M/s Shree Siddeshwara Souhardha Credit Co-operative Limited , Bangalore V. Income Tax Officer Ward-7(2)(2), Bangalore

ITA 2254/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0173 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-09-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 25-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR NISCHAL B
• Assessee Lawyers: K S GURUPRASAD
• Keywords: Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 22 54 /BANG/201 8 ASSESSMENT YEAR : 201 4 - 1 5 M/S. SHREE SIDDESHWARA SOUHARDHA CREDIT CO-OPERATIVE LTD., NO. 2, JANAKA PRASAD, 2 ND CROSS, LALBAGH ROAD, CKC GARDEN, BANGALORE 560 027. PAN: AAFAS2584R VS. THE INCOME TAX OFFICER, WARD 7 (2) (2), BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI K.S. GURUPRASAD, CA RE VENUE BY : DR. NISCHAL .B, ADDL. CIT(DR) DATE OF HEARING : 1 2 . 0 9 .2018 DATE OF PRONOUNCEMENT : 20 . 0 9 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND THE SAME I S DIRECTED AGAINST THE ORDER OF LD. CIT(A)-7, BANGALORE DATED 09.05.2018 FOR ASSESS MENT YEAR 2014-15. 2. THE GROUNDS RAISED BY THE ASSESSEEARE AS UNDER. 1. THE ORDER OF THE LEARNED ASSESSING OFFICER IS NO T JUSTIFIED IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN HOLDI NG THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P OF T HE INCOME TAX ACT. 1961 ON THE INTEREST INCOME RECEIVED FROM THE INVES TMENTS MADE OUT OF THEIR SURPLUS FUNDS'. 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN INTER PRETING SECTION 80P(2)(D) R.W.S 80P(2)(A)(I). THE DEDUCTION UNDER 8 0P(2)(D) IS QUESTIONED BY THE LEARNED AO ON THE GROUNDS OF HAVI NG DERIVED SUCH INTEREST INCOME FROM INVESTMENTS MADE IN OTHER COOP ERATIVE BANKS (NOT FROM OTHER CO-OPERATIVE SOCIETIES). HOWEVER, T HE AO HAS FAILED TO COMPREHEND THE RELEVANT SECTION AND FAILED TO CONSI DER THE INTERPLAY OF 80P(2)(D) R.W.S 80P(2)(A)(I), THE APPELLANT CO-O PERATIVE SOCIETY WOULD STILL BE ELIGIBLE FOR DEDUCTION OF WHOLE OF I TS PROFITS U/S 80P(2)(A)(I) EVEN IF DEDUCTION UNDER 80P(2)(D) WERE TO BE HELD INELIGIBLE. THIS VIEW WAS UPHELD IN M/S. HONNALI CR EDIT CO-OP SOCIETY LTD, VS. INCOME TAX OFFICER WARD 2, SHIVAMOGGA. [IT A NOS. 2752&2753/BANG/2017]. THEREFORE. THE LEARNED ASSESS ING OFFICER IS ITA NO.2254/BANG/2018 PAGE 2 OF 4 NOT JUSTIFIED IN DISALLOWING DEDUCTION CLAIMED BY T HE APPELLANT DESPITE SPECIFIC PLEA IN THIS REGARD. 4. SIMILAR VIEW WAS TAKEN BY THE ANDHRA PRADESH HIG H COURT IN THE CASE OF CIT V. A. P.STATE CO-OPERATIVE BANK LTD. RE PORTED IN [2011] 336 ITR 516 (AP) : [2011] 200 TAXMAN 220/12 TAXMANN .COM 66 AND KARNATAKA HIGH COURT IN THE MATTER OF TUMKUR MERCHA NTS SOUHARDA CREDIT CO-OPERATIVE LTD. V. ITO [2015] 55 TAXMANN.C OM 447. IN BOTH CASES, THE WHOLE OF THE PROFITS ATTRIBUTABLE TO ASS ESSEE CO-OPERATIVE SOCIETY INCLUDING INTERESTS EARNED ON INVESTMENTS M ADE BY THE ASSESSEE WERE HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). 5. THE LEARNED ASSESSING OFFICER HAS ALSO ERRED IN LEVYING INTEREST U/S 234A WITHOUT TAKING NOTE OF THE DUE DATE OF FILING THE INCOME TAX RETURN UNDER SECTION 139(1). INTEREST UNDER 234A CA NNOT HE LEVIED AS THE RETURN OF INCOME WAS TILED WITHIN THE STATUTORY DUE DATE. 6. THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THE PROVISIONS U/S 80P (2) (A) (I) READ WITH SECTION 80P (4) AND HAS DISAL LOWED THE CLAIM OF THE APPELLANT. THUS, THE ORDER OF THE CIT(A) IS LIA BLE TO BE QUASHED. 7. THE LEARNED CIT(A) HAS FAILED TO CONSIDER THE WR ITTEN SUBMISSIONS MADE BY THE APPELLANT. IN PARTICULAR, THE LD. CIT(A ) HAS FAILED TO APPRECIATE THAT THE PRECEDENTS RELIED UPON BY THE A PPELLANT THAT ARE SQUARELY APPLICABLE IN THE APPELLANT'S CASE GIVEN T HE FACTS AND CIRCUMSTANCES AND HAS PASSED THE ORDERS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 8. THE LEARNED CIT(A) HAS ERRED IN CONSIDERING THE FACTS AND THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CAS E OF TOTGAR'S CO- OPERATIVE SALE SOCIETY LTD. (2010) 188 TAXMAN 282, AND HONOURABLE KARNATAKA HIGH COURT IN THE CASE OF TOTGAR'S CO-OPE RATIVE SALE SOCIETY LTD. 83 TAXMAN.COM 140. WHICH ARE CLEARLY D ISTINGUISHABLE FROM THE APPELLANT'S CASE AND HAS INCORRECTLY CHARA CTERISED INTEREST INCOME EARNED ON INVESTMENT IN FIXED DEPOSITS AS 'I NCOME FROM OTHER SOURCES' LIABLE FOR TAX. 9. THE LEARNED ASSESSING CIT(A) HAS ERRED IN NOT FO LLOWING THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS SRI BILURE GURUBASAVA PATTINASAHAKARI SANGHA NIYAMITA, ON SIMI LAR FACTS. 10. ON THE BASIS OF ABOVE GROUNDS AND OTHER GROUNDS WHICH MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER PASSED UNDER SECTION 143(3) BE QUASHED AND RELIEF SOUGHT BE GRAN TED IN THE INTEREST OF LAW, JUSTICE AND EQUITY. 3. AT THE VERY OUTSET, IT WAS POINTED OUT BY THE BE NCH THAT IN THE PRESENT CASE, THE ASSESSEE IS A SOUHARDA CREDIT CO-OPERATIVE LTD. AND THE TRIBUNAL HAS TAKEN A VIEW IN THE CASE OF M/S. UDAYA SOUHARDA CREDIT CO-O PERATIVE SOCIETY LTD. VS. ITA NO.2254/BANG/2018 PAGE 3 OF 4 ITO IN ITA NO. 2831/BANG/2017 DATED 17.08.2018 WHER EIN IT WAS HELD THAT NO ASSESSEE CAN CLAIM TO BE A CO-OPERATIVE SOCIETY IN THE ABSENCE OF PROPER REGISTRATION UNDER THE CO-OPERATIVE SOCIETIES ACT. THE TRIBUNAL ALSO HELD THAT IF THE CREATION OF CO-OPERATIVE SOCIETY UNDER THE CO-O PERATIVE SOCIETIES ACT IS DOUBTFUL, THE CLAIM OF DEDUCTION U/S. 80P CANNOT BE ALLOWED. IN THAT CASE, THE MATTER WAS RESTORED BACK TO THE FILE OF AO TO EXAMI NE VARIOUS ASPECTS AFTER MAKING NECESSARY ENQUIRY AND INVESTIGATION AND THEN PASSING A REASONED ORDER. PARA 13 OF THIS TRIBUNAL ORDER IS RELEVANT WHICH IS REPRODUCED HEREINBELOW FOR READY REFERENCE. 13. WE HAVE ALSO CAREFULLY PERUSED THE CAUSE TITLE IN THE ASSESSMENT ORDER AND IN THE CAUSE TITLE OF THE ASSESSMENT ORDE R, WE FIND THAT ASSESSMENT ORDER WAS PASSED IN THE NAME OF UDAYA SO UHARDA CREDIT CO-OPERATIVE SOCIETY LTD., WHEREAS NO CERTIFICATE O F REGISTRATION WAS PLACED BEFORE US IN THE NAME OF UDAYA SOUHARDHA CRE DIT CO- OPERATIVE SOCIETY LTD. THEREFORE, WE ARE UNABLE TO UNDERSTAND HOW THE ASSESSEE CAN CLAIM IT TO BE THE CO-OPERATIVE SO CIETY IN THE ABSENCE OF PROPER REGISTRATION UNDER THE KARNATAKA CO-OPERA TIVE SOCIETIES ACT. CREATION OF CO-OPERATIVE SOCIETY UNDER THE CO- OPERATIVE SOCIETIES ACT IS DOUBTFUL. THUS THE CLAIM OF DEDUCT ION UNDER SECTION 80P CANNOT BE ALLOWED. AS PER THE PROVISIONS OF SEC TION 80P OF THE ACT, DEDUCTION CAN ONLY BE ALLOWED TO THE CO-OPERAT IVE SOCIETIES REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT. WI THOUT A PROPER REGISTRATION UNDER CO-OPERATIVE SOCIETIES ACT, NOBO DY CAN CLAIM IT TO BE CO-OPERATIVE SOCIETY AS THE ACTIVITIES OF THE CO -OPERATIVE SOCIETIES ARE TO BE CONTROLLED UNDER THE CO-OPERATIVE SOCIETI ES ACT THROUGH REGISTRAR OF THE COOPERATIVE SOCIETIES. SINCE ALL T HESE NEW POINTS HAVE BEEN RAISED DURING THE COURSE OF HEARING BEFOR E US AND ACCORDING TO US ALL THESE POINTS GOES TO THE ROOT O F THE CASE, WE ARE OF THE VIEW THAT PROPER ADJUDICATION OF THE ISSUES IS REQUIRED BY THE AO. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT (A) A ND RESTORE THE MATTER TO THE AO TO REEXAMINE ALL THESE ASPECTS BY MAKING NECESSARY ENQUIRY AND INVESTIGATION AND ALSO BY PASSING A REA SONED ORDER IN THIS REGARD. SINCE WE HAVE RESTORED THE MATTER TO T HE AO, WE FIND NO JUSTIFICATION TO ADJUDICATE THE ISSUE RAISED ON MER IT. ACCORDINGLY, ORDER OF THE CIT (A) IS SET ASIDE AND MATTER IS RES TORED TO THE AO FOR ADJUDICATION OF THE IMPUGNED ISSUE IN TERMS INDICAT ED ABOVE. 4. THE BENCH POINTED OUT THAT IN THE PRESENT CASE A LSO, NO CERTIFICATE OF REGISTRATION WAS PLACED BEFORE US IN THE NAME OF PR ESENT ASSESSEE M/S. SHREE SIDDESHWARA SOUHARDHA CREDIT CO-OPERATIVE LTD. AND THEREFORE, THE BENCH PUT FORWARD A PROPOSITION THAT RESPECTFULLY FOLLOWING T HIS TRIBUNAL ORDER, IN THE PRESENT CASE ALSO, THE MATTER SHOULD BE RESTORED TO AO FOR FRESH DECISION WITH SIMILAR DIRECTIONS. IN REPLY, BOTH SIDES AGREED TO THIS PROPOSITION PUT FORWARD BY ITA NO.2254/BANG/2018 PAGE 4 OF 4 THE BENCH. HENCE, WE SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR A FRESH DECISION WITH TH E SAME DIRECTIONS AS WERE GIVEN BY TRIBUNAL IN THAT CASE AS PER PARA 13 OF TH AT TRIBUNAL ORDER REPRODUCED ABOVE. WE ALSO HOLD THAT IN VIEW OF THIS DECISION, NO ADJUDICATION ON MERIT IS CALLED FOR AT THE PRESENT STAGE. 5. IF IT IS FOUND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80P THEN THE ISSUE REGARDING DEDUCTION U/S 80P IN RESPECT OF INTEREST INCOME FROM BANK SHOULD BE EXAMINED IN THE LIGHT OF THE TWO JUDGEMENTS OF HON' BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA C REDIT COOPERATIVE LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309 AND IN THE CA SE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY AS REPORTED IN 395 ITR 611 (KARN). 6. 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 20 TH SEPTEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.