The Kalol People Co. Op. Credit Society Ltd, Panchmahal V. ITO, Wrad-2, Godhra

ITA 2229/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7871 (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: 2013-2014
• Appeal Filed On: 06-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Question of law

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.2229/AHD/2017 ( / ASSESSMENT YEAR : 2013-14) THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD., NR. KALOL NAGAR SEVA SADAN, GHOYA BAZAR, KALOL 389330, PANCHMAHAL. / VS. CIT-4, VADODARA ./ ./ PAN/GIR NO. : AADAT 8779 K ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : --NONE-- / 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- 136/2016-17 DATED 30.06.2017 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 17.02.2016 RELEVANT TO ASSESSMENT YEAR (AY) 2013-14. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. THE LEARNED ASSESSING OFFICER AS WELL AS FIRST APPELLATE AUTHORITY HAS ERRED IN DISALLOWING DEDUCTION OF RS.12,94,067/ - CLAIMED BY ITA NO.2229/AHD/2017 THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2013-14 - 2 - THE APPELLANT-CO-OPERATIVE SOCIETY UNDER SECTION 80 -P OF THE ACT, THE SAME DESERVES TO BE ALLOWED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED ASS ESSING OFFICER AS WELL AS FIRST APPELLATE AUTHORITY HAS ERRED IN NOT ALLOWING DEDUCTION UNDER SECTION 80-P(2)(D) RELEVANT TO A SU M OF RS.2,18,529/- EARNED BY THE APPELLANT CO-OPERATIVE SOCIETY BY WAY OF INTEREST FROM CO-OPERATIVE BANK. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED ASS ESSING OFFICER AS WELL AS FIRST APPELLATE AUTHORITY HAS ERRED IN COMP UTING INCOME FROM BANKS AT RS.12,94,067/- WITHOUT ALLOWING DEDUC TION FOR PROPORTIONATE EXPENSES THERE BY DETERMINING THAT, A LL EXPENSES INCURRED BY THE APPELLANT COOPERATIVE SOCIETY RELAT E TO THE INCOME BY WAY OF INTEREST EARNED FOR LOANS ADVANCED TO MEMBERS AND NO EXPENSE COULD BE ATTRIBUTABLE TO INCOME EARN ED BY WAY OF INTEREST ON DEPOSITS WITH BANKS. 4. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSING O FFICER AS WELL AS FIRST APPELLATE AUTHORITY HAS ERRED IN NOT ALLOWING DEDUCTION UNDER SECTION 80-P(2)(C)(II) OF THE ACT TO THE TUNE OF RS. 50,000 IN THE CASE OF THE APPELLANT-CO-OPERATIVE SOCIETY. 5. THE APPELLANT CRAVES TO RESERVE HIS RIGHT TO AD D, ALTER, AMEND, OR DELETE ANY GROUND OF APPEAL DURING THE COURSE OF HE ARING. 3. AT THE OUTSET IT WAS OBSERVED THAT THE ASSESSEE/ HIS AUTHORIZED REPRESENTATIVE NEITHER APPEARED NOR FILED ANY ADJOU RNMENT PETITION AT THE TIME OF HEARING. HOWEVER WE OBSERVED THAT THE ISSUE INVOLVED IN THIS APPEAL IS ALREADY COVERED BY VARIOUS JUDICIAL PRONO UNCEMENTS. THEREFORE WE DECIDED TO PROCEED TO ADJUDICATE THE ISSUE RAISE D BY THE ASSESSEE AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE ON BEHA LF OF REVENUE. 4. THE INTERCONNECTED ISSUE INVOLVED IN THE GROUNDS OF APPEAL RELATES TO WHETHER INTEREST INCOME EARNED ON FIXED DEPOSITS WITH THE NATIONALIZED BANK AND CO-OPERATIVE BANK WOULD QUALIFY FOR DEDUCT ION UNDER SECTION 80P(2)(A)(I), 80P(2)(C) 80P(2)(D) OF THE INCOME TAX ACT. ITA NO.2229/AHD/2017 THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2013-14 - 3 - 5. AT THE OUTSET, IT WAS OBSERVED THAT ISSUE IN DI SPUTE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA VS. C IT, 389 ITR 578, WHEREIN HON'BLE COURT HELD THAT INTEREST EARNED FRO M THE INVESTMENT MADE IN ANY BANK IS NOT DEDUCTIBLE UNDER SECTION 80 P(2)(A)(I) OF THE ACT. IN THIS VIEW OF THE MATTER, WE DISMISS THE APPEAL O F THE ASSESSEE. HOWEVER, WE DIRECT THE AO TO EXCLUDE THE AMOUNT OF NET INTEREST INCOME FROM THE DEDUCTION 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 SE CTION 80P(2)(A)(I) OF THE ACT. IN THIS CONNECTION WE FIND SUPPORT & GUIDA NCE FROM THE ORDER OF THIS TRIBUNAL IN THE CASE OF SHREEJI CO-OPERATIVE CREDIT SOCIETY LTD VS. ITO PERTAINING TO THE ASSESSMENT YEAR 2013-14 IN IT A NO.2751/AHD/2016 VIDE ORDER DATED 15-02-2018 WHEREI N 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 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. ITA NO.2229/AHD/2017 THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2013-14 - 4 - 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 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 ITA NO.2229/AHD/2017 THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2013-14 - 5 - 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 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) & ITA NO.2229/AHD/2017 THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2013-14 - 6 - 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. SIMILARLY WE ALSO NOTE THAT THE ASSESSEE IS ELIGIBL E FOR DEDUCTION UNDER SECTION 80P(2)(C) OF THE ACT IN AS PER THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF 2426/AHD/2013 IN THE CASE OF DHAN LAXMI CO-OPERATIVE CREDIT SOCIETY LIMITED WHEREIN I T WAS HELD AS UNDER: 5. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND G ONE THROUGH THE RECORD CAREFULLY. WE FIND THAT IN AN IDENTICAL SITU ATION THE TRIBUNAL HAS ISSUED FOLLOWING DIRECTIONS IN THE ASSTT.YEAR 2009- 10 FOR VERIFICATION OF THE ASSESSEE'S CLAIM. '11) RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. JU RISDICTIONAL HIGH COURT AND EXAMINING THE FACTS OF THE CASE AS ALSO I N THE LIGHT OF DECISION OF THE CO-ORDINATE BENCH DISCUSSED IN THE ABOVE PAR AGRAPHS, WE ARE OF FOLLOWING VIEW :- (1) ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P( 2)(A)(I) OF THE ACT ON THE INTEREST INCOME EARNED FROM SURPLUS DEPOSITS HE LD WITH NATIONALIZED/SCHEDULED BANKS. (2) ASSESSEE WILL BE ELIGIBLE TO STATUTORY DEDUCTIO N OF RS.50,000/-U/S 80P(2)(C) (II) OF THE ACT. (3) ASSESSEE WILL ALSO BE ELIGIBLE TO CLAIM PRO RAT A EXPENSES FOR EARNING INTEREST INCOME OF RS.8,55,854/- ASSESSEE'S CLAIM O F PRO RATA EXPENSES OF RS.5,77,423/- AGAINST THE INTEREST INCOME OF RS.8,5 5,854/- AFTER DUE VERIFICATION BY THE LEARNED ASSESSING OFFICER. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO VERI FY ASSESSEE'S CLAIM OF PRO RATA EXPENSES BY EXAMINING THE RECORD TO BE SHO WN FOR VERIFICATION BY THE ASSESSEE. NEEDLESS TO MENTION PROPER OPPORTU NITY OF BEING HEARD ITA NO.3268 AND 3269 /AHD/2014 IS TO BE GIVEN TO TH E ASSESSEE. WE ORDER ACCORDINGLY. THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES.' ITA NO.2229/AHD/2017 THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2013-14 - 7 - 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. SIMILARLY, WE ALSO FURTHER DIRECT THE ASSESSING OFF ICER TO ALLOW THE DEDUCTION TO THE ASSESSEE UNDER SECTION 80P(2)(C) O F THE ACT. HENCE, GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 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 ITA NO.2229/AHD/2017 THE KALOL PEOPLES CO-OP CREDIT SOCIETY LTD. VS. ITO ASST.YEAR 2013-14 - 8 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-4, VADODARA. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD