Jagruti Urban Souharda Credit Co-op. Ltd., Raibag V. The Income Tax Officer, Ward-2 (2), Belagavi., Belagavi

ITA 177/PAN/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1198 (ITAT-PANAJI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIRAJ Y V
• Keywords: Question of law
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER & SHRI RAMIT KOCHAR HONBLE ACCOUNTANT MEMBER ITA NO. 177 /P A N/201 6 (ASST. YEAR : 20 07 - 08 ) JAGRUTI URBAN SOUHARDA CREDIT COOPERATIVE LTD., A/P HARUGERI, TQ : RAIBAG, DIST. BELGAUM . VS. ITO , WARD - 2(2), BEL A GA VI. PAN NO. AAAJJ 0083 E (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE . DEPARTMENT BY : SHRI RAVIRAJ Y.V. - DR DATE OF HEARING : 2 3 / 11 /201 6 . DATE OF PRONOUNCEMENT : 23 / 11 /201 6 . O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , BELAGAVI IN APPEAL NO. 243/BGM/2012 - 13, DATED 2 8 /0 6 /201 6 FOR THE ASSESSMENT YEAR 2007 - 08. 2. NONE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI RAVIRAJ Y.V., DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF THE REVENUE. 3 . IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80P(2)(A)(I) IN RESPECT OF INTEREST EARNED BY THE ASSESSEE ON SHORT TERM INVESTMENTS. 2 ITA NO. 177 /P A N/201 6 4 . AT THE TIME OF HEARING, IT WAS FAIRLY AGREED THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF TH IS TRIBUNAL IN THE CASE OF ITO VS. AKSHAYA CO - OPERATIVE CREDIT SOCIETY LTD . IN ITA NO. 59/PAN/2016, DATED 21/11/2016 , WHEREIN IT H AS BEEN HELD AS FOLLOWS: - 7. THE LD. DR COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH ALLOWED THE APPEAL OF THE ASSESSEE. FURTHER, HE COULD NOT BRING ANY CONTRARY DECISION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE SOCIETY LTD (SUPRA), WHEREIN THE HONBLE KARNATAKA HIGH COURT HELD AS UNDER: - 6. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, THE UNDISPUTED FACTS WHICH EMERGES IS, THE SUM OF RS. 1,77,305 / - REPRESENTS THE INTEREST EARNED FROM SHORT - TERM DEPOSITS AND FROM SAVINGS BANK ACCOUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT CARRYING ON ANY OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DE POSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHETHER THIS INTEREST IS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELEVANT PROVISION OF LAW I.E., SECTION 80P(2)(A)(I): 'DEDUCTION IN RESPECT OF INCOME OF CO - OPERATIVE SOCIETIES: 8 OP (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO - OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB - SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB - SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING, NAMELY: (A) IN THE CASE OF CO - OPERATIVE SOCIETY ENGAGED IN - (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR (II) XXX (III) XXX (IV) XXX (V) XXX (VI) XXX (VII) XXX 3 ITA NO. 177 /P A N/201 6 THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 7. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION IS OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSIDER THE MEANING OF THE WORD 'ATTR IBUTABLE' AS SUPPOSED TO DERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO . LTD. V . COMMISSIONER OF INCOME TAX , GUJARAT - II REPORTED IN ITR VOL 113 (1978) PAGE 842 AT PAGE 93 AS UNDER: 'AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION 'ATTRIBUTABLE TO' OCCURRING IN THE PHRASE 'PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF THE SPECIFIED INDUSTRY (HERE GENERATION AND DISTRIBUTION OF ELECTRICITY) ON WHICH THE LD. SOLICITOR - GENERAL RELI ED, IT WILL BE PERTINENT TO OBSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION 'ATTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED THAT THE EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESS ION 'DERIVED FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE OF O L D MACHINERY AND BUILDINGS CANNOT BE REGARDED AS PROFITS AND GAINS DERIVED FROM THE CONDUCT OF T HE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE LD. SOLICITOR - GENERAL, IT HAS USED THE EXPRESSION 'DERIVED FROM', AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAMELY, 'ATTRIBUTABLE TO', HAS BEEN USED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GENERATION AND D ISTRIBUTION OF ELECTRICITY.' 8. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EXPRESSION 'DERIVED FROM'. THE EXPRESSI ON 'ATTRIBUTABLE TO' BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINESS OF PROV IDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO 4 ITA NO. 177 /P A N/201 6 ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP THE SAID AMOUN T IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS F OR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO - OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION BOP OF THE ACT. 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S. TOTGARS CO OPERATIVE SALE SOCIETY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT 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. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT - TERM DEPOS IT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED 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 CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY ME NTIONED IN SECTION 80P(2)(A) ( I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. F URTHER THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF T HAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AM OUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN 5 ITA NO. 177 /P A N/201 6 FACT SI MILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX III, HYDERABAD V S . ANDHRA PRADESH STATE COOPERATIVE BANK LTD REPORTED IN (2011) 200 TAXMAN 220/12 IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCT ION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIA L QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING O RDER: APPEAL IS ALLOWED. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL AT PANAJI IN THE CASE OF M/S. VYAVASAYA SEVA SAHAKARI BANK LTD. (SUPRA) AND THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE SOCIETY LTD (SUPRA), WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) WHICH IS HEREBY CONFIRMED AND THE APPEAL OF THE REVENUE IS DISMISSED. WE ORDER ACCORDINGLY. 5. IN T HESE CIRCUMSTA N CES, RESPECTFULLY FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE CASE OF AKSHAYA CO - OPERATIVE CREDIT SOCIETY LTD. (SUPRA) , THE ASSESSING OFFICER IS DIRECTED TO GRANT THE ASSESSEE THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 6 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 2 3 RD DAY OF NOVEMBER , 201 6 AT GOA . S D / - S D / - ( RAMIT KOCHAR ) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 3 RD NOVEMBER , 201 6 . VR/ - 6 ITA NO. 177 /P A N/201 6 COPY TO: 1 . THE ASSESSEE. JAGRUTI URBAN SOUHARDA CREDIT COOPERATIVE LTD., A/P HARUGERI, TQ : RAIBAG, DIST. BELGAUM. 2 . THE REVENUE. ITO , WARD - 2(2), BEL A GA VI. 3 . THE PR. CIT, BELAGAVI. 4 . THE CIT(A) , BELAGAVI. 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 23 / 11 /2016 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 23/11/2016 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 23/11/2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 23/11/2016 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 23/11/2016 SR.PS 6. DATE OF PRONOUNCEMENT 23/11/2016 SR.PS 7. FILE SENT TO THE BENCH CLERK 23/11/2016 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER