Shri Venkatesh Nagari Sah. Pat Sanstha Maryadit, V. Income-tax Officer,

ITA 2178/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8468 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.2178/PN/2013 (ASSESSMENT YEAR: 2010-11) SHRI VENKATESH NAGARI SAH. PAT SANSTHA MARYADIT, 38, VAKHAR BHAG, SANGLI. PAN: AAATS5531L . APPELLANT VS. THE INCOME TAX OFFICER, WARD 2(1), SANGLI. . RESPONDENT APPELLANT BY : SHRI KISHORE PHADKE RESPONDENT BY : SHRI MAZHAR AKRAM DATE OF HEARING : 27-10-2014 DATE OF PRONOUNCEMENT : 31-10-2014 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), KOLHAPUR DATED 25.11.2013 RELATING TO ASSESSMENT YEAR 20 10-11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1.1 THE LEARNED AO FAILED TO APPRECIATE THAT THE ASSE SSEE IS EXCLUSIVELY ENGAGED IN THE BUSINESS OF PROVIDING CRE DIT FACILITY TO ITS MEMBER AND HENCE THE ENTIRE INCOME OF THE APPELLANT IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I) O F INCOME TAX ACT. 1.2 THE LEARNED AO FAILED TO APPRECIATE THAT THE INTER EST FROM THE DEPOSITS WITH SCHEDULED / NATIONALIZED BANK IS NOT HING BUT INCOME ATTRIBUTABLE TO PROVIDING CREDIT FACILITIE S TO ITS ITA NO.2178/PN/2013 SHRI VENKATESH NAGARI SAH. PAT SANSTHA MARYADIT 2 MEMBERS AND HENCE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A )(I) OF THE INCOME TAX ACT. 1.3 THE LEARNED AO MAY BE DIRECTED TO ALLOW DEDUCTION U/S 80P(2)(A)(I) FOR THE ENTIRE INCOME OF THE APPELLANT. 2.1 WITHOUT PREJUDICE TO ABOVE, IF THE INTEREST ON D EPOSITS IS TREATED AS INCOME FROM OTHER SOURCE, THE LEARNED A.O. M AY BE DIRECTED TO ALLOW PROPORTIONATE DEDUCTION FOR INTE REST PAID ON DEPOSIT ACCEPTED BY THE CO-OPERATIVE CREDIT SOCIETY. 2.2 THE LEARNED AO MAY BE DIRECTED TO ALLOW DEDUCTION U/S 80P(2)(C)(II) OF THE INCOME TAX ACT. 2.3 THE APPELLANT CRAVES RIGHT TO ADD, LATER, DELETE, MOD IFY ALL OR ANY OF THE GROUNDS OF APPEAL. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 4. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE AT THE OUTSET OF HEARING POINTED OUT THAT THE ISSUE IN THE PRE SENT APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE RATIO LAID DOWN BY PUNE BENCH OF THE TRIBUNAL IN ITA NO.1336/PN/2011, ORDER DATED 31.07.2 013 IN THE CASE OF ITO VS. NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLAC ED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 6. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A ND ON VERIFICATION OF FINANCIAL STATEMENTS AND ON EXAMINATION OF BOOK S OF ACCOUNT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE SOCIETY MAINLY EARNED INCOME FROM INTEREST FROM LOANS AND ADVANCES GIVEN TO THE ITA NO.2178/PN/2013 SHRI VENKATESH NAGARI SAH. PAT SANSTHA MARYADIT 3 MEMBERS AND FROM OTHER CO-OPERATIVE SOCIETIES. THE ASSE SSEE ALSO DEPOSITED ITS SURPLUS FUNDS WITH THE BANKS AND EARNED INT EREST INCOME THEREON. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECT ION 80P(2)(A)(I) OF THE ACT IN RESPECT OF THE WHOLE OF INTEREST INC OME I.E. RS.64,56,310/-. THE ASSESSEE WAS SHOW CAUSED TO EXPLAIN AS TO WHY THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT WAS AVAI LABLE TO IT ON THE INTEREST INCOME DERIVED FROM THE DEPOSITS IN THE B ANK. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN TH E CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. IT O REPORTED IN (2010) 229 CTR 209 (SC) BY THE ASSESSING OFFICER. THE PLEA OF THE ASSESSEE WAS THAT, IT WAS PROVIDING CREDIT FACILITIES TO ITS M EMBERS AND DURING THE COURSE OF CARRYING ON ITS BUSINESS, MONEY WAS RECEIVED AS DEPOSITS FROM THE MEMBERS. THE SURPLUS WAS PARKED IN DE POSITS WITH THE BANKS IN ORDER TO PROVIDE FOR THE NEEDS OF THE DEPO SITORS FOR REDEMPTION OF THE DEPOSITS ON MATURITY. IT WAS ALSO POINT ED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSEE HAD RECEIVED DEPOSITS FROM THE MEMBERS, WHICH WERE INTERE ST BEARING AS AGAINST NON-INTEREST BEARING RETAINED FUNDS, IN THE CA SE BEFORE THE HONBLE SUPREME COURT. THE ASSESSING OFFICER APPLYING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS CO- OPERATIVE SALE SOCIETY LTD. (SUPRA) DENIED THE DEDUCTION U NDER SECTION 80P(2)(A)(I) OF THE ACT TO THE ASSESSEE ON THE INCOME FROM INT EREST ON DEPOSITS ON SURPLUS FUNDS INVESTED IN BANKS. THE TOTAL IN TEREST INCOME RECEIVED FROM THE BANK BY THE ASSESSEE IS TABULATED IN PARA 5.1 AT PAGE 2 OF THE ASSESSMENT ORDER AND THE DEDUCTION U NDER SECTION 80P(2)(A)(I) OF THE ACT WAS DENIED ON INTEREST INCOME OF RS.31,43,254/-. ITA NO.2178/PN/2013 SHRI VENKATESH NAGARI SAH. PAT SANSTHA MARYADIT 4 7. THE CIT(A) OBSERVED THAT THE INTEREST INCOME EARNED FROM THE BANKS COULD NOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVIT IES OF THE ASSESSEE AS ITS ACTIVITIES WERE TO PROVIDE CREDIT FACILITIES T O ITS MEMBERS. SINCE THE INTEREST RECEIVED FROM THE BANK WAS NOT IN THE COURSE OF ACTIVITIES CARRIED ON BY THE ASSESSEE, THE DENIA L OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT WAS UPHELD BY THE CIT(A). 8. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF CIT(A). WE FIND THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE O F ANOTHER CO- OPERATIVE SOCIETY I.E. HIND VIJAY NAGARI SAHAKARI PATSANS THA MARYADIT VS. ITO IN ITA NOS.845 & 846/PN/2013 & OTHER CO-OPERAT IVE SOCIETIES, HAD AFTER CONSIDERING SIMILAR OBJECTIONS, HAS RAISED IN THE P RESENT APPEAL HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FILED THE COPIES OF THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN NIPHAD NAGARI SAHAKARI PATSANSTHA LTD. (SUPRA) AND HIND VIJAY NAGARI SAHAKARI P ATSANSTHA MARYADIT (SUPRA) ON RECORD AND THE LEARNED DEPARTMENTA L REPRESENTATIVE FOR THE REVENUE HAS NEITHER CONTROVERTE D THE SAME NOR REFERRED TO ANY CONTRARY DECISIONS. IN VIEW THEREOF AND FOR THE SAKE OF CONSISTENCY, WE UPHOLD THE PLEA OF THE ASSESSEE THAT IT IS ENTITLED TO THE CLAIM OF THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT . THE RELEVANT FINDINGS OF THE TRIBUNAL IN NIPHAD NAGARI SAHAKARI PATSANSTHA LTD., IN TURN THE SAME WAS FOLLOWED IN THE CASE OF SHRI VENKATESH NAGARI SAH. PAT SANSTHA MARYADIT (SUPRA) ARE AS UNDER:- 7 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISI ONS ITA NO.2178/PN/2013 SHRI VENKATESH NAGARI SAH. PAT SANSTHA MARYADIT 5 CITED BEFORE US. IN THE INSTANT CASE THERE IS NO DI SPUTE TO THE FACT THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS ACTIVITY OF CREDIT COOPERATIVE SOCIE TY, I.E. PROVIDING CREDIT FACILITY TO ITS MEMBERS. ACCORDING T O THE REVENUE THE INCOME OF THE SOCIETY ON ACCOUNT OF INT EREST FROM BANKS OTHER THAN COOPERATIVE BANKS, INTEREST ON MUTUAL FUNDS, LONG TERM AND SHORT TERM CAPITAL GAIN ON S ALE OF MUTUAL FUNDS ETC. ARE NOT COVERED BY THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND HENCE N OT ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE INCOME TAX ACT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA). W E FIND THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80P(2)(A)(I) ON ACCOUNT OF INTEREST FROM BANKS OT HER THAN COOPERATIVE BANKS, INTEREST ON MUTUAL FUNDS LONG TERM A ND SHORT TERM CAPITAL GAIN ON MUTUAL FUNDS ETC. WHILE DOI NG SO, HE HELD THAT THE DECISION IN THE CASE OF TOTAGARS COOPERATIVE SALE SOCIETY LTD. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE IN THAT CASE THE AM OUNT INVESTED IN SHORT TERM DEPOSITS AND SECURITIES WAS N OT OUT OF INTEREST BEARING DEPOSITS COLLECTED FROM MEMBERS B UT OUT OF SALE PROCEEDS OF AGRICULTURAL PRODUCE OF FARMER ME MBERS MARKETED BY THE SOCIETY. FURTHER, THE HONBLE APEX COU RT HAS CONSIDERED ONLY THE LATTER PART OF SECTION 80P(2 )(A)(I), I.E. INCOME OF A COOPERATIVE SOCIETY ENGAGED IN PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION AN D HAS NOT CONSIDERED THE EARLIER PART OF SECTION 80P(2)(A)(I) , I.E. INCOME OF A COOPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING IS ELIGIBLE FOR DEDUCTION. 11.1. 17. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE EITHER PARTY, PERUSED THE RELEVANT RECORDS AND ALSO THE CASE LAW ON WHICH THE LEARNED AR HAD RESERVATION IN ITS APPLICABLY IN THE CIRCUMSTANCES O F THE ASSESSEE'S CASE. 18 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BEEN RENDERED IN IDENTICAL CIRCUMSTANCES AND FOR THE SAKE OF MAINTAINING CONSISTENCY, WE ALLOW THE PLEA OF THE ASSES SEE. ACCORDINGLY, ASSESSEE SUCCEEDS IN ITS APPEAL. 9. FOLLOWING THE AFORESAID PARITY OF THE REASONING, WE DIRECT THE ASSESSING OFFICER TO ALLOW CLAIM OF DEDUCTION UNDER SECTION 80 P(2)(A)(I) ITA NO.2178/PN/2013 SHRI VENKATESH NAGARI SAH. PAT SANSTHA MARYADIT 6 OF THE ACT ON THE INTEREST INCOME RECEIVED FROM THE BANK TOTALING RS.31,43,254/-. THE GROUNDS OF APPEAL RAISED BY THE ASSE SSEE ARE THUS, ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2014. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST OCTOBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE