Bijapur Co-operative Credit Society Ltd, Vijayapura V. Income Tax Officer, Ward-1, Vijayapura

ITA 22/BANG/2018

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5486 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 03-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALAKRISHNAN N
• Keywords: Opportunity of being heard; Question of law
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 22 / BANG/201 8 ASSESSMENT YEAR : 2013 - 1 4 M/S. BIJAPUR CO-OP CREDIT SOCIETY LTD., SHREE SIDDESHWAR FRONT ROAD, YARANAL BUILDING, VIJAYAPUR. PAN: AAAAT9969J VS. THE INCOME TAX OFFICER, WARD 1, VIJAYAPUR. APPELLANT RESPONDENT APPELLANT BY : SHRI SANDEEP, C. A. RESPONDENT BY : SHRI BALAKRISHNAN N. ADDL. CIT (DR) DATE OF HEARING : 27 .0 2 .2018 DATE OF PRONOUNCEMENT : 2 7 .0 2 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A), BELAGAVIDATED 31.10.2017 FOR ASSESSMENT YEA R 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) IS PREJUDICIAL TO THEINTERESTS OF THE APPELLANT, IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMST ANCES OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE INTEREST INCOM E EARNED FROM THE TERM DEPOSITS IN THE BANKS AS DEDUCTION U/S. 80P(2) (A)(I) OF THE ACT ON THE GROUND THAT THE SAME CANNOT BE ATTRIBUTABLE TO BUSINESS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE INTEREST INCOM E EARNED FROM CO- OPERATIVE BANKS AS DEDUCTION U/S. 80P(2)(D) OF THE ACT EVEN THOUGH THE CO-OPERATIVE BANK IS REGISTERED AS A CO-OPERATIVE S OCIETY UNDER KARNATAKA STATE CO-OPERATIVE SOCIETIES ACT, 1959. EACH OF THE ABOVE GROUND IS WITHOUT PREJUDICE TO ON E ANOTHER AND THE ITA NO. 22/BANG/2018 PAGE 2 OF 4 APPELLANT CRAVES THE LEAVE OF THE HON'BLE INCOME TA X APPELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR MODIFY OTHERWISE ANY OF THE GROUND EITHER BEFORE THE HEARING OR AT THE TIME OF HEARING THIS APPEAL. 3. IT WAS SUBMITTED BY LD. AR OF THE ASSESSEE THAT THE ISSUE WAS DECIDED BY CIT(A) BY FOLLOWING THE JUDGMENT OF HON'BLE KARNATA KA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERAT IVE SALE SOCIETY AS REPORTED IN 395 ITR 611 (KARN). HE SUBMITTED THAT THE FACTS OF THAT CASE ARE DIFFERENT AND THEREFORE, THIS JUDGMENT IS NOT APPLI CABLE IN THE PRESENT CASE. HE DRAWN MY ATTENTION TO THE SECOND PARA OF THISJUDGME NT ON PAGE 616 OF 395 ITR AND POINTED OUT THAT AS PER THE FACTS OF THAT CASE NOTED BY HON'BLE KARNATAKA HIGH COURT IN THIS PARA, THE AMOUNT DEPOSITED BY AS SESSEE IN BANK WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT AND IT WAS A LIABILITY AND IT WAS SHOWN BY ASSESSEE IN THE BALANCE SHEET O N THE LIABILITY SIDE. THEREAFTER, HE PLACED RELIANCE ON AN EARLIER JUDGME NT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309 AND DRAWN MY ATTENTION TO PARA NO. 10 OF THIS JUDGMENT AND POINT ED OUT THAT IN THAT CASE, THE FACTS WERE THIS THAT THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARNINTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBER AND IT WAS NOT LIAB ILITY AND IT WAS NOT SHOWN AS LIABILITY IN THE BALANCE SHEET. THEREAFTER HE S UBMITTED THAT THERE IS NO FINDING OF ANY OF THE AUTHORITIES BELOW IN RESPECT OF THESE FACTS IN THE PRESENT CASE AND THESE FACTS ARE NOT READILY AVAILABLE BEFORE TRIBUN AL ALSO AND THEREFORE, THE MATTER MAY BE RESTORED TO AO OR CIT (A) FOR A FRESH DECISION AFTER EXAMINING THESE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE SE TWO JUDGMENTS.THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL I REPRODUCETHE RELEVANT PARA FROM THE JUDGMENT OF HON'BLE KARNATAKA HIGH CO URT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA) BEING SECOND PARA ON PAGE 616 OF 395 ITR. THE SAME IS AS UNDER. FURTHER, AS STATE ABOVE, THE ASSESSEE(S) MARKETS TH E AGRICULTURAL PRODUCE OF ITS MEMBERS. IT RETAINS THE SALE PROCEED S IN MANY CASES. IT IS THIS 'RETAINED AMOUNT' WHICH WAS PAYABLE TO ITS MEMBERS, FROM ITA NO. 22/BANG/2018 PAGE 3 OF 4 WHOM PRODUCE WAS BOUGHT, WHICH WAS INVESTED IN SHOR T-TERM DEPOS- ITS/SECURITIES. SUCH AN AMOUNT, WHICH WAS RETAINED BY THE ASSESSEE- SOCIETY, WAS A LIABILITY AND IT WAS SHOWN IN THE BA LANCE-SHEET ON THE LIABILITY-SIDE. THEREFORE, TO THAT EXTENT, SUCH INT EREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENT IONED IN SECTION 80P(2)(A)(I) OF THE ACT OR IN SECTION 80P(2)(A)(III ) OF THE ACT. THEREFORE, LOOKING TO THE FACTS AND CIRCUMSTANCES O F THIS CASE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME, INDICATED ABOVE, UNDER SECTION 56 OF THE AC T. 5. I ALSO REPRODUCE PARA NO. 10 FROM THE JUDGMENT O F HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUH ARDA CREDIT COOPERATIVE LTD. VS. ITO(SUPRA). THE SAME READS AS UNDER. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVES TED 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 A CCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MO NEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HA D DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID IN TEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P (1) O F THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH CO URT IN THE CASE OF COMMISSIONER OF INCOME-TAX 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 DENYI NG THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER: APPEAL IS ALLOWED. THE IMPUGNED ORDER IS HEREBY SET ASIDE. PARTIES TO BEAR THEIR OWN COST . 6. WHEN I GO THROUGH BOTH THESE JUDGMENTS OF HON'BL E KARNATAKA HIGH COURT, I FIND THAT THERE IS NO CONTRADICTION IN BOTH THESE J UDGMENTS. BOTH THESE JUDGMENTS ARE ON THE SAME LINE THAT IF THE DEPOSIT IN BANK ARE OUT OF OWN FUNDS OF SOCIETY THEN THE INTEREST ON SAME IS ELIGIBLE FO R DEDUCTION U/S. 80P (1) ANDIF THE DEPOSIT IN BANK IS OUT OF THE FUND AVAILABLE WI TH THE SOCIETY IN THE FORM OF LIABILITY THEN THE SAME IS NOT ELIGIBLE FOR DEDUCTI ON U/S. 80P (2) OFIT ACT. THE CONCLUSION IS DIFFERENT IN BOTH THE JUDGMENTS BECAU SE THE FACTS ARE DIFFERENT IN BOTH THESE CASES. IF AS PER THE FACTS OF THE PRESE NT CASE, IT IS FOUND THAT THE DEPOSIT IN BANK ARE OUT OF OWN FUNDS OF SOCIETY THE N THE INTEREST ON SAME IS ITA NO. 22/BANG/2018 PAGE 4 OF 4 ELIGIBLE FOR DEDUCTION U/S. 80P (1) AS PER THE JUDG MENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO(SUPRA) AND IF IT IS FOUND THAT THE DEPOSIT IN BANK IS OUT OF THE FUND AVAILABLE WITH THE SOCIETY IN THE FORM OF LIABILITY THEN THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P (2) OF IT ACT AS PE R THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT A ND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA). HENCE, THE FACT S OF THE PRESENT CASE HAS TO BE LOOKED INTO AND SINCE THE FACTS OF THE PRESENT C ASE ARE NOT READILY AVAILABLE AND THERE IS NO FINDING OF ANY OF THE AUTHORITIES B ELOW IN RESPECT OF THESE FACTS, I SET ASIDE THE ORDERS OF CIT (A) IN BOTH YEARS AND R ESTORE THE MATTER BACK TO HIS FILE FOR A FRESH DECISION WITH THE DIRECTION THAT H E SHOULD DECIDE THE ISSUE AFRESH IN BOTH YEARS AS PER ABOVE DISCUSSION AFTER PROVIDI NG ADEQUATE OPPORTUNITY OF BEING HEARD IN BOTH YEARS. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS 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 27 TH FEBRUARY, 2018. /MS/ 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.