The Sarvoday Credit Cum Consumers Co-operative Society Ltd., Banaskantha V. The ACIT,B K.Circle, Palanpur

ITA 1875/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7892 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 23-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Question of law

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD , , BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO.1875/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) THE SARVODAY CREDIT CUM CONSUMERS CO-OPERATIVE SOCIETY LTD. OPP. NAYA MANDIR AT: DEESA DIST: BANASKANATHA 385 535 / VS. THE ACIT B.K. CIRCLE, PALANPUR ' ./ ./ PAN/GIR NO. : AAAAT 1649 R ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '%( / APPELLANT BY : SHRI TEJ SHAH, AR &''%)( / RESPONDENT BY : SHRI V.K. SINGH, SR.DR *+), / DATE OF HEARING 21/06/2018 -./0), / DATE OF PRONOUNCEMENT 11 / 07 /2018 / O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL HAS BEEN FILED BEFORE US BY TH E ASSESSEE AGAINST THE ORDER DATED 23.04.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-4, AHMEDABAD [LD.CIT(A) IN SHORT] FOR ASSESSMENT YEAR (AY) 2011 -12 ARISING OUT OF THE ORDER DATED 30.01.2014 PASSED BY THE ACIT, B.K. CIRCLE, PALANP UR WITH THE FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING THE ORDER U/S.143(3) THE ACT OF THE A.O. WHO HAS COMPUTED THE INCOME AT RS.23,23,030/- AS AGAINST NIL INCOME OF THE ASSESSEE. 2. THE LEARNED CIT(A) HAS WITHOUT CONSIDERING THE MERIT OF THE CASE DISMISSED THE APPEAL OF THE APPELLANT AND HAS NOT GIVEN RELIEF ON ACCOUN T OF ADDITION MADE BY THE A.O. IN RESPECT - 2 - ITA NO.1875AHD/2015 THE SARVODAY CREDIT CUM CONSUMERS CO-OPERATIVE SOCIETY LTD. VS. ACIT ASST.YEAR 2011-12 OF THE DEDUCTION OF RS.22,52,868/- AND RS.4,44,200/ - BEING INTEREST AND DIVIDEND INCOME RESPECTIVELY RECEIVED FROM BANAS CO.OPERATIVE BANK AND WHICH WAS CLAIMED THE APPELLANT UP TO GROSS TOTAL INCOME I.E. RS.22,51,000/- UNDER SECTION 80P(2)(A)(D) OF THE INCOME-TAX ACT, 1961. 3. THE LEARNED CIT(A) ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING INTEREST CHARGED U/S.234A/B/C OF THE ACT. 2. THE ISSUES RAISED IN THE GROUNDS ARE INTER-RELA TED AND THEREFORE ARE TAKEN TOGETHER FOR THE SAKE OF BREVITY. 3. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A CREDIT CO-OPERATIVE SOCIETY REGISTERED UNDER GUJARAT CO-OPERATIVE SOCIETIES ACT , 1961 CARRYING ON BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE A SSESSEE FILED ITS RETURN ON 29.11.2011 DECLARING TOTAL INCOME OF RS.NIL. THE ASSESSEE FUR THER CLAIMED DEDUCTION OF RS.22,51,000/- U/S.80P(2)(A)(I) & 80P(2)(D) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') ON ACCOUNT OF INTEREST I NCOME FROM THE BANASKANTHA DIST.CENTRAL CO-OPERATIVE BANK LTD. AND DIVIDEND INCOME OF RS.4, 44,200/- AGGREGATING TO RS.26,97,068/-. A SHOW-CAUSE NOTICE WAS ISSUED ON 17.01.2014 UPON THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS ASKING FOR REPLY AS TO W HY DEDUCTION CLAIMED U/S.80P(2)(A)(I) & 80P(2)(D) OF THE ACT SHOULD NOT BE WITHDRAWN AS P ER THE AMENDMENT INSERTED W.E.F. 01.04.2007. THE ASSESSEE REPLIED THAT THE ASSESSE E IS A CO-OPERATIVE SOCIETY AND THE BANAS CO-OPERATIVE BANK (IN SHORT BANAS) IS ALSO A CO-OPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS, THEREFORE INTEREST INCOME AND DIV IDEND INCOME RECEIVED FROM IT IS TOTALLY EXEMPT FROM TAX. THE SAID BANAS IS REGISTERED WITH THE GUJARAT CO-OPERATIVE SOCIETY ACT, 1961 COPY WHEREOF WAS ALSO SUBMITTED BEFORE THE LD . AO ALONG WITH THE SUBMISSION MADE BY THE ASSESSEE. THE ASSESSEE FURTHER SUBMITTED BE FORE THE AO THAT THE PAYER I.E. BANAS CO-OPERATIVE BANK AND THE PAYEE BEING THE ASSESSE E, BOTH ARE CO-OPERATIVE SOCIETIES, HENCE, THE DEDUCTION OF INTEREST AND DIVIDEND OF RS .26,97,068/- IS DEDUCTIBLE U/S.80P(2)(D) OF THE ACT EVEN AFTER THE AMENDMENT OF THE PROVISIO N ON 01.04.2007. HOWEVER, THE - 3 - ITA NO.1875AHD/2015 THE SARVODAY CREDIT CUM CONSUMERS CO-OPERATIVE SOCIETY LTD. VS. ACIT ASST.YEAR 2011-12 ASSESSING OFFICER WAS NOT SATISFIED WITH THE CONTE NTION MADE BY THE ASSESSEE IN ITS REPLY DATED 27.01.2014. SINCE THE BANASKANTHA DIST.CENT RAL CO-OPERATIVE BANK LTD. IS A CO- OPERATIVE BANK, THE ASSESSEE, ACCORDING TO THE AO IS NOT ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) & 80P(2)(D) AND ADDED RS.23,23,034 /- TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER PAS SED BY THE LD. AO AND HENCE THE APPEAL BEFORE US. 5. AT THE TIME OF HEARING OF THE APPEAL, THE LD. RE PRESENTATIVE FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ASSESSEE IS A CO-OPERA TIVE CREDIT SOCIETY WHICH IS DISTINCT FROM THE CO-OPERATIVE BANK. IT IS A CREDIT-CUM-CON SUMER CO-OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, PROF IT OF SUCH ACTIVITY OF PROVIDING CREDIT FACILITIES TO THE MEMBERS IS ALLOWABLE DEDUCTION U/ S.80P(2)(A)(I) & SECTION 80P(2)(D) OF THE ACT. HE FURTHER SUBMITS THAT THE DEFINITION OF IN COME U/S.2(24) OF THE ACT AFTER INSERTION OF SUB-CLAUSE (VII(A) W.E.F. 01.04.2007 HAS BECOME AS FOLLOWS: THE PROFIT AND GAIN OF ANY BUSINESS OF BANKING (IN CLUDING PROVIDING CREDIT FACILITIES) CARRIED ON BY A CO-OPERATIVE SOCIETY WITH ITS MEMBE RS. FURTHER THAT INSERTION OF SUB-SECTION (4) OF SECT ION 80P W.E.F. 1.04.2007 IMPLIES THAT THE PROVISION OF THIS SECTION SHALL NOT APPLY IN RE LATION TO ANY CO-OPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. THE LD.AR CONTENDED THAT THE AO HAS COME TO AN ERRONEOUS FINDING TO THIS EFFECT THAT THE BANASKANTHA DIST.CENTRAL CO -OPERATIVE BANK LTD. FROM WHOM THE ASSESSEE HAS EARNED INTEREST AND DIVIDEND INCOME F ROM ITS DEPOSITS IS NOT A CO-OPERATIVE SOCIETY BUT A BANK AND THUS THE ASSESSEE IS NOT EN TITLED TO DEDUCTION AS CLAIMED FOR WHICH WAS FURTHER CONFIRMED BY THE LD. CIT(A) WITHOUT APP LICATION OF MIND. IN SUPPORT OF HIS ARGUMENT, THAT THE BANASKANTHA DIST.CENTRAL CO-OPER ATIVE BANK LTD. IS A CO-OPERATIVE SOCIETY, THE LD. AR HAS SUBMITTED THE CERTIFICATE OF REGISTRATION DATED 20.08.1959 BEFORE - 4 - ITA NO.1875AHD/2015 THE SARVODAY CREDIT CUM CONSUMERS CO-OPERATIVE SOCIETY LTD. VS. ACIT ASST.YEAR 2011-12 US WHICH IS CLAIMED TO HAVE BEEN SUBMITTED BEFORE T HE LD. CIT(A). HE FURTHER ADDED THAT THE CASE OF THE ASSESSEE IS COVERED BY A COMMON DEC ISION DATED 23.03.2018 PASSED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN ITA NOS.1891/A HD/2014, 2987/AHD/2015, 1090/AHD/2015 & 1582/AHD/2015 WHERE THE ASSESSEES INTEREST INCOME DERIVED FROM THE SAID BANASKANTHA DIST.CENTRAL CO-OPERATIVE BANK LTD . HAS BEEN MADE ELIGIBLE FOR DEDUCTION EVEN AFTER THE INSERTION OF SUB-SECTION 4 IN SECTION 80P UPON AMENDMENT W.E.F. 01.04.2007. 6. ON THE OTHER HAND, THE LD. DR RELIES UPON THE OR DERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE RES PECTIVE PARTIES AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE FIND T HAT THE ISSUE RAISED BY THE ASSESSEE AS TO WHETHER THE ASSESSEE IS ENTITLED TO THE CLAIM U/S.8 0P(2)(A)(I) & 80P(2)(D) OF THE ACT ON THE INTEREST AND DIVIDEND INCOME RECEIVED FROM THE BANA SKANTHA DIST.CENTRAL CO-OPERATIVE BANK LTD. IS IDENTICAL TO THE ISSUE INVOLVED IN THO SE ABOVE APPEALS DECIDED BY THE COORDINATE BENCH OF THIS TRIBUNAL. THE COORDINATE BENCH WHILE DECIDING THE ISSUE HAS OBSERVED AS FOLLOWS: 4. WE NOW ADVERT TO THE LEAD ISSUE OF SECTION 80(P )(2) DISALLOWANCE OF RS.27,97,019/- IN RESPECT OF ASSESSEES INTEREST IN COME DERIVED FROM ITS DEPOSITS WITH THE BANAS CO-OPERATIVE BANK. BOTH THE LOWER A UTHORITIES QUOTE THE LEGISLATIVE AMENDMENT VIDE FINANCE ACT, 2006 W.E.F. 01.04.2007 INSERTING SUBSECTION 4 IN SECTION 80P AS WELL AS CBDTS EXPLA NATORY NOTES TO THE ABOVE FINANCE ACT DATED 28.122006 IN HOLDING THAT THE IMP UGNED INTEREST INCOME DERIVED FROM CO-OPERATIVE BANK IS NOT ELIGIBLE FOR DEDUCTION. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDS THA T HONBLE KARNATAKA HIGH COURTS RECENT DECISION IN (2017) 83 TAXMANN.COM 14 0 (KARNATAKA) PCIT VS. TOTAGARS CO-OPERATIVE SALE SOCIETY HAS SETTLED THE LAW THAT SUCH AN INCOME IS NOT ALLOWABLE AS SECTION 80P DEDUCTION IN VIEW OF THE L EGISLATIVE AMENDMENT HEREINABOVE. MR. KABRA THEREAFTER FILES HONBLE AP EX COURTS JUDGMENT IN (2017) 397 ITR 1 (SC). THE CITIZEN CO-OPERATIVE SOCIETY L TD. VS. ACIT SETTLING SECTION 80P DEDUCTION ISSUE IN RESPECT OF ORDINARY AND NOMI NAL MEMBERS. WE HOWEVER FIND THAT THE ABOVE FORMER DECISION GOES CONTRARY T O HONBLE JURISDICTIONAL HIGH - 5 - ITA NO.1875AHD/2015 THE SARVODAY CREDIT CUM CONSUMERS CO-OPERATIVE SOCIETY LTD. VS. ACIT ASST.YEAR 2011-12 COURTS JUDGMENT IN TAX APPEAL NO. 473 OF 2014 CIT VS. SABARKANTHA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD. DECLINING REV ENUES IDENTICAL QUESTION OF LAW CHALLENGING TRIBUNALS DECISION ALLOWING SECTIO N 80P DEDUCTION IN RESPECT OF INTEREST EARNED ON FIXED DEPOSITS WITH A COOPERATIV E BANK IN ASSESSMENT YEAR 2009-10 I.E. POST SECTION 80P(4) AMENDMENT W.E.F. 0 1.04.2007. THEIR LORDSHIPS REASONING TO THIS EFFECT READS AS UNDER: 4.0. NOW, SO FAR AS PROPOSED QUESTION NO. B I.E. W HETHER THE APPELLATE TRIBUNAL HAS SUBSTANTIALLY ERRED IN UPHOLDING THE ORDER OF T HE CIT(A) IN DELETING THE DISALLOWANCES OF RS.1,42,19,5157- UNDER SECTION 80( P)(2)(D) OF THE ACT IS CONCERNED, IT IS REQUIRED TO BE NOTED THAT THE ASSE SSEE CLAIMED DEDUCTION UNDER SECTION 80(P)(2)(D) OF THE ACT ON THE INTEREST EARN ED ON THE FIXED DEPOSIT WITH COOPERATIVE BANK AND THE SOCIETIES AND IT HAS BEEN FOUND THAT AS SUCH THE INCOME WAS RECEIVED FROM THE INVESTMENT IN COOPERATIVE SOC IETIES AND COOPERATIVE BANK. CONSIDERING SECTION 80(P)(2)(D) OF THE ACT WHEN THE ONLY REQUIREMENT WAS THAT THE INCOME SHOULD BE RECEIVED FROM INVESTMENT IN CO OPERATIVE SOCIETIES AND THE COOPERATIVE BANK WHICH IN THE PRESENT CASE HAS BEEN FULFILLED, IT CANNOT BE SAID THAT THE LEARNED TRIBUNAL HAS COMMITTED ANY ERROR I N DELETING DISALLOWANCE OF RS.1,42,19,515/- UNDER SECTION 80(P)(2)(D) OF THE A CT. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE LEARNED TRIBUN AL. UNDER THE CIRCUMSTANCES, PROPOSED QUESTION B IS ALSO ANSWERED AGAINST THE RE VENUE. WE THEREFORE FOLLOW HONBLE JURISDICTIONAL HIGH CO URTS JUDGMENT THAN HONBLE KARNATAKA HIGH COURTS DECISION. COMING TO HONBLE APEX COURTS DECISION IN THE CITIZEN CO-OPERATIVE SOCIETY LTD. (SUPRA), WE FIND THAT THERE IS NO DISPUTE ABOUT THE CATEGORY OF MEMBERS AS IT WAS BEF ORE THEIR LORDSHIPS. WE THUS CONCLUDE IN VIEW OF ALL THESE FACTS AND CIRCUMSTANC ES THAT HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IS BINDING ON US. WE ACCORDI NGLY DELETE THE IMPUGNED DISALLOWANCE OF RS.27,97,019/- IN QUESTION. THIS L EAD APPEAL ITA NO. 1891/AHD/2014 IS PARTLY ACCEPTED 8. THUS IT IS A FACT IN THE AFORESAID MATTER THAT T HE CO-ORDINATE BENCH HAS BEEN PLEASED TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF INTEREST INCOME DERIVED FROM THE DEPOSITS WITH THE BANASKANTHA DIST. CENTRAL CO-OPER ATIVE BANK LTD. 9. TAKING INTO CONSIDERATION THE ENTIRE FACT S OF THE MATTER AND THE DECISION CITED BY THE LD. AR, WE ARE OF THE CONSIDERED VIEW THAT THE ASSE SSEE IS ENTITLED TO DEDUCTION U/S.80(2)(A)(I) & 80P(2)(D) OF RS.22,52,868/- & RS .4,44,200/- BEING INTEREST AND DIVIDEND - 6 - ITA NO.1875AHD/2015 THE SARVODAY CREDIT CUM CONSUMERS CO-OPERATIVE SOCIETY LTD. VS. ACIT ASST.YEAR 2011-12 INCOME RESPECTIVELY DERIVED FROM THE DEPOSITS WITH THE BANASKANTHA DIST.CENTRAL CO- OPERATIVE BANK LTD. AND THUS ACCORDINGLY DELETE THE IMPUGNED DISALLOWANCE OF RS.22,51,000/-. 10. THE GROUND OF APPEAL PREFERRED BY THE ASSE SSEE IS ALLOWED. CONSEQUENTLY, WE OBSERVE THAT THE ASSESSEE IS ENTITLED TO THE INTERE ST U/S.234/A/B/C OF THE ACT. WE THEREFORE, DIRECT THE LD. AO TO COMPUTE THE INTEREST U/S.234/A /B/C OF THE ACT AND TO PROCEED IN BENEFIT OF THE SAME TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL PREFERRED BY THE ASS ESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 11 / 0 7 /201 8 SD/- SD/- ( ) ( ) ( WASEEM AHMED ) ( MS. MADH UMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/ 07 /2018 2,..*,.*../ T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 34 5 / CONCERNED CIT 4. 5 ( ) / THE CIT(A)-4, AHMEDABAD 5. 89:&*4 , ,40 , 3 / DR, ITAT, AHMEDABAD 6. :;<=+ / GUARD FILE. / BY ORDER, '8& //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD