M/s. The Government Servants Co.Operative Credit Society Ltd., Vadodara V. The ITO, Ward-3(1)(5), Vadodara

ITA 1869/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9732 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 11-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD TANVANI
• Keywords: Business income; Initiation of penalty proceedings; Co-operative Credit Society
• Section: 234B; 80P; 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.1869/AHD/2017 (ASSESSMENT YEAR : 2014-15) THE GOVERNMENT SERVANTS CO-OPERATIVE CREDIT SOCIETY SANSTHA VASAHAT, RAOPURA, VADODARA 390 006. VS. THE INCOME TAX OFFICER, WARD 3(1)(5), AAYAKAR BHAVAN, RACE COURSE, VAODARA. [ PAN NO. AABAT 5146 J ] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY : SHRI VINOD TANVANI, SR. D.R. DATE OF HEARING 12.06.2019 DATE OF PRONOUNCEMENT 01.07.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER DATED 30.05.2017 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS) 3, VADODARA ARISING OUT OF THE ORDER DATED 28.07.2016 PASSED BY THE INCOME TAX OFFICER, WARD 3(1)(5), VADODARA UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS TO THE ACT) FO R ASSESSMENT YEAR 2014-15 WITH THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - 3, VADODARA ['THE CIT(A)'] ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE LEARNED INCOME TAX OFFICER, WARD- 3(1)(5), VADODARA ('THE AO') IN TREATING RS. 1,51,81,968/- A S INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 2 - 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW I N CONFIRMING THE ACTION OF THE AO IN NOT ALLOWING DEDUCTION U/S. 80P OF THE ACT OF RS. 1,51,81,968/-. 3. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN T AXING THE GROSS AMOUNT INSTEAD THE NET AMOUNT. 4. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN C ONFIRMING THE ACTION OF AO IN CHARGING INTEREST 234B OF THE ACT. 5. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF AO IN CHARGING INTEREST 234C OF THE ACT. 6. YOUR APPELLANT CRAVES THE RIGHT TO ADD TO OR ALT ER, AMEND, SUBSTITUTE, DELETE OR MODIFY ALL OR ANY OF THE ABOV E GROUNDS OF APPEAL. 2. GROUND NO.1, 2 AND 3 RELATES TO THE ORDER PASSED BY THE LEARNED CIT(A) CONFIRMING THE ORDER IN TREATED RS.1,51,81,9 68/- AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. TAXING OF GROSS AMOUNT INSTEAD OF THE NET INCOME HAS ALSO BEEN QUESTIONED BEFORE US. 3. THE ASSESSEE, A REGISTERED CO-OPERATIVE SOCIETY UNDER THE GUJARAT CO- OPERATIVE SOCIETY ACT, 1960, ENGAGED IN ACCEPTING D EPOSITS AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS. DURING THE COURSE OF ASSESSMENT PROCEEDING, FROM VE RIFICATION OF THE DETAILS FILED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE EARNED INTEREST INCOME OF RS.1,51,81,968/- FROM NATIONALIZED BANK. THE ASS ESSEE FURTHER CLAIMED DEDUCTION UNDER CHAPTER VIA UNDER SECTION 80P(2) OF THE ACT OF RS.1,80,34,441/-. BUT THE INTEREST INCOME WAS FOUND NOT TO HAVE BEEN DERIVED BY THE ASSESSEE FROM ITS ACTIVITY OF PROVIDING CRED IT FACILITIES TO ITS MEMBERS AND ULTIMATELY, THEREFORE, THE SAME WAS CONSIDERED AS INCOME FROM OTHER ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 3 - SOURCES AND TAXED UNDER SECTION 56 OF THE ACT AND ACCORDINGLY THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) HAS BEEN DISAL LOWED. IN VIEW OF THE JUDGMENT PASSED BY THE HONBLE GUJARAT HIGH COURT I N THE MATTER OF STATE BANK OF INDIA-VS-CIT, WHICH WAS CONFIRMED IN APPEAL . 4. AT THE TIME OF THE HEARING OF THE INSTANT APPEAL THOUGH NONE APPEARED BUT THE WRITTEN SUBMISSION FILED BY THE ASSESSEE FA IRLY STATED THAT THIS GROUND OF APPEAL IS COVERED AGAINST THE ASSESSEE IN VIEW OF T HE SAID JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA-VS-CIT. HOWEVER, SO FAR AS THE 2 ND PART OF THE ORDER CHALLENGING THE DISALLOWANCE ON THE GROSS AMOUNT INSTEAD OF NET AMOUNT, THE ASSE SSEE RELIED ON THE JUDGMENT PASSED BY THE HONBLE ITAT IN ITA NO.108/AHD/2017 F OR A.Y.2013-14 IN ASSESSEES OWN CASE PASSED IN FAVOUR OF THE ASSESSE E. THE LEARNED DR, HOWEVER, NOT RAISED ANY OBJECTION IN THIS REGARD. 5. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. IT APPEARS THAT IN ITA NO.108/AHD/2017, HON BLE CO-ORDINATE BENCH OBSERVED AS FOLLOWS: 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE IS A CO-OPERATIVE SOCIETY E NGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT INCLUDING THE AMOUNT OF INTEREST OF RS. 1,18,21,506/- (NATIONALIZED BANK RS. 1,16,54,552/- AND COOPERATIVE BANK RS. 1,6 6,954/-) AN AMOUNT OF INVESTED IN THE FIXED DEPOSITS. AFTER THE PERUSAL O F MATERIAL ON RECORDS AND FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ASSE SSEE IS ENTITLED FOR DEDUCTION U/S. 80P(2)(A)(I) ON THE PROFIT AND GAINS OF BUSINE SS ATTRIBUTABLE TO THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND T HE ASSESSING OFFICER HAS CORRECTLY TREATED THE INTEREST INCOME EARNED FROM B ANKS/CO-OPERATIVE BANKS AMOUNTING TO RS. 1,18,21506 AS INCOME FROM OTHER SO URCES U/S. 56 OF THE ACT. IN THIS REGARD, WE PLACE RELIANCE ON THE DECISION O F THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA VS. C IT (2016) 72 TAXMAN.COM ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 4 - 64 (GUJ.) AND A NUMBER OF JUDICIAL PRONOUNCEMENTS O F THE CO-ORDINATE BENCHES OF THE ITAT. WE HAVE NOTICED THAT ON 29.08. 2018 THE COORDINATE BENCH OF THE ITAT IN A COMBINED ORDER IN RESPECT OF FOLLOWING CASES:- SL. NO. ITA NO. A.Y. ASSESSEE REVENUE 1 1992/AHD/2017 2014-15 THE NARSANDA MERCANTILE CO.OP. CREDIT SOCIETY LTD. DCIT, NADIDAD 2 1313/AHD/2018 2015-16 THE SANT TALUKA TEACHERS CO-OP. CREDIT SOCIETY LTD. ACIT, PANCHM AHAL CIRCL E, GODHRA 3 1314/AHD/2018 2015-16 THE SATYAPRAKASH CO-OP. CREDIT SOCIETY LTD ACIT, PANCHM AHAL CIRCL E, GODHRA 4 1295/AHD/2018 2015-16 SHRI FRIENDS COOP. CREDIT SOCIETY LTD ITO, WARD3(1)(2), VADODARA 5 1296/AHD/2018 2015-16 SHRI SHRAMJIVI NAGRIK SAHAKARI MANDLI LTD ITO, WD3(1)(2), VADODARA ON IDENTICAL ISSUES AND FACTS HAS HELD AS UNDER:- '7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD CAREFULLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER HAS NOTICED T HAT IN ADDITION TO THE INTEREST INCOME EARNED ON LOAN AND ADVANCES TO ITS MEMBERS, THE ASSESSE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON I NTEREST INCOME EARNED FROM FIXED DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK A ND COOPERATIVE BANKS. AS PER SECTION 80P(2)(A)(I) OF THE ACT THE INTEREST IN COME EARNED ON PROVIDING CREDIT FACILITY TO ITS MEMBERS IS DEDUCTIBLE U/S. 8 0P(2)(A)(I) OF THE ACT. AFTER PERUSAL OF THE AFORESAID PROVISION OF THE ACT WE OB SERVE THAT DEDUCTION U/S 80P(2)(A)(I) IS NOT AVAILABLE ON THE INTEREST EARNE D ON DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. WE FIND THAT THE HONBLE JURIS DICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVENU E VIDE STATE BANK OF INDIA VS. CIT (2016) 72 TAXMANN.COM 64 (GUJARAT) WHEREIN IT IS HELD THAT INTEREST INCOME ON DEPOSIT PLACED WITH THE COMMERCIAL BANKS IS NOT EXEMPT U/S. 80P(2)(A)(I) OF THE ACT. IN RESPECT OF THE CLAIM OF THE LD. COUNSEL THAT INTEREST EARNED FROM INVESTMENT OF SURPLUS FUNDS WITH THE CO OPERATIVE BANK IS ENTITLED FOR DEDUCTION U/S 80P(2)(D) OF THE ACT WE HAVE NOTI CED THAT AS PER SECTION 80P(2)(D) OF THE ACT, THE WHOLE OF INTEREST AND DIV IDEND INCOME DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENT IN ANY OTH ER CO-OPERATIVE SOCIETY IS ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 5 - DEDUCTIBLE U/S. 80P(2)(D). WE FIND THAT THE HONBLE HIGH COURT OF KARNATAKA, IN THE CASE OF (2017) 83 TAXMANN.COM 140 (KAR) PRIN CIPAL CIT VS. TATAGARS CO-OPERATIVE SALE SOCIETY ON IDENTICAL ISSUE AND FA CTS HAS HELD THAT IT IS ONLY PRIMARY AGRICULTURAL CREDIT SOCIETY WITH ITS LIMITE D WORK OF PROVIDING CREDIT FACILITIES TO ITS MEMBER WHICH IS GOVERNED BY AMBIT AND SCOPE OF DEDUCTION U/S. 80P AND FURTHER STATED THAT INTEREST INCOME EA RNED FROM SURPLUS DEPOSIT WITH CO-OPERATIVE BANK IS NOT ENTITLED FOR DEDUCTIO N 80P(2)(D). THE RELEVANT PART OF THE DECISION OF THE HONBLE HIGH COURT OF K ARNATAKA, IN THE CASE OF (2017) 83 TAXMANN.COM 140 (KAR) PRINCIPAL CIT VS. T ATAGARS CO-OPERATIVE SALE SOCIETY ON IDENTICAL ISSUE AND FACTS IS REPROD UCED AS UNDER:- ADMITTEDLY AND UNDOUBTEDLY, THE ASSESSEE IS A CO-O PERATIVE SOCIETY ENGAGED MAINLY IN THE ACTIVITY OF MARKETING OF AGRI CULTURAL PRODUCES GROWN BY ITS MEMBERS. THE ASSESSEE CO-OPERATIVE SOC IETY ALSO ACCEPTS DEPOSITS FROM ITS MEMBERS AND PROVIDES CREDIT FACIL ITY TO ITS MEMBERS, RUNS KIRANA STORES, RICE MILLS, LIVE STOCKS, VAN SE CTION, MEDICAL SHOPS, LODGING, PLYING AND HIRING OF GOODS CARRIAGE, ETC. [PARA 10] THE ASSESSMENT YEARS INVOLVED IN THE INSTANT APPEALS AR E ASSESSMENT YEARS 2007-08 TO 2011-12. THE BONE OF CONTENTION IS THAT THE DEDUCTION UNDER SECTION 80P(2) IS NOW CLAIMED BY THE ASSESSEE UNDER SECTION 80P(2)(D) AND NOT UNDER SECTION 80P(2)(A) OF THE AC T. THE REASON IS THAT NOW THE INVESTMENTS AND DEPOSITS AFTER THE SUP REME COURT'S DECISION AGAINST THE ASSESSEE IN TOTGAR'S CO-OPERAT IVE SALE SOCIETY LTD. V. ITO [2010] 322 ITR 283/188 TAXMAN 282 (SC), THE ASSESSEE HEREIN HAS SHIFTED THE DEPOSITS AND INVESTMENTS FRO M SCHEDULE BANKS TO CO-OPERATIVE BANK AND SUCH CO-OPERATIVE BANK IS ESSENTIALLY A COOPERATIVE SOCIETY ALSO AND CLAUSE (D) ALLOWS DEDU CTION OF INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE ASSESSE E CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPER ATIVE SOCIETY. [PARA 11] THE SHEET ANCHOR OF THE CONTENTION OF THE ASSESSEE MISSES TWO ESSENTIAL POINTS REQUIRED FOR CLAIMING THE DEDU CTION FROM GROSS TOTAL INCOME FOR A CO-OPERATIVE SOCIETY; (I) THAT T HE CHARACTER OR NATURE OF INCOME, NAMELY INTEREST ON INVESTMENTS OR DEPOSI TS, DOES NOT CHANGE IRRESPECTIVE OF THE FACT WHETHER IT IS EARNED OR RE CEIVED FROM A SCHEDULE BANK OR CO-OPERATIVE BANK, (II) THAT WHAT THE SUPREME COURT HELD IN THE CASE OF THE ASSESSEE ITSELF, AGAI NST ASSESSEE, WAS THAT SUCH INTEREST INCOME ON ITS SURPLUS AND IDLE FUNDS NOT IMMEDIATELY REQUIRED FOR ITS BUSINESS, IS NOT INCOME FROM BUSIN ESS TAXABLE UNDER SECTION 28 OF THE ACT, BUT WAS TAXABLE AS 'INCOME F ROM OTHER SOURCES' UNDER SECTION 56, WHEREAS FOR AVAILING THE EXEMPTIO N OR 100 PER CENT DEDUCTION UNDER SECTION 80P, THE INCOME IS SPECIFIE D IN CLAUSES (A) TO (F) OF SUB SECTION (2) OF SECTION 80P WHICH SHOULD BE ITS BUSINESS OR OPERATIONAL INCOME. [PARA 12] WHAT SECTION 80P(2)(D ) WHICH WAS THOUGH NOT SPECIFICALLY ARGUED AND CANVASSED BEFORE THE SUPREME ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 6 - COURT, ENVISAGES IS THAT SUCH INTEREST OR DIVIDEND EARNED BY AN ASSESSEE CO-OPERATIVE SOCIETY SHOULD BE OUT OF THE INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY. THE WORDS 'CO-OPERATIVE BANKS' ARE MISSING IN CLAUSE (D) OF SUB SECTION (2) OF SECTION 80P. EVEN THOUGH A COOPERATIVE BANK MAY HAVE THE CORPORATE BODY OR SKE LETON OF A CO- OPERATIVE SOCIETY BUT ITS BUSINESS IS ENTIRELY DIFF ERENT AND THAT IS THE BANKING BUSINESS, WHICH IS GOVERNED AND REGULATED B Y THE PROVISIONS OF THE BANKING REGULATION ACT, 1949. ONLY THE PRIMA RY AGRICULTURAL CREDIT SOCIETY WITH THEIR LIMITED WORK OF PROVIDING CREDIT FACILITY TO ITS MEMBERS CONTINUED TO BE GOVERNED BY THE AMBIT AND S COPE OF DEDUCTION UNDER SECTION 80P OF THE ACT. [PARA 13] T HE BANKING BUSINESS, EVEN THOUGH RUN BY A CO-OPERATIVE BANK IS SOUGHT TO BE EXCLUDED FROM THE BENEFICIAL PROVISIONS OF EXEMPTIO N OR DEDUCTION UNDER SECTION 80P OF THE ACT. THE PURPOSE OF BRINGI NG ON THE STATUTE BOOK SUB-SECTION (4) IN SECTION 80P WAS TO EXCLUDE THE APPLICABILITY OF SECTION 80P ALTOGETHER TO ANY COOPERATIVE BANK AND TO EXCLUDE THE NORMAL BANKING BUSINESS INCOME FROM SUCH EXEMPTION/ DEDUCTION CATEGORY. THE WORDS USED IN SECTION 80P(4) ARE SIGN IFICANT. THEY ARE: 'THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY CO- OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CR EDIT SOCIETY.' THE WORDS 'IN RELATION TO' CAN INCLU DE WITHIN ITS AMBIT AND SCOPE EVEN THE INTEREST INCOME EARNED BY THE ASSESSEE, A CO- OPERATIVE SOCIETY FROM A CO-OPERATIVE BANK. THIS EX CLUSION BY SECTION 80P(4) EVEN THOUGH WITHOUT ANY AMENDMENT IN SECTION 80P(2)(D) IS SUFFICIENT TO DENY THE CLAIM OF THE ASSESSEE FOR DE DUCTION UNDER SECTION 80P(2)(D). THE ONLY EXCEPTION IS THAT OF A PRIMARY AGRICULTURAL CREDIT SOCIETY. THE DEPOSITORY I.T.A NO. 108/AHD/2017 A.Y. 2013-14 PAGE NO THE GOVERNMENT SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. ITO 5 KANARA DISTRICT CENTRAL BANK LIMITED IN THE PRESENT CASE I S ADMITTEDLY NOT SUCH A PRIMARY AGRICULTURAL CREDIT SOCIETY. [PARA 1 4] THE AMENDMENT OF SECTION 194A(3)(V) EXCLUDING THE CO-OPERATIVE BA NKS FROM THE DEFINITION OF 'COOPERATIVE SOCIETY' BY FINANCE ACT, 2015 AND REQUIRING THEM TO DEDUCT TAX AT SOURCE UNDER SECTION 194A ALS O MAKES THE LEGISLATIVE INTENT CLEAR THAT THE CO-OPERATIVE BANK S ARE NOT THAT SPECIE OF GENUS CO-OPERATIVE SOCIETY, WHICH WOULD BE ENTIT LED TO EXEMPTION OR DEDUCTION UNDER THE SPECIAL PROVISIONS OF CHAPTER V IA IN THE FORM OF SECTION 80P OF THE ACT. [PARA 15] IF THE LEGISLATIV E INTENT IS SO CLEAR, THEN IT CANNOT BE CONTENDED THAT THE OMISSION TO AM END CLAUSE (D) OF SECTION 80P(2) OF THE ACT AT THE SAME TIME IS FATAL TO THE CONTENTION RAISED BY THE REVENUE BEFORE THIS COURT AND SUB SIL ENTIO, THE DEDUCTION SHOULD CONTINUE IN RESPECT OF INTEREST INCOME EARNE D FROM THE CO- OPERATVE BANK, EVEN THOUGH THE SUPREME COURT'S DECI SION IN THE CASE OF ASSESSEE ITSELF IS OTHERWISE. [PARA 16] AS STATE D ABOVE, IT IS THE CHARACTER AND NATURE OF INCOME WHICH DETERMINES ITS TAXABILITY OR ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 7 - EXEMPTION FROM TAXABILITY. IT IS NEEDLESS TO SAY TH AT THE PROVISIONS RELATING TO EXEMPTION AND DEDUCTION NEED TO BE STRI CTLY CONSTRUED AND NO LIBERAL INTERPRETATION OR INTENDMENT CAN BE INFE RRED IN SUCH PROVISIONS. WHAT WAS CLEARLY HELD TO BE NOT EXEMPT AND NOT DEDUCTIBLE UNDER SECTION 80P(2)(A) BY THE SUPREME COURT IN THE CASE OF ASSESSEE, CANNOT BE CONTRARILY HELD AS EXEMPTED AND DEDUCTIBL E NOW FOR THESE YEARS, MERELY BECAUSE THE DEPOSITORY BANK, WITH WHO M THE INVESTMENTS WERE MADE BY THE ASSESSEE HAPPENS TO BE A CO-OPERAT IVE BANK. ONE CANNOT APPRECIATE THIS DISTINCTION SO AS NOT TO APP LY THE BINDING PRECEDENT OF THE SUPREME COURT FOR SUBSEQUENT YEARS MERELY ON ACCOUNT OF THE CHANGE OF THE BANK WHERE SUCH DEPOSI TS WERE MADE BY THE ASSESSEE, ALL OTHER FACTS REMAINING THE SAME, P ARTICULARLY THE NATURE AND CHARACTER OF THE INCOME EARNED BY IT. TH E INTEREST INCOME OF ASSESSEE CONTINUES TO BE NOT ATTRIBUTABLE TO ITS BUSINESS OPERATIONS EVEN IN THESE SUBSEQUENT YEARS. [PARA 17] THE CHARA CTER OF INCOME DEPENDS UPON THE NATURE OF ACTIVITY FOR EARNING THA T INCOME AND THOUGH ON THE FACE OF IT, THE SAME MAY APPEAR TO BE FALLING IN ANY OF THE SPECIFIED CLAUSES OF SECTION 80P(2) OF THE ACT, BUT ON A DEEPER ANALYSIS OF THE FACTS, IT MAY BECOME INELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT. HENCE, THE INCOME BY WAY OF INTEREST EARNED BY DEPOSIT OR INVESTMENT OF IDLE OR SURPLUS FUNDS D OES NOT CHANGE ITS CHARACTER IRRESPECTIVE OF THE FACT WHETHER SUCH INC OME OF INTEREST IS EARNED FROM A SCHEDULED BANK OR A CO-OPERATIVE BANK AND, THUS, CLAUSE (D) OF SECTION 80P(2) OF THE ACT WOULD NOT A PPLY IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE PERSON OR BO DY CORPORATE FROM WHICH SUCH INTEREST INCOME IS RECEIVED WILL NOT CHA NGE ITS CHARACTER, VIZ. INTEREST INCOME NOT ARISING FROM ITS BUSINESS OPERATIONS, WHICH MADE IT INELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. [PARA 23] IN VIEW OF THE AFORESAID, THE APPEAL FILED BY T HE REVENUE DESERVES TO BE ALLOWED.: [PARA 24] IN THE LIGHT OF THE ABOVE FACTS AND LEGAL FINDINGS WE CONSIDER THAT THE INCOME BY WAY OF INTEREST EARNED BY DEPOSIT OR INVESTMENT OF IDLE OR SURPLUS DOES NOT CHANGE ITS CHARACTER IRRESPECTIVE OF THE FACT WHETH ER SUCH INCOME OF INTEREST IS EARNED FROM A SCHEDULE BANK OR A CO-OPERATIVE BANK AND THUS CLAUSE (D) OF SECTION 80P(2) OF THE ACT WOULD NOT APPLY IN THE FA CTS AND THE CIRCUMSTANCES OF THE PRESENT CASE. THE ASSESSEE HAS EARNED INTEREST INCOME ON SURPLUS FUNDS DEPOSITED WITH NATIONALIZED BANK AND THE COOPERATIV E BANK AND THE SAME IS NOT ATTRIBUTABLE TO BUSINESS OPERATION OF THE ASSES SEE CO-OPERATIVE SOCIETY AS INTEREST EARNED ON THE FUND INVESTED WITH THE COMME RCIAL BANK IS NOT OPERATIONAL INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. WE CONSIDER THAT EARNING OF SUCH INTEREST INCOME EITHE R FROM NATIONALIZED OR COOPERATIVE BANK WILL NOT CHANGE NATURE AND CHARACT ER OF THE INCOME. ON PERUSAL OF THE PROVISION OF SECTION WE OBSERVE SUCH DEDUCTION IS PERTINENT TO ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 8 - THE OPERATIONAL INCOME EARNED BY THE CO-OPERATIVE S OCIETY FROM THE ACTIVITIES IN WHICH IT IS ENGAGED AND NOT THE OTHER INCOME WHI CH ACCRUES TO THE SOCIETY IN THE FORM OF INTEREST FROM INVESTMENT OF SURPLUS FUNDS WITH THE COOPERATIVE BANK. AFTER CONSIDERING THE FACTS AND LEGAL FINDING , WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE, THEREFORE, THE SAME IS DISMISSED. HOWEVER AS DECIDED IN THE VARIOUS DECISION OF THE CO-ORDINATE BENCHES OF ITAT AHMEDABAD WE DIRECT THE ASSESSING OFFICER TO ALLOW PRO RATA EXPENSES IN RESPECT OF INTEREST EARNED FROM DEPOSIT HELD WITH N ATIONALIZED BANK TO THE ASSESSEE FOR COMPUTING THE DEDUCTION U/S. 80P AFTER EXAMINING/VERIFICATION AND AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURP OSES. 8. ASSESSEES GROUND OF APPEAL REGARDING LEVY OF IN TEREST U/S. 234A/B/C IS OF GENERAL NATURE WHICH IS TO BE CHARGED MANDATORY AS PER PROVISION OF THE ACT. THEREFORE, THE SAME IS DISMISSED. THE OTHER GROUND OF APPEAL AGAINST INITIATION OF PENALTY PROCEEDINGS U/S. 271C IS PREM ATURE WHICH DO NOT REQUIRE ANY ADJUDICATION AT THIS STAGE, THEREFORE, THE SAME IS ALSO DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 5. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH OF THE ITAT AS SUPRA, WE DO NOT FIND ANY MERIT IN THE APPE AL OF THE ASSESSEE, THEREFORE, THE SAME IS DISMISSED. HOWEVER , WE DIRE CT THE ASSESSING OFFICER TO ALLOW PRO RATA EXPENSES IN RESPECT OF INTEREST EARN ED FROM DEPOSIT HELD WITH NATIONALIZED BANK AND COOPERATIVE BANK FOR COMPUTIN G THE DEDUCTION U/S. 80P AFTER EXAMINING/VERIFICATION AND AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL OF THE ASSES SEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. RESPECTFULLY RELYING UPON THE JUDGMENT PASSED BY TH E HONBLE CO- ORDINATE BENCH, WE FIND NO INFIRMITY IN THE ORDER I MPUGNED PASSED BY THE FIRST APPELLATE AUTHORITY SO FAR AS TO WARRANT INTERFEREN CE. THE QUESTION IS ACCORDINGLY ANSWERED IN THE AFFIRMATIVE, I.E. IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. CONSEQUENTLY, THE APPEAL FAILS AND ACCORDINGLY DISMISSED. 6. GROUND NO.4, 5 & 6 THE ISSUES RAISED BY THE ASSESSEE IN GROUND NO. 4, 5 & 6 ARE EITHER GENERAL OR CONSEQUENTIAL IN NATURE . THEREFORE NO SEPARATE ITA NO.1869/AHD/2017 THE GOVT. SERVANTS CO-OP. CREDIT SOCIETY LTD. VS. I TO ASSESSMENT YEAR 2014-15 - 9 - ADJUDICATION IS REQUIRED. THEREFORE, THE GROUNDS RA ISED BY THE ASSESSEE ARE DISMISSED. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 01/07/2019 SD/- SD /- ( PRAMOD KUMAR ) ( M S. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 01/07/2019 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-XV, AHMEDABAD. 5. , , / DR, ITAT, AHMEDABAD 6. !' #$ / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , !' / ITAT, AHMEDABAD 1. DATE OF DICTATION 13.06.2019 (COMPUTER DICTATION) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14.06.2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 26.06.2019 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER