Income-tax Officer, V. National Heavy Engg. Co.op. Ltd.,

ITA 1834/PUN/2013

• Counselvise Citation: 183424514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 11-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNITA BILLA
• Keywords: Business income; Earning of tax free income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1834/PN/2013 (ASSESSMENT YEAR : 2010-11) INCOME TAX OFFICER, WARD 2(3), PUNE. . APPELLANT VS. NATIONAL HEAVY ENGG. CO-OP. LTD., TALEGAON DABHADE, DISTT.- PUNE. PAN : AAAAN4710D . RESPONDENT DEPARTMENT BY : SMT. SUNITA BILLA ASSESSEE BY : SHRI NIKHIL PATHAK DATE OF HEARING : 13-01-2015 DATE OF PRONOUNCEMENT : 21-01-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE D ATED 26.04.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 19.12.2012 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, THE SOLITARY ISSUE RAISED BY THE REVENUE RELATES TO A CLAIM OF PROPORTIONATE DEDUCTION U/S 80P(2) OF THE ACT AMOUNTING TO RS.59,72,411/- MADE BY THE ASSESSEE, WHICH WAS DISA LLOWED BY THE ASSESSING OFFICER AND ALLOWED BY THE CIT(A). 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A CO-OPERATIVE SOCIETY ENGAGED IN MANUFACTURING OF MACHINERY, ERECTION AND COMMISSIONING SUGAR FACTORIES ON TURNKEY CONTRACT BASIS. DURING THE AS SESSMENT YEAR UNDER ITA NO.1834/PN/2013 CONSIDERATION, IT FILED A RETURN OF INCOME DECLARIN G TOTAL INCOME AT NIL AFTER CLAIMING DEDUCTION U/S 80P(2)(D) OF THE ACT AMOUNTI NG TO RS.59,72,411/- WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROU ND THAT THE SAID AMOUNT AS BEING INTEREST RECEIVED ON DEPOSITS WITH CO-OPER ATIVE BANKS WHEREAS ASSESSEE HAD PAID AN AMOUNT OF RS.1,63,52,819/- AS INTEREST ON BORROWED FUNDS WHICH ARE MOSTLY IN THE FORM OF CASH CREDITS FROM CC ACCOUNTS. THE ASSESSING OFFICER WAS APPLIED THE PROVISIONS OF SEC TION 80P R.W.S. 80AB OF THE ACT FOLLOWING THE DECISION OF THE AHMEDABAD BENCH O F THE TRIBUNAL IN THE CASE OF ITO VS. PETLAD TALUKA PURCHASE AND SALES UNION L TD. REPORTED IN (1992) 44 TTJ 574 (AHD) AND ASKED THE ASSESSEE TO IDENTIFY TH E EXPENDITURE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING O F SUCH INTEREST INCOME. IN THIS REGARD, ASSESSEE EXPLAINED THAT HE HAD KEPT TH E FIXED DEPOSITS WITH THE DIFFERENT CO-OPERATIVE BANKS AND HAD EARNED THE INT EREST ON THE FDS. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE HIS CLAIM BY ANY DOCUMENTARY EVIDENCE AND HELD THAT THE INTEREST EXPENDITURE INCURRED ON EARNING THE INTEREST INCOME CLAIMED EXE MPT WAS MORE THAN THE INTEREST RECEIVED. THEREFORE, THE ASSESSING OFFICE R DISALLOWED THE CLAIM OF DEDUCTION U/S 80P(2)(D) OF THE ACT AMOUNTING TO RS. 59,72,411/-. NOT BEING SATISFIED WITH THE ASSESSING OFFICER, ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO HAS SINCE DISAGREED WITH THE VIEW OF THE ASSESSING OFFICER AND FOLLOWING THE EARLIER DECISION OF HIS P REDECESSOR FOR ASSESSMENT YEARS 2007-08, 2008-09 & 2009-10, ALLOWED THE CLAIM OF DEDUCTION OF RS.59,72,411/- MADE BY THE ASSESSEE U/S 80P(2)(D) O F THE ACT. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFO RE US. 4. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PAR TIES THAT AN IDENTICAL CONTROVERSY HAS BEEN CONSIDERED BY THE PUNE BENCH O F THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2007-08, 2 008-09 & 2009-10 VIDE ITA NO.1834/PN/2013 ITA NOS.710 & 2385/PN/2012 AND ITA NO.300/PN/2013 R ESPECTIVELY DATED 27.02.2014 AND THE RELEVANT PORTION OF THE ORDER RE ADS AS UNDER :- 6. WE HAVE HEAD THE RIVAL SUBMISSIONS OF THE PARTIE S AND PERUSED THE RECORD. THE ASSESSEE IS NOT IN APPEAL EVEN THO UGH THE PRO-RATA DEDUCTION IS ALLOWED. THE GRIEVANCE OF THE REVENUE IS THAT I N THE A.YS. 1999-2000 AND 2000-01, THE ASSESSEE HAS ADMITTED BEFORE THE LD. C IT-II, PUNE THAT THE FIXED DEPOSITS WERE MADE OUT OF THE BORROWING AND NOW THE ASSESSEE CANNOT TAKE THE DIFFERENT STANDS. PER CONTRA, THE LD. COUNSEL ARGUES THAT THE ISSUE IN A.YS. 1999-2000 AND 2000-01 WAS TOTALLY DIFFERENT T HAT WHETHER THE INTEREST FROM NATIONALIZED BANK IS TO BE TAXED UNDER THE HEA D INCOME FROM OTHER SOURCES OR UNDER THE HEAD BUSINESS INCOME. HE SUBM ITS THAT SO FAR AS A.Y. 2007-08 IS CONCERNED NO FRESH FIXED DEPOSIT IS MADE , ALL FIXED DEPOSITS ARE MADE IN THE YEAR 2005 ONWARDS. THE ASSESSEE HAS FI LED THE CHART IN THE PAPER BOOK (PAGE NOS. 2 TO 5) SHOWING THE DETAILS O F F.DS. WITH THE DIFFERENT BANKS FROM WHICH IT IS SEEN THAT AS RIGHTLY ARGUED BY THE LD. COUNSEL NONE OF THE DEPOSIT RELATE BACK TO 2000. IN OUR OPINION TH E CONTROVERSY IS IN VERY NARROW COMPASS. ADMITTEDLY THE ASSESSEE IS ELIGIBL E FOR DEDUCTION U/S. 80P(2)(D) IN RESPECT OF THE INTEREST RECEIVED FROM THE CO-OPERATIVE BANKS AS THE ASSESSEE ITSELF IS A CO-OPERATIVE SOCIETY BUT O NLY DISPUTE IS THE QUANTUM OF DEDUCTION. THOUGH IT IS CONTENDED BY THE ASSESS EE BEFORE THE AUTHORITIES BELOW THAT THERE IS NO NEXUS OF THE BORROWED FUNDS WITH THE INVESTMENT MADE IN THE FIXED DEPOSIT BUT THE SAID CONTENTION HAS NO T BEEN ACCEPTED BY THE CIT(A). THE CIT(A) KEPT PRAGMATIC APPROACH RELYING ON THE PRINCIPLES LAID IN THE CASE OF RAJASTHAN RAJYA SAHAKARI UPBHOKTA SANG H LTD. (SUPRA). IN THE SAID CASE THE ASSESSEE WAS CO-OPERATIVE SOCIETY AND HAS RECEIVED THE INTEREST INCOME FOR WHICH DEDUCTION U/S. 80P(2)(D) OF THE ACT WAS CLAIMED. THE CONTROVERSY WAS IDENTICAL, THE HON'BLE HIGH COU RT HELD THAT WHEN NO SEPARATE BOOKS OR BOOKS OF ACCOUNT HAVE BEEN MAINTA INED FOR THE EXEMPTED AND NON-EXEMPTED ACTIVITIES AND THE EXPENSES HAVE B EEN INCURRED JOINTLY FOR EARNING BOTH THE INCOMES THEN THE PROPER WAY IS TO ESTIMATE THE EXPENSES ATTRIBUTABLE FOR EARNING THE EXEMPT AS WELL AS NON- EXEMPT INCOME. 7. IN THE PRESENT CASE NOWHERE IT IS THE CASE OF TH E ASSESSING OFFICER THAT THE ASSESSEE HAS MADE THE ENTIRE INVES TMENTS FROM THE BORROWED FUNDS NOR IT IS THE CASE THAT THE ENTIRE BORROWED F UNDS ARE USED FOR MAKING THE INVESTMENT IN THE FIXED DEPOSITS ON WHICH THE ASSES SEE HAS EARNED THE INTEREST INCOME ON WHICH DEDUCTION U/S. 80P(2)(D) O F THE INCOME-TAX ACT IS CLAIMED. THE LD. CIT(A) DIRECTED THE ASSESSING OFF ICER TO APPORTION THE EXPENDITURE OF THE INTEREST DEBITED TO THE PROFIT A ND LOSS ACCOUNT CONSIDERING TAXABLE AS WELL AS NON-TAXABLE INCOME I.E. INTEREST INCOME WHICH IS CLAIMED AS DEDUCTION AND ALLOCATE THE INTEREST EXPENDITURE ON PROPORTIONATE BASIS. IN OUR OPINION THE APPROACH OF THE LD. CIT(A) CANNOT BE FA ULTED WITH AS THE SAME IS SUPPORTED BY THE PRINCIPLES LAID DOWN IN THE CASE O F RAJASTHAN RAJYA SAHAKARI UPBHOKTA SANGH LTD. (SUPRA). WE, THEREFORE, FIND N O REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, THE SA ME IS CONFIRM IN THE A.Y. 2007-08 AND GROUNDS TAKEN BY THE REVENUE ARE DISMIS SED. 5. FOLLOWING THE AFORESAID PRECEDENT, WHICH CONTINU ES TO HOLD THE FIELD, WE HEREBY AFFIRM THE ORDER OF THE CIT(A) AND THE REVEN UE HAS TO FAIL ACCORDINGLY. ITA NO.1834/PN/2013 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 21 ST JANUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE