M/s.Prathmik Krushi Pattina Sahakar Sangh Niyamita, Koppal V. Income-tax, Ward-1, Hospet

ITA 1957/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9910 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 06-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: SHIVPRASAD S PARNATTI
• Keywords: Opportunity of being heard; Principle of natural justice; Set aside
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO . 1957 /BANG/201 8 ASSESSMENT YEAR : 20 1 2 - 1 3 M/S. PRATHMIK KRUSHI PATTINA SAHAKAR SANGH NIYAMITA, ABOVE GP OFFICE, MARKET AREA, KINNAL VILLAGE, TQ. & DIST. KOPPAL 583 230. PAN: AACAP0154F VS. THE ITO, WARD 1, HOSPET. APPELLANT RESPONDENT APPELLANT BY : SHRI SHIVPRASAD S. PARNATTI, CA RESPONDENT BY : SMT. PADMA MEENAKSHI, JCIT (DR) DATE OF HEARING : 0 4 . 1 2 .2018 DATE OF PRONOUNCEMENT : 07 . 1 2 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT (A), GULBARGA DATED 29.03.2018 FORASSESSMEN T YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE AS PER CONCIS E GROUNDS OF APPEAL ARE AS UNDER. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), G ULBARGA (`CIT-A') IS PREJUDICIAL TO THE INTERESTS OF THE AP PELLANT, IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMST ANCES OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT-A, FAILED TO CONSIDER THE SUBMISSIONS DATED 11.11.2014 FILED BY THE APPELLANT BEFORE THE ASSESSING OFFICER ON 19.11.201 4 AND RESORTED TO PASS THE IMPUGNED ORDER, THEREFORE, THE ORDER PASSE D IS WITHOUT AFFORDING THE APPELLANT A REASONABLE OPPORTUNITY OF BEING HEARD AND THEREBY VIOLATED THE PRINCIPLES OF NATURAL JUSTICE. 3. ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE L EARNED CIT-A HAD FAILED TO APPRECIATE THAT THE APPELLANT IS A PRIMAR Y AGRICULTURAL CREDIT SOCIETY AND WAS DEALING ONLY WITH ITS MEMBER S BY PROVIDING THE CREDIT FACILITIES TO THEM. THEREFORE, IN THE FA CTS OF THE CASE, THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT PASSE D IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. V . ITO REPORTED IN [TS-5931-HC-2014 (KARNATAKA)-O] IS APPL ICABLE. ITA NO. 1957/BANG/2018 PAGE 2 OF 6 4. THE LEARNED CIT-A HAS ERRED IN UPHOLDING THE JUD GMENT RELIED UPON BY THE LEARNED AO WHICH ARE DISTINGUISHABLE FR OM THE FACTS OF THE APPELLANT CASE ON HAND. THUS, IT IS RESPECTFULL Y SUBMITTED THAT THE RATIOS OF JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF TOTGARS COOPERATIVE SALE SOCIETY LIMITED V. ITO REPORTED IN [TS-5012-SC- 2010-O] AND THE CITIZENS COOPERATIVE LIMITED V. ACI T REPORTED IN [TS-5136-SC-2017-O] IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE ON HAND. THEREFORE, THE IMPUGNED ORDER IS NOT LEGALLY NOT SUSTAINABLE AND LIABLE TO BE SET ASIDE AS VOID. 5. THE LEARNED CIT-A ERRED IN HOLDING THAT THE INTE REST EARNED ON TERM DEPOSITS HELD WITH BANK IS LIABLE TO BE TAXED UNDER THE ACT. WITHOUT APPRECIATING THE NATURE OF THE TRANSACTION OF THE APPELLANT AND FACT OF THE CASE, THE ORDER LEVYING OF TAX BY T HE AUTHORITY IS AGAINST THE SETTLED PRINCIPLES OF LAW AND IS IN GRO SS VIOLATION OF THE FOLLOWING DECISIONS OF THE HON'BLE JURISDICTIONAL H IGH COURT AND THEREFORE, LIABLE TO BE QUASHED: A. TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. V . ITO [TS-5931-HC-2014 (KARNATAKA)-O]; B. CIT V. SHREE MAHILA CREDIT SOUHARDA SAHAKARI LIMITE D [TS- 5541-HC-2017(KARNATAKA)-O]; C. CIT V. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGH A NIYAMITHA, BAGALKOT [TS-393-HC-2014(KARNATAKA)-O]; D. PCIT AND ANOTHER V. TOTGARS CO-OPERATIVE SALE SOCIE TY [TS- 5548-HC-2017(KARNATAKA)-O]; AND E. SHREE SIDDESHWAR SOUHARDHANA SAHAKARI NIYAMIT V. IT O, BAGALKOT [TS-5361-HC-2015(KARNATAKA)-O] 6. IT IS SUBMITTED THAT THE HON'BLE BANGALORE BENCH OF ITAT IN THE CASE OF BASAVARAJ CEO, PRIMARY AGRICULTURE CREDIT C OOPERATIVE SOCIETY LTD V. CIT REPORTED IN [TS-6073-ITAT-2017(B ANGALORE)-O] BY RELYING ON THE JUDGMENT PASSED BY THE HON'BLE AP EX COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT REPORTED IN [TS-5004-SC-1978-O] HAS HELD THAT THE WORD 'ATTR IBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERI VED FROM'. THE HON'BLE BENCH HAS FURTHER HELD THAT IF A COOPERATIV E SOCIETY EARNS INTEREST BY DEPOSITING THE INCOME EARNED FROM PROVI DING CREDIT FACILITIES TO ITS MEMBERS OR THE CAPITAL, IF NOT IM MEDIATELY REQUIRED FOR LENDING, THE SAID INTEREST INCOME EARNED IS LIA BLE TO BE DEDUCTED UNDER SECTION 80P OF THE ACT. SIMILAR VIEW IS UPHEL D BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH IN CIT V. ANDHRA PRADE SH STATE COOPERATIVE BANK LTD REPORTED IN [TS-294-HC-2011(AP )-O]. 7. THE HON'BLE COCHIN BENCH OF THE ITAT IN THE CASE OF ITO V. EDANAD KANNUR SCB LTD. REPORTED IN [TS-5009-ITAT-20 18(COCHIN)- O] FOLLOWED THE DECISION OF HON'BLE HIGH COURT OF K ERALA IN CHIRAKKAL SERVICE CO-OPERATIVE BANK LIMITED REPORTE D IN TS-5269- HC-2016(KERALA)-O AND DISTINGUISHED THE DECISION OF HON'BLE APEX COURT PASSED IN THE CASE OF CITIZEN COOPERATIVE SOC IETY LTD REPORTED IN [TS-5136-SC-2017-O] AND OBSERVED THAT SECTION 3 OF THE BANKING REGULATION ACT, 1949 SHALL NOT APPLY TO PRIMARY AGR ICULTURAL SOCIETIES AND REJECTED THE REVENUE'S CONTENTION OF RELYING ON THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN CITIZE NS CASE. ITA NO. 1957/BANG/2018 PAGE 3 OF 6 8. IN THIS CONNECTION REFERENCE MAY ALSO BE MADE TO THE DECISION OF THE HON'BLE BANGALORE BENCH OF ITAT IN THE CASE OF PRIMARY AGRICULTURAL CREDIT COOP. BANK LTD V. ITO REPORTED IN [TS-5782- ITAT-2018(BANGALORE)-O] HAS CATEGORICALLY HELD THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN ITS RECENT JUDGMENT PA SSED IN THE CASE OF PCIT AND ANOTHER V. TOTGARS CO-OPERATIVE SALE SOCIE TY AS REPORTED IN [TS-5548-HC-2017(KARNATAKA)-O] HAS DISTINGUISHED THE FACTS AS HELD IN THE TOTGARS RECENT JUDGMENT. THEREFORE, THE JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE AS THERE ARE DISSIMI LARITIES IN THE FACTS OF THE CASE. THUS, THE PRESENT IMPUGNED ORDER SUFF ERS FROM FACTUAL AND LEGAL INFIRMITIES AND THEREFORE, IT IS LIABLE T O QUASHED. 9. THE LEARNED CIT-A ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAS DEPOSITED THE MONEY IMMEDIATELY NOT R EQUIRED FOR LENDING APART FROM RESERVES WHICH HAVE BEEN DEPOSIT ED WITH COOPERATIVE BANK AS PER THE NORMS OF THE KARNATAKA COOPERATIVE SOCIETIES ACT, 1959 AND IS ELIGIBLE FOR DEDUCTION U NDER SECTION 80P(2)(A)(I) OF THE ACT AND THAT THE PROVISIONS OF SECTION 80P(2)(D) ARE NOT APPLICABLE TO THE APPELLANT SOCIETY AND THE REBY CONTRAVENED THE JUDGMENT OF THE HON'BLE HYDERABAD BENCH OF ITAT IN SBI OFFICERS COOP. CREDIT SOCIETY LTD V. ITO REPORTED I N [TS-7973-ITAT- 2017(HYDERABAD)-O]. 10. THE CIT- A HAS FAILED TO NOTE THAT A LITERAL AN D MECHANICAL READING OF THE PROVISION OF SECTION 80P WOULD DEFEA T THE PURPOSE OF THE LAW IN CASES WHERE THE ASSESSEE IS A PRIMARY AG RICULTURAL SOCIETY AND IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. THE HON'BLE APEX COURT HAS HELD IN K.P. VERGHESE V. ITO REPORTED IN [TS-11-SC-1981-O] THAT WHERE THE PLAIN LITERAL INTE RPRETATION OF A STATUTORY PROVISION WOULD PRODUCE A MANIFESTLY ABSU RD AND UNJUST RESULT WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MAY MODIFY THE LANGUAGE USED BY THE LEGISLATU RE OR EVEN DO 'VIOLENCE' TO IT SO AS TO ACHIEVE THE OBVIOUS INTEN TION OF THE LEGISLATURE. 11. THAT EACH OF THE ABOVE GROUND IS WITHOUT PREJUD ICE TO ONE ANOTHER AND THEAPPELLANT CRAVES LEAVE TO ADD, ALTER , AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL AND PRAYS TO BE ALLOWED THE PERMISSION TO SUBMIT FURTHER EVIDENCE / JUDGMENT / WRITTEN SUBMISSIONS AT THE TIME OF HEARING BEFORE THE HON'B LE TRIBUNAL. 3. BRIEF FACTS ARE THAT AS PER PARA NO. 7 OF THE OR DER OF CIT(A), THE REVENUE HAS DECIDED THE ISSUE AGAINST THE ASSESSEE FOLLOWING TH E JUDGEMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF TOTAGARS CO-OPE RATIVE SALES SOCIETY LTD. VS. ITO AS REPORTED IN 322 ITR 283(SC). IN THE SAM E PARA OF HIS ORDER ON PAGE NO. 11, HE HAS ALSO REFERRED TO ANOTHER JUDGEM ENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CITIZEN CO-OPERATIVE SOCIETY AS REPORTED IN TS- 326-SC-2017 DATED 16.08.2017 AND THEREAFTER, IN PAR A 7.1 OF HIS ORDER, LD. CIT(A) HAS GIVEN FINDING THAT CONSIDERING THESE TWO JUDGEMENTS OF HONBLE APEX COURT RENDERED IN THE CASE OF TOTAGARS CO-OPE RATIVE SALES SOCIETY LTD. ITA NO. 1957/BANG/2018 PAGE 4 OF 6 VS. ITO (SUPRA) AND CITIZEN CO-OPERATIVE SOCIETY (S UPRA), THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2)(D) OF IT ACT. T HE LD. AR OF ASSESSEE SUBMITTED THAT IN THE PRESENT CASE, ANOTHER JUDGMEN T OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VVS ITO AS REPORTED IN 230 TAXMAN 309 IS APPLICABLE. REGARDING THIS ASPECT THAT WHETHER THE ASSESSEE IS A CO-OPERATIVE BANK OR NOT, HE SUBMITTED THAT AS PER PARA 24 OF THIS JUDGE MENT OF HONBLE APEX COURT IN THE CASE OF CITIZEN CO-OPERATIVE SOCIETY (SUPRA) , IT WAS HELD THAT IN ORDER TO HOLD THAT THE ASSESSEE SOCIETY IS A CO-OPERATIVE BA NK, IT SHOULD BE ESTABLISHED THAT SUCH ASSESSEE CO-OPERATIVE SOCIETY IS HOLDING LICENSE FROM RESERVE BANK OF INDIA. AT THIS JUNCTURE, IT WAS PO INTED OUT BY THE BENCH THAT IN THE SAME PARA OF THIS JUDGEMENT OF HONBLE APEX COURT, IT IS ALSO NOTED THAT IN THAT CASE, THE ASSESSEE DOES NOT POSSESS LICENSE FROM RBI AND THE RBI HAS ITSELF CLARIFIED THAT THE BUSINESS OF THE ASSES SEE DOES NOT AMOUNT TO THAT OF A CO-OPERATIVE BANK. IT WAS POINTED OUT THAT IN THE FACTS OF PRESENT CASE ALSO, THE ASSESSEE SHOULD OBTAIN CERTIFICATE FROM R BI REGARDING THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE. IT WAS ALSO O BSERVED BY THE BENCH THAT BEFORE FOLLOWING THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPER ATIVE LTD. VS. ITO (SUPRA), IT HAS TO BE ASCERTAINED AS TO WHETHER FAC TS OF THE PRESENT CASE ARE IN LINE WITH THE FACTS IN THAT CASE OR THE FACTS OF TH E PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF TOTAGARS CO-OPERATIVE SAL ES SOCIETY LTD. VS. ITO (SUPRA) AS PER THE JUDGEMENT OF HONBLE APEX COURT RENDERED IN THAT CASE. IN REPLY, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF CIT (A) FOR FRESH DECISION AND IF THIS IS DONE THEN THE ASSESSEE WILL PRODUCE THE CERTIFICATE FROM RBI REGA RDING THE NATURE OF BUSINESS ACTIVITY OF THE ASSESSEE AND ALSO SUBMIT T HE FACTS BEFORE CIT (A) TO ESTABLISH THAT THE FACTS OF PRESENT CASE ARE IN LIN E WITH THE FACTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. V S. ITO (SUPRA). THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITI ES BELOW. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN MY CONSIDERED OPINION, THIS ISSUE SHOULD GO BACK TO THE FILE OF CIT (A) FOR FRESH DEC ISION IN THE LIGHT OF ABOVE DISCUSSION AND HENCE, I SET ASIDE THE ORDER OF CIT (A) AND RESTORE THE MATTER ITA NO. 1957/BANG/2018 PAGE 5 OF 6 BACK TO HIS FILE FOR FRESH DECISION WITH THE DIRECT ION THAT ON THIS ISSUE WHETHER THE ASSESSEE IS A CO-OPERATIVE BANK OR NOT, THE ASS ESSEE HAS TO OBTAIN AND PRODUCE THE CERTIFICATE FROM RESERVE BANK OF INDIA REGARDING THE NATURE OF BUSINESS OF THE ASSESSEE. IF IT IS FOUND THAT AS P ER THE SAID CERTIFICATE OF RBI, THE ASSESSEES BUSINESS IS OF A CO-OPERATIVE BANK T HEN THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P. IF THE ASSESSEE I S NOT A CO-OPERATIVE BANK AS PER THIS CERTIFICATE OF RBI THEN REGARDING THE CLAI M OF THE ASSESSEE FOR DEDUCTION U/S. 80P(2)(D), THE FACTS OF PRESENT CASE SHOULD BE EXAMINED IN THE LIGHT OF THESE TWO JUDGEMENTS OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPER ATIVE LTD. VS. ITO (SUPRA) AND THE JUDGEMENT OF HONBLE APEX COURT REN DERED IN THE CASE OF TOTAGARS CO-OPERATIVE SALES SOCIETY LTD. VS. ITO ( SUPRA) AND IF IT IS FOUND THAT THE FACTS OF THE PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. V S. ITO (SUPRA), THEN THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESS EE AND IF THE FACTS OF THE PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF TOTAGARS CO-OPERATIVE SALES SOCIETY LTD. VS. ITO (SUPRA), THEN THE ISSUE SHOULD BE DECIDED AGAINST THE ASSESSEE. NEEDLESS TO SAY, LD. CIT(A) SHOULD P ASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADE QUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. IN VIEW OF THIS DECISION, NO SEPARATE ADJUDICATION ON ANY OTHER GROUND IS CALLED FOR. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 07 TH DECEMBER, 2018. /MS/ ITA NO. 1957/BANG/2018 PAGE 6 OF 6 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.