M/s Sri Basaveshwara Swamy Pattana Pattina Sahakara Sangha Niyamitha , Shivamoga V. The Income Tax Officer Ward-5 , Shivamoga

ITA 230/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4489 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 08-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMER SINGH MEENA
• Assessee Lawyers: SOWMYA
• Keywords: Opportunity of being heard; Source of fund; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 230 / BANG /201 9 ASSESSMENT YEAR : 20 14 - 1 5 M/S. SRI BASAVESHWARA SWAMY PATTANA PATTINA SAHAKARA SANGHA NIYAMITHA, BASAVA SADANA, NEHARU ROAD, SHIVAMOGGA 577 201. PAN : AABAS 7894 N VS. THE INCOME-TAX OFFICER WARD-5, SHIVAMOGGA. APPELLANT RESPONDENT ASSESSEE BY : SMT. SOWMYA , ADVOCATE REVENUE BY : SHRI. SUMER SINGH MEENA, ADDL. CIT DATE OF HEARING : 2 5 .0 4 .2019 DATE OF PRONOUNCEMENT : 15 .0 5 .2019 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), DAVANGERE, DATED 22.11.2018 FOR ASSESSMENT YEAR 2014-15. 2. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT FOR DISPOSAL OF THIS APPEAL ARE AS UNDER: 2.1 THE ASSESSEE, AN AOP, ENGAGED IN PROVIDING CREDIT FACILITIES / FINANCE, FILED ITS RETURN FOR ASSESSMENT YEAR 2014-15 ON 26.09.2014 DECLARING NIL INCOME, AFTER CLAIMING DEDUCTION OF RS.39,22,577/- UNDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON ACCOUNT OF INTEREST EARNED ON DEPOSITS WITH BANKS. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ORDER OF ASSESSMENT WAS CONCLUDED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 26.12.2016, WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.39,22,577/-; IN ITA NO. 230/BANG/2019 PAGE 2 OF 5 VIEW OF THE AO DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ON APPEAL, THE ASSESSEE WAS ALLOWED PARTIAL RELIEF BY THE CIT(A), DAVANGERE, VIDE THE IMPUGNED ORDER DATED 22.11.2018. 3.1 AGGRIEVED BY THE ORDER OF CIT(A), DAVANGERE DATED 22.11.2018 FOR ASSESSMENT YEAR 2014-15, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL; WHEREIN IT HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (A) ERRED IN UPHOLDING THE DISALLOWANCE MADE TOWARDS INTEREST INCOME EARNED BY THE APPELLANT AS INCOME ASSESSABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 2. THE LEARNED COMMISSIONER (A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER BY NOT CONSIDERING THE JUDGMENT OF THE HON'BLE HIGH COURT OF KARNATAKA WHEN IT CLEARLY HELD THAT THE INTEREST EARNED BY CREDIT CO-OPERATIVE SOCIETIES ON DEPOSITS WITH BANKS IS AN INCOME ATTRIBUTABLE TO BUSINESS AND HENCE ELIGIBLE FOR CLAIM OF DEDUCTION. 3. THE LEARNED COMMISSIONER (A) ERRED IN RELYING ON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF TOTAGARS CO-OPERATIVES SALE SOCIETY AS THE SAME IS NOT SQUARELY APPLICABLE TO THE CASE OF THE APPELLANT AS THE SAID JUDGMENT IS CONFINED ONLY TO THE FACTS OF THE CASE BEFORE THE HON'BLE HIGH COURT AND ACCORDINGLY CANNOT BE APPLIED IN GENERAL TO ALL KINDS OF CO-OPERATIVE SOCIETIES. 4. WITHOUT PREJUDICE, THE DISALLOWANCE IS ARBITRARY AND UNREASONABLE AND LIABLE TO BE DELETED IN TOTO. 5. THE LEARNED COMMISSIONER (A) ERRED IN CONFIRMING THE INTEREST U/S.234B OF THE ACT. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 3.2 THE LEARNED AR WAS HEARD IN SUPPORT OF THE GROUNDS RAISED IN RESPECT OF THE ASSESSEES CLAIM FOR BEING ALLOWED DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST INCOME EARNED ON DEPOSITS WITH BANKS. THE LEARNED AR SUBMITTED THAT THE ABOVE ISSUE FOR CONSIDERATION IN THIS APPEAL IS COVERED BY THE DECISION OF THE ITAT-BANGALORE BENCH IN THE ASSESSEES OWN CASE FOR ITA NO. 230/BANG/2019 PAGE 3 OF 5 ASSESSMENT YEAR 2009-10 AND 2012-13, WHEREIN VIDE ORDER IN ITA NOS. 2793 AND 2794/BANG/2018 DATED 25.01.2019, THE TRIBUNAL SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER (AO) FOR DE NOVO ADJUDICATION AFTER EXAMINING THE FACTS OF THE CASE IN THE LIGHT OF THE JUDGMENTS OF THE HONBLE APEX COURT IN THE CASE OF THE TOTAGARS CO-OPERATIVES SALE SOCIETY LTD., (83 TAXMANN.COM 140) AND OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD., VS. ITO 230 TAXMAN 309 (KARN). 3.3 THE LEARNED DR FOR REVENUE SUPPORTED THE IMPUGNED ORDER OF THE CIT(A). 3.4.1 I HAVE HEARD AND CONSIDERED THE SUBMISSIONS PUT FORTH AND THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. I FIND THAT THE IDENTICAL ISSUE WAS CONSIDERED BY THE ITAT-BANGALORE BENCH IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2009-10 AND 2012-13 (SUPRA). IN ITS ORDER IN ITA NOS.2793 AND 2794/BANG/2018 DATED 25.01.2019, THE CO-ORDINATE BENCH AT PARAS 6 TO 8 THEREOF HAS HELD AS UNDER: 6. I HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED AR RELIED ON THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. VS. /TO 230 TAXMAN 309 (KAM) WHEREIN THE HON'BLE KARNATAKA HIGH COURT CONSIDERED THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF THE TOTGAR'S CO- OPERATIVE SALES SOCIETY (SUPRA) AND HELD THAT INTEREST INCOME IN RESPECT OF TEMPORARY PARKING OF OWN SURPLUS FUNDS NOT IMMEDIATELY REQUIRED IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE LEARNED DR RELIED ON A SUBSEQUENT DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. 395 ITR 611 (KAM). 7. I HAVE CAREFULLY GONE THROUGH THE JUDGMENT RELIED BY THE LEARNED DR. THE FACTS OF THE CASE BEFORE THE HON'BLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE LEARNED DR WAS THAT THE ITA NO. 230/BANG/2019 PAGE 4 OF 5 HON'BLE COURT WAS CONSIDERING A CASE RELATING TO ASSESSMENT YEARS 2007-2008 TO 2011- 2012. IN CASE DECIDED BY THE HON'BLE SUPREME COURT IN THE CASE OF THE VERY SAME ASSESSEE, THE ASSESSMENT YEARS INVOLVED WAS AY 1991-92 TO 19992000. THE NATURE OF INTEREST INCOME FOR ALL THE AYS WAS IDENTICAL. THE BONE OF CONTENTION OF THE ASSESSEE IN AY 2007-08 TO 2011-12 WAS THAT THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT IS CLAIMED BY THE RESPONDENT-ASSESSEE UNDER SECTION 80P(2)(D) OF THE ACT AND NOT UNDER SECTION 80P(2)(A) OF THE ACT WHICH WAS THE CLAIM IN AY 1991-92 TO 1999-2000. THE REASON GIVEN BY THE ASSESSEE WAS THAT IN AY 2007-08 TO 2011-12 INVESTMENTS AND DEPOSITS AFTER THE SUPREME COURT'S DECISION AGAINST THE ASSESSEE IN TOTGAR'S CO- OPERATIVE SALE SOCIETY LTD. (SUPRA), WERE SHIFTED FROM SCHEDULE BANKS TO CO-OPERATIVE BANK. U/S.80P(2)(D) OF THE ACT. INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INTEREST OR DIVIDEND INCOME. TILE CLAIM OF THE ASSESSEE WAS THAT CO-OPERATIVE BANK IS ESSENTIALLY A CO-OPERATIVE SOCIETY AND THEREFORE DEDUCTION HAS TO BE ALLOWED UNDER CLAUSE (D) OF SEC.80P(2) OF THE ACT. THE HON'BLE KARNATAKA HIGH COURT FOLLOWED THE DECISION OF THE SUPREME COURT IN THE TOTGARS CO-OPERATIVE SALES SOCIETY LTD. (SUPRA) AND HELD THAT INTEREST EARNED FROM SCHEDULE BANK OR COOPERATIVE BANK IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH INVESTMENTS WERE MADE REMAINED THE SAME IN AY 2007-08 TO 2011- 12 AND IN AY 1991-92 TO 1999-2000 DECIDED BY THE HON'BLE SUPREME COURT. THEREFORE, WHETHER THE SOURCE OF FUNDS WERE ASSESSEE'S OWN FUNDS OR OUT OF LIABILITY WAS NOT SUBJECT MATTER OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE LEARNED DR. TO THIS EXTENT, THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA) STILL HOLDS GOOD. HENCE, ON THIS ASPECT, THE ISSUE SHOULD BE RESTORED BACK TO THE AO FOR A FRESH DECISION AFTER EXAMINING THE FACTS IN THE LIGHT OF THESE JUDGMENTS OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) AND OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA). THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE TO FILE APPROPRIATE EVIDENCE, IF DESIRED BY THE ASSESSEE, TO SUBSTANTIATE ITS CASE, BEFORE DECIDING THE ISSUE. 8. IN THE RESULT, APPEALS BY THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 230/BANG/2019 PAGE 5 OF 5 3.4.2 FOLLOWING THE DECISION OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2009-10 AND 2012-13, IN ITA NOS.2793 AND 2794/BANG/2018 DATED 25.01.2019, THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80P(2)(A) OF THE ACT IN RESPECT OF INTEREST INCOME EARNED FROM OUT OF BANK DEPOSITS IS RESTORED TO THE FILE OF THE AO FOR DENOVO ADJUDICATION AFTER EXAMINING THE FACTS IN THE LIGHT OF THE JUDGMENTS OF THE HONBLE APEX COURT IN THE CASE OF THE TOTAGARS CO- OPERATIVE SALE SOCIETY LTD., (SUPRA) AND OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD., (SUPRA). NEEDLESS TO ADD, THE AO SHALL AFFORD THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE SUBMISSIONS / DETAILS REQUIRED, WHICH SHALL BE DULY CONSIDERED BEFORE DECIDING THE ISSUE. 4. IN THE RESULT, ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15 IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 15 TH MAY, 2019. SD/- SD/- (N. V. VASUDEVAN) (JASON P. BOAZ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE. DATED: 15 TH MAY, 2019. /NS/* COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.