The Rayat Sevak Co-operative Bank Ltd, Satara V. Assistant Commissioner of Income tax,

ITA 231/PUN/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2934 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MALVIYA
• Assessee Lawyers: R V KADREKAR
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NOS.230 & 231/PUN/2017 / ASSESSMENT YEARS : 2012-13 & 2013-14 THE RAYAT SEVAK CO-OPERATIVE BANK LTD., 455/2/20-F, SADAR BAZAAR, SATARA, SATARA-415001. PAN : AAAAT0952H ....... / APPELLANT / V/S. ACIT, SATARA CIRCLE, SATARA. / RESPONDENT ASSESSEE BY : SHRI R. V. KADREKAR REVENUE BY : SHRI ALOK MALVIYA / DATE OF HEARING : 09.03.2020 / DATE OF PRONOUNCEMENT : 09.03.2020 / ORDER PER BENCH : THERE ARE TWO APPEALS UNDER CONSIDERATION. BOTH THE APPEALS FILED BY THE ASSESSEE ARE AGAINST THE SEPARATE ORDERS OF THE CIT(A)-4, PUNE DATED 06.09.2016 AND 07.09.2016 INVOLVING TWO ASSESSMENT YEARS I.E. A.YS. 2012-13 AND 2013-14 RESPECTIVELY. SINCE THE FACTS AND ISSUES ARE COMMON IN BOTH THE APPEALS, THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER. 2. THE SOLITARY ISSUE, RAISED BY THE ASSESSEE IN BOTH THE APPEALS, RELATES TO THE ALLOWABILITY OF THE CLAIM OF INTEREST RECEIPTS AS A DEDUCTION U/S 36(1)(VIII) OF THE ACT WHEN THE ASSESSEE PROVIDES INTEREST BEARING LOANS I.E. HOUSING LOANS PROVIDED TO ITS MEMBERS. 2 ITA NOS.230 & 231/PUN/2017 3. BEFORE US, AT THE OUTSET, NARRATING THE FACTS OF THE CASE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS IS A CASE WHERE THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES/LONG TERM FINANCE TO ITS MEMBERS WHO ARE EMPLOYEES OF RAYAT SHIKSHAN SANSTHA. THE ASSESSEE PROVIDES LOAN TO ITS MEMBERS FOR HOUSING PURPOSES I.E. PURCHASE AND CONSTRUCTION OF HOUSES/FLATS IN INDIA. THE ASSESSEE EARNED INTEREST INCOME ON THE SAID LOANS AND FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.9,20,98,300/- FOR THE ASSESSMENT YEAR 2012-13 AND RS.8,01,48,730/- FOR THE ASSESSMENT YEAR 2013-14. ASSESSEE CLAIMED DEDUCTION U/S 36(1)(VIII) OF THE ACT. 4. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE MADE A CLAIM OF DEDUCTION OF RS.15,00,000/- EACH FOR THE ASSESSMENT YEARS 2012-13 AND 2013-14 U/S 36(1)(VIII) OF THE ACT. THIS SAID PROVISION WAS AMENDED W.E.F. 01.04.2009 AND THE AMENDED PROVISION APPLIES TO THE FACTS OF THE PRESENT CASE. THE LIMITED IRRITANT BETWEEN THE AUTHORITIES AND THE ASSESSEE IS IF THE EXPRESSION DEVELOPMENT OF HOUSING IN INDIA [SUB-CLAUSE (C) OF CLAUSE (B) OF THE EXPLANATION TO SECTION 36(1)(VIII) OF THE ACT], DOES NOT COVER THE BUSINESS ACTIVITY OF THE ASSESSEE I.E. PROVIDING LOANS TO THE MEMBERS FOR BUYING/ACQUIRING/CONSTRUCTING OF FLATS/HOUSES IN INDIA. THIS IS THE VIEW OF THE ASSESSING OFFICER. 5. ON THE OTHER HAND, THE CASE OF THE ASSESSEE IS THAT THE EXPRESSION DEVELOPMENT OF HOUSING IN INDIA IS OF WIDE CONNOTATION. THE SECTION WAS AMENDED TO BRING MANY ENTITIES INTO ITS SCOPE WHO ARE ENGAGED IN PROVIDING LONG TERM FINANCE FOR DEVELOPMENT OF HOUSING IN INDIA. DENIAL OF DEDUCTION U/S 3 ITA NOS.230 & 231/PUN/2017 36(1)(VIII) OF THE ACT IN RESPECT OF THE INTEREST RECEIPTS, SUBJECT TO THE CONDITIONS MADE BY THE ASSESSING OFFICER, ONLY ON THE GROUND THAT THE FINANCING WAS DONE FOR BUYING AND ACQUIRING OF THE HOUSES/FLATS, IS NOT IN TUNE WITH THE PROVISIONS OF THE ACT. THE EXPRESSION DEVELOPMENT OF HOUSING IN INDIA IS OF WIDER AND ACTIVITY OF PROVIDING FINANCING TO MEMBERS FOR ACQUIRING/CONSTRUCTION OF HOUSE IS AN ELIGIBLE BUSINESS FOR AVAILING THE BENEFIT OF DEDUCTION U/S 36(1)(VIII) OF THE ACT. FURTHER, THE LD. AR FOR THE ASSESSEE RELIED ON THE VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE CASE OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE IS FOUND ELIGIBLE FOR CLAIM OF DEDUCTION U/S 36(1)(VIII) OF THE ACT. IN THIS REGARD, LD. AR FOR THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, AHMEDABAD BENCH IN THE CASE OF DCIT VS. SURAT NATIONAL CO-OP. BANK LTD. VIDE ITA NO.2793/AHD/2012 DATED 23.08.2013. THE LD. AR ALSO RELIED ON ANOTHER DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF DCIT VS. M/S. THE SARASWAT COOPERATIVE BANK LTD. VIDE ITA NO.6396/MUM/2016 DATED 24.09.2018. ITAT DECISION BOTH APPEALS OF ASSESSEE 6. ON HEARING BOTH THE SIDES AND PERUSING THE ABOVE CITED DECISIONS OF THE TRIBUNAL IN THE CASE OF SURAT NATIONAL CO-OP. BANK LTD. (SUPRA), WE FIND THE SAID DECISIONS ARE DELIVERED BASED ON THE PRE-AMENDED PROVISIONS AND NOT THE POST-AMENDED PROVISIONS OF THE I.T. ACT. FURTHER, WE FIND, IN THE CASE OF M/S. THE SARASWAT COOPERATIVE BANK LTD. (SUPRA), THE TRIBUNAL ALLOWED THE CLAIM OF DEDUCTION U/S 36(1)(VIII) OF THE ACT, WHEN THE SAID M/S. THE SARASWAT COOPERATIVE BANK LTD. IS ENGAGED IN SIMILAR LINE OF BUSINESS LIKE THE PRESENT ASSESSEE BEFORE US. THE SAID FACTS OF THAT CASE AND ACTIVITIES OF M/S. THE SARASWAT COOPERATIVE BANK LTD. (SUPRA) ARE NOT APPRECIATED BY THE LOWER 4 ITA NOS.230 & 231/PUN/2017 AUTHORITIES. CONSIDERING THE SAME, WE ARE OF THE CONSIDERED OPINION THAT THE RELIEF SHOULD BE GRANTED IN FAVOUR OF THE ASSESSEE PROVIDED THE FACTS ARE IDENTICAL. 7. FURTHER, WE PERUSED THE RELEVANT PROVISIONS OF SECTION 36 OF THE ACT AND EXAMINED THE RELEVANT PROVISIONS. FOR THE SAKE OF COMPLETENESS, THE RELEVANT PORTIONS OF THE SAID PROVISIONS OF SECTION 36 OF THE ACT ARE EXTRACTED HEREUNDER :- OTHER DEDUCTIONS. 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 .. (VIII) IN RESPECT OF ANY SPECIAL RESERVE CREATED AND MAINTAINED BY A SPECIFIED ENTITY, AN AMOUNT NOT EXCEEDING TWENTY PER CENT OF THE PROFITS DERIVED FROM ELIGIBLE BUSINESS COMPUTED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' (BEFORE MAKING ANY DEDUCTION UNDER THIS CLAUSE) CARRIED TO SUCH RESERVE ACCOUNT: .. EXPLANATION.IN THIS CLAUSE, .. (B) 'ELIGIBLE BUSINESS' MEANS, (I) IN RESPECT OF THE SPECIFIED ENTITY REFERRED TO IN SUB-CLAUSE (I) OR SUB- CLAUSE (II) OR SUB-CLAUSE (III) OR SUB-CLAUSE (IV) OF CLAUSE (A), THE BUSINESS OF PROVIDING LONG-TERM FINANCE FOR .. (C) DEVELOPMENT OF HOUSING IN INDIA; 8. FROM THE ABOVE EXTRACTED PORTIONS, IT IS EVIDENT THAT THE ELIGIBLE BUSINESS IS DEFINED TO INCLUDE THAT DEVELOPMENT OF HOUSING IN INDIA. AS DISCUSSED BY US IN THE PRECEDING PARAGRAPHS OF THIS ORDER, AFTER AMENDMENT THE DEVELOPMENT OF HOUSING IN INDIA IS OF WIDE CONNOTATION AND INCLUDE THE TRANSACTIONS OF PURCHASE AND ACQUIRING/CONSTRUCTING OF THE HOUSES/FLATS. THIS IS A BUSINESS 5 ITA NOS.230 & 231/PUN/2017 DONE BY THE ASSESSEE WHICH SHOULD CONSTITUTE AN ELIGIBLE BUSINESS FOR THE PURPOSE OF SECTION 36(1)(VIII) OF THE ACT. 9. THUS, WE FIND APPROPRIATE TO REMAND THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIONS TO EXAMINE THE FACTS AND APPLY THE LAW DECIDED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. THE SARASWAT COOPERATIVE BANK LTD. (SUPRA). ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IN BOTH THE APPEALS IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 09 TH DAY OF MARCH, 2020. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 09 TH MARCH, 2020 SUJEET / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-4, PUNE. 4. THE PR. CIT-3, PUNE. 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.