M/s. Bharath Credit Co-operative Society Limited, Bengaluru V. The Income Tax Officer, Ward- 6(2)(2), Bengaluru

ITA 1954/BANG/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5067 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 11-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S. PRAKASH SHETTY
• Keywords: Opportunity of being heard; Source of fund
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N V VASUDEVAN, VICE PRESIDENT AND S HRI B R BASKARAN , ACCOUNTANT MEMBE R SP NO.282/BANG/2019 & ITA NO. 1954/BANG/2019 ASSESSMENT YEAR : 201 6 - 17 BHARATH CREDIT CO-OPERATIVE SOCIETY LTD., # 748/18, 8 TH MAIN, MAHALAKSHMI LAYOUT, BENGALURU 560 086. P AN: AAAAB 4144K VS. THE INCOME TAX OFFICER, WARD 6(2(2), BENGALURU. APPLICANT/ APP ELLANT RESPONDENT APP ELLANT BY : SHRI S. PRAK ASH SHETTY, AD VOCATE RESPONDENT BY : SHRI SUNIL KUMAR AGARWAL, ADDL.CIT(DR)(ITAT), BENGALURU. DATE O F HEARING : 01 . 1 1 .2019 DATE OF PRONOUNCEMENT : 06 . 1 1 .2019 O R D E R PER N V VASUDEVAN, VICE PRESIDENT S.P. NO.282/BANG/2019 IS A PETITION FILED BY THE AS SESSEE PRAYING FOR AN ORDER OF STAY OF RECOVERY OF OUTSTANDING DEM AND OF RS.3,30,609/- ARISING OUT OF THE ORDERS OF THE REVENUE AUTHORITIE S IN RELATION TO AY 2016- 17. AT THE TIME OF HEARING OF THE STAY PETITION, W E THOUGHT IT FIT TO HEAR THE APPEAL, AS THE ISSUE INVOLVED IN THE APPEAL LIES IN A VERY NARROW COMPASS. SP NO.282/BANG/2019 & ITA NO.1954/BANG/2019 PAGE 2 OF 5 THE ABOVE APPEAL BY THE ASSESSEE IS AGAINST THE ORD ER DATED 24.6.2019 OF THE CIT(APPEALS), BENGALURU-6, BENGALURU RELATING T O ASSESSMENT YEAR 2016-17. 2. THE ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS WITH REGARD TO THE CLAIM FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (THE ACT) WHICH WAS DENIED BY THE REVENUE AUTHORITIES. THE ASSESSEE IS A CREDIT CO-OPERATIVE SOCIETY REGISTERED UNDER THE KA RNATAKA CO-OPERATIVE SOCIETIES ACT, 1959. IT IS PRIMARILY ENGAGED IN PR OVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE CLAIMED DEDUCTION U/S 80P(2) (A)(I) OF THE ACT ON A SUM OF RS.7,05,026/- WHICH WAS INTEREST INCOME DE RIVED FROM INVESTMENTS OUT OF SURPLUS FUNDS OF THE ASSESSEE. IT WAS THE PLEA OF THE ASSESSEE THAT FUNDS NOT IMMEDIATELY REQUIRED WERE I NVESTED TO EARN INTEREST INCOME AND THEREFORE THE INTEREST INCOME W AS VERY MUCH PART OF THE INCOME DERIVED FROM THE BUSINESS OF PROVIDING C REDIT FACILITIES TO MEMBERS. 3. THE DEDUCTION CALMED BY THE ASSESSEE WAS NOT A LLOWED BY THE REVENUE AUTHORITIES FOR THE REASON THAT THE INCOME WHICH WAS CLAIMED AS DEDUCTION WAS INTEREST INCOME WHICH WAS EARNED BY T HE ASSESSEE ON DEPOSITS AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD., 83 TAXMANN.COM 140 , INTEREST INCOME HAD TO BE REGARDED AS INCOME FRO M OTHER SOURCES. SINCE INTEREST INCOME WAS NOT INCOME DERIVED FROM T HE BUSINESS OF CO- OPERATIVE SOCIETY, THE DEDUCTION CLAIMED BY THE ASS ESSEE CANNOT BE ALLOWED. THE REVENUE AUTHORITIES ALSO PLACED RELIA NCE ON A SIMILAR DECISION RENDERED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. 395 ITR 611 (KARN.) . SP NO.282/BANG/2019 & ITA NO.1954/BANG/2019 PAGE 3 OF 5 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED BY THE ORDERS OF THE CIT(A), THE ASSE SSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARN ED AR RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO 230 TAXMAN 309 (KARN) WHEREIN THE HONBLE KARNATAKA HIGH COURT CONSIDERE D THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF T HE TOTGARS CO- OPERATIVE SALES SOCIETY (SUPRA) AND HELD THAT INTEREST INCOME IN RESPECT OF TEMPORARY PARKING OF OWN SURPLUS FUNDS NOT IMMEDIAT ELY REQUIRED IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE LEAR NED DR RELIED ON A SUBSEQUENT DECISION OF THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. 395 ITR 611 (KARN.) . 6. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT REL IED BY THE LEARNED DR. THE FACTS OF THE CASE BEFORE THE HONBLE KARNA TAKA HIGH COURT IN THE DECISION CITED BY THE LEARNED DR WAS THAT THE HONB LE COURT WAS CONSIDERING A CASE RELATING TO ASSESSMENT YEARS 200 7-2008 TO 2011- 2012. IN CASE DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF THE VERY SAME ASSESSEE, THE ASSESSMENT YEARS INVOLVED WAS AY 1991-92 TO 1999- 2000. THE NATURE OF INTEREST INCOME FOR ALL THE AY S WAS IDENTICAL. THE BONE OF CONTENTION OF THE ASSESSEE IN AY 2007-08 TO 2011-12 WAS THAT THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT IS CLAIME D BY THE RESPONDENT ASSESSEE UNDER SECTION 80P(2)(D) OF THE ACT AND NOT UNDER SECTION 80P(2)(A) OF THE ACT WHICH WAS THE CLAIM IN AY 1991 -92 TO 1999-2000. THE REASON GIVEN BY THE ASSESSEE WAS THAT IN AY 2007-08 TO 2011-12 INVESTMENTS AND DEPOSITS AFTER THE SUPREME COURT'S DECISION AGAINST THE ASSESSEE IN TOTGAR'S CO-OPERATIVE SALE SOCIETY LTD. (SUPRA), WERE SHIFTED FROM SCHEDULE BANKS TO CO-OPERATIVE BANK. U/S.80P( 2)(D) OF THE ACT, SP NO.282/BANG/2019 & ITA NO.1954/BANG/2019 PAGE 4 OF 5 INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SO CIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INTEREST OR DIVIDEND INCOME. THE CLAIM OF THE ASSESSEE WAS THAT CO-OPERATIVE BANK IS ESSENTIA LLY A CO-OPERATIVE SOCIETY AND THEREFORE DEDUCTION HAS TO BE ALLOWED U NDER CLAUSE (D) OF SEC.80P(2) OF THE ACT. THE HONBLE KARNATAKA HIGH C OURT FOLLOWED THE DECISION OF THE SUPREME COURT IN THE TOTGARS CO-OPERATIVE SALES SOCIETY LTD. (SUPRA) AND HELD THAT INTEREST EARNED FROM SCHEDULE BANK OR CO- OPERATIVE BANK IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE THE PROVISIONS OF SEC.80P(2)(D) OF TH E ACT WAS NOT APPLICABLE TO SUCH INTEREST INCOME. IT IS THUS CLEAR THAT THE SOURCE OF FUNDS OUT OF WHICH INVESTMENTS WERE MADE REMAINED THE SAME IN AY 2007-08 TO 2011- 12 AND IN AY 1991-92 TO 1999-2000 DECIDED BY THE HO NBLE SUPREME COURT. THEREFORE, WHETHER THE SOURCE OF FUNDS WERE ASSESSEES OWN FUNDS OR OUT OF LIABILITY WAS NOT SUBJECT MATTER OF THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE L EARNED DR. TO THIS EXTENT, THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMUKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA ) STILL HOLDS GOOD. HENCE, ON THIS ASPECT, THE ISSUE SHOULD BE RESTORED BACK TO THE AO FOR A FRESH DECISION AFTER EXAMINING THE FACTS IN THE LIG HT OF THESE JUDGMENTS OF THE HONBLE APEX COURT RENDERED IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) AND OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMUKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA ) . 7. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND FILING APPROPRIATE EVIDENCE, IF DESIRED, BY THE ASS ESSEE TO SUBSTANTIATE ITS CASE, BEFORE DECIDING THE ISSUE. SP NO.282/BANG/2019 & ITA NO.1954/BANG/2019 PAGE 5 OF 5 8. IN THE RESULT, APPEAL BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. STAY PETITION FILED BY THE ASS ESSEE IS DISMISSED AS INFRUCTUOUS. PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF NOVEMBER, 2019. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 6 TH NOVEMBER, 2019. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, I TAT, BANGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.