIAL MEMBER Pune; Dated, this 27 th day of July 2022 Ankam Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT (A)-2, Kolhapur. 3. The Pr. CIT 2, Kolhapur 4. Dr. D.R. (ITAT) Pune 5. Guard File BY ORDER, /// TRUE COPY /// Sr. Private Secretary ITAT, Pune. 7 ITA No. 1624/PUN/2018 Shripatrao Dada Sahakari Bank Ltd. A.Y. 2015-16 Date 1 Draft dictated on 26-07-2022 Sr.PS 2 Draft placed before author 26-07-2022 Sr.PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS Sr.PS 6 Kept for pronouncement on 27-07-2022 Sr.PS 7 Date of uploading of order 27-07-2022 Sr.PS 8 File sent to Bench Clerk 27-07-2022 Sr.PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order