The Thasra Vepari Mandal Co.Op. Credit Society Ltd., Kheda V. DCIT, Kheda Circle, Nadiad

ITA 1993/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7819 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 04-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: S N DIVETIA
• Keywords: Principle of natural justice
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THASRA VEPARI MANDAL CO - OP. CREDIT SOCIETY LTD. MAIN MARKET, TAL. THASRA, DIST. KHEDA - 388250 PAN: AAATT4672K (APPELLANT) VS THE DCIT, KHEDA CIRCLE, NADIAD (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: S H RI S.N. DIVETIA , A.R. DATE OF HEARING : 27 - 06 - 2 018 DATE OF PRONOUNCEMENT : 10 - 07 - 2 018 / ORDER P ER : AMARJIT SINGH, AC COUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2014 - 15 , ARIS ES FROM ORDER OF THE CIT(A) - 2, VADODARA DATED 16 - 06 - 2017 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS O F APPEAL: - 1.1 THE ORDER PASSED U/S.250 ON 16.06.2017 FOR A.Y.2014 - 15 BY CIT(A) - 2, VADODARA UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S.80P OF RS.40,97,746/ - TOWARDS INTEREST EARNED FROM NATIONALIZED BANKS ETC. IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S.80P OF RS.40,97,746/ - TOWARDS INTEREST EARNED FROM NATIONALIZED BANKS ETC. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE THE DISALLOWANCE OF DEDUCTION U/S.80P OF RS.40,97,746/ - TOWARDS INTEREST EARNED FROM NATIONALIZED BANKS ETC. I T A NO . 199 3 / A HD/20 17 A SSESSMENT YEAR 2014 - 15 I.T.A NO. 1993 /AHD/20 17 A.Y. 2014 - 15 PAGE NO THASRA VEPARI MANDAL CO - OP. CREDIT SOCIETY LTD. VS. DCIT 2 3.1 WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE, THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE EXPENSES INCURRED FOR EARNING THE IMPUGNED INCOME OF RS.40,97,746/ - AND THEREAFTER CONSIDERED THE DEDUCTION ADMISSIBLE U/S.80(2)(A)(I). IT IS, THEREFORE, PRAYED THAT THE DISALLOWANCE OF DEDUCTION U/S.80P OF RS.40,97,746/ - UPHELD BY THE CIT(A) MAY KINDLY BE DELETED. 3. THE BRIEF FACT OF THE ACT IS THAT ASSESSE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. NIL ON 2 4 TH SEP, 2014. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) ON 16 - 09 - 2015 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EARNED INTEREST INCOME TOTALING TO RS . 40,97,746 / - ON SURPLUS FUNDS DEPOSITED WITH NATIONALIZED BANK . HE HAS FURTHER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U NDER CHAPTER VIA OF THE ACT U/S. 80P(2)(A)(I) IN RESPECT OF AFORESAID INTEREST INCOME DERIVED FROM INVESTMENT IN FIXED DEPOSIT WITH COMMERCIAL B ANKS. THE ASSESSING OFFICER OBSERVED THAT EXEMPTION U/S. 80P(2)(A)(I) IS AVAILABLE ON INCOME WHICH IS ATTRIBUTA BLE TO BUSINESS OPERATION OF THE ASSESSEE CO - OPERATIVE SOCIETY AND THE INTEREST EARNED ON THE FUND INVESTED WITH THE COMMERCIAL BANK IS NOT OPERATIONAL INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. CONSEQUENTLY, HE HAS TREAT ED THE INTEREST INCOM E OF RS. 40,97,746 / / - AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT AND DISALLOWED THE CLAIM OF DEDUCTION U/S. 80P ON THE AFORESAID INTEREST INCOME. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE AFTER PLACING RELIANCE ON THE DECISION OF JURISDICTIONAL HON BLE HIGH COURT OF GUJARAT IN THE CASE OF SBI VS. CIT (2016) 72 TAXMANN.COM 64 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER HAS NOTICED THAT 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 INTEREST IN COME EARNED FROM FIXED I.T.A NO. 1993 /AHD/20 17 A.Y. 2014 - 15 PAGE NO THASRA VEPARI MANDAL CO - OP. CREDIT SOCIETY LTD. VS. DCIT 3 DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. AS PER SECTION 80P(2)(A)(I) OF THE ACT THE INTEREST INCOME EARNED ON PROVIDING CREDIT FACILITY TO ITS MEMBERS IS DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE ACT. AFTER PERUSAL OF THE AFORESAID PR OVISION OF THE ACT WE OBSERVE THAT DEDUCTION U/S 80P(2)(A)(I) IS NOT AVAILABLE ON THE INTEREST EARNED ON DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVEN UE 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 VIEW OF THE ABOVE FACTS AND LEGAL FINDINGS WE ARE INCL INED WITH THE DECISION OF THE LD. CIT(A) THAT INVESTING SURPLUS FUNDS IN A COMMERCIAL BANK IS NO PART OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS WHICH IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER AS DECIDED IN THE VAR IOUS 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 NATIONALIZED BANK TO THE ASSESSEE FOR COMPUTING THE DEDUCTION U/S. 80P AFTER EXAMININ G/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 ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 07 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 10 /07 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) I.T.A NO. 1993 /AHD/20 17 A.Y. 2014 - 15 PAGE NO THASRA VEPARI MANDAL CO - OP. CREDIT SOCIETY LTD. VS. DCIT 4 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,