Rosa Sahkari Ganna Samiti Ltd, Shahjahanpur V. ITO Range-1(5)., Shajahanpur

ITA 210/LKW/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1306 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 26-06-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 06-07-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KR RASTOGI LD.
• Keywords: Opportunity of being heard; Additional evidence; Set aside
• Section: 143(3); 80P; 250; 143(2); 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH LUCKNOW ITAT-Lucknow Page 1 of 8 BEFORE HON’BLE SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER AND SHRI SUBHASH MALGURIA, JUDICIAL MEMBER आयकर अपील स ं . / ITA No.210 & 211/LKW/2023 निर्धारण वर्ा / Assessment Year : 2016-17 & 2017-18 Rosa Sahakari Ganna Samiti Ltd. 148 TP Tareen, Bahadur Ganj, Shahjahanpur, UP-242001. PAN: AAALR0096F . . . . . . . अपीलार्थी / Appellant बिधम / V/s. The Income Tax Officer, Range-1(5), Shahjahanpur . . . . . . . प्रत्यर्थी / Respondent द्वधरध / Appearances Assessee by : Mr KR Rastogi [‘Ld. AR’] Revenue by : Mr SK Sharma [‘Ld. DR’] स ु नवाई की तारीख / Date of conclusive Hearing : 27/06/2024 घोषणा की तारीख / Date of Pronouncement : 01/07/2024 आदेश / ORDER Per G. D. Padmahshali, AM; These twin appeals of the assessee are assailed against the separate DIN & Order No. ITBA/NFAC/S/250/2023-24/1052785671(1) dt. 12/05/2023 & 1053006061(1) dt. 19/05/2023 orders passed u/s 250 of the Income Tax Act [‘the Act’ in short] by the Ld. National Faceless Appeal Centre, Delhi [‘NFAC’ in short] which in turn arisen out of separate orders of assessment passed u/s 143(3) of the Act by the Ld. Income Tax Officer, Range-1(5), Shahjahanpur [‘AO’ in short] anent to assessment year [‘AY’ in short] 2016-17 & 2017-18. Rosa Sahakari Ganna Samiti Ltd. Vs ITO ITA No.210 & 211/LKW/2023 AY:2016-17 & 2017-18. ITAT-Lucknow Page 2 of 8 2. Since the facts and solitary issue involved in this twin appeals are similar & identical, on the request of rival parties, for the sake of brevity these appeals are heard together for a common and consolidated order. 3. Tersely stated the common facts emanating from the case records are that; 3.1 The respondent assessee is a society registered under the provisions of Society Registration Act, 1860 and engaged in providing fertilizers & pesticides etc., to its members eligible for deduction under s/c (iv) of clause (a) of s/s (2) of section 80P of the Act. 3.2 The assessee filed its returns of income declaring total income ₹NIL after making a claim of deduction u/c VI-A of the Act. The case/s of the assessee was subjected to scrutiny be service of notice u/s 143(2) of the Act, wherein the Ld. AO denied the proportionate deduction towards Management Expenses and Interest paid from the gross interest earned by the assessee and also denied the benefit of section 80P(2)(d) of the Act in relation to interest income claimed to have earned by the assessee society from its investment with banks. 3.3 Aggrieved by the denials, the assessee carried the matters in separate appeal u/s 246A(1) of the Act before the first appellate authority unsuccessfully. 3.4 Further aggrieved by the adjudication of Ld. NFAC, the assessee instituted instant twin appeals u/s 253(1)(a) of the Act on as many as ten argumentative grounds, the reproduction of which deemed unnecessary in view of rule 8 of ITAT-Rules, 1963. However, it suffices to state that these grounds common to Rosa Sahakari Ganna Samiti Ltd. Vs ITO ITA No.210 & 211/LKW/2023 AY:2016-17 & 2017-18. ITAT-Lucknow Page 3 of 8 both the appeals under adjudication solitarily directed against (1) proportionate deduction of management expenses and interest expense from the gross interest earned by the appellant assessee and further denial of deduction of interest u/s 80P(2)(d) of the Act. 4. We have heard the rival common contention and arguments of both the parties and subject to rule 18 of ITAT Rules, 1963 perused material placed on records and considered the facts in the light of settled position of law. 5. The present dispute solitarily revolves around appellant assessee’s entitlement for deduction u/s 80P(2)(d) of the Act in relation to interest income earned from investment held by it with banks more precisely scheduled co- operative banks. 6. Without multiplying the authority on the subject matter, as rightly pointed out the Ld. DR Mr Sharma that, the identical issue came for consideration before the co-ordinate bench of this Tribunal in different assessee which was first adjudicated in favour of assessee. The adjudication however in appeal was reversed by the Hon’ble Jurisdictional Allahabad High Court. When the matter further taken up by assessee, the Hon’ble Supreme Court remanded the matter back to the Tribunal for fresh adjudication. Following the direction of Hon’ble Apex Court (supra), the remanded matter by a consolidate order dt. 01/09/2022 in ITA No. 285, 474, 525, 536 & 540/Lkw/2015 decided by the co-ordinate bench vide para 7 which as under; Rosa Sahakari Ganna Samiti Ltd. Vs ITO ITA No.210 & 211/LKW/2023 AY:2016-17 & 2017-18. ITAT-Lucknow Page 4 of 8 ‘7. We have heard the rival parties and have gone through the material placed on record. Similar grounds have been taken in these appeals by the Revenue and the Tribunal had dismissed the appeals of the Revenue and on appeals before Hon'ble Allahabad, the orders of the Tribunal were reversed and Hon'ble High Court decided the issue in favour of the Revenue after relying on the judgment of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Limited (supra). The assessee filed appeals before Hon'ble Supreme Court and Hon'ble Supreme Court set aside the order of Hon'ble Allahabad High Court by holding as under: “Having heard learned counsel for the parties, we are inclined to remit the matters to the Income Tax Appellate Tribunal to decide afresh the appeals relating to the assessment years in question. We have passed the order in view of lack of clarity on facts and the exemption clause under sub-section 2 to Section 80P of the Income Tax Act, 1961 relied upon by the assessee, and considered by authorities and the Tribunal. Learned senior counsel appearing for the appellants has submitted that they would like to place on record additional documents, including the statutory rules, which may have bearing on the nature of income, and entitlement to exemption under Section 80P. We permit the appellants to file the said documents, including the statutory rules, within a period of four weeks from today. The respondent i.e. Revenue would be entitled to file additional documents and also place written reply on record within a period of eight weeks from the date a copy of the documents is furnished. Accordingly, we would set aside the impugned order passed by the High Court and the Tribunal with the request that the Tribunal would decide the issue of exemption under Section 80P on merits and in accordance with law without being influenced and being bound by the earlier orders passed by them and the High Court. We would clarify that the above direction would not entitle either the Revenue or the assessee to reopen the closed cases where assessments have become final. The Trial Court/Tribunal would try to dispose of the appeals expeditiously and preferably within a period of eight months from the date of first hearing. The party would appear before the Tribunal on 10th January, 2022 when date of hearing would be fixed. Rosa Sahakari Ganna Samiti Ltd. Vs ITO ITA No.210 & 211/LKW/2023 AY:2016-17 & 2017-18. ITAT-Lucknow Page 5 of 8 With the aforementioned directions, the civil appeals are disposed of. All the pending applications are disposed of.” 7.1 Now the parties are again before us. We find that assessees had earned interest from fixed deposits from bank and co-operative societies. Hon'ble Supreme Court, after acceptance of additional documents had set aside the issue before this Tribunal for readjudication. We find that the arguments of the assessees are that the assessees had placed the funds in the form of fixed deposits with nationalized banks and Co- operative banks in view of the specific requirements of U.P. Co-operative Societies Act. We find that section 58 of the U.P. Co-operative Societies Act requires the net profit to be distributed as under: “(a) An amount not less than twenty five percent shall be transferred to a fund called the reserved fund: (b) Not less than such amount as may be prescribed, shall be credited to a Co-operative Education fund to be established in the manner prescribed, and this shall be applicable to such co- operative societies also which incur loss in the year, [Provided that the provisions of this clause shall not apply to a Primary Agriculture Credit Co-operative Society, a Central Co- operative Bank or the Apex Bank.',] (c) An amount that may be prescribed shall be credited to the research and development fund created in the Apex Society of the concerned class of Co-operative societies and which shall be maintained for the purpose of Research and development in the prescribed manner. (d) an amount not exceeding twenty percent as may be prescribed shall be transferred to a fund called the Equity Redemption Fund to be established and utilized in the manner prescribed by such co- operative society which has the subscription of the State Government in its share capitals.” Rosa Sahakari Ganna Samiti Ltd. Vs ITO ITA No.210 & 211/LKW/2023 AY:2016-17 & 2017-18. ITAT-Lucknow Page 6 of 8 7.2 Hon'ble Allahabad High Court in the case of CIT vs. Krishak Sahkari Ganna Samiti Ltd. [2002] 258 ITR 594 (Alld) has held that the investment by co-operative society in the form of Government securities, equivalent to 25% of its profit, was the requirement of keeping the same as statutory reserve therefore, has held that such earning of interest was attributable to the activity carried on by the assessee. The relevant findings of Hon'ble Allahabad High Court are reproduced below: “Clause (c) of Section 80-P(2) exempts income of cooperative societies to the extent mentioned in that section if the profits or gains are 'attributable' to the activity in which the cooperative society is engaged. The findings are that under statutory provisions the cooperative society is bound to invest 25% of its profits in Government securities. The assessee complied with this provision. In the process, it earned interest on these investments. The question is whether such profits or gains are attributable to the activity of supplying sugarcane carried on by the assessee. In Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 1TR 84 the Supreme Court held that the expression 'attributable to' suggests that the Legislature intended to cover receipts from sources other than the actual conduct of the business of the assessee. The investment of the statutory percentage of its profits in Government securities was a condition of the carrying on the business. The profits or gains from such investments were connected with or incidental to the carrying on of the actual business. They were, in our opinion, rightly held by the Tribunal to be attributable to the activity carried on by the assessee within the "meaning of clause (c) aforesaid. We therefore, answer the question referred to us in the affirmative in favour of the assessee and against the Department. 8. Following the aforementioned ratio laid down by the Division Bench which we consider binding on us, we too answer the question referred to us in the affirmative in favour of the assessee cooperative society and against the Revenue.” Rosa Sahakari Ganna Samiti Ltd. Vs ITO ITA No.210 & 211/LKW/2023 AY:2016-17 & 2017-18. ITAT-Lucknow Page 7 of 8 7.3 Further we find that the assessee has relied on a judgment of Raipur Tribunal in the case of Gramin Sewa Sahakari Samiti Maryadit vs. Income Tax Officer [2022] 138 taxmann.com 476 (Raipur-Trib.) wherein the Tribunal has held that the interest earned by the assessee from deposit with co-operative bank and nationalized bank was eligible for deduction u/s 80P(2)(a) of the Act. 7.4 The above two judgments respectively by Hon'ble High Court and Tribunal hold that the interest earned by a Co-operative Society on deposits, which are statutorily required to be kept in the form of bank deposits or Government securities, are attributable to the business of an assessee. 7.4 Here in the present cases, we do not find the figures regarding the interest which the assessees may have earned on fixed deposits attributable to the making of statutory reserves. We further find that bye laws of the assessee has to be gone through which, though are available in the paper book, but require examination by the Assessing Officer as these were filed before Hon'ble Supreme Court as additional evidences. Therefore, as agreed by the parties, we deem it appropriate to remit the issue of deduction u/s 80P for readjudication by the Assessing Officer, who, in the light of judgment of Hon'ble Supreme Court and keeping in view the judgments relied on by the assessee and keeping in view the additional documents, as filed before Hon'ble Supreme Court, will adjudicate the issue afresh. Needless to say that the assessees will be provided sufficient opportunity of being heard. 7. In the extant batch of appeals the facts are indifferent from the aforestated cases decided by the co-ordinate bench. In view thereof, respectfully following the decision of co-ordinate bench (supra) and maintaining the parity in the decision on the sole & substantive issue of deduction, we set-aside the impugned orders of first appellate authority and remand the matter back to the file of Ld. AO with a Rosa Sahakari Ganna Samiti Ltd. Vs ITO ITA No.210 & 211/LKW/2023 AY:2016-17 & 2017-18. ITAT-Lucknow Page 8 of 8 direction to deal with these two bullet issues (1) proportionate deduction of management expense & interest paid against the gross interest earned and (2) deduction of interest u/s 80P(2)(d) of the Act and decide the same in accordance with law in the light of judicial precedents (supra) referred herein above. Needless to state that the appellant shall be given three effective opportunities of being heard in each these cases separately. 8. The ground number 1 and 8 of appeals raised in this bunch of appeals stands partly allowed. Remaining grounds are also stands adjudicated accordingly. 9. These twin appeals of the assessee in result stands allowed for statistical purposes in aforestated terms. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Monday, 01st day of July, 2024 -S/d- -S/d- SUBHASH MALGURIA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER प ु णे / PUNE ; दिना ां क / Dated : 01st day of July, 2024 आदेश की प्रनिनलनप अग्रेनर्ि / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(A)-NFAC, Delhi (India) 4. The Concerned CIT 5. DR, ITAT, Bench ‘A’, Pune 6. गार्डफ़ाइल / Guard File. आिेशान ु सार / By Order, वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्यायादिकरण, प ु णे / ITAT, Lucknow