Sindhudurg Zilla Madhyamik Adhyapak Sahakari Patpedhi Maryadit, Sindhudurg V. Income-tax Officer,

ITA 1825/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85012 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 09-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1825/PN/2013 (ASSESSMENT YEAR : 2010-11) SINDHUDURG ZILLA MADHYAMIK ADHYAPAK SAHAKARI PATPEDHI MARYADIT, 33, SINDHUDURGNAGARI, OROS, TAL : KUDAL, DIST : SINDHUDURG-416812 PAN NO.AAFFS4132E .. APPELLANT VS. ITO, WARD-2(4), KUDAL .. RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 23-09-2014 DATE OF PRONOUNCEMENT : 24-09-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 09-07-2013 OF THE CIT(A), KOLHAPUR RELATING T O ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COOPERATIVE CREDIT SOCIETY PROVIDING CREDIT FACILIT IES TO ITS MEMBERS. IT FILED ITS RETURN OF INCOME ON 17-08-20 10 DECLARING TOTAL INCOME OF NIL. DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE CREDI T COOPERATIVE SOCIETY IS REGISTERED UNDER MAHARASHTRA COOPERATIVE SOCIETIES ACT, 2 1960. ITS MAIN OBJECT IS TO PROVIDE CREDIT FACILIT IES TO ITS MEMBERS. DURING THE IMPUGNED ASSESSMENT YEAR, THE SOCIETY HA S EARNED INTEREST INCOME FROM ITS INVESTMENT MADE WITH THE S INDHUDURG CENTRAL COOPERATIVE BANK AMOUNTING TO RS.31,77,452/ -, THE DETAILS OF WHICH ARE AS UNDER : SR.NO. INTEREST EARNED UPON AMOUNT (RS.) 1 INVESTMENTS OUT OF STATUTORY RESERVE FUND 29,43,097/- 2 FIXED & RECURRING 1,79,737/- 3 SAVINGS BANK ACCOUNT 54,618/- TOTAL 31,77,452/- THE ABOVE INTEREST HAS BEEN CREDITED TO THE P&L ACC OUNT AND HAS BEEN OFFERED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. THE ASSESSEE CLAIMED THE SAME AS DEDU CTION U/S.80P(2)(D) IN THE COMPUTATION OF INCOME. SIMILA RLY, THE ASSESSEE HAS ALSO EARNED DIVIDEND INCOME OF RS.5,41,667/- ON THE INVESTMENTS MADE IN THE SHARES OF SINDHUDURG CENTRA L COOPERATIVE BANK AND CLAIMED THE SAME AS DEDUCTION U/S.80P(2)(D ) OF THE I.T ACT. ACCORDING TO THE ASSESSING OFFICER, AS PER TH E PROVISIONS OF SECTION U/S.80P(2)(D) OF THE I.T ACT, THE WHOLE OF THE AMOUNT IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDEN DS RECEIVED BY THE COOPERATIVE SOCIETY FROM ITS INVESTMENTS WITH A NY OTHER COOPERATIVE SOCIETY IS ALLOWABLE AS DEDUCTION. HOW EVER, IN THE PRESENT CASE, THE INTEREST AND DIVIDEND SO RECEIVED IS FROM THE INVESTMENTS MADE IN THE SINDHUDURG CENTRAL COOPERAT IVE BANK WHICH IS A COOPERATIVE BANK AND NOT A COOPERATIVE S OCIETY. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO JUSTIFY AND EXPLAIN AS TO HOW THE ABOVE INTEREST AND DIVIDEND I NCOME QUALIFIES 3 FOR DEDUCTION U/S.80P(2)(D) OF THE I.T. ACT. 3. THE SUBMISSION OF THE ASSESSEE THAT SINDHUDURG C ENTRAL COOPERATIVE BANK IS A COOPERATIVE SOCIETY AND THERE FORE THE DEPOSITS KEPT WITH IT WILL BE COVERED UNDER CLAUSE (D) OF SECTION 80P(2) WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE COOPERATIVE SOCIETIES ARE GOVERNED BY THE PROVISION S OF MAHARASHTRA COOPERATIVE SOCIETIES ACT, 1960 WHEREAS BANKS ARE G OVERNED BY THE PROVISIONS OF BANKING REGULATION ACT, 1949 IN A DDITION TO THE PROVISIONS OF MAHARASHTRA COOPERATIVE SOCIETIES ACT , 1960. THE ABOVE FACT ACCORDING TO THE AO MAKES BOTH THE ENTIT IES DISTINT FROM EACH OTHER. FURTHER, AFTER INSERTION OF SECTION 80 P(4) BY THE FINANCE ACT, 2006 W.E.F.,01-04-2007, THE COOPERATIVE BANKS HAVE BEEN DEPRIVED OF THE BENEFIT OF 80P WHEREAS COOPERATIVE SOCIETIES ARE ENJOYING THE BENEFIT OF SAID SECTION. THE ASSESSIN G OFFICER AFTER ANALYSING THE PROVISIONS OF BANKING REGULATION ACT ETC., HELD THAT THE COOPERATIVE BANKS CARRY ON THE BANKING BUSINESS WHICH NORMALLY INCLUDES ALL THE ACTIVITIES OF A BANKING B USINESS AND THAT TOO WITH THE PUBLIC AT LARGE WHEREAS THE COOPERATIV E SOCIETIES CARRY ON THE BUSINESS OF PROVIDING CREDIT FACILITY THAT T OO RESTRICTED ONLY TO ITS MEMBERS. HE ACCORDINGLY HELD THAT THE COOPERAT IVE BANKS CANNOT BE SAID TO BE AT PAR WITH THE COOPERATIVE SO CIETIES. HE ACCORDINGLY HELD THAT THE INTEREST INCOME OF RS.31, 77,452/- ON DEPOSITS WITH AND DIVIDEND INCOME OF RS.5,41,667/- EARNED ON THE INVESTMENTS MADE IN THE SHARES OF SINDHUDURG CENTRA L COOPERATIVE BANK IS NOT QUALIFIED FOR DEDUCTION U/S.80P(2)(D) O F THE I.T. ACT. 4 HE ACCORDINGLY REJECTED THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE. IN APPEAL THE LD.CIT(A) UPHELD THE ACTIO N OF THE ASSESSING OFFICER. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER ON FACTS AND IN LAW, 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION IN RESPECT OF INTEREST INCOME OF RS. 31,77,4527- AND DIVI DEND INCOME OF RS.5,41,667/- RECEIVED BY THE ASSESSEE CO-OPERATIVE SO CIETY ON INVESTMENTS MADE IN DEPOSITS/ SAVING BANK ACCOUNT AND SHA RES OF SINDHUDURG CENTRAL CO-OPERATIVE BANK. 2] THE LEARNED CIT(A) ERRED IN HOLDING THAT T HE ASSESSEE WAS NOT ELIGIBLE TO CLAIM THE DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF THE INCOME EARNED BY WAY OF INTEREST ON DEPOSITS/ SAVING BA NK ACCOUNT AND DIVIDEND INCOME ON THE GROUND THAT THE SAID INC OME CANNOT BE SAID TO BE ATTRIBUTABLE TO THE BUSINESS ACTIVITY OF TH E ASSESSEE CO- OPERATIVE SOCIETY AND HENCE, THE ASSESSEE IS NOT ELIGIB LE TO CLAIM THE DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF THIS INCOME. 3] THE LEARNED CIT(A) FAILED TO APPRECIATE TH AT THE ASSESSEE WAS A CREDIT COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS AND HENCE, THE INVESTME NTS MADE IN DEPOSITS/ SAVING BANK ACCOUNT AND SHARES OF SINDHUDURG C ENTRAL CO-OPERATIVE BANK LTD. WERE MADE IN THE COURSE OF TH E ASSESSEE'S BUSINESS AND THUS, THERE WAS NO REASON TO DENY THE DEDUCT ION U/S 80P(2)(A)(I) IN RESPECT OF THE INCOME DERIVED FROM T HE ABOVE INVESTMENTS. 4] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSEE SUBMITS THAT SINDHUDURG CENTRAL CO-OP. BANK LTD. WAS REGISTER ED UNDER THE MAHARASHTRA CO-OP. SOCIETIES ACT, 1960 AND HENCE, THE INCOME DERIVED BY WAY OF INTEREST AND DIVIDEND EARNED ON IN VESTMENTS MADE IN THE SAID CO-OP, SOCIETY WAS ELIGIBLE AS A DEDUC TION U/S 80P(2)(D) OF THE ACT. 5] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, ASSUM ING WITHOUT ADMITTING THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM THE DEDUCTION U/S 80P(2)(A)(I) OR SECTION 80P(2)(D), THE ASSESSEE SUBMIT S THAT THE DISALLOWANCE MAY BE RESTRICTED TO THE NET INCOME EARNED AFTER DEDUCTING PROPORTIONATE EXPENSES INCURRED IN RESPECT OF THE ABOVE INCOME AND THE SAID DISALLOWANCE MAY NOT BE MADE IN R ESPECT OF THE GROSS INCOME EARNED BY THE ASSESSEE. 6] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 5 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET F ILED A COPY OF THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF ACIT VS. M/S. JANATA GRAHAK MADHYAVARTI SAHAKARI SA NGH MARYADIT VIDE ITA NO.571/PN/2013 ORDER DATED 27-11- 2013 FOR A.Y. 2009-10. REFERRING TO THE SAID DECISION, HE S UBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES, THE DEDUCT ION U/S.80P(2)(D) HAS BEEN ALLOWED ON ACCOUNT OF INTEREST RECEIVED ON THE DEPOSIT WITH AURANGABAD DISTRICT CENTRAL COOPERATIVE BANK. HE A CCORDINGLY SUBMITTED THAT THIS IS A COVERED MATTER IN FAVOUR O F THE ASSESSEE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AO AND THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. T HE IST DISPUTE IN THE GROUNDS OF APPEAL IS REGARDING THE ALLOWABILITY OF DEDUCTION U/S.80P(2)(D) IN RESPECT OF INTEREST INCOME OF RS.3 1,77,452/- AND DIVIDEND INCOME OF RS.5,41,667/- RECEIVED BY THE AS SESSEE COOPERATIVE SOCIETY ON INVESTMENT MADE IN DEPOSITS/ SAVINGS ACCOUNTS AND SHARES OF SINDHUDURG CENTRAL COOPERATI VE BANK. ACCORDING TO THE ASSESSING OFFICER THE DEDUCTION IS ALLOWABLE U/S.80P(2)(D) IN CASE OF A COOPERATIVE SOCIETY FOR RECEIVING ANY INTEREST OR DIVIDEND INCOME FROM ANY OTHER COOPERAT IVE SOCIETY. SINCE THE SAME HAS BEEN RECEIVED FROM A COOPERATIVE BANK WHICH IS 6 DISTINCT FROM A COOPERATIVE SOCIETY, THEREFORE, THE ASSESSEE IS NOT ENTITLED TO THE SAME FOR WHICH HE DISALLOWED THE CL AIM OF DEDUCTION U/S.80P(2)(D). THE SAME HAS BEEN UPHELD BY THE CIT (A). 7.1 IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSES SEE THAT EVEN THOUGH THE ASSESSEE HAS RECEIVED INTEREST ON DEPOSI TS WITH SINDHUDURG CENTRAL COOPERATIVE BANK AND RECEIVED DI VIDEND ON SHARES OF THE SAID COOPERATIVE BANK, HOWEVER, THE F ACT REMAINS THAT SINDHUDURG CENTRAL COOPERATIVE BANK IS ALSO A COOPE RATIVE SOCIETY. 7.2 WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE T HE TRIBUNAL IN THE CASE OF M/S. JANATA GRAHAK MADHYAVARTI SAHAKARI SANGH MARYADIT (SUPRA). WE FIND THE TRIBUNAL, FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF BAJAJ AUTO LTD. EMPLOYE ES CREDIT COOPERATIVE SOCIETY LTD. VIDE ITA NO.1047/PN/2012 D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND ALLOWED THE CLA IM OF DEDUCTION U/S.80P(2)(D) FOR INTEREST RECEIVED ON THE DEPOSITS WITH THE AURANGABAD DISTRICT CENTRAL COOPERATIVE BANK. THE RELEVANT OBSERVATION OF THE TRIBUNAL READS AS UNDER : 2. AT THE OUTSET OF HEARING, LEARNED AUTHORIZED RE PRESENTATIVE POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSE E BY THE DECISION OF ITAT, PUNE B BENCH IN ITA NO.L047/PN/201 2 IN THE CASE OF ACIT VS. M/S. BAJAJ AUTO LTD. EMPLOYEES CO-OP. CRED IT SOCIETY LTD., WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE BY OBSERVING AS UNDER: '4. WE HAVE HEARD THE LD. DR. NONE WAS PRESENT FOR T HE ASSESSEE. WE HAVE ALSO PERUSED THE ORDER OF THE AUTHORITIES BELOW. IN OUR OPINION SO FAR AS THE AMOUNT OF INTEREST RECEIVED ON THE DEPOSI T WITH AURANGABAD DISTRICT CENTRAL CO-OPERATIVE BANK IS CONC ERNED THE ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THE PROVI SIONS OF LAW. SEC. 80P(2)(D) READS AS UNDER: 7 80P(1): WHERE, IN THE CASE OF AN ASSESSEE BEING A COOPER ATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REF ERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPE CIFIED IN SUBSECTION (2), IN COMPUTING THE TOTAL INCOME OF T HE ASSESSEE. 80P(2): THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE THE FOLLOWING, NAMELY: (A) ........... (B) ........... (C) 2(D): IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVESTME NTS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH I NCOME; 5. SUB-SEC. (4) OF SEC. SOP HAS WITHDRAWN THE DEDUCTI ON TO THE CO OPERATIVE BANK OTHER THAN PRIMARY AGRICULTURAL CRED IT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOP MENT BANK W.E.F. THE A.Y. 2007-08. THE SAID PROVISION IS APPLICABLE TO THE AURANGABAD DISTRICT CENTRAL CO-OPERATIVE BANK (ADCCB) IN WHICH THE ASSESSEE SOCIETY HAS KEPT DEPOSIT. THE WITHDRAWAL OF DEDUCTION BY INSERTION OF SUB-SECTION (4) OF SEC. SOP DOES NOT CHANGE 'STATUS' OF AURANGABAD DISTRICT CENTRAL CO-OPERATIVE BANK 'AS A CO-OPERATIVE SOCIETY WHICH IS CONTEMPLATED IN SEC. 80P(1) OF THE ACT. WE, THEREFO RE, HOLD THAT THE INTEREST RECEIVED ON THE DEPOSIT WITH THE AURANGABAD DISTRICT CENTRAL CO OPERATIVE BANK BY THE ASSESSEE ON THE DEPOSITS ARE SQUA RELY COVERED U/S. 80P(L)(D) AND THE INTEREST RECEIVED ON D EPOSIT KEPT WITH THE AURANGABAD DISTRICT CENTRAL COOPERATIVE BANK IS A N ALLOWABLE DEDUCTION. SO FAR AS THE FINDING OF THE LD. CIT(A) T HAT THE PROVISIONS OF SEC. 80P(2)(A)(I), IN OUR OPINION THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTAGARS COOPERATIVE VS. ITO (SUPRA) IS AGAINST THE ASSESSEE AS INTEREST RECEIVED ON DEPOSITS WITH AURANGABAD DISTRICT CENTRAL CO-OPERATIVE BANK CANNOT BE SAID TO BE THE INCOME DERIVED FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. WE, ACCORDINGLY, ANSWER THE GROUND TAKEN BY THE REVE NUE. BUT, FINALLY WE HAVE CONFIRMED ORDER OF LD. CIT(A) GIVING RELIEF TO THE ASSESSEE U/S. 80P(2)(D).' 2.1 FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING , THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(D). IN VIEW OF AB OVE, ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S.80P(2)(D) OF I.T ACT, WHICH IS AVAILABLE FOR INCOME EARNED FROM BUSINESS AND NOT FRO M OTHER SOURCES AS RIGHTLY HELD BY CIT(A). WE UPHOLD THE SAME. 3. IN THE RESULT, APPEAL FILED BY REVENUE IS DISM ISSED. 7.3 RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE H OLD THAT THE INTEREST INCOME OF RS.31,77,452/- AND DIVIDEND INCO ME OF RS.5,41,667/- RECEIVED BY THE ASSESSEE COOPERATIVE SOCIETY IS ELIGIBLE FOR DEDUCTION/S.80P(2)(D) OF THE I.T. ACT. GROUND OF APPEAL ON THIS ISSUE BY THE ASSESSEE ARE ACCORDINGLY ALLOW ED. 8 8. SINCE THE ASSESSEE SUCCEEDS ON THE ISSUE OF ALLO WABILITY OF DEDUCTION U/S.80P(2)(D) OF THE I.T. ACT, THEREFORE, THE ALTERNATE GROUNDS RELATING TO ALLOWABILITY OF THE INTEREST & DIVIDEND INCOME U/S.80P(2)(A)(I) OF THE I.T. ACT BECOMES ACADEMIC I N NATURE AND THEREFORE THE SAME ARE NOT BEING ADJUDICATED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED PRONOUNCED IN THE OPEN COURT ON 24-09-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE DATED: 24 TH SEPTEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE