Appeal details
Counselvise Citation
[2024] 101 COUNSELVISE.COM (IT) 7966 (ITAT-RAJKOT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-04-2024
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
15-01-2024
Assessment Year
2017-2018
Appeal Filed On
31-05-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted Through Virtual Court) Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Lodhika Seva Sahkari Mandali, C/o D.R. Adhia “Om Shri Padamlaya” Nr. Trikamrayji Haweli, 16- Jagnath Plot, Dr. Yagnik Road, Opp. Imperial Hotel, Rajkot-360001 PAN: AAAAL0211F (Appellant) Vs The Principal Commissioner of Income-tax-1, Rajkot, Rajkot (Respondent) Assessee Represented: Written Submission Revenue Represented: Shri Shramdeep Sinha, CIT-DR Date of hearing : 16-01-2024 Date of pronouncement : 05-04-2024 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the Revision order dated 01.02.2022 passed by the Principal Commissioner of Income Tax, Rajkot-1, arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18. ITA No. 184/Rjt/2022 Assessment Year 2017-18 I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 2 2. The Grounds of Appeal raised by the Assessee reads as under: 1. The Ld. C.I.T. has erred in law and facts in passing order U/s. 263. The order needs cancellation. 2. The Ld. C.I.T. has erred in law and facts in passing order U/s. 263 although the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The order needs cancellation. 3. The Ld. C.I.T. has erred in law and facts in not providing adequate and reasonable opportunity to the appellant. The order needs cancellation. 4. The Ld. C.L.T. has erred in law and facts in not considering the aspect that all relevant documents and information with full details were produced before the Ld. A.O. and therefore no action U/s. 263 can be levied legally. The order needs cancellation. 5. The Ld. C.I.T. has erred in law and facts in not considering the aspect that all relevant documents and information with full details were also submitted before the Ld. A.O. and therefore no action U/s. 263 can be levied legally. The order needs cancellation. 6. The Ld. C.I.T. has erred in law and facts in not considering that as per statutory position fully settled under the law, there was no scope to consider action U/s. 263. The order needs cancellation. 7. Taking into consideration the legal, statutory and factual aspect, no action U/s. 263 ought to have been taken. The same needs cancellation. 8. Without prejudice, initiation of action taken U/s. 263 is bad in law, illegal and void. The order needs cancellation. 9. Without prejudice, the action taken U/s. 263 is bad in law, illegal and void. The same needs cancellation. 10. The appellant craves leave to add/alter/amend and or substitute any/all grounds of appeal before the actual hearing takes place. 3. Today is the 10 th time of hearing of the above appeal, none appeared on behalf of the assessee. Two written submissions dated 21.11.2023 & 15.01.2024 were filed by one Mr. D.R. Adhia. On verification of the appeal records, there is no authorization given by the assessee in favour of Mr. D.R. Adhia. It is also to mention here I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 3 that Mr. D.R. Adhia never appeared before this Tribunal, though the Court proceedings are conducted through Virtual Mode for the past seven years. It is further noticed in many other cases, Mr. D.R. Adhia never appeared before this Tribunal but is of the habit of filing written submissions only, thus we do not get proper assistance from the assessee side as well as for the Authorized Representative side. 3.1. However in the written submissions, there is reliance about Rajkot Bench decisions in the case of Rajkot Jilla Sahakari Kharid Vechan Sangh wherein it was held that interest received from Co- operative Bank is allowable as deduction u/s. 80P of the Act and also relied on the following other case laws;. (i) Aliudepur Seva Sahakar Mandli Ltd. in ITA No. 269/Rjt/2022, A.Y. 2019-20 dated 24.02.2023 (ii) Antaliya Kheti Vikas Karyakari Seva Sahakari Mandali Ltd. in ITA No. 276/Rjt/2022, A.Y. 2019-20 dated 24.02.2023 (iii) Dahida Seva Sahakari Mandli Ltd. in ITA No. 277/Rjt/2022, A.Y. 2019-20 dated 24.02.2023 (iv) Nava Vaghaniya Seva Sahakar Mandli Ltd. in ITA No. 13/Rjt/2022, A.Y. 2019-20 dated 01.03.2023 3.2. It is further stated Miscellaneous Applications filed by the Revenue were been dismissed by the Hon’ble Rajkot Tribunal in the following cases: (i) Trambakpur Sahakari Mandli Ltd.- M.A. No. 10/Rjt/2023 in ITA No.23/Rjt/2022, A.Y. 2019-20 dated 08.11.2023 (ii) Nava Ujala Seva Sahakri Mandli Ltd. – M.A. No. 13/Rjt/2023 in ITA No. 20/Rjt/2022, A.Y. 2019-20 dated 08.11.2023 I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 4 (iii) Dhar Seva Sahkari Mandli Ltd. – M.A. No. 11/Rjt/2023 in ITA No. 33/Rjt/2022, A.Y. 2019-20 dated 08.11.2023 (iv) Medi Seva Sahakari Mandli Ltd. – M.A. No. 12/Rjt/2023 in ITA No. 38/Rjt/2022 A.Y. 2019-20 dated 08.11.2023 3.3. Therefore pleaded to quash the Revision order passed by PCIT and allow the Assessee appeal. 4. Per Contra Ld CIT DR Shri. Shramdeep Sinha appearing for the Revenue strongly supported the revision order passed by the Ld PCIT and filled a detailed submission as follows: “It is important to note that Hon Gujarat High Court in their decision in Katlary Kariyana (supra) has approved further improved the decision of Hon. Karnataka High Court of Totagars (2017) by clearly stating that "co-operative Banks are not species of Genus Cooperative Society." Though the issue has not yet travelled to Hon. SC, as far as Gujarat is concerned, the issue is settled by the decision of Hon. Gujarat High Court. Thus Ld. ITAT is bound by the decision of Hon. Gujarat High Court, as and when the principal question is same as stated in para 2.4 of the Katlary Kariyana (2022), repeated for ready reference: "2.4 The principal ground which was taken into consideration was as regards the deduction claimed by the assessee society in terms of provisions of Section 80P(2)(d) of the Income Tax Act, as not admissible being interest received on FDR's from the cooperative banks and nationalized banks." The appellant, Lodhika Seva Sahkari Samiti has deposited its surplus funds with the Rajkot Distrct Co- operative bank (RDC). This is borne out from the response dated 19th December 2019 by the assessee wherein at Sr. Number 5, it is informed that surplus funds are parked only in Rajkot District Co-operative bank. It is submitted that RDC (website address: https://rdcbank.org/rdc/index.php) is a full fledged bank having RBI license and is a co-operative Bank in terms of Hon. SC test in Mavilayi (supra). The relevant screen shot from the website of the RDC proclaiming that it has RBI license since 1994 is placed below: ... ..... ... I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 5 Ld. PCIT in his 263 order has relied upon the Totagars (2017) and the issue raised in 263 order is interest on FDR deposited with Banks including Co-Op Banks. The Department further relies upon Katlary Kariyana (2022), supra. 7. Thus, it is most humbly submitted that all orders of Ld. ITAT, Rajkot holding otherwise than what has been held by Hon. Gujarat High Court, including the order relied upon by the appellant as Rajkot Jilla Sahakari Kharid Vechan Sangh, ITA Nos. 49/Rjt/2022 dated 09.08.2023. In fact, it is most surprising that the submissions of department and the reliance of Department on Katlary Kariyana (2022) is unreasonably being ignored by Id. ITAT in their orders, viz order in the case of Tifls Cooperative in ITA number 115/Rjt/2023, where despite recording the reliance of department on Katlary Kariyana, Ld. ITAT has ignored the ratio-decidendi of jurisdictional High Court. It is prayed that such cases cannot act as precedent or bar for Ld. ITAT Rajkot, as these decisions have been sub- silentio on the ratio of jurisdictional HC in Katlary Kariyana (2022). In this case, such violation of judicial discipline may be avoided and appeal of the appellant may be dismissed while upholding the order of Ld. PCIT in 263. 5. We have given our thoughtful consideration and fully gone through the submission filed by the Revenue. It is appropriate to consider the jurisdictional high Court judgement in the case of Katlary Kariyana Merchant Sahkart Sarafi Mandali Ltd. Vs. ACIT (2022) 140 taxmann.com 602 (Gujarat) wherein it was held as follows: “... 11. In this context, when we look at the facts of the case on hand, it is not in dispute that the writ applicant cooperative Society is incorporated as Cooperative Society under the Gujarat Cooperative Societies act, 1961 with the main object of accepting deposits and providing credit facilities to its members. Thus, there is no doubt that the writ applicant being society engaged in providing credit facilities is entitled to the deductions available in terms of section 80P(2)(a)(i) of the Income Tax act, 1961. The writ applicant has placed on record the original computation of Income along with audit report. Bare perusal of the same reveals that the writ applicant has disclosed Gross total income of Rs.2117353 as against that I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 6 the writ applicant has disclosed deductions under Chapter VI-A of Rs. 2117353 , thereby declaring Net taxable income 'NIL'. Now, under head of Gross Total Income, the deductions (Chapter VI-A) refers to section 80P providing credit facilities to its members is shown Rs. 2121935 whereby the assessee writ applicant has claimed eligible deductions of Rs.2121935 by pressing Allowable deductions of Rs. 2117353. The Audit report of the writ applicant further explains return of Income wherein amount of Rs.18,08,444:00 is shown under the head of interest derived from investment and Rs. 69,33,052 under the head of income derived from credit. The record of limited scrutiny reveals that under original assessment, the AO has mainly examined two issues viz. (a) Sales Turnover Mismatch (b) Deduction under Chapter VI-A, wherein vide letter dated 16.05.2017, the assessee- writ applicant was called upon to justify the deductions claimed under section 80P of the IT act. That the assessee- writ applicant had submitted details on 23.06.2017, wherein in unequivocal terms clarified that "No interest received from non-member". Further, it mentions: "9. We have deposit more than 30% of the deposit accepted from the members with the other banks according to Co Operative society Act. We accepted deposit of Rs.7,94,71,817 from the members. We have to maintain fix deposit of Rs. 2,38,41,545 with other banks. As against we deposited Rs.2,96,63,500/-. Difference of Rs.58,21,955 is deposited against reserve Rs.1,04,75,974.So, we deposited less amount of Rs. 46,54.019 as per requirement under the Co operative Society Act. In other words no interest received from the surplus deposit with the banks FDR." Further, vide letter dated 13.07.2017, the assessee- writ applicant has claimed such FDR of Banks as part of business activity and had prayed for deductions under section 80P (2) of the Income Tax Act. 13. Similar issue arose for consideration before the Hon'ble High Court of Karnataka (Dharwad Bench) in the case of Principal Commissioner of Income Tax and ors. Vs. Totagars co-operative sale Society, reported in (2017) 395 ITR 611(KAR). The substantial questions of law which arose for consideration as recorded in Para1 are reproduced as under: "(I) Whether the assessee, Totagar Co-operative Sale Society, Sirsi, is entitled to 100% deduction under Section 80P(2)(d) of the Income Tax Act, 1961 (for short 'the Act') in respect of whole of its income by way of interest earned by it during the relevant Assessment Years from 2007-2008 to 2011-2012 on the deposits or investments I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 7 made by it during these years with a Co-operative Bank, M/s. Kanara District Central Co-operative Bank Limited? (II) Whether the Supreme Court decision in the case of the present respondent assessee, Totgar Co-operative Sale Society Limited itself rendered on 08th February 2010, in Tot- gar's Co-operative Sale Society Limited v. ITO , reported in MANU/SC/0095/2010: (2010) 322 ITR 283 SC : (2010) 3 SCC 223 for the preceding years, namely Assessment Years 1991-1992 to 1999-2000 (except Assessment Year 1995-1996) holding that such interest income earned by the assessee was taxable under the head 'Income from Other Sources' under Section 56 of the Act and was not 100% deductible from the Gross Total Income under Section 80P of the Act, is not applicable to the present Assessment Years 2007-2008 to 2011-2012 involved in the present appeals and therefore, whether the Income Tax Appellate Tribunal as well as CIT (Appeals) were justified in holding that such interest income was 100 percent deductible under section 80P(2)(d) of the Act?" That while holding the aforesaid issues in favour of the revenue department, the Court followed the decision of the Hon'ble Supreme Court in the case of same assessee which was later on followed by this Court in the case of State Bank of India Vs. CIT, reported in MANU/GJ/1053/2016 : (2016) 389 ITR 578 (Guj), relevant paras are reproduced as under : "16. In case where the co-operative society is a bank, one of its objects would be to carry on the general business of banking. Like other banks, money would be its stock-in-trade or circulating capital and its normal business is to deal in money and credit. The business of such a bank does not consist only of receiving deposits and lending money to its members or such other societies as are mentioned in the objects. When such a society lends out its monies so that they may be readily available to meet the demands of its depositors if and when they arise, it is a legitimate mode of carrying on its banking business. In case of a credit society like the present one, the business of the society is limited to providing credit to its members and the income that is earned from providing such credit facilities to its members is deductible under section 80P(2)(a)(i) of the Act. However, investing its surplus funds with the State Bank of India is no part of the business of the appellant of providing credit to its members and hence, it cannot be said that the interest income derived from depositing surplus funds with the I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 8 State Bank of India is profits and gains of business attributable to the activities of the appellant society. The character of the interest is different from the income attributable to the business of the society of providing credit facilities to its members. The interest in- come derived from investing surplus funds with the State Bank of India must be closely linked with the business of providing credit facilities for it to be held that it is attributable to the business of the assessee. Therefore, the profits and gains can be said to be directly attributable to the business of providing credit facilities to its members if there is a direct and proximate connection between the profits gains and the business of the appellant. In the present case there is no obligation upon the appellant to invest its surplus funds with the State Bank of India. In- vesting surplus funds in a bank is no part of the business of the assessee of providing credit facilities to its members. Therefore, it is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India not being attributable to the business carried on by the appellant, cannot be deducted under section 80P(2)(a)(i) of the Act. If the appellant wants to avail of the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d) of the Act. 17. Section 71 of the Gujarat Co-operative Societies Act, 1961 permits a society to invest or deposit its fund in the State Bank of India. Therefore, while investment in the State Bank of India is permissible under section 71 of that Act, there is no statutory obligation cast upon the appellant to deposit funds as a part of its business. The said provision also permits investment of funds in any co-operative bank or any banking company approved for this purpose by the Registrar on such conditions as the Registrar may from time to time impose. However, insofar as the provisions of the Income Tax Act are concerned, under section 80P(2)(d) thereof, it is only the in- come by way of interest or dividends derived by a cooperative society from its investments with any other cooperative society which is required to be deducted while computing the total income of the assessee." Thus, following the decision of the Hon'ble Supreme Court in the case of Totagar's Co-operative Sale Society ltd., (2010) 322 ITR 283(SC) it was held that interest earned from investments made in any bank, not being co- operative society, is not deductible under section 80P(2) (d) of the act. I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 9 14. This Court further finds that by virtue of amendment in section 194A(3)(v) of the Income tax act, it has also excluded the cooperative banks from the definition of "co-operative society" by the Finance act, 2015. The High Court of Karnataka has taken note of this amendment in the case of Totagars Co-op/sale society (Supra) (2017) 395 ITR (KAR) thereby holding that the effect of the aforesaid amendment explicitly makes clear intention of legislation that co-operative banks are not specie of genus co-operative society, which would entitled to exemption or deduction under the special provisions of Chapter VI-A in the form of section 80P of the Act. 15. In view of aforesaid settled legal position, and having held that the allowance of deduction of the income derived by way of interest from the investment in the form of FDR's with other banks was incorrect ... ” 6. After considering the Jurisdictional High Court judgements, we do not find any infirmity in the Revision order passed by the Ld. PCIT which does not warrant any interference. Thus the grounds raised by the assessee is devoid of merits liable to be rejected. 7. In the result the appeal filed by the assessee is hereby dismissed. Order pronounced in the open court on 05-04-2024 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 05/04/2024 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) I.T.A No. 184/Rjt/2022 A.Y. 2017-18 Page No LOdhika Seva Sahkari Mandali vs. PCIT 10 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, राजकोट
