Shri. S.M.Revana Siddaiah, CEO, Bellary V. Commissioner of Income Tax, Gulbarga

ITA 2202/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8571 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANG
• Assessee Lawyers: K MALLAHA RAO SHRI AR V
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH - SMC A BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 2202 TO 2204 & 2208 /BANG/201 6 (ASSESSMENT YEAR : 2013 - 14 ) 1. SHRI S.M. REVANA SIDDAIAH, CEO, PRIMARY AGRICULTURE CREDIT CO - OPERATIVE SOCIETY LTD., DOMMUR POST, BELLARY DISTRICT. PAN AAATP 6832D VS. COMMISSIONER OF INCOME TAX (APPEALS), KALBURGI. 2. SHRI B. MADHVESH RAO, CEO PRIMARY AGRICULTURE CREDIT CO - OPERATIVE SOCIETY LTD., BYLUR POST, BELLARY DISTRI CT. PAN AAATP 6810F 3. SHRI BASAVARAJ, CEO PRIMARY AGRICULTURE CREDIT CO - OPERATIVE SOCIETY LTD., KOLUR POST, BELLARY DISTRICT. PAN AAAAP 4586H 4. SHRI H. CHANNABASAPPA, CEO, PRIMARY AGRICULTURE CREDIT CO - OPERATIVE SOCIETY LTD., KALKAMBA POST , BELLARY DISTRICT. PAN AAJFP 7896C APPELLANT S RESPONDENT. PAGE 2 ITA NO. 2202 TO 2204 & 2208 /BANG/ 2016 APPELLANT S BY : SHRI K. MALLAHA RAO, ADVOCATE. RESPONDENT BY : SHRI AR.V.SREENIVASAN, JCIT (D.R) DATE OF H EARING : 21.02.2017. DATE OF P RONOUNCEMENT : 28 .02 . 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THESE FOUR APPEALS BY THE FOUR ASSESSEES ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS), GULBARGA FOR THE ASSESSMENT YEAR 2013 - 14. SINCE COMMON GROUNDS ARE INVOLVED IN THESE APPEALS THEREFORE FOR THE SAKE OF CONVENIENCE THESE FOUR APPEALS ARE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER. 2. COMMON GROUNDS RAISED IN THESE APPEALS ARE AS UNDER : PAGE 3 ITA NO. 2202 TO 2204 & 2208 /BANG/ 2016 PAGE 4 ITA NO. 2202 TO 2204 & 2208 /BANG/ 2016 3. THE ONLY ISSUE RAISES IN THESE APPEALS IS REGARDING THE DISALLOWANCE OF CLAIM OF SECTION 80P OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') IN RESPECT OF THE INTEREST ON FIXED DEPOSITS WITH THE BANK. THE ASSESSEE IS A CO - OPERATIVE SOCIETY WHICH PROVIDES CREDIT FACILITIES TO THE FARMERS. THE ASSESSEE EARNED INTEREST ON FIXED DEPOSITS FROM SBI, AGRICULTURE DEVELOPMENT BANK, STATION ROAD BRANCH, BELLARY. THE ASSESSEE C LAIMED DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF THE INTEREST INCOME. THE ASSESSING OFFICER DENIED THE CLAIM UNDER SECTION 80P IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTGAR S CO - OPERATIVE SALES SOCIETY LTD. VS. ITO 188 TAXMAN 282 (SC) . THE PAGE 5 ITA NO. 2202 TO 2204 & 2208 /BANG/ 2016 ASSESSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE CIT (APPEALS) BUT COULD NOT SUCCEED AS THE CIT (APPEALS) HAS ALSO FOLLOWED THE DECISION OF HON'BLE SUPREME COURT (SUPRA). 4. BEFORE THE TRIBUNAL, TH E LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS NOW COVERED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TUMKUR MERCHANT S SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO 230 TAXMANN 309 AS WELL AS IN THE CASE OF M /S. GUTTIGEDARARA CO - OPERATIVE SOCIETY LTD. VS. ITO 377 ITR 464. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTGAR CO - OPERATIVE SALES SOCIETY LTD. VS. IT O (SUPRA) AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TOTGAR SALES CREDIT SOCIETY LTD. VS . ITO (SUPRA) WAS DISCUSSED AND CONSIDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF TUMKUR MERCHANT S SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA) AND AGAIN IN THE CASE OF M/S. GUTTIGEDARARA CO - OPERATIVE SOCIETY LTD. VS. ITO (SUPRA). THE HON'BLE HIGH COURT HAS UNDERSTOOD THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PAGE 6 ITA NO. 2202 TO 2204 & 2208 /BANG/ 2016 TOTGAR S CO - OPERATIVE SALES SOCIETY LTD. VS. ITO (SUPRA) AND HELD THAT WHEN THE SOCIETY HAS SURPLUS FUNDS WHICH WERE MADE FIXED DEPOSIT IN THE BANK TO EARN INTERE ST, THE SAME IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. IN THE CASE OF M/S. GUTTIGEDARARA CO - OPERATIVE SOCIETY LTD. VS. ITO (SUPRA), THE HON'BLE HIGH COURT HAS AGAIN CONSIDERED THIS ISSUE IN PARAS 7 TO 12 AS UNDER : 7. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, THE UNDISPUTED FACTS WHICH EMERGE ARE, CERTAIN SUMS OF INTEREST WERE EARNED FROM SHORT - TERM DEPOSITS AND FROM SAVINGS BANK ACCOUNT. THE ASSESSEE IS A CO - OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT C ARRYING ON ANY OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHETHER THIS INTEREST IS ATTRIBUTABLE TO THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. 8. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELEVANT PROVISION OF LAW I.E., SECTION 80P(2)(A)(I): '80P DEDUCTION IN RESPECT OF INCOME OF CO - OPERATIVE SOCIETIES : (1) WHERE, IN THE CA SE OF AN ASSESSEE BEING A CO - OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB - SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB - SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE THE FOLLOWING, NAMELY: ( A ) IN THE CASE OF CO - OPERATIVE SOCIETY ENGAGED IN ( I ) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBER S, OR ( II ) TO ( VII ) ** ** ** THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 9. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION IS OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSIDE R THE MEANING OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (AT PAGE 93) AS UNDER: 'AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION 'ATTRIBUTABLE TO' OCCURRING IN THE PHRASE 'PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF' THE SPECIFIED INDUSTRY (HERE GENERATION AND DISTRIBU TION OF ELECTRICITY) ON WHICH THE LEARNED SOLICITOR - GENERAL RELIED, IT WILL BE PERTINENT TO OBSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION 'ATTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED THAT THE PAGE 7 ITA NO. 2202 TO 2204 & 2208 /BANG/ 2016 EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE OF OLD MACHINERY AND BUILDINGS CANNO T BE REGARDED AS PROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED B Y THE LEARNED SOLICITOR - GENERAL, IT HAS USED THE EXPRESSION 'DERIVED FROM', AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMPORT, NAMELY, 'ATTRIBUTABLE TO', HAS BEEN USED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOUR CES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY.' 10. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTE D MEANING, THEY HAVE USED THE EXPRESSION 'DERIVED FROM'. THE EXPRESSION 'ATTRIBUTABLE TO' BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSI NESS. A CO - OPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATE LY REQUIRED TO BE LENT TO THE MEMBERS, THE SOCIETY CANNOT KEEP THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIE S TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVID ING CREDIT FACILITIES TO ITS MEMBERS BY A CO - OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. 11. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY'S CASE ( SUPRA ), ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE/CO - OPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT - TERM DEPOSIT/SECURITY. S UCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECT ION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MAD E IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 12. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED 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 ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO ITS MEMBERS, AS THERE WERE NO TAKERS. THER EFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS PAGE 8 ITA NO. 2202 TO 2204 & 2208 /BANG/ 2016 ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TA KEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. ANDHRA PRADESH STATE CO - OPERATIVE BANK LTD. [2011] 336 ITR 516/200 TAXMAN 220/12 TAXMANN.COM 66 . THUS IT IS CLEAR THAT WHEN THE AMOUNT WHICH WAS DEPOSITED IN THE BANK WA S NOT AN AMOUNT DUE TO MEMBERS AND IT WAS NOT THE LIABILITY OF THE SOCIETY TO THE MEMBERS THEN THE INTEREST EARNED FROM THE DEPOSITS IN THE BANK WAS HELD TO BE ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80P (1) AS WELL AS 80P(2)(A)(I) OF THE ACT. IN THE CASE ON HAND, THE ASSESSEES ARE CO - OPERATIVE SOCIETIES PROVIDING THE CRE DIT FACILITIES TO ITS MEMBERS. T HE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS EARNED INTEREST ON FUNDS WHICH ARE NOT REQ UIRED FOR THE BUSINESS DEPOSITED IN THE FIXED DEPOSIT IN THE BANK. THEREFORE IN THE FACTS OF THESE CASES, THE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT ARE APPLICABLE. ACCORDINGLY, BY FOLLOWING THE BINDING PRECEDENT OF HON'BLE JURISDICTIONAL HIGH COURT, THE CLAIM OF THE ASSESSEES ARE ALLOWED AND THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH FEB., 2 01 7 . SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGALORE, DT. 28 .02. 2017. *REDDY GP