The Tarapur Nagrik Co.-Op. Society Ltd., Anand V. The Income Tax Officer, Ward-1(3)(1), Anand

ITA 2308/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6036 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 07-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE TARAPUR NAGRIK CO - OP. CREDIT SOCIETY LTD. ANAND PAN: AAAAT9416C (APPELLANT) VS THE ITO, WARD - 1(3)(1), PETLAD (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 08 - 12 - 2 017 DATE OF PRONOUNCEMENT : 13 - 02 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , ARIS ES FROM ORDER OF T HE CIT(A) - 5, VADODARA DATED 03 - 05 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. TH E LEARNED CIT(A) - 5,VADODARA HAS ERRED IN LAW AND ON FACTS IN NOT A LLOWING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT ON BANK INTEREST INCOME TREATING THE SAME AS INCOME FROM OTHER SOURCES . 2. THE LEARNED CIT(A) - 5 , VADODARA HAS ERRED IN LAW AND ON FACTS IN TREATING NET BANK INT EREST INCOME OF RS. 4,10,518/ - AS INCOME FROM OTHER SOURCES, WHICH IN FACT IS INCOME FROM BUSINESS. I T A NO . 2308 / A HD/20 16 A SSESSM ENT YEAR 2012 - 13 I.T.A NO. 2308 /AHD/20 16 A.Y. 2012 - 13 PAGE NO THE TARAPUR NAGRIK CO - OP. CREDIT SOCIETY LTD. VS. ITO 2 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING INTERE ST FROM CO - OPERATIVE BANKS AS INCOME FROM OTHER SOURCES . 4. AS A CONSEQUENCE OF GROUND NO. 3, LEARNED CIT(A) HAS ERRE D IN LAW AND ON FACTS IN CONFIRMING DEDUCTION U/S 80P(2)(D) . 5. IF GROUND NO. 1 OF APPELLANT IS ALLOWED, ITO MAY PLEASE BE DIRECTED TO DELETE DEDUCTION OF RS. 50,000/ - ALLOWED U/S 80P(2)(C)(II). 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. NIL WAS FILED ON 5 TH JULY, 2012 AFTER CLAIMING DEDUCTION U/S. 80P. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF N OTICE U/S. 143(2) OF THE ACT ON 7 TH AUGUST, 2013. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFICER NOT ICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT IN RESPECT OF IN TEREST EARNED FROM OTHER THAN CO - OPERATIVE BANK. THE ASSESSING OFFICER OBSERVED THAT THE INCOME EARNED FROM FIXED DEPOSIT MAINTAINED WITH COMMERCIAL BANK IN THE FORM OF INTEREST CANNOT BE ATTRIBUTABLE TO THE ACTIVITY OF THE SOCIETY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. CONSEQUENTLY, HE CONCLUDED THAT SECTION 80P(2)(A)(I) DEDUCTION IS NOT ALLOWABLE ON THE INTEREST INCOME AR I SING ON T HE SURPLUS FUND INVE STED IN SHORT TERM DEPOSIT W ITH THE CO - OPERATIVE BANK. THEREFORE , THE ASSESSING OFFICER HAS TREATED THE SAME AS INCOME IN THE CATEGORY OF INCOME FROM OTHER SOURCES TO BE TAXABLE U/S. 56 OF THE ACT WITHOUT PROVIDING 80P(2) DEDUCTION. 4. AGGRIEVED ASSESSEE FILED APPEA L BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS PLACED RELIANCE ON THE DECISION OF IT AT, AHMEDABAD IN THE CASE OF MAFATLAL INDUSTRIES LTD S EMPLOYEE S CREDIT SOCIETY VS. ITO IN ITA NO. 2797/AHD/2012. HE HAS FURTHER PLACED RELIANCE IN THE CASE OF MONTO L O CO - OPERATIVE THRIFT & CREDIT SOCIETY LTD. VS . C IT 2014 50 TAXMANN.COM 27 ( DELHI ) IN WHICH IT WAS HELD WHERE ASSESSEE A CO - OPERATIVE SOCIETY ENGAGED I N PROVIDING CREDIT FACILITIES TO ITS MEMBERS DEPOSITED SURPLUS FUND IN FIXED DEPOS I T AND EARNED INTEREST T HEREON SUCH INTEREST WOULD BE TAXABLE AS INCOME FROM OTHER SOURCES AND NOT ELIGIBL E FOR DEDUCTION U/S. 80P(2)(A)(I ) OF THE ACT. HE HAS ALSO REFERRED THE DECISION OF I.T.A NO. 2308 /AHD/20 16 A.Y. 2012 - 13 PAGE NO THE TARAPUR NAGRIK CO - OP. CREDIT SOCIETY LTD. VS. ITO 3 HON BLE UTTRAKHAND HIGH COURT IN THE CASE OF CIT VS. LAKSAR CO - OPERATIVE CANE DEVELOPMENT UNION LTD ( 2013 ) 35 TAXMANN.COM 445 AND THE DECISION OF HON BLE SUPREME C OURT CASE OF TOLGAR S CO - OPERATIVE SALE SOCIETY LTD VS. ITO 322 ITR 283 (S C). 5. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIAL ON RECORD CAREFULLY. 6. AFTER CONSIDERING THE ABOVE FACTS W E OBSERVE THAT THE LD. CIT(A) HAS CORRECTLY DECIDED THE ISSUE AFTER TAKING INTO CONSIDERATION THE ABOVE REFERRED JUDICIAL PRONOUNCEMENT S. HOWEVER, WE OBSERVE THAT ON IDENTICAL ISSUES IN RESPECT OF PRO RATA EXPENSES FOR EARNING INTEREST INCOME , THE CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF DHAN LAXMI CREDIT CO - OPERATIVE SOCIETY VIDE ITA NO. 2426/AHD/2013 DATED 24 TH JAN, 2017 HE L D AS U NDER : - 10. WE FURTHER OBSERVE THAT DURING THE COURSE OF HEARING BEFORE US, ID. AR ACCEPTED THAT ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80P(2)(A)(I) OF THE ACT ON THE INTEREST EARNED ON SURPLUS DEPOSITS/INVESTMENTS HELD WITH SCHEDULED/NATIONALIZED BANK BUT URGED FOR ALLOWING DEDUCTION ON PRO RATA EXPENSES INCURRED FOR EARNING THE INTEREST INCOME AND ALSO FOR ALLOWING STATUTORY DEDUCTION OF RS.50,000/ - U/S 80P(2)(C)(II) OF THE ACT. LD. AR ALSO SUBMITTED THAT A TOTAL EXPENSES INCURRED FOR THE YEAR ST OOD AT RS.28,60,298/ - AND PRO RATA EXPENSES FOR EARNING INTEREST INCOME OF RS.8,55,854/ - AS AGAINST TOTAL INTEREST INCOME OF RS.42,39,515/ - WILL BE CALCULATED AT RS.5,77,423/ - . 11. WE OBSERVE THAT ID. AR HAS REFERRED TO THE DECISION OF THE CO - ORDINATE BENC H IN THE CASE OF KHERAVA CO - OP. CREDIT SOCIETY LTD. VS.LTO, WARD - 4, MEHSANA IN ITA NO.2704/AHD/2015 FOR ASST. YEAR 2012 - 13 WHEREIN SIMILAR ISSUE OF ALLOWING PRO RATA EXPENSES AND ALLOWING STATUTORY DEDUCTION OF RS.50,000/ - U/S 80P(2)(II) OF THE ACT HAS BE EN ADJUDICATED BY THE CO - ORDINATE BENCH BY OBSERVING AS UNDER : - 10. FROM GOING THROUGH THE ALTERNATE SUBMISSIONS MADE BY THE ASSESSEE WE FIND THAT MAJOR PORTION OF INTEREST INCOME IS FROM GOVERNMENT SECURITIES AND ARE NOT IN THE NATURE OF SHORT TERM DEPOS ITS. THEREFORE, THE FACTS OF THE CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACTS DISCUSSED IN THE CASE OF TOTAGARS CO - OP. SALE SOCIETY LTD. VS. ITO (SUPRA) AND THAT OF CO - ORDINATE BENCH IN THE CASE OF JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD. (SUPRA) A S WELL AS IN THE CASE OF DHANALAXMI CREDIT CO - OP. SOCIETY LTD. VS. ITO (SUPRA). THIS INTEREST INCOME IS ON INVESTMENTS NOT OF SHORT TERM NATURE EXCEPT BANK INTEREST WHICH TOO INCLUDES INTEREST ON FIXED DEPOSITS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW T HAT AS THE ASSESSEE SUO MOTO HAS GIVEN A PROPOSITION OF TAXING THE INTEREST AND COMMISSION INCOME ON INVESTMENTS TO BE TAXED U/S 56 OF THE ACT AND HAS ALSO SHOWN THAT PROPORTIONATE EXPENSES OF RS.3,31,828/ - HAVE BEEN INCURRED TO EARN THE ABOVE INCOME AND T HE SAME HAS DULY BEEN ACCEPTED BY THE ASSESSING AUTHORITY, SO WE FIND IT JUSTIFIED THAT ASSESSING OFFICER HAS RIGHTLY TAXED THE INTEREST INCOME OF RS.2,16,689/ - AS INCOME FROM OTHER SOURCES. HOWEVER, DEDUCTION U/S 80P(2)(C) OUGHT TO HAVE BEEN ALLOWED TO TH E ASSESSEE AS SECTION 80P(2)(C) READS AS UNDER: - SECTION 8OP(2)(C) (C) IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED IN ACTIVITIES OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) (EITHER INDEPENDENTLY OF, OR IN ADDITION TO, ALL OR ANY OF THE I.T.A NO. 2308 /AHD/20 16 A.Y. 2012 - 13 PAGE NO THE TARAPUR NAGRIK CO - OP. CREDIT SOCIETY LTD. VS. ITO 4 ACTIVI TIES SO SPECIFIED), SO MUCH OF ITS PROFITS AND GAINS ATTRIBUTABLE TO SUCH ACTIVITIES AS DOES NOT EXCEED, - (I) WHERE SUCH CO - OPERATIVE SOCIETY IS A CONSUMERS' CO - OPERATIVE SOCIETY, ONE HUNDRED THOUSAND RUPEES; AND (II) IN ANY OTHER CASE, FIFTY THOUSAND RU PEES. EXPLANATION. - IN THIS CLAUSE,' CONSUMERS' CO - OPERATIVE SOCIETY' MEANS A SOCIETY FOR THE BENEFIT OF THE CONSUMERS;] FROM GOING THROUGH THE ABOVE PROVISIONS IT IS VERY CLEAR THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS.50,000/ - U/S 80P(2)(A)(I) O F THE ACT AND THE SAME SHOULD HAVE BEEN ALLOWED BY THE ASSESSING AUTHORITY.. 11. THEREFORE, IN VIEW OF OUR ABOVE DISCUSSION, WE QUASH THE ORDER OF ID. CIT(A) ENHANCING THE ADDITION AND ALSO PARTLY ALLOW THE APPEAL OF ASSESSEE AND ACCORDINGLY THE ADDITION M ADE BY ASSESSING OFFICER SHALL BE REDUCED TO RS.1,68,305/ - [RS.2,16,689/ - MINUS RS.50,000/ - DEDUCTION U/S 80P(2)(C)]. 11. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT AND EXAMINING THE FACTS OF THE CASE AS ALSO IN THE LIGHT OF DECI SION OF THE CO - ORDINATE BENCH DISCUSSED IN THE ABOVE PARAGRAPHS, 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 HELD WITH NATIONALIZED/SCHEDULED BANKS. (2) ASSESSEE WILL BE ELIGIBLE TO STATUTORY DEDUCTION OF RS.50,000/ - U/S 80P(2)(II) OF THE ACT. (3) ASSESSEE WILL ALSO BE ELIGIBLE TO CLAIM PRO RATA EXPENSES FOR EARNING INTEREST INCOME OF RS.8,55,854/ - ASSESSEE'S CLAIM OF PRO RATA EXPENSES OF RS.5,77,423/ - AGAINST THE INTEREST INCOME OF RS.8,55,854/ - AFTER DUE VERIFICATION BY THE LEARNED ASSESSING OFFICER. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEE'S CLAIM OF PRO RATA EXPENSES BY EXAMINING THE RECORD TO BE SHOWN FOR VERIFICATION BY THE ASSESSEE. NEEDLESS TO MENTION PROPER OPPORTUNITY OF BEING HEARD IS TO BE GIVEN TO THE ASSESSEE. WE ORDER ACCORDINGLY. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN VIEW OF THE ABOVE MENTIONED FACTS AND DECISION OF THE CO - O RDINATE BENCH OF ITAT, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEE S CLAIM ON PRO RATA EXPENSES BY EXAMINING/RECORDING AND AFFORDING ADEQUATE OPPORTUNITY TO ALLOW IT PRO RATA EXPENSES FOR COMPUTING THE DEDUCTION U/S. 80P IN R ESPECT OF INTEREST EARNE D FROM DEPOSIT HELD WITH NATIONALIZED BANK. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 13 - 02 - 201 8 SD/ - SD/ - ( MAHAVIR PRASAD ) ( AMARJIT SING H ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 13 /02 /2018 I.T.A NO. 2308 /AHD/20 16 A.Y. 2012 - 13 PAGE NO THE TARAPUR NAGRIK CO - OP. CREDIT SOCIETY LTD. VS. ITO 5 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,