The Commercial Co. Op. Credit Society Ltd., Halol V. The Income Tax Officer, Ward-2, Godhra

ITA 2227/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7865 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 06-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 56

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD LOZJH LOZJH LOZJH LOZJH OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW; EK/KQFERK JKW;] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; DS LE{KA DS LE{KA DS LE{KA DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO.2227/AHD/2017 ( / ASSESSMENT YEAR : 2014-15) M/S. THE COMMERCIAL CO-OP. CREDIT SOCIETY LTD, STATION ROAD, HALOL 389 350, PANCHMAHAL / VS. THE INCOME TAX OFFICER, WARD 2, GODHRA. ./ ./ PAN/GIR NO. : AAAAT 5920 B ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SULABH PADSHAH, A.R. / RESPONDENT BY : SHRI PRASOON KABRA, SR. D.R. / DATE OF HEARING 05/07/2018 !'# / DATE OF PRONOUNCEMENT 13/07/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-4 VADODARA [CIT(A) IN SHORT] VIDE APPEAL NO.CAB/4- 390/2016-17 DATED 16.06.2017 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 (HERE-IN -AFTER REFERRED TO AS 'THE ACT') DATED 24.11.2016 RELEVANT TO ASSESSMENT YEAR (AY) 2014-15. ITA NO.2227/AHD/2017 THE COMMERCIAL CO.OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2014-15 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- YOUR APPELLANT BEING AGGRIEVED BY THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4, VADODARA PR ESENTS THIS APPEAL AGAINST THE SAME ON THE FOLLOWING AMONGST OT HER GROUNDS. 1. THE COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN DIRECTING THE AO TO TAX THE INTEREST INCOME RECEIVE D BY THE APPELLANT FROM SAVINGS ACCOUNTS HELD IN NATIONALIZE D BANKS AND PANCHMAHAL DIST CO OP. BANK LTD FOR RS 28,87,397/- UNDER THE HEAD INCOME FROM OTHER SOURCES U/S. 56 OF THE INCOM E TAX ACT, 1961. IT IS SUBMITTED THAT, YOUR APPELLANT IS ENTIT LED TO EXEMPTION U/S 80P OF THE INTEREST INCOME AND THEREFORE INCOME ASSESSED U/S 56 OF THE ACT MAY PLEASE BE DELETED. 2. NOTWITHSTANDING THE DECISION OF GUJARAT HIG H COURT IN THE CASE OF STATE BANK OF INDIA VS. CIT, THE APPELLANT CO.OP .CREDIT SOCIETY LTD IS ENTITLED TO EXEMPTION U/S 80 P OF THE INCOME TAX ACT ON THE INTEREST INCOME OF RS 28,87,397/- ALSO. 3. WITHOUT PREJUDICE TO THE ABOVE LD. A.O. HAS ERRED IN TAXING THE WHOLE INTEREST INCOME U/S.56 OF THE ACT AMOUNTING RS.28,87,397/- RECEIVED BY APPELLANT FROM PANCHMAHA L DIST CO OP. BANK LTD & INTEREST FROM NATIONALIZED BANKS WIT HOUT APPRECIATING THE FACT THAT EXPENDITURE INCURRED FOR EARNING SUCH INCOME MUST BE ALLOWED U/S 57 OF THE ACT AND PRO-RA TA INTEREST INCOME RECEIVED FROM CO. OP. BANK INTEREST FROM NAT IONALIZED BANKS ONLY CAN BE TAXED. IT IS SUBMITTED THAT SAME BE ALLOWED NOW. 4. THE ORDER PASSED BY THE LEARNED C.I.T(A) IS B AD IN LAW AND CONTRARY TO THE PROVISIONS OF LAW AND FACTS. IT IS SUBMITTED THAT THE SAME BE HELD SO NOW. 5. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER A ND/OR TO AMEND ALL OR ANY OF THE GROUNDS BEFORE THE FINAL HEARING. 3. THE ASSESSEE ALSO FILED ADDITIONAL GROUNDS OF AP PEAL VIDE LETTER DATED 5 TH JULY 2018 AS DETAILED UNDER:- WITHOUT PREJUDICE TO THE OTHER GROUNDS, THE LD. CI T(A) HAS ERRED IN TAXING INTEREST INCOME RECEIVED OF RS.26,238/-FROM PANCHMAHAL DISTRICT CO.OP BANK U/S. 56 OF THE ACT. IT IS SUBMITTED THAT THE ANY INTEREST RECEIVED BY CO.OP SOCIETY ON INVESTMENT MADE WITH C O.OP BANK/CO.OP ITA NO.2227/AHD/2017 THE COMMERCIAL CO.OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2014-15 - 3 - SOCIETY IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(D) OF THE ACT. THEREFORE, THE INTEREST INCOME RECEIVED OF RS.1,66,038/- BE ALLOWE D AS DEDUCTION U/S. 80P(2)(D) OF THE ACT. 4. THE INTERCONNECTED ISSUE INVOLVED IN THE GROUNDS OF APPEAL RELATES TO WHETHER INTEREST INCOME EARNED ON FIXED DEPOSITS WITH THE NATIONALIZED BANK AND COOPERATIVE BANK WOULD QUALIFY FOR DEDUCTI ON UNDER SECTION 80P(2)(A)(I) AND 80P(2)(D) OF THE INCOME TAX ACT. 5. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSE SSEE FAIRLY CONCEDED THAT ISSUE IN DISPUTE IS SQUARELY COVERED AGAINST T HE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF STATE BANK OF INDIA VS. CIT, 389 ITR 578, WHEREIN HON'BLE COURT HELD THAT INTEREST EARNED FROM THE INVESTMENT MADE IN ANY BAN K IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN THIS VIEW OF THE MATTER, WE DISMISS THE APPEAL OF THE ASSESSEE. HOWEVER, WE DIR ECT THE AO TO EXCLUDE THE AMOUNT OF NET INTEREST INCOME FROM THE DEDUCTIO N CLAIMED U/S 80P(2)(A)(I) OF THE ACT. THUS THE AO WILL ALLOW THE EXPENSES INCURRED BY THE ASSESSEE IN THE EARNING OF SUCH INTEREST INCOME NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN THIS CONNECTION WE FIND SUPPORT & GUIDANCE FROM THE ORDER OF THIS TRIB UNAL IN THE CASE OF SHREEJI CO-OPERATIVE CREDIT SOCIETY LTD VS. ITO PER TAINING TO THE ASSESSMENT YEAR 2013-14 IN ITA NO.2751/AHD/2016 VID E ORDER DATED 15- 02-2018 WHEREIN IT WAS HELD AS UNDER: 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE FAIRY CONCEDED THAT ISSUE IN DISPUTE IS SQUARELY COVERED AGAINST THE AS SESSEE BY DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F STATE BANK OF INDIA ITA NO.2227/AHD/2017 THE COMMERCIAL CO.OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2014-15 - 4 - VS. CIT, 389 ITR 578 WHEREIN HONBLE COURT HELD THA T INTEREST EARNED FROM INVESTMENT MADE IN ANY BANK IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(D). IN THIS VIEW OF THE MATTER, WE DISMISS T HE APPEAL OF THE ASSESSEE. HOWEVER, ANY EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING SUCH INCOME COULD BE ALLOWED TO IT. IN OTHE R WORDS, THE LD. AO HAS TO DETERMINE THE NET INTEREST EARNED BY THE ASS ESSEE ON SUCH INVESTMENT WITH BANK, AND ONLY THEREAFTER THAT INCO ME HAS TO BE EXCLUDED FROM THE ADMISSIBILITY OF DEDUCTION UNDER SECTION 80P(2) OF THE ACT. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. SIMILARLY WE ALSO NOTE THAT THE INCOME EARNED BY TH E ASSESSEE ON THE INVESTMENT MADE WITH THE ANY OTHER COOPERATIVE SOCI ETY WILL BE ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80P(2)(D) OF THE AC T. IN THIS CONNECTION WE FIND SUPPORT & GUIDANCE FROM THE ORDER OF THIS T RIBUNAL IN THE CASE OF THE SARVODAY CREDIT CUM CONSUMERS CO-OPERATIVE SOCI ETY LTD. VS. ACIT IN ITA NO.1875AHD/2015 PERTAINING TO THE ASSES SMENT YEAR 2011-12 WHEREIN IT WAS HELD AS UNDER: 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE RE SPECTIVE PARTIES AND PERUSED THE RELEVANT MATERIALS AVAILABLE ON REC ORD. WE FIND THAT THE ISSUE RAISED BY THE ASSESSEE AS TO WHETHER THE ASSE SSEE IS ENTITLED TO THE CLAIM U/S.80P(2)(A)(I) & 80P(2)(D) OF THE ACT ON TH E INTEREST AND DIVIDEND INCOME RECEIVED FROM THE BANASKANTHA DIST.CENTRAL C O-OPERATIVE BANK LTD. IS IDENTICAL TO THE ISSUE INVOLVED IN THOSE AB OVE APPEALS DECIDED BY THE COORDINATE BENCH OF THIS TRIBUNAL. THE COORDIN ATE BENCH WHILE DECIDING THE ISSUE HAS OBSERVED AS FOLLOWS: 4. WE NOW ADVERT TO THE LEAD ISSUE OF SECTION 80(P )(2) DISALLOWANCE OF RS.27,97,019/- IN RESPECT OF ASSESSEES INTEREST INCOME DERIVED FROM ITS DEPOSITS WITH THE BANAS CO-OPERATIVE BANK. BOT H THE LOWER AUTHORITIES QUOTE THE LEGISLATIVE AMENDMENT VIDE FI NANCE ACT, 2006 W.E.F. 01.04.2007 INSERTING SUBSECTION 4 IN SECTION 80P AS WELL AS CBDTS EXPLANATORY NOTES TO THE ABOVE FINANCE ACT D ATED 28.122006 IN ITA NO.2227/AHD/2017 THE COMMERCIAL CO.OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2014-15 - 5 - HOLDING THAT THE IMPUGNED INTEREST INCOME DERIVED F ROM CO-OPERATIVE BANK IS NOT ELIGIBLE FOR DEDUCTION. LEARNED DEPART MENTAL REPRESENTATIVE VEHEMENTLY CONTENDS THAT HONBLE KAR NATAKA HIGH COURTS RECENT DECISION IN (2017) 83 TAXMANN.COM 14 0 (KARNATAKA) PCIT VS. TOTAGARS CO-OPERATIVE SALE SOCIETY HAS SET TLED THE LAW THAT SUCH AN INCOME IS NOT ALLOWABLE AS SECTION 80P DEDU CTION IN VIEW OF THE LEGISLATIVE AMENDMENT HEREINABOVE. MR. KABRA THERE AFTER FILES HONBLE APEX COURTS JUDGMENT IN (2017) 397 ITR 1 (SC). TH E CITIZEN CO- OPERATIVE SOCIETY LTD. VS. ACIT SETTLING SECTION 80 P DEDUCTION ISSUE IN RESPECT OF ORDINARY AND NOMINAL MEMBERS. WE HOWEVE R FIND THAT THE ABOVE FORMER DECISION GOES CONTRARY TO HONBLE JURI SDICTIONAL HIGH COURTS JUDGMENT IN TAX APPEAL NO. 473 OF 2014 CIT VS. SABARKANTHA DISTRICT COOPERATIVE MILK PRODUCERS UNION LTD. DECL INING REVENUES IDENTICAL QUESTION OF LAW CHALLENGING TRIBUNALS DE CISION ALLOWING SECTION 80P DEDUCTION IN RESPECT OF INTEREST EARNED ON FIXED DEPOSITS WITH A COOPERATIVE BANK IN ASSESSMENT YEAR 2009-10 I.E. POST SECTION 80P(4) AMENDMENT W.E.F. 01.04.2007. THEIR LORDSHIPS REASONING TO THIS EFFECT READS AS UNDER: 4.0. NOW, SO FAR AS PROPOSED QUESTION NO. B I.E. W HETHER THE APPELLATE TRIBUNAL HAS SUBSTANTIALLY ERRED IN UPHOL DING THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCES OF RS.1,42 ,19,5157- UNDER SECTION 80(P)(2)(D) OF THE ACT IS CONCERNED, IT IS REQUIRED TO BE NOTED THAT THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 8 0(P)(2)(D) OF THE ACT ON THE INTEREST EARNED ON THE FIXED DEPOSIT WIT H COOPERATIVE BANK AND THE SOCIETIES AND IT HAS BEEN FOUND THAT AS SUC H THE INCOME WAS RECEIVED FROM THE INVESTMENT IN COOPERATIVE SOCIETI ES AND COOPERATIVE BANK. CONSIDERING SECTION 80(P)(2)(D) O F THE ACT WHEN THE ONLY REQUIREMENT WAS THAT THE INCOME SHOULD BE RECEIVED FROM INVESTMENT IN COOPERATIVE SOCIETIES AND THE COOPERA TIVE BANK WHICH IN THE PRESENT CASE HAS BEEN FULFILLED, IT CANNOT B E SAID THAT THE LEARNED TRIBUNAL HAS COMMITTED ANY ERROR IN DELETING DISALL OWANCE OF RS.1,42,19,515/- UNDER SECTION 80(P)(2)(D) OF THE A CT. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE LEARN ED TRIBUNAL. UNDER THE CIRCUMSTANCES, PROPOSED QUESTION B IS ALS O ANSWERED AGAINST THE REVENUE. WE THEREFORE FOLLOW HONBLE JURISDICTIONAL HIGH COU RTS JUDGMENT THAN HONBLE KARNATAKA HIGH COURTS DECISION. COMI NG TO HONBLE APEX COURTS DECISION IN THE CITIZEN CO-OP ERATIVE ITA NO.2227/AHD/2017 THE COMMERCIAL CO.OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2014-15 - 6 - SOCIETY LTD. (SUPRA), WE FIND THAT THERE IS NO DISP UTE ABOUT THE CATEGORY OF MEMBERS AS IT WAS BEFORE THEIR LORDSHIP S. WE THUS CONCLUDE IN VIEW OF ALL THESE FACTS AND CIRCUMSTANC ES THAT HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IS BIN DING ON US. WE ACCORDINGLY DELETE THE IMPUGNED DISALLOWANCE OF RS.27,97,019/- IN QUESTION. THIS LEAD APPEAL ITA N O. 1891/AHD/2014 IS PARTLY ACCEPTED 8. THUS IT IS A FACT IN THE AFORESAID MATTER THAT T HE CO-ORDINATE BENCH HAS BEEN PLEASED TO ALLOW THE CLAIM OF THE AS SESSEE FOR DEDUCTION OF INTEREST INCOME DERIVED FROM THE DEPOS ITS WITH THE BANASKANTHA DIST. CENTRAL CO-OPERATIVE BANK LTD. 9. TAKING INTO CONSIDERATION THE ENTIRE FACT S OF THE MATTER AND THE DECISION CITED BY THE LD. AR, WE ARE OF THE CON SIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.80(2 )(A)(I) & 80P(2)(D) OF RS.22,52,868/- & RS.4,44,200/- BEING INTEREST AND DIVIDEND INCOME RESPECTIVELY DERIVED FROM THE DEPOS ITS WITH THE BANASKANTHA DIST.CENTRAL CO-OPERATIVE BANK LTD. AND THUS ACCORDINGLY DELETE THE IMPUGNED DISALLOWANCE OF RS. 22,51,000/-. 10. THE GROUND OF APPEAL PREFERRED BY THE ASSE SSEE IS ALLOWED. THE FACTS OF THE CASE ON HAND ARE IDENTICAL AS DISC USSED IN THE ABOVE CASE. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DIRE CT THE AO TO EXCLUDE THE AMOUNT OF NET INTEREST INCOME FROM THE DEDUCTIO N CLAIMED U/S 80P(2)(A)(I) OF THE ACT. THUS THE AO WILL ALLOW THE EXPENSES INCURRED BY THE ASSESSEE IN THE EARNING OF SUCH INTEREST INCOME NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. SI MILARLY, WE ALSO DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION TO THE ASSESSEE FOR THE AMOUNT OF INTEREST EARNED FROM THE CO-OPERATIVE BAN K UNDER SECTION 80P(2)(D) OF THE ACT . HENCE, GROUNDS OF APPEAL FIL ED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2227/AHD/2017 THE COMMERCIAL CO.OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2014-15 - 7 - 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 13/07/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LN L; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13/07/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-4, VADODARA. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 09/07/2018 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10/07/2018. 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 13/07/2018 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER