The Arbuda Credit Co.Op. Society Ltd., Banaskantha V. The ACIT, B.K.Circle, Palanpur

ITA 2084/AHD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9370 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 14-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILASH V SHINDE
• Assessee Lawyers: MEHUL S THAKKAR
• Keywords: Gift; Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, A M. ITA NO.2084 & 2085/AHD/2015 ASST. YEARS: 2011-12 & 2012-13 THE ARBUDA CREDIT CO-OP. SOCIETY LTD., 1 ST FLOOR, TOWER GANJ BAZAR SHOPPING CENTRE, TOWER GANJ BAZAR, DHANERA, DIST. B.K. VS. ACIT, BANASKANTHA CIRCLE, PALANPUR. APPELLANT RESPONDENT PAN AAAAA 1251A APPELLANT BY SHRI MEHUL S. THAKKAR, AR RESPONDENT BY SHRI VILASH V. SHINDE, DR DATE OF HEARING: 2/12/2015 DATE OF PRONOUNCEMENT: 29/02/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF LD. CIT(A)-4, AHMEDABAD, DATED 8 .5.2015 AND 8.6.2015. ASSESSMENT ORDERS WERE FRAMED U/S 143(3) OF IT ACT, 1961 (IN SHORT THE ACT) BY ACIT, B.K. CIRCLE, PALANPUR O N 28.01.2014 & 27.02.2015 FOR ASST. YEARS 2011-12 & 2012-13 RESPEC TIVELY. THE ASSESSEE HAS RAISED VARIOUS GROUNDS OF APPEAL FOR B OTH THE YEARS BUT THE SOLITARY ISSUE IN ALL THESE GROUNDS IS REGARDIN G DENIAL OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT AT RS.55,731/- FOR ASST . YEAR 2011-12 AND ITA NOS.2084 & 2085/AHD/2015 ASST. YEARS 2011-12 & 2012-13 2 RS.69,486/- FOR ASST. YEAR 2012-13 FOR INTEREST INC OME EARNED FROM SHORT TERM DEPOSITS WITH BANKS OUT OF LIQUID FUNDS WITH THE ASSESSEE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A CREDIT CO-OP. SOCIETY AND IT FILED ITS RETURN OF INCOME AT RS.NIL FOR ASST. YEAR 2011-12 ON 5.10.2011 AND FOR ASST. YEAR 2012-13 ON 25.12.2007. ASSESSEES CASE WAS SELECTED FOR SCRUTINY ASSESSMEN TS AND PROCEEDINGS U/S 143(2) OF THE ACT WERE INITIATED AN D INCOME OF THE ASSESSEE WAS ASSESSED U/S 143(3) OF THE ACT AT RS.3 3,66,850/- FOR ASST. YEAR 2011-12 AND AT RS.69,486/- FOR ASST. YEA R 2012-13. ADDITIONS FOR ASST. YEAR 2011-12 MAJORLY INCLUDED D ISALLOWANCE OF DEDUCTION AT RS.33,11,115/- U/S 80P(2)(A)(I) AND RS .55,731/- U/S 80P(2)(D) OF THE ACT WHEREAS IN ASST. YEAR 2012-13 ADDITION WAS ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 80P(2)(I) O F THE ACT. 3. IN BOTH THE ASST. YEARS ASSESSEE HAS CLAIMED DED UCTION FOR INCOME FROM INTEREST FROM BANASKANTHA DIST. CO-OP. BANK AND THE SAME WAS DENIED BY THE ASSESSING OFFICER. AGGRIEVED , ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A) AND FOR ASST. YEAR 2011-12 LD. CIT(A) DELETED ADDITION OF RS.33,11,115/- AND CONFI RMED THE ADDITION OF RS.55,731/- AND FOR ASST. YEAR 2012-13 RS.69,48 6/-. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. LD. AR SUBMITTED THAT INTEREST OF RS.55,731/- AND RS.69 ,486/- FOR ASST. YEARS 2011-12 & 2012-13 RESPECTIVELY HAVE BEEN EARN ED FROM SHORT TERM DEPOSITS MADE WITH BANASKANTHA DISTRICT CO-OP. BANK AND THESE SHORT TERM DEPOSITS WERE REQUIRED BY THE ASSESSEE S OCIETY TO ITA NOS.2084 & 2085/AHD/2015 ASST. YEARS 2011-12 & 2012-13 3 MAINTAIN OPERATION FUNDS AND TO MEET THE EVENTUALIT Y FOR REPAYING IN DEPOSIT. LD. AR FURTHER SUBMITTED THAT EVEN IF IT I S HELD THAT BANAS BANK IS NOT A CREDIT CO-OP. SOCIETY AND NOT ELIGIBL E FOR DEDUCTION U/S 80P(2)(D) BUT ALTERNATIVELY DEDUCTION U/S 80P(2)(A) (I) IS ALSO AVAILABLE ON SUCH INTEREST INCOME EARNED THROUGH SHORT TERM D EPOSITS WITH BANKS AND, THEREFORE, LD. CIT(A) WAS NOT CORRECT IN DENYING THE BENEFITS TO THE ASSESSEE. IN SUPPORT OF HIS CONTENT ION LD. AR RELIED ON THE DECISION OF HON. KARNATAKA HIGH COURT IN THE CA SE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OP. LTD. VS. ITO IN IT A NO.307 OF 2014 DATED 28 TH OCTOBER 2014 AND ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF DHANLAXMI CREDIT CO-OP. SOCIET Y LTD. VS. ITO IN ITA NO.2342/AHD/2012 FOR ASST. YEAR 2008-09 VIDE OR DER DATED 8/2/2013. 5. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE BEFORE US IS WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT AT RS. 55,731/- AND RS.69,486/- FOR ASST. YEARS 2011-12 AND 2012-13 RES PECTIVELY FOR INTEREST INCOME EARNED FROM DEPOSITS WITH THE BANK. LET US FIRST GO THROUGH THE FACTS OF THE OBJECTS OF ASSESSEE. FROM GOING THROUGH THE BYE-LAWS OF THE CO-OPERATIVE SOCIETY, WE FIND THAT ASSESSEE SOCIETY HAS GOT FOLLOWING OBJECTS AND RULES ABOUT FUNDS :- ITA NOS.2084 & 2085/AHD/2015 ASST. YEARS 2011-12 & 2012-13 4 (2) OBJECTS (1) TO INCREASE THE SENSE OF THRIFT, SAVINGS AND M UTUAL COOPERATION AMONG THE MEMBERS AND ENCOURAGE IT. (2) TO COLLECT FUNDS, DEPOSITS FROM THE MEMBERS. (3) TO TAKE ON HAND THE DIFFERENT KIND OF SAVING SC HEMES TO COLLECT THE DEPOSITS. (4) TO P ROVIDE LOANS TO NEEDY MEMBERS FOR BUSINESS, TRADE. INDUSTR Y, EMPLOYMENT AND FOR OTHER PROPER OBJECTS. (5) TO OBTAIN CASH CREDIT FROM THE CENTRAL FINANCIA L INSTITUTION AND PROVIDE FACILITY OF LOAN TO THE MEMBERS. (6) IF NECESSARY, TO WORK AS INSURANCE AGENT OF THE MEMBERS FOR THEIR PERSONAL LIFE AND PROPERTY. (7) TO PURCHASE MOVEABLE, IMMOVEABLE PROPER TY FOR SOCIETIE'S WORK AND ADMINISTRATION, SALE, HIRE, DWELL, RAISE. (3) FUNDS (3) FUNDS WILL BE RAISED FROM THE FOLLOWING WAYS :- SHARE OBTAIN FUNDS. A. BY SHARE B. TO OBTAIN FUNDS I. FROM MEMBERS. K. BY TAKING AMOUNT ON LOAN. D. BY GIFT. E. BY ENTRANCE FEE. : (4) TO COLLECT FUND BY SELLING SHARES SHOULD NOT BE MORE THAN RS 50 00 000/- THE VALUE OF: EACH SHARE WILL REMAIN R S.100/-' (5) THE DEPOSITS AND LOANS FOR FIXED DEPOSIT IN CUR RENT OR SAVINGS ACCOUNT CAN BE TAKEN AT THE RATE OF INTEREST AND AMOUNT AS DECIDED BY THE M ANAGING COMMITTEE. BUT THE TOTAL AMOUNT OF DEPOSITS / AND LOAN SHOULD NOT BE MORE TH AN TWELVE TIMES OF ACCUMULATED LOSS AFTER DEDUCTION OF RECOVERED SHARE AMOUNT, RES ERVE FUND AND BUILDING FUND BUT THIS LIMIT CAN BE ENHANCED WITH THE PERMISSION OF R EGISTRAR FOR FIXED TIME AND CONDITIONS FROM TIME TO TIME (6) IF THE FUNDS OF SOCIETY IS NOT ENGAGED IN THE WORKI NG OF SOCIETY THEN IT WILL BE INVESTED AS MENTIONED IN SECTION -71 OF COOPERATIVE RULES. BUT IN SPECIAL CIRCUMSTANCES INVESTMENT CAN BE MADE AT ANY OTHER PLACE WITH PRIO R APPROVAL OF REGISTRAR. ITA NOS.2084 & 2085/AHD/2015 ASST. YEARS 2011-12 & 2012-13 5 7. FROM THE ABOVE WE FIND THAT THE ASSESSEES MAIN OBJECT IS TO TAKE DEPOSITS FROM ITS MEMBERS AND TO PROVIDE LOAN TO THE NEEDY MEMBERS FOR VARIOUS BUSINESS AND PERSONAL PURPOSES AND AS REGARDS OF FUNDS IT IS ALSO MENTIONED IN THE BYE-LAWS THAT IN ORDER TO GIVE OPTIMUM RETURN TO THE MEMBERS UNUTILIZED FUNDS MAY BE INVESTED FOR EARNING INTEREST INCOME BY DEPOSITS WITH BANKS OR O THER CO-OP. SOCIETY. 8. WE FURTHER FIND THAT THE INTEREST INCOME OF RS.5 5,731 AND RS.69,486/- FOR ASST. YEARS 2011-12 & 2012-13 RESPE CTIVELY HAVE BEEN EARNED FROM DEPOSITS WITH BANAS BANK. FURTHER SECTION 80P(2)(A)(I) OF THE ACT DEALS WITH DEDUCTION FOR I NCOME EARNED BY A CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUS INESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND L OOKING TO THE OBJECTS OF THE SOCIETY IT CLEARLY FALLS IN THIS CATEGORY. N OW FURTHER WHETHER THE INTEREST RECEIVED FROM CO-OP. BANK CAN ALSO BE DEEM ED AS AN INCOME EARNED BY CREDIT CO-OPERATIVE SOCIETY FROM ITS MEMB ERS. WE FIND THAT HON. KARNATAKA HIGH COURT HAS DEALT WITH SIMILAR IS SUE IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OP. LTD. VS. IT O (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER :- 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT, DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUN T WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSE SSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THE Y HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE I T IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILA R VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX ITA NOS.2084 & 2085/AHD/2015 ASST. YEARS 2011-12 & 2012-13 6 III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD . , REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BEN EFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDING LY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING O RDER. 9. WE ALSO FIND THAT SIMILAR ISSUE WAS DEALT BY THE TRIBUNAL, DELHI BENCH IN ITA NO.2607/DEL/2012 FOR ASST. YEAR 2008-0 9 IN THE CASE OF ACIT VS. M/S JAWALA CO-OPERATIVE URBAN THRIFT & CRE DIT SOCIETY LTD. WHEREIN IT WAS OBSERVED AS UNDER :- 9. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. WE FIND THAT TOTAL INCOME EARNED BY THE ASS ESSEE INCLUDED INCOME ON FIXED DEPOSITS PLACED WITH BOMBAY MERCANTILE BANK, INTEREST, INCOME FROM A SCHEDULED BANK AND DIVIDEND INCOME FROM DELHI COOPE RATIVE BANK. FROM THE CERTIFICATE AS PLACED AT PAPER BOOK PAGE 30, WE FIN D THAT BOMBAY MERCANTILE COOPERATIVE BANK IS A COOPERATIVE SOCIETY REGISTERE D UNDER MAHARASHTRA COOPERATIVE SOCIETIES ACT AND WE FURTHER FIND THAT THE SAID SOCIETY HAS BEEN ASSESSED U/S 143(3) AS A COOPERATIVE SOCIETY AND IT S INCOME WAS ALLOWED TO BE EXEMPT U/S 80P(2)(I) AS HELD BY MUMBAI TRIBUNAL IN I.T.A. NO. 4128 AND 4129 VIDE ITS ORDER DATED 30.11.2005, FOR ASSESSMENT YEA R 1990-91 AND 1991-92 AND FURTHER BY MUMBAI TRIBUNAL VIDE ORDER DATED 07.09.2 011 IN I.T.A. NO. 5292 FOR ASSESSMENT YEAR 1997-98. THEREFORE IT IS HELD THAT FIXED DEPOSITS PLACED WITH BOMBAY MERCANTILE BANK FALLS WITHIN' THE EXEMPTION GRANTED BY SECTION 80P(2)(D) OF THE ACT. THE ASSESSEE WAS ALSO ELIGIBL E UNDER THE PROVISIONS OF SECTION 80P(2)A(I) AS THE FUNDS PLACED BY ASSESSEE IN THE FORM OF FIXED DEPOSITS CAN BE SAID TO BE KEPT FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AS THE ASSESSEE HAD AVAILED CREDIT FACILITIES ALSO AGAINST SUCH FIX ED DEPOSITS WHICH WERE AGAIN USED FOR THE PURPOSE OF BUSINESS OF ASSESSEE. MOREO VER, UNDER SIMILAR CIRCUMSTANCES, CHANDIGARH BENCH IN I.T.A. NO. 996/2 009 AS NOTED BY LD. CIT(A) HAS DECIDED IN FAVOUR OF ASSESSEE. THE DIVID END INCOME IS EXEMPT FOR ALL PERSONS INCLUDING ASSESSEE. THE INTEREST INCOME FROM BANK AMOUNTING TO RS.18,190/- IS THOUGH NOT EXEMPT U/S 80(P)(2)(D) BU T IS EXEMPT U/S 80P(2)(I) OF THE ACT. THE CASE LAW OF TOTGAR'S COOPERATIVE SOCIE TY WAS RIGHTLY DISTINGUISHED BY LD. CIT(A). THEREFORE, KEEPING IN VIEW ALL FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). 10. IN VIEW OF ABOVE, APPEAL FILED BY REVENUE IS DISMISSED. ITA NOS.2084 & 2085/AHD/2015 ASST. YEARS 2011-12 & 2012-13 7 10. RESPECTFULLY FOLLOWING THE DECISIONS OF HON. KA RNATAKA HIGH COURTS DECISION AND THAT OF THE CO-ORDINATE BENCH DELHI IN THE CASES REFERRED ABOVE AND IN THE LIGHT OF THE FACTS OF THE CASE OF ASSESSEE, WE ARE OF THE VIEW THAT ASSESSEE IS ELIGIBLE FOR DE DUCTION U/S 80P(20(A)(I) OF THE ACT FOR THE INTEREST INCOME EAR NED ON UNUTILIZED IDLE FUNDS KEPT FOR BUSINESS PURPOSES OF THE SOCIET Y BEING DEPOSITED WITH BANAS BANK . IN THE RESULT, THE IMPUGNED ADDIT IONS OF THE APPEALS OF ASSESSEE ARE DELETED AND THE APPEALS ARE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29/02/2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 29/02/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NOS.2084 & 2085/AHD/2015 ASST. YEARS 2011-12 & 2012-13 8 1. DATE OF DICTATION: 15/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 23/02/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 29/2/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: