SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR V. DEPUTY COMMISSIONER OF INCOME TAX, ALWAR

ITA 240/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5352 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 19-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Section: 147; 56

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 240/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, MALAKHERA GATE BAHAR, NEAR POST OFFICE, ALWAR. CUKE VS. THE DCIT, CIRCLE-1, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAGAS 4023 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15.10.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16/10/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22 ND JANUARY 2018 OF LD. CIT (A), ALWAR FOR THE ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF THE ORDER PASSED BY AO U/S 147 OF THE I T ACT, 1961. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF IN NOT ALLOWING THE DEDUCTION IN RESPECT OF INTEREST RECEIPT OF RS. 1,35,241/- FROM BANKS U/S 80P(2)(A)( I) OF THE IT ACT, 1961. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 2 ITA NO. 240/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. 2. THE ASSESSEE IS A COOPERATIVE SOCIETY AND REGIST ERED WITH REGISTRAR OF COOPERATIVE SOCIETIES. THE AO NOTED THAT THE ASSES SEE HAS RECEIVED INTEREST FROM BANK AND ACCORDINGLY DISALLOWED THE CLAIM UNDER SEC TION 80P(2)(A)(I) OF THE IT ACT IN RESPECT OF THE INTEREST FROM THE BANK. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ISSUE OF DISALLOWANCE OF DEDUCTION UNDER S ECTION 80P(2)(A)(I) IS COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CAS E FOR THE A.Y. 2014-15. THUS HE HAS SUBMITTED THAT SINCE THE ISSUE ON MERIT IS COVE RED, THEREFORE, GROUND NO. 1 REGARDING VALIDITY OF REOPENING OF THE ASSESSMENT I S NOT PRESSED. ACCORDINGLY GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. GROUND NO. 2 IS REGARDING DISALLOWANCE OF DEDUCTION UNDER SECTION 80P(2)(A)(I) IN RESPECT OF INTEREST RECEIVED FROM T HE BANK. 3. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE INTEREST IN QUESTION WAS RECEIVED FROM THE SAVINGS BANK ACCOUNT AND, THEREFO RE, IT WAS AN INTEREST ON THE AMOUNT WHICH WAS KEPT BY THE ASSESSEE IN THE SAVING S BANK. THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 16 TH JULY, 2018 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2014-15. 4. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, AT THE OUTSET, WE NOTE THAT AN IDENTICAL IS SUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2014-15 VIDE ORDER DATED 16 TH JULY, 2018 IN ITA NO. 425/JP/2018 IN PARA 3 AS UND ER :- 3 ITA NO. 240/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. 3. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE WAS CONSIDERED AND DECIDED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2013-14 AND 2014-15 VIDE ORDER DATED 21 ST MAY, 2018 IN ITA NOS. 957 & 958/JP/2017. THE RELEVANT FINDING OF THE TRIBUNAL IN PARA 4 ARE AS UNDER :- 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSES SEE HAS EARNED THE INTEREST FROM SAVINGS BANK ACCOUNT WHICH IS MAINTAINED BY THE ASSESSEE WITH THE SCHEDULED BANKS FOR THE PURPOSE OF ITS DAY TO DAY ACTIVITY OF PROVIDING CRE DIT FACILITIES TO ITS MEMBERS AND KEEPING ITS FUNDS WITH THE BANK. TH E HONBLE KARNATAKA HIGH COURT IN THE CASE OF GUTTIGEDARARA CREDIT CO- OPERATIVE SOCIETY LTD. VS. ITO (SUPRA) WHILE CONSID ERING AN IDENTICAL ISSUE HAS OBSERVED AND HELD IN PARA 7 TO 12 AS UNDER :- 7. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, TH E UNDISPUTED FACTS WHICH EMERGE ARE, CERTAIN SUMS OF INTEREST WERE EAR NED FROM SHORT- TERM DEPOSITS AND FROM SAVINGS BANK ACCOUNT. THE AS SESSEE IS A CO- OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO IT S MEMBERS. IT IS NOT CARRYING ON ANY OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMB ERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTERES T. THEREFORE, WHETHER THIS INTEREST IS ATTRIBUTABLE TO THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. 8. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELE VANT PROVISION OF LAW I.E., SECTION 80P(2)(A)(I): '80P DEDUCTION IN RESPECT OF INCOME OF CO- OPERATIV E SOCIETIES: (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERAT IVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUB JECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN S UB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY: 4 ITA NO. 240/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. (A) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS, OR (II) TO (VII) ** ** ** THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 9. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION I S OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSI DER THE MEANING OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FR OM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE CASE OF CAMB AY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (AT PAGE 93) AS UNDER: 'AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION 'ATTRIBUTABLE TO' OCCURRING IN THE PHRASE 'PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF' THE SPECIFIED INDU STRY (HERE GENERATION AND DISTRIBUTION OF ELECTRICITY) ON WHIC H THE LEARNED SOLICITOR-GENERAL RELIED, IT WILL BE PERTINENT TO O BSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION 'A TTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNO T BE DISPUTED THAT THE EXPRESSION 'ATTRIBUTABLE TO' IS C ERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. HAD T HE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISIN G FROM THE SALE OF OLD MACHINERY AND BUILDINGS CANNOT BE REGAR DED AS PROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE B USINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WA NTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE LEARNED SOLICITOR- GENERAL, IT HAS USED THE EXPRESSION 'DER IVED FROM', AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINC E THE EXPRESSION OF WIDER IMPORT, NAMELY, 'ATTRIBUTABLE T O', HAS BEEN USED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FR OM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GE NERATION AND DISTRIBUTION OF ELECTRICITY.' 10. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LE GISLATURE WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EX PRESSION 'DERIVED FROM'. THE EXPRESSION 'ATTRIBUTABLE TO' BEING OF WI DER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A CO-OPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSIN ESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INT EREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THE SOCIETY CANNOT KEEP THE SAID AMOUNT ID LE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAI D INTEREST INCOME IS 5 ITA NO. 240/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSIN ESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. 11. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF TH E APEX COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY'S CASE (SUPRA) , ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CAS E WHERE THE ASSESSEE/CO-OPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATIO N RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS R ETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE T O ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHO RT-TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE-S OCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME CAN NOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SE CTION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SE CTION 56 OF THE ACT. FURTHER THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPR EME COURT WAS NOT LAYING DOWN ANY LAW. 12. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT W AS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR A CCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MO NEY TO ITS MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HA D DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID IN TEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH CO URT IN THE CASE OF CIT V. ANDHRA PRADESH STATE CO-OPERATIVE BANK LT D. [2011] 336 ITR 516/200 TAXMAN 220/12 TAXMANN.COM 66 . THUS IT IS CLEAR THAT THE HONBLE HIGH COURT HAS AN ALYZED THE PROVISIONS OF SECTION 80P(2) AND PARTICULARLY THE T ERM ATTRIBUTABLE USED IN THE SECTION AND HELD THAT TH E WORD ATTRIBUTABLE TO IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 6 ITA NO. 240/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. DERIVED FROM. THUS ON THE IDENTICAL FACT, THE HO NBLE HIGH COURT HAS HELD THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE PRESE NT CASE AS IN THE SAID CASE BEFORE THE HONBLE SUPREME COURT THE AMOUNT DEPOSITED WITH BANK DID NOT BELONG TO THE SOCIETY B UT IT WAS A LIABILITY OF THE SOCIETY TO BE PAID TO THE MEMBERS AGAINST THE SALE OF AGRICULTURAL PRODUCE. THUS THE SALE CONSID ERATION RECEIVED BY THE SOCIETY TO BE PAID TO THE MEMBERS W AS KEPT WITH THE BANK AND EARNED INTEREST AND ACCORDING THE HONBLE SUPREME COURT HELD THAT SUCH AN AMOUNT WAS RETAINED BY THE SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BAL ANCE SHEET ON THE LIABILITY SIDE. THEREFORE, ON THE SPECIFIC FAC TS OF THE SAID CASE THE INTEREST INCOME WAS HELD TO BE NON ATTRIBU TABLE EITHER TO THE ACTIVITIES MENTIONED IN SECTION 80P(2)(A)(I) OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. IN THE CASE IN HAND, THE INTEREST INCOME RECEIVED BY THE ASSESSEE IS ON ITS OWN FUNDS AND NOT ON THE FUNDS WHICH IS A LIABILITY TOWARDS T HE MEMBERS. FURTHER, THIS INTEREST INCOME IS EARNED FROM THE SA VINGS BANK WHICH IS MAINTAINED FOR DAY TO DAY ACTIVITY OF THE ASSESSEE SOCIETY FOR PROVIDING CREDIT FACILITIES TO ITS MEMB ERS. THEREFORE, FOLLOWING THE ORDER OF THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY L TD. VS. ITO (SUPRA), WE HOLD THAT THE SAID INTEREST INCOME EARN ED BY THE ASSESSEE FROM SAVINGS BANK ACCOUNT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, FOLLOWING THE EARLIER ORDER OF THIS TR IBUNAL, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW, QUA THIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE. 7 ITA NO. 240/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. ACCORDINGLY FOLLOWING THE EARLIER ORDER OF THIS TRI BUNAL, WE ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16/10/2 018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 16/10/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHIKSHA COOPERATIVE THRIFT & CRED IT SOCIETY, ALWAR. 2. THE RESPONDENT THE DCIT, CIRCLE-1, ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 240/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NO. 240/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR.