Shiva Credit Co-operative Society Ltd , Honnali V. Income Tax Officer Ward-2 , Shimoga

ITA 2186/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5618 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 15-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR G MANOJ KUMAR
• Assessee Lawyers: DR S KRISHNASWAMY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO S . 2186 TO 2188/ BANG/201 7 ASSESSMENT YEAR S : 2009 - 10, 2011 - 12 & 2012 - 13 M/S. SHIVA CREDIT CO-OPERATIVE SOCIETY LTD., NYAMATHI ROAD, HONNALI, DAVANGERE DIST 577 217. PAN: AABAS 0097D VS. THE INCOME TAX OFFICER, WARD 2, SHIMOGA. APPELLANT RESPONDENT APPELLANT BY : DR. S. KRISHNASWAMY, CA RESPONDENT BY : DR. G. MANOJKUMAR, ADDL. CIT (DR) D ATE OF HEARING : 10 .01.2018 DATE OF PRONOUNCEMENT : 1 1 .0 1 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER ALL THESE THREE APPEALS ARE FILED BY THE ASSESSEE W HICH ARE DIRECTED AGAINST THREE SEPARATE ORDERS OF CIT(A), DAVANGERE DATED 29 .06.2017 FOR ASSESSMENT YEAR 2009-10, DATED 29.06.2017 FOR ASSESSMENT YEAR 2011-12 AND DATED 03.07.2017 FOR ASSESSMENT YEAR 2012-13. ALL THESE A PPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ALL THE THREE APPEALS, THE GROUNDS RAISED BY THE ASSESSEE ARE IDENTICAL EXCEPT DIFFERENCE IN AMOUNTS. HENCE I REPRODUCE TH E GROUNDS FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 2186/BANG/2017. THE GROUND S RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LEARNED ITO AND CIT (A) IS AGAI NST LAW AND FACTS. 2. RS.1,82,303/- (INTEREST INCOME FROM DDCC BANK) I. THE LEARNED ITO AND CIT (A) ERRED IN BRINGING TO TAX THE INTEREST INCOME RECEIVED FROM INVESTMENT IN A COOPERATIVE BA NK ON THE ITA NOS. 2186 TO 2188/BANG/2017 PAGE 2 OF 4 GROUND THAT A 'CO-OPERATIVE BANK' IS NOT A CO-OPERA TIVE SOCIETY, AND FURTHER THAT SUCH INTEREST WAS NOT CO-OPERATIVE INC OME. II. THE LEARNED ITO AND CIT (A) WRONGLY APPLIED THE DECISION OF THE SUPREME COURT IN TOTAGARA CO-OPERATIVE SALE SOC IETY LTD V ITO (2010) 188 TAXMANN AND THE CIT (A) THE DECISION OF KARNATAKA HIGH COURT IN PRINCIPAL COMMISSIONER OF I NCOME-TAX AND ANOTHER V. TOTAGARS COOPERATIVE SALE SOCIETY [2 017] 395 ITR 611 (KARN) AS THESE TWO DECISIONS WERE DEALING WITH A CASE OF CO- OPERATIVE SOCIETY INDULGING IN NON-COOPERATIVE BUSINESS ALSO WHICH WAS NOT THE CASE IN THE INSTANT CASE. III. THE LEARNED ITO AND CIA (A) OUGHT TO HAVE APPR ECIATED THAT THE APPELLANTS' ACTIVITIES ARE RESTRICTED AND CONFI NED TO CO- OPERATIVE ACTIVITIES I.E. TRANSACTIONS WITH MEMBERS AND HENCE THE INTEREST FROM INVESTMENT OF SUCH SURPLUS RELATING T O CO-OPERATIVE INCOME WAS EQUALLY EXEMPT UNDER THE MAIN PROVISIONS OF SEC. 80P(2). IV. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING TH E RATIO DECIDENDI OF THE KARNATAKA HIGH COURT DECISION PR.COMMISSION ER OF INCOME TAX V TOTAGARA'S CO-OPERATIVE SOCIETY (20 17) 395 ITR 611 (KAR) WHICH LAID DOWN; 'IT IS THE CHARACTER AND NATURE OF INCOME WHICH DET ERMINES ITS TAXABILITY OR EXEMPTION FROM TAXABILITY' IN THE INSTANT CASE THE DEPOSITS REPRESENTED SURPLU S OF COOPERATIVE ACTIVITY INCOME AND NOT ANY NON-CO-OPERATIVE BUSINE SS INCOME AS WAS THE CASE IN TOTAGAR'S WHICH HAD MULTIPLE BUSINESS A CTIVITIES. 3. AT THE VERY OUTSET, IT WAS SUBMITTED BY LD. AR O F ASSESSEE THAT THE ISSUE INVOLVED IN THESE APPEALS IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CAS E OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO IN ITA NO. 307 OF 2014 DATED 28.10.2014. HE ALSO POINTED OUT THAT THIS JUDGEMEN T IS REPORTED IN (2015) 55 TAXMANN.COM 447(KAR) AND HE ALSO FILED A COPY OF TH IS JUDGEMENT. AT THIS JUNCTURE, THE BENCH POINTED OUT THAT AS PER PARA NO . 10 OF THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT, VARIOUS FACTUAL ASPEC TS ARE TO BE EXAMINED AS TO WHETHER THE AMOUNTS INVESTED BY THE ASSESSEE IN BANKS WAS LIABILITY OF THE ASSESSEE OR IT WAS OWN FUNDS OF THE ASSESSEE. AS P ER THIS PARA OF THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT, IT IS AL SO REQUIRED TO BE SEEN AS TO WHETHER THE FUNDS INVESTED BY THE ASSESSEE IN BANK WERE NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE M EMBERS, AS THERE WERE NO ITA NOS. 2186 TO 2188/BANG/2017 PAGE 3 OF 4 TAKERS. IN REPLY, LEARNED AR OF THE ASSESSEE SUBMI TTED THAT THESE FACTS ARE NOT READILY AVAILABLE AND THE MATTER MAY BE RESTORED TO AO OR CIT (A) TO DECIDE AFRESH IN THE LIGHT OF THIS JUDGMENT AFTER CONSIDER ING RELEVANT FACTS WHICH WILL BE BROUGHT ON RECORD BY THE ASSESSEE. THE BENCH ALSO P OINTED OUT THAT AS PER A RECENT JUDGMENT OF HONBLE APEX COURT RENDERED IN T HE CASE OF THE CITIZEN CO- OPERATIVE SOCIETY LTD., HYDERABAD V. ACIT IN CIVIL APPEAL NO. 10245 OF 2017 DATED 08.08.2017, THE MATTER WAS RESTORED BACK TO T HE FILE OF AO TO VERIFY WHETHER CREDIT FACILITIES WERE GIVEN BY THE ASSESSE E COOPERATIVE BANK TO OUTSIDERS ALSO. THE BENCH POINTED OUT THAT THE MAT TER MAY BE RESTORED BACK TO THE FILE OF CIT (A) FOR FRESH DECISION IN THE LIGHT OF THIS JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT CITED BY LD. AR OF ASSESSEE AN D ALSO IN THE LIGHT OF THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO- OPERATIVE SOCIETY LTD., HYDERABAD V. ACIT (SUPRA) A FTER EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THESE TWO JUDGEMEN TS. IN REPLY, BOTH SIDES AGREED TO THIS PROPOSITION. HENCE I SET ASIDE THE ORDER OF CIT (A) IN ALL THE THREE YEARS AND RESTORE THE ENTIRE MATTER BACK TO HIS FIL E FOR FRESH DECISION IN THE LIGHT OF THESE TWO JUDGMENTS NOTED ABOVE OF HON'BLE KARNA TAKA HIGH COURT AND HONBLE APEX COURT AFTER ASCERTAINING THE NECESSARY FACTS OF THE PRESENT CASE. 4. THE CIT (A) SHOULD PASS NECESSARY ORDER AS PER L AW AS PER ABOVE DISCUSSION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO BOTH SIDES. IN VIEW OF THIS DECISION, I DO NOT MAKE ANY COMMENT ON THE MER IT OF THE CASE BECAUSE THE ISSUE IS RESTORED BACK TO THE FILE OF CIT(A) FOR FR ESH DECISION. 5. IN THE RESULT, ALL THE THREE APPEALS FILED BY TH E ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH JANUARY, 2018. /MS/ ITA NOS. 2186 TO 2188/BANG/2017 PAGE 4 OF 4 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.