Orissa State Handloom Weavers Cooperative Society Ltd., Bhubaneswar V. ITO, Ward-1(2), Bhubaneswar

ITA 169/CTK/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0856 (ITAT-CUTTACK)
• Duration Of Justice: 4 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-01-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J K LENKA
• Assessee Lawyers: B K MOHAPATRA
• Keywords: Business income
• Section: 251; 56

Judgement Text

P A G E 1 | 5 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 169 /CTK/201 6 ASSESSMENT YEAR : 2011 - 12 ORISSA STATE HANDLOOM WEAVERS CO - OPERATIVE SOCIETY LTD., BAYAN BHAWAN PT. J.N. MARG, BHUBANESWAR. VS. ITO, WARD 1(2), BHUBANESWAR. PAN/GIR NO. AAAAO 0474 F (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI B.K.MOHAPATRA , AR REVENUE BY : SHRI J.K.LENKA , DR DATE OF HEARING : 4 / 0 6 / 20 20 DATE OF PRONOUNCEMENT : 4 / 0 6 /20 20 O R D E R PER C.M.GARG,JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 2 , BHUBANESWAR FOR THE ASSESSMENT YEAR 2011 - 12 . 2. IN THE GROUNDS OF APPEAL, THE EFFECTIVE GRIEVANCE OF THE ASSESSEE IS THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN REJECTING THE CLAIM OF DEDUCTION U/S 80P(2)(II) OF THE ACT OF RS.14,49,015/ - . 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THIS SIMILAR ISSUE HAD COME UP FOR CONSIDERATION FOR THE ASSESSMENT YEARS 2013 - 14 & 2014 - 15 IN ASSESSEES OWN AND THE TRIBUNAL VIDE ORDER DATED 9.4.2018 IN ITA NOS.364 & 365/CTK/2017 HAS UPHELD THE ORDER OF THE LD CIT(A) DISMISSING THE APPEALS OF THE REVENUE. SINCE THERE IS NO CHANGE IN FACTS, THE APPEAL OF THE ASSESSEE BE ALLOWED. ITA NO.169/CTK/2016 ASSESSMENT YEAR : 2011 - 12 P A G E 2 | 5 4. LD D.R. COULD NOT CONTROVERT THE AFORESAID SUBMISSION OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD OF THE CASE. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TRIBUNAL DATED 9.4.2018 (SUPRA), WHEREIN, IT IS NOTICED THAT THE TRIBUNAL HAS DISMISSED THE APPEAL OF THE REVENUE BY OBSERVING AS UNDER: WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND TH AT THE AO HAS MADE THE ADDITION WITHOUT GIVING ANY REASON WHATSOEVER AND HE PASSED A VERY CRYPTIC ORDER. WE FURTHER FIND THAT THE LD CIT(A) HAS PASSED THE ORDER AFTER VERIFYING ALL THE DETAILS AND BOOKS OF ACCOUNT OF THE ASSESSEE AND AFTER PERUSING THE CA SE LAWS CITED BY THE ASSESSEE AT THE TIME OF FIRST APPELLATE PROCEEDINGS. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE LD CIT(A) HAS RIGHTLY TREATED THE INTEREST INCOME OF RS.7,02,256/ - OF THE ASSESSEE AS BUSINESS INCOME AND ALLOWED EXE MPTION U/S.80P (2)(II) OF THE ACT. THIS GROUND OF THE REVENUE IS, THEREFORE, DISMISSED. 6. IN THE PRESENT CASE, THE ASSESSEE HAD SHOWN INTEREST INCOME OF RS.1,53,24,015/ - AND BEFORE THE ASSESSING AUTHORITY EXPLAINED THE AMOUNT OF RS.1,38,75,000/ - AS IN TEREST FROM RESERVE FUND BUT FAILED TO EXPLAIN THE NATURE OF INTEREST OF BALANCE AMOUNT OF RS.14,49,015/ - , THE IMPUGNED ADDITION HEREIN. THE LD CIT(A) REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOTGHARS CO - OPERATIVE SALES SOCIETY LTD VS ITO, 322 ITR 283 (SC), WHEREIN, IT HAS BEEN HELD THAT INTEREST INCOME EARNED BY CO - OPERATIVE FROM FUND CREATED BY RETENTION WHICH IS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES FALL UNDER THE HEAD INCOME FROM OTHER SOURCE AND HENCE, IS TAXABLE U/ S.56 OF THE ACT AND, ACCORDINGLY, HELD THAT THE SAID AMOUNT IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2)(II) OF THE ACT. 7. WE ALSO FIND THAT IN ITS APPEAL IN ITA NO.364/CTK/2017 FOR THE ASSESSMENT YEAR 2013 - 14, IN GROUND NO.1 OF APPEAL, THE REVENUE HAD DISPU TED THE DELETION OF ITA NO.169/CTK/2016 ASSESSMENT YEAR : 2011 - 12 P A G E 3 | 5 ADDITION OF RS.17,29,750/ - MADE BY THE AO TREATING IT AS INCOME FROM OTHER SOURCES WHEN THE INTEREST INCOME EARNED FROM SURPLUS FUNDS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES. THE TRIBUNAL BY RELYING ITS OWN ORDER FOR THE ASSESS MENT YEAR 2003 - 04 HAS DISMISSED THE GROUND OF THE REVENUE AND NO CONTRARY DECISION WAS PLACED ON RECORD BEFORE US. 8 . WE FIND THAT T HE APEX COURT IN THE CASE OF TOTGARS CO - OPERATIVE SALE SOCIETY LTD.(SUPRA), ON WHICH RELIANCE WAS PLACED IN THE IMPUGNED ORDER , WAS DEALING WITH A CASE WHERE THE ASSESSEE - COOPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS AND THE SALE CONSIDERATION R ECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES, AND THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT - TERM DEPOSIT/SECURITY; SUCH AN AMOUNT WHICH WAS RETAI NED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE; THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME COULD NOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR U/S. 80P(2)(A)(III) OF THE ACT . I N THE FACTS OF THE SAID CASE, THE HONBLE SUPREME COURT HELD THAT THE A SSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME U/S. 56 OF THE ACT BUT THIS IS NOT THE CASE OF THE AO IN THE PRESENT CASE AND FACTS A ND CIRCUMSTANCES ARE QUITE DISSIMILAR AND DISTINGUISHABLE FROM THAT CASE. HENCE, BENEFIT OF THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T OTGARS CO - OPERATIVE SALE SOCIETY LTD.(SUPRA ) IS NOT AVAILABLE FOR REVENUE IN THE PRESENT CASE. HENCE, LD CIT(A) AS ITA NO.169/CTK/2016 ASSESSMENT YEAR : 2011 - 12 P A G E 4 | 5 WELL AS THE AO WAS NOT CORRECT IN RELYING ON THIS JUDGMENT WHILE DISMISSING THE CLAIM OF THE ASSESSEE U/S. 80P(2) OF THE ACT. 9. IT IS THE SUBMISSION OF THE ASSESSEE THAT A RESERVE FUND WAS CREATED TO THE MEET THE UNFORESEEN LOSS AS PER THE GUIDELINES OF ORISSA CO - OPERATIVE SOCIETY RULES, 1965. FROM PARA 3.1 OF ASSESSMENT ORDER, IT IS OBSERVED THAT THE AO FOUND THAT THE ASSESSEE HA S CREATED CERTAIN RESERVE FUNDS FROM YEAR TO YEAR AND PART OF ITS SURPLUS INCOME IN THE FORM OF FIXED DEPOSIT IN DIFFERENT BANKS RESULTING INTO SUBSTANTIAL INTEREST INCOME. WE ARE IN AGREEMENT WITH THE CONTENTION OF LD A.R. THAT THIS ASPECT WAS THOROUGHLY EXAMINED BY THE TRIBUNAL IN PARA 5 OF ORDER DATED 1.12.200 8 IN ASSESSEES OWN CASE IN I.T.A. NO.184/CTK/2007 FOR A.Y. 2003 - 04, WHEREIN, IT WAS HELD THAT THE ASSESSEE CREATED A RESERVE FUND AS PER THE GUIDELINES OF ORISSA CO - OPERATIVE SOCIETY, 1965, CHAP TER - V CLAUSE - 44 AND AS PER ARTICLE OF ASSOCIATIONS AND CLAUSE 34(1) TO MEET THE UNFORESEEN LOSS. IT WAS ALSO ACCEPTED BY THE TRIBUNAL THAT THE ASSESSEE WAS BOUND TO CREATE SUCH SURPLUS FUND UNDER THIS GUIDELINES AND IT WAS INTRINSICALLY CONNECTED WITH T HE CARRYING OUT OF THE BUSINESS AND BEING A BUSINESS COMPULSION AND THE INTEREST EARNED FROM SUCH STATUTORY DEPOSITS WAS THE INCOME FROM BUSINESS AND NOT THE INCOME FROM OTHER SOURCES AS HELD BY THE AO. THEREFORE, WE HAVE NO HESITATION TO HOLD THAT THE S AID INCOME IS EXEMPT FROM TAXATION U/S. 80P(2)(II) OF THE ACT. OUT CONCLUSION GETS STRONG SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KARNATAKA STATE CO.OP. APEX BANK, 251 ITR 194 (SC) AND IN THE CASE OF CIT VS BANGALORE DIST RICT CO - OPERATIVE CENTRAL BANK LTD, 233 ITR 282 (SC). ITA NO.169/CTK/2016 ASSESSMENT YEAR : 2011 - 12 P A G E 5 | 5 10. ON BEING ASKED BY THE BENCH, LD D.R. COULD NOT SHOW ANY NEW DECISION OR DISSIMILAR FACTS FROM THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003 - 04. THEREFORE, WE ARE BOUND TO FOLLOW THE DECIS ION OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2003 - 04, WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL IN A.Y. 2013 - 14 & 2014 - 15 (SUPRA) DIRECT THE AO TO DELETE THE ADDITION OF RS.14,49,015/ - . 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. OR DER PRONOUNCED ON 4 / 0 6 /20 20 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER CUTTACK; DATED 4 / 0 6 /20 20 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK 1. THE APPELLANT : 2. THE RESPONDENT. 3. THE CIT(A) - , BHUBANESWAR 4. PR.CIT - , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//