M/s Bhadravathi Town Bhavasara Kshatriya Co-operative Society Ltd , Shimoga V. Income TAx Officer Ward-3 , Shimoga

ITA 2191/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5676 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 15-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR G MANOJ KUMAR
• Assessee Lawyers: S KRISHNA SWAMY
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 2191 / BANG/201 7 ASSESSMENT YEAR : 20 1 0 - 11 M/S. BHADRAVATHI TOWN BHAVASARA KSHATRIYA CO- OPERATIVE SOCIETY LTD., B.H. ROAD, NR. HALAPPA CIRCLE, BHADRAVATHI 577 301 SHIMOGA DIST. PAN: AACCB 0919N VS. THE INCOME TAX OFFICER, WARD 3, SHIMOGA. APPELLANT RESPONDENT APPELLANT BY : SHRI S. KRISHNASWAMY, CA RESPONDENT BY : DR. G. MANOJKUMAR, ADDL. CIT (DR) DATE OF HEARING : 08 .01.2018 DATE OF PRONOUNCEMENT : 19 .0 1 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE O RDER OF LD. CIT(A) DAVANGERE DATED 19.07.2017 FOR ASSESSMENT YEAR 2010-11. 2. THE GROUNDS 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.2,97,123/- (INTEREST INCOME FROM CO-OPERATIVE BANKS) I. THE LEARNED ITO AND CIT (A) ERRED IN BRINGING TO TA X THE INTEREST INCOME RECEIVED FROM INVESTMENT IN A CO-OP ERATIVE BANK ON THE GROUND THAT A 'CO-OPERATIVE BANK' IS NO T A CO- OPERATIVE SOCIETY AND FURTHER THAT SUCH INTEREST WA S NOT CO- OPERATIVE INCOME. PARTICULARS RS. INTEREST INCOME FROM CO-OPERATIVE BANK SHIMOGA DISTRICT CENTRAL CO-OP BANK LTD- SB AND FD DIVIDEND INCOME FROM CO-OPERATIVE SOCIETIES SHIMOGA DISTRICT CENTRAL CO-OP BANK LTD 2,96,498 625 TOTAL 2,97,123 ITA NO.2191/BANG/2017 PAGE 2 OF 4 II. THE LEARNED ITO AND CIT (A) WRONGLY APPLIED THE DEC ISION OF THE SUPREME COURT IN TOTAGARA CO-OPERATIVE SALE SOC IETY LTD V ITO (2010)188 TAXMANN AND THE CIT (A) THE DECISIO N OF KARNATAKA HIGH COURT IN PRINCIPAL COMMISSIONER OF INCOME-TAX AND ANOTHER V. TOTAGARS CO-OPERATIVE SAL E SOCIETY [2017) 395 ITR 611 (KERN) AS THESE TWO DECI SIONS 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 APPRECIAT ED 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 RELATI NG TO CO- OPERATIVE INCOME WAS EQUALLY EXEMPT UNDER THE MAIN PROVISIONS OF SEC. 80P(2). IV. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE RATIO DECIDENDI OF THE KARNATAKA HIGH COURT DECISION PR.COMMISSIONER OF INCOME TAX V TOTAGARA'S CO-OPERA TIVE SOCIETY (2017) 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. THE LD. AR OF ASSESSEE SUBMITTED COPY TWO JUDGME NTS OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO IN ITA NO. 307 OF 2014 DAT ED 28.10.2014 AND IN THE CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY L TD. VS. ITO IN ITA NO. 29/2015 DATED 09.06.2015. HE SUBMITTED THAT IN BOT H THESE JUDGMENTS, IT WAS HELD BY HON'BLE KARNATAKA HIGH COURT THAT IF THE AM OUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS AND IF IT WAS NOT THE LIABILITY AND IF IT IS AN AMOUNT WHICH WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS AS THERE WERE NO TAKERS AND FOR THIS REASON, THE MONEY WAS DEPOSITED IN A BANK SO A S TO EARN INTEREST INCOME, IT HAS TO BE ACCEPTED THAT THE SAID INCOME IS ATTRI BUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE, IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. HE SUBMITTED THAT IN THE PRESEN T CASE, THE MATTER MAY BE ITA NO.2191/BANG/2017 PAGE 3 OF 4 RESTORED BACK FOR A FRESH DECISION AFTER EXAMINING THE FACTS IN THE LIGHT OF THESE TWO JUDGMENTS OF HON'BLE KARNATAKA HIGH COURT. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT IN THE PRESENT CASE, THE ISSUE IN DISPUTE IS REGARDING ALLOWABILITY OF DEDUC TION U/S. 80P(2) OF THE IT ACT IN RESPECT OF INCOME OF RS. 297,123/- RECEIVED ON ACCO UNT OF INTEREST EARNED ON INVESTMENTS WITH CO OPERATIVE BANKS. IN THE CASES O F TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) AN D GUTTIGEDARARA CREDIT CO- OPERATIVE SOCIETY LTD. VS. ITO (SUPRA), IT WAS HELD THAT IF THE AMOUNT INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBER AND IT WAS NOT A LIABILITY AND THE AMOUNT SO INVESTED WAS NOT IMMEDI ATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO ITS MEMBERS AS THERE WERE NO TAKERS, THE RESULTANT INTEREST INCOME IS ATTRIBUTABLE TO CARRYI NG ON THE BUSINESS OF BANKING AND THEREFORE, ELIGIBLE FOR DEDUCTION U/S 80P. I FE EL THAT THE FACTS OF THE PRESENT CASE ARE TO BE EXAMINED IN THE LIGHT OF THESE JUDGM ENTS OF HONBLE KARNATAKA HIGH COURT AND SINCE, THE FACTS ARE NOT AVAILABLE O N RECORD AND WERE NOT EXAMINED BY THE LOWER AUTHORITIES, I FEEL IT PROPER TO RESTORE THIS MATTER BACK TO AO FOR AFRESH DECISION IN THE LIGHT OF THESE TWO JU DGMENTS OF HONBLE KARNATAKA HIGH COURT. I ORDER ACCORDINGLY. THE MATTER IS REST ORED TO THE FILE OF AO FOR A FRESH DECISION AFTER EXAMINING THE FACTS OF THE PRE SENT CASE IN THE LIGHT OF THESE JUDGMENTS OF HONBLE KARNATAKA HIGH COURT AND AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 19 TH JANUARY, 2018. /MS/ ITA NO.2191/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.