ITO, Nashik V. Shri Gogababa Nagari Sahakari Patsanstha ltd, Nashik

ITA 2452/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79863 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2452/PN/2012 (ASSESSMENT YEAR : 2009-10) ITO, WARD-1(3), NASHIK .. APPELLANT VS. SHRI GOGABABA NAGARI SAHAKARI PATSANSTHA LTD., 4424, RAJ APARTMENT, MALVIYA CHOWK, PANCHAVATI, NASHIK .. RESPONDENT PAN NO. AABAS4047F ASSESSEE BY : NONE (WRITTEN SUBMISSION FILED) REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 03-04-2014 DATE OF PRONOUNCEMENT : -05-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 10-09-2012 OF THE CIT(A)-I, NASHIK RELATING TO ASSE SSMENT YEAR 2009-10. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. HOWEVER, THE ASSESSEE HAS FILED WRITTEN SUBMISSION STATING THAT THE SAME MAY BE CONSIDERED WHILE DISPOSING OF THE APPEAL. T HEREFORE, THIS APPEAL IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AND THE WRITTEN SUBMISSION FILED BY THE ASSESSEE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING, I.E. AC CEPTING DEPOSITS FROM MEMBERS AND LENDING THE SAME AND EARNING INTEREST I NCOME FROM 2 MEMBERS. IT FILED ITS RETURN OF INCOME ON 30-09-20 09 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION OF RS.6,67,947/- UN DER CHAPTER VIA OF THE INCOME TAX ACT. 3.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED FROM THE ANNUAL REPORT FILED BY THE ASSESS EE SOCIETY THAT IT IS HAVING GROSS RECEIPT OF RS.73,88,660/-. DESPITE BE ING ASKED BY THE ASSESSING OFFICER TO FILE TAX AUDIT REPORT THE ASSE SSEE DID NOT FILE THE SAID TAX AUDIT REPORT AS REQUIRED U/S.44AB OF THE I.T. A CT. ACCORDING TO THE ASSESSING OFFICER NO TAX AUDIT REPORT UNDER THE COO PERATIVE SOCIETIES ACT WAS ALSO FILED BEFORE HIM. FURTHER, THE ASSESSEE D ID NOT FILE THE COPIES OF CHALLANS OF TDS PAID INTO GOVERNMENT ACCOUNT ALTHOU GH IT FILED THE LEDGER ACCOUNT OF COMMISSION WHICH SHOWS PAYMENT OF COMMIS SION OF RS.19,13,706/-. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE SAME U/S.40(A)(IA) OF THE I.T. ACT. SIMILARLY, THE COMM ISSION PAID TO MSEB AMOUNTING TO RS.2,27,109/- WAS ALSO DISALLOWED BY T HE ASSESSING OFFICER SINCE ASSESSEE DID NOT FURNISH THE AUDIT REPORT EIT HER U/S.44AB OR UNDER THE COOPERATIVE SOCIETIES ACT. REJECTING THE CLAIM OF DEDUCTION U/S.80P(2)(C)(I), THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT RS.28,08,760/- THE DETAILS OF WHICH ARE AS UNDER : PARTICULARS AMOUNT RETURNED INCOME BEFORE DEDUCTION UNDER CHAPTER VIA 6,67,947/- ADD : DISALLOWANCE U/S.40(A)(IA) 19,13,706/- ADD : MSEB COMMISSION 2,27,109/- TOTAL 28,08,762/- LESS : DEDUCTION UNDER CHAPTER VIA U/S.80P NIL ASSESSED INCOME 28,08,762/- ROUNDED OFF 28,08,760/- 4. BEFORE CIT(A) IT WAS SUBMITTED THAT ASSESSEE HAD INFACT AUDITED ITS BOOKS OF ACCOUNTS U/S.44AB AS PER THE TAX AUDIT REP ORT DATED 29-09-2009. 3 SIMILARLY, THE ASSESSEE HAS ALSO FILED THE RETURN O F INCOME ON 30-09-2009. A COPY OF TAX AUDIT REPORT DT 29-09-2009 DULY SIGNE D BY THE CHARTERED ACCOUNTANT WHO HAS CERTIFIED DEDUCTION U/S.80P UNDE R CHAPTER VIA WAS FILED BEFORE THE CIT(A). THE LD.CIT(A) FORWARDED T HE SUBMISSIONS FILED BEFORE HIM BY THE ASSESSEE TO THE ASSESSING OFFICER FOR OBTAINING THE REMAND REPORT. 4.1 THE ASSESSING OFFICER STATED THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS THE AR OF THE ASSESSEE WAS ASKED TO FUR NISH A COPY OF THE TAX AUDIT REPORT AS PER THE PROVISIONS OF SECTION 44AB. HOWEVER, SAME WAS NOT FILED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THE ASSESSEE HAS FILED THE ANNUAL REPORT CONTAINING FINANCIAL STATEM ENTS WHICH IS NOT A TAX AUDIT REPORT. THE ASSESSING OFFICER, THEREFORE, RE JECTED THE TAX AUDIT REPORT DATED 29-09-2009 FILED BY THE ASSESSEE DURIN G THE APPEAL PROCEEDINGS. THE ASSESSING OFFICER ACCORDINGLY HEL D THAT THE DEDUCTION U/S.80P CANNOT BE ALLOWED SINCE THE TAX AUDIT REPOR T HAS BEEN FILED AFTER THE ASSESSMENT. THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MAHALAXMI RICE FACTORY WAS RELIED ON BY THE ASSESSING OFFICER FOR THE ABOVE PROPOSITION. THE L D. CIT(A) AFTER CONFRONTING THE SAME AND AFTER CONSIDERING THE REJO INDER OF THE ASSESSEE HELD THAT THE ASSESSEE CREDIT SOCIETY IS ELIGIBLE F OR DEDUCTION U/S.80P(2)(A)(I). THE REVENUE IS NOT IN APPEAL ON THIS ISSUE. 4.2 SO FAR AS THE DISALLOWANCE OF RS.19,13,706/- U/ S.40(A)(IA) BEING COMMISSION PAID WITHOUT TDS IS CONCERNED IT WAS SUB MITTED THAT THE MANAGER OF THE SOCIETY COULD NOT FILE THE SAID CHAL LANS DUE TO COMMUNICATION GAP BETWEEN THE ASSESSING OFFICER AND THE MANAGER. THE 4 ASSESSEE FILED THE CHALLANS OF TDS IN SUPPORT OF DE DUCTION U/S.194H IN RESPECT OF THE COMMISSION, THE DETAILS OF WHICH AR E AS UNDER : MONTH OF THE COMMISSION PAID DATE / MONTH OF PAYMENT AMOUNT OF TDS PAID AS PER CHALLAN APRIL, 2008 16/5/2008 8,441 MAY, 2008 27/8/2008 3,986 JUNE, 2008 27/8/2008 8,959 JULY, 2008 27/8/2008 8,633 AUGUST, 2008 25/11/2008 8,549 SEPTEMBER, 2008 25/11/2008 7,310 OCTOBER, 2008 25/11/2008 8,482 NOVEMBER, 2008 22/1/2009 9,657 DECEMBER, 2008 22/1/2009 9,027 JANUARY, 2009 19/3/2009 9,667 FEBRUARY, 2009 19/3/2009 8,165 MARCH, 2009 12/6/2009 8,619 TOTAL 99,495 4.3 IT WAS CLAIMED THAT WHEREVER APPLICABLE THE ASS ESSEE SOCIETY HAS DEDUCTED AND PAID TDS IN GOVERNMENT TREASURY AS REQ UIRED U/S.194H FOR ALL THE MONTHS OF THE YEAR UNDER APPEAL AND THEREFO RE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE SAID C OMMISSION DEBITED TO THE PROFIT AND LOSS ACCOUNT. IT WAS ALSO SUBMITTED THA T ADDITION U/S.40(A)(IA) SHALL INCREASE THE INCOME OF THE ASSESSEE UNDER THE HEAD BUSINESS INCOME WHICH IS ELIGIBLE FOR DEDUCTION U/S.80P. THEREFORE , ON THIS ACCOUNT ALSO, THE ADDITION IS NOT JUSTIFIED. FOR THIS PROPOSITIO N THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MAHAVIR NAGARI SAHAKARI PATSANSTHA VS. DCIT REPORTED IN 74 TTJ 793 WAS RELIED UPON. 4.4 THE LD.CIT(A) FORWARDED THE SUBMISSIONS MADE BY THE ASSESSEE TO THE ASSESSING OFFICER FOR HIS COMMENTS. AFTER OBTA INING THE COMMENTS OF THE ASSESSING OFFICER AND AFTER CONSIDERING THE REJ OINDER OF THE ASSESSEE TO 5 THE SAME HE DIRECTED THE ASSESSING OFFICER TO DELET E THE ADDITION OF RS.19,13,706/- BY OBSERVING AS UNDER : 7.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE RIVAL CONTENTIONS. ON PERUSAL OF THE SAME, IT HAS BEEN NOTIC ED THAT IN FACT THE APPELLANT HAS DEDUCTED AND PAID TDS IN RESPECT OF COM MISSION PAYMENT MADE DURING THE YEAR AS PER DETAILS MENTIONED IN PRECED ING PARA. IT HAS ALSO BEEN NOTICED FROM THE SAID CHALLANS THAT IN RESP ECT OF 4 CHALLANS PAID FOR COMMISSION OF APRIL, MAY, JUNE AND JULY, 2008, THE YEAR MENTIONED IS 2008-09 INSTEAD OF A.Y. 2009-10, AS THE FINANCIAL YEAR HAS BEEN INADVERTENTLY MENTIONED IN THE SAID CHALLANS. IN VIEW OF THE ABOVE FACTS OF DEDUCTION AND PAYMENT OF TAX BY THE APPELLANT IN RESP ECT OF COMMISSION PAYMENT, THE A.O. IS NOT JUSTIFIED IN DISALLOWING COMMISS ION OF RS.19,13,706/- DEBITED IN PROFIT AND LOSS ACCOUNT OF T HE APPELLANT SOCIETY. THE APPELLANT, HOWEVER, HAS NOT FILED THE DETAILS OF THE COMMISSION IN RESPECT OF WHICH THE ABOVE MENTIONED TDS HAS BEEN DED UCTED AND PAID AND ALSO DETAILS IN RESPECT OF THE COMMISSION PAID WHICH IS BELOW THE LIMIT OF REQUIREMENT OF TDS U/S.194H AND THE COMMISSION IN RE SPECT OF WHICH FORM NO. 13 HAS BEEN FILED BY THE AGENTS FOR NON DE DUCTION OF TDS. IN VIEW OF THE ABOVE FACTS, IT IS HELD THAT THE APPELLANT IS NOT LIABLE TO DEDUCT TDS IN RESPECT OF WHICH IT HAS DEDUCTED AND PAID TDS MENTIONED IN PRECEDING PARAGRAPH. GROUND NO.2 IS ACCORDINGLY PARTLY ALLOWED. THE ADDITION IS ALSO NOT JUSTIFIED ON OTHER COUNT THAT THE SAID ADDITION U/S.40(A)(IA) SHALL INCREASE THE BUSINESS INCOME OF THE APPELLANT SOCIETY WHICH IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) AND, HENCE, THERE WILL NOT BE ANY EFFECTIVE ADDITION. THIS PROPOSITION OF LAW IS SUPPORTED BY THE DECISION OF HON'BLE ITAT, PUNE IN THE CASE OF SHRI M AHAVIR NAGARI SAHAKARI PATSANSTHA LTD. VS. DCIT (2002) 74 TTJ 1793 PUNE, WHEREIN IT HAS BEEN HELD EVEN IN RESPECT OF ADDITION U/S 68, THE SOCIETY IS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I). IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION OF RS.19 ,13,706/- TO THE INCOME RETURNED BY THE APPELLANT SOCIETY. THE SAID ADDITION OF RS.19,13,706/- IS THEREFORE DELETED. THE A.O. IS DIRECTED ACCORDINGLY . GROUND NO.3 IS ALLOWED. 5. SO FAR AS THE ADDITION OF RS.2,17,109/- ON ACCOU NT OF MSEB COMMISSION IS CONCERNED IT WAS ARGUED THAT THE TOTA L GROSS INCOME EARNED BY THE ASSESSEE SOCIETY IS RS.73,88,660/- WHEREAS T HE EXPENDITURE INCURRED IS RS.67,53,713/- WHICH IS 91.40% OF THE INCOME AND HENCE NET INCOME FROM MSEB COMMISSION IS ONLY RS.19,531/- AFTER CONS IDERING PROPORTIONATE EXPENSES OF RS.2,07,578/- @91.40%. I T WAS ARGUED THAT SUBSTANTIAL DEPOSIT HAS TO BE KEPT WITH MSEB FOR EA RNING COMMISSION INCOME AND ALSO STAFF OF THE SOCIETY IS TO BE EMPLO YED AND VARIOUS 6 ADMINISTRATION EXPENSES ARE ALSO TO BE INCURRED FOR EARNING MSEB COMMISSION INCOME. IT WAS ACCORDINGLY ARGUED THAT EVEN IF IT IS CONSIDERED THAT THE SAID NET INCOME OF RS.19,531/- IS NOT ELIGIBLE FOR DEDUCTION U/S.80P, THE INCOME OF COOPERATIVE SOCIET Y IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(C) TO THE EXTENT OF RS.50,000/ - AND HENCE THE TAXABLE INCOME SHALL REMAIN NIL. 6. THE LD.CIT(A) FORWARDED THE ABOVE SUBMISSIONS OF THE ASSESSEE TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESS ING OFFICER STATED THAT THE MSEB COMMISSION IS NOT ELIGIBLE FOR DEDUCTION U /S.80P OF THE ACT. FURTHER, THE ASSESSEE HAD NOT DEBITED SEPARATELY EX PENDITURE FOR EARNING COMMISSION IN PROFIT AND LOSS ACCOUNT AND THEREFORE THE HYPOTHETICAL CLAIM OF EXPENDITURE ON PRO-RATA BASIS IN SUPPORT O F THE COMMISSION CANNOT BE ALLOWED. THE ASSESSEE IN HIS COUNTER REP LY SUBMITTED THAT COMMISSION RECEIVED FOR COLLECTING ELECTRIC BILLS F ROM CUSTOMERS ON BEHALF OF/AS AGENT OF GOVERNMENT IS BANKING ACTIVITY ELIGI BLE FOR DEDUCTION U/S.80P(2)(A)(I) IN VIEW OF THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT, NASHIK VS. JALGAON DISTRICT CENTRA L COOPERATIVE SOCIETY VIDE INCOME TAX APPEAL NO.20/2008 DATED 08-07-2011. IT WAS FURTHER ARGUED THAT IN ANY CASE THE NET INCOME IS MUCH LESS THAN RS.50,000/-, I.E. DEDUCTION ELIGIBLE U/S.80P(2)(C) OF THE I.T. ACT. 7. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) ALSO DELETED THE ADDITION OF RS.2,27,109/- BY OBSER VING AS UNDER : 8.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE RIVAL CONTENTIONS. IN RESPECT OF THE ADDITION OF RS.2,27,1 09/- THE APPELLANT HAS RAISED THREE CONTENTIONS. FIRSTLY, THE SAID COMMISSION CA NNOT BE TAXED AT GROSS FIGURE WITHOUT ALLOWING EXPENDITURE TOWARDS THE SAME AND AS NO SEPARATE RECORD CAN BE MAINTAINED IN RESPECT OF THE SA ID EXPENDITURE, AS THE COMMON EXPENDITURE IS TO BE INCURRED FOR RUNNING THE ACTIVITY OF THE CREDIT CO-OPERATIVE SOCIETY. THE APPELLANT HAS, THERE FORE, WORKED OUT NET 7 EXPENDITURE AND INCOME ON PRO RATA BASIS IN RESPECT OF MSEB COMMISSION AT RS.19,531/-. THE ABOVE CONTENTION OF THE APPELLAN T, IS FOUND TO BE REASONABLE AND, HENCE, ACCEPTED. THE SECOND CONTENTION RAISED BY THE APPELLANT IS THAT IN VIEW OF RATIO LAID DOWN BY HON'BLE BOMBAY HIGH COURT, AURANGABAD BENCH , IN THE CASE OF CIT, NASHIK VS. JALGAON DISTRICT CENTRAL CO-OP. BANK, MSEB COMMISSION, IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) BEING PART O F BANKING ACTIVITY OF THE SAID CO-OPERATIVE BANK. IN THE CASE UNDER APPEAL, THE APPELLANT CO-OP, SOCIETY IS ALSO CARRYING ON BANKING ACTIVITY I.E. ACCE PTING DEPOSITS FROM THE MEMBERS ON INTEREST AND ADVANCING LOANS TO THE MEMBERS AT COMPARATIVELY HIGHER INTEREST. FURTHER, HON'BLE MADR AS HIGH COURT IN THE CASES OF SYNDICATE BANK EMPLOYEES CO-OP. THRIFT AND CR EDIT SOCIETY LTD. VS. ITO (2006) 287 ITR 40 AND STATE BANK OF INDIA, S TAFF CO-OP. SOCIETY VS. ITO 234 ITR 104 HAS HELD AS UNDER: 'THE TERM' CO-OPERATIVE SOCIETY' PRECEDING THE WORDS 'CARRYING ON THE BUSINESS OF BANKING' REFERS TO CO-OPERATIVE SOCIETY WHIC H NEED NOT NECESSARILY BE A BANKING COMPANY OR A COMPANY TO WHIC H THE PROVISIONS OF BANKING REGULATION ACT, 1949 ARE MADE APPLICABLE. A CO-OPERATIVE SOCIETY WHICH IS LENDING MONEY TO ITS MEMBERS OR ACCEPTING DEP OSITS OR RAISING LOANS FROM FINANCIAL OR BANKING INSTITUTIONS AND ADVAN CING THE SAME TO ITS MEMBERS, AMOUNTS TO DOING THE BUSINESS OF BANKING.' 'WE FEEL THAT THE TERM' A CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON BUSINESS OF BANKING' REFERS TO A PARTICULARS KIND OF CO-OPERATIVE SOCIETY A ND IT NEED NOT BE A BANKING COMPANY OR A COMPANY TO WHICH THE PROVISIONS OF BANKING REGULATION ACT ARE MADE APPLICABLE.' IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND FOLLOWING THE RATIO LAID DOWN BY THE DECISION OF HON'BLE MADRAS HIGH COURT AND BOMB AY HIGH COURT REFERRED TO ABOVE, I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION OF RS.2,27,109/- BY TREATING THE GROSS COMMISSION AS INCOME OF THE APPELLANT NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2)(A)(I). THE ADDITION OF RS.2,27,109/- IS DELETED. THE A.O. IS DIRECTED ACCORDINGLY. GROUND NOS. 4 & 5 ARE ALLOWED. 8. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. ON THE BASIS FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE FIRST GROUND OF APPEAL IS THAT THE HONBLE CIT(A)-I, NASHIK HAS ERRED IN DELETING THE ADDITION OF RS.19,13,706/- MADE U/S.40(A)(IA) OF THE I.T. ACT, 1961 ON ACCOUNT OF COMMISSION CLAIMED. THE SAID DISALLOWANCE W AS MADE AS THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE AND THEREBY FAILE D TO PAY IT INTO THE GOVERNMENT ACCOUNT. THE CIT(A)-I, NASHIK HAS HEL D THAT IT WILL INCREASE THE BUSINESS INCOME OF THE ASSESSEE SOCIETY WHICH I S ELIGIBLE FOR DEDUCTION U/S.80P(A)(A)(I). THE DECISION OF THE CIT( A) ON THIS GROUND IS NOT AT ALL ACCEPTABLE. 2. THE CIT(A)-I, NASHIK HAS FURTHER RELIED ON THE PRO POSITION OF LAW SUPPORTED BY THE DECISION OF HONBLE ITAT, PUNE IN TH E CASE OF SHRI MAHAVIR NAGARI SAHAKARI PATSANSTHA LTD. VS. DCIT (2002) 74 TTJ 793, PUNE WHICH WAS DELEGATED IN RESPECT OF THE ADDITION U/S.68 OF THE ACT. THUS, THE DECISION QUOTED ABOVE IS NOT SQUARELY APPLICABLE IN TH E INSTANT CASE AS THE AFORESAID ADDITION WAS MADE U/S. 40(A)(IA) OF THE ACT . THEREFORE, THE ADDITION MADE AS ABOVE DESERVES TO BE SUSTAINED. 8 3. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE SECOND GROUND OF APPEAL IS THAT THE LD.CIT(A)-I, NASHI K HAS ERRED IN DELETING THE ADDITION OF RS.2,27,109/- WHICH WAS MADE ON ACCOUNT OF MSEB COMMISSION AS THIS BUSINESS WAS SHOWN TO HAVE BEEN OTHE R BUSINESS OF THE ASSESSEE. 4. ON THE BASIS OF FACTS AND IN THE CIRCUMSTANCES OF THE CASE, IT IS REQUESTED TO QUASH THE ORDER OF THE HONBLE CIT(A)-I, NASHIK AND RESTORE BACK THE ORDER OF THE AO. 9. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED TH AT THE LD. CIT (A)-L, NASHIK HAS DECIDED BOTH THE ISSUES IN FAVOUR OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. THE ADDITION OF RS.19,13,706/- WAS MADE BY APPLYING THE PROVISIONS OF SECTION 40A(IA) OF THE ACT. THE ASSESSEE HAS FAILED TO PRODUCE COPIES OF CHALLANS O F TDS WHICH HAS TO BE PAID IN TO THE GOVERNMENT ACCOUNT DURING ASSESSMENT PROCEEDINGS WHICH WERE LATER PRODUCED BY HIM IN THE APPELLATE PROCEED INGS AND MADE THE CASE STRONGER. HE SUBMITTED THAT THE TDS OF RS.5278 4/- PERTAINS TO A.Y.2009-10 AND BALANCE TDS OF RS.29,519/- PERTAINS TO A.Y.2008-09. THE ASSESSEE PAID COMMISSION OF RS.19,13,706/- ON W HICH TDS CLAIMED TO BE DEDUCTED AT RS.1,58,678/-. THE ASSESSEE NOW P RODUCED THE COPIES OF CHALLANS BEFORE APPELLATE PROCEEDINGS WHICH HE FAIL ED TO PRODUCE DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO FAILED TO FURNISH THE COPIES OF FORM NO.26Q OF RELEVANT QUARTERS OF F.Y.2008-09 REL EVANT TO A.Y.2009- 10 IN ORDER TO MATCH THE TDS MADE WITH COMMISSION P AID. SINCE THE TDS WAS NOT MADE AND PAID FULLY IN TO GOVERNMENT TREASU RY, THE DISALLOWANCE MADE U/S.40A(IA) WAS JUSTIFIED AND DESERVES TO BE S USTAINED. 9.1 HE SUBMITTED THAT THE LD.CIT(A)-I, NASHIK HAS E RRED IN HIS VERSION THAT THE MSEB COMMISSION AT RS.2,27,109/- CANNOT BE TAXED AT GROSS FIGURE WITHOUT ALLOWING EXPENDITURE TOWARDS THE SAM E AND NO SEPARATE RECORD CAN BE MAINTAINED IN RESPECT OF SAID EXPENDI TURE. HE HAS ENTIRELY 9 RELIED UPON THE ASSESSEES CONTENTION WITH REGARD T O ELIGIBILITY FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT BEING PART OF BANKING ACTIVITY OF THE SAID CO-OPERATIVE BANK. THUS, THE CIT(A)-I, NASHIK HAS NOT APPRECIATED THE FACTS OF THE CASE WITH REGARD TO TREATING THE G ROSS COMMISSION AS INCOME OF THE ASSESSEE AND THEREBY DELETED THE ENTI RE ADDITION AT RS.2,27,109/- MADE ON ACCOUNT OF MSEB COMMISSION. 10. THE ASSESSEE HAS FILED ITS WRITTEN SUBMISSION W HICH READS AS UNDER: WITH REFERENCE TO THE ABOVE MENTIONED SUBJECT, IT I S HUMBLY SUBMITTED TO YOUR HONOUR AS UNDER : 1. GROUND NO.1 RAISED BY THE REVENUE IS THAT THE CIT (A)-I, NASHIK HAS ERRED IN DELETING THE ADDITION U/S.40(A)(IA) ON ACCO UNT OF DISALLOWANCE OF COMMISSION ON TWO COUNTS : (I) SECTION 40(A)(IA) IS NOT APPLICABLE TO THE AMOUN TS PAID DURING THE YEAR UNDER APPEAL AND APPLICABLE ONLY TO OUTSTANDIN G AMOUNTS. (II) THE DECISIONS OF HONBLE ITAT, PUNE IN THE CASE O F SHRI MAHAVIR NAGARI SAHAKARI PATSANSTHA LTD. VS. DCIT (2002) 74 TTJ 793 FOLLOWED BY CIT(A) IS ON DISTINGUISHABLE FACTS AS THE SAME IS IN RESPEC T OF ADDITION U/S.68 AND IN THE YEAR UNDER APPEAL THE ADDITION IS U /S.40(A)(IA). ASSESSEES CONTENTIONS I. AS REGARDS FIRST COUNT MENTIONED ABOVE THE ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE BY FOLLOWING RECENT DECISIONS, COP IES OF WHICH ARE ENCLOSED AS ANNEXURE-1 & 2. 1. ACIT CIRCLE XV CHENNAI VS. M/S. ESKAY DESIGNS, CHENN AI- ITA NO.1951/MDS/12 A.Y. 2009-10 ORDER DATED 09-12-2013 2) ITO WARD 11(4), MADURAI VS. M/S. THEEKATHIR PRESS, ITA NO.2076/MDS /2012, A.Y. 2009-10, DATED 18 TH SEPTEMBER, 2013. II. AS REGARDS SECOND COUNT MENTIONED ABOVE THE ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE, BY FOLLOWING RECENT DECISION OF HON'BLE ITAT, PUNE IN THE CASE OF ACIT (CENTRAL) CIRCLE, KOLHAPUR VS. LA XMI CIVIL ENGG. SERVICES PVT. LTD., ITA NO. 1745/PN/2012 A.Y. 2007-08 AND LA XMI CIVIL ENGG. SERVICES PVT. LTD., KOLHAPUR VS. ADDL. CIT RANGE-2, K OLHAPUR, ITA NO. 1751/PN/2012 A.Y. 2007-08. COPY OF THE DECISION IS E NCLOSED AS ANNEX. 3. IN THIS DECISION THE ASSESSEE HAS RELIED ON FOLLOWING DECISIONS WHICH HAVE BEEN FOLLOWED BY THE HON'BLE ITAT, PUNE, WHILE DECI DING IDENTICAL ISSUE. A) CIT VS. GEM PLUS JEWELLERY INDIA LTD. 233 CTR ( BOM) 248 B) ITO VS. KEVAL CONSTRUCTION (2013) 33 TAXMANN.CO M 277(AHD) C) SHRI MAHAVIR NAGARI SAHAKARI PATSANSTHA LTD. V S. DCIT 74 TTJ 793 (PUNE) 10 THE A.O. HAS ERRED IN STATING THAT THE DECISION IN THE CASE OF SHRI MAHAVIR NAGARI SAHAKARI PATSANSTHA LTD. VS. DCIT 74 TTJ 793 ( PUNE) IS DISTINGUISHABLE ON FACTS WITHOUT UNDERSTANDING THE RAT IO LAID DOWN BY THE SAID DECISION. GROUND NO.2 RAISED BY THE REVENUE IS THAT THE CIT(A )-I, NASHIK HAS ERRED IN DELETING ADDITION OF RS.2,27,109/- WHICH WAS MADE ON ACCOUNT OF MSEB COMMISSION. THE HON'BLE BOMBAY HIGH COURT, AURANGABAD BENCH, IN THE CASE OF CIT, NASHIK VS. JALGAON DISTRICT CENTRAL CO-OP. BANK IN TA X APPEAL NO.20 OF 2008, ORDER DATED 8 TH JULY, 2011, HAS HELD THAT THE COMMISSION RECEIVED FOR COLLECTING ELECTRIC BILLS FROM CUSTOMERS ON BEHALF OF /AS AGENT OF GOVERNMENT IS BANKING ACTIVITY ELIGIBLE FOR DEDUCTIO N U/S. 80P(2)(A)(I). THIS PROPOSITION OF LAW IS ALSO SUPPORTED BY DECISION IN THE CASE OF ELECTRO URBAN CO-OP. CR. SOCIETY LTD. VS. ITO 70 TTJ 441 (CA L). IT IS ALSO WORTH NOTING HERE THAT IN THE CASE OF ITO WARD 1(4) VS. NIP HAD NAGARI SAHAKARI PATSANSTHA LTD., ITA NO. 1336/PN/2011, DATED 31/7/201 3, THE HON'BLE ITAT, PUNE IN PARA 1 1.3, PAGE NO. 14 OF THE ORDER HAS LAID DOWN AS UNDER: WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF MAHAVIR NAGARI SAHAKARI PATSANSTHA LTD. REPORTED 74 TTJ 793 (PUNE) H AS HELD THAT CREDIT SOCIETY WHICH IS CARRYING ON BUSINESS OF BANKING ACTIVIT Y AND PROVIDING CREDIT FACILITY TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTI ON U/S.80P(2)(A)(I) THEREFORE IMPLIEDLY THE HON'BLE ITAT HAS HELD THAT T HE CREDIT CO-OPERATIVE SOCIETY IS CARRYING ON BANKING ACTIVITY AND HENCE THE ABOVE DECISION OF HON'BLE BOMBAY HIGH COURT, AURANGABAD BENCH WHICH H AS BEEN RENDERED IN THE CASE OF A CO-OPERATIVE BANK IS ALSO APPLICAB LE TO THE ASSESSEE CREDIT CO- OPERATIVE SOCIETY. WITHOUT PREJUDICE TO ABOVE CONTENTION IT IS ALSO WORTH MENTIONING HERE THAT THE GROSS MSEB C OMMISSION EARNED IS RS.2,27,109/- AND NO EXPENDITURE HAS BEEN ALLOWED BY THE A.O. FOR EARNING THE SAID COMMISSION. ON PRO RATA BASIS THE EXPENDITURE I NCURRED FOR EARNING THE INCOME OF THE SOCIETY IS 91.40% AND HENCE IF THE SAME IS APPLIED THEN THE NET INCOME FROM MSEB COMMISSION AFTE R CONSIDERING THE EXPENDITURE AT 91.40% ON PRO RATA BASIS WORKS OUT TO RS.19,531/- WHICH IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(C). 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. SO FAR AS THE ISSUE REL ATING TO ADDITION OF RS.19,13,706/- U/S.40(A)(IA) IS CONCERNED WE FIND B EFORE THE ASSESSING OFFICER THE ASSESSEE DID NOT FILE THE DETAILS OF TD S FOR WHICH HE MADE THE ADDITION. WE FIND BEFORE THE CIT(A) THE ASSESSEE F ILED THE DETAILS OF 11 CHALLANS ON THE BASIS OF WHICH THE CIT(A) HELD THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE AMOUNTS PAID DU RING THE YEAR AND THE SAME IS APPLICABLE ONLY TO OUTSTANDING AMOUNTS. H E FURTHER HELD THAT IN VIEW OF THE DECISION OF THE PUNE BENCH OF THE TRIBU NAL IN THE CASE OF SHRI MAHAVIR NAGARI SAHAKARI PATSANSTHA (SUPRA) EVEN IF THE ADDITION IS SUSTAINED THE SOCIETY IS ENTITLED TO DEDUCTION U/S. 80P(2)(A)(I) AND THEREFORE HE DELETED THE ADDITION. 11.1 WE FIND THE PUNE BENCHES OF THE TRIBUNAL ARE T AKING THE VIEW THAT WHEN THE ASSESSEE HAS MADE DEFAULT IN MAKING THE TD S THE ADDITION U/S. 40(A)(IA) IS SUSTAINABLE EVEN IF NO AMOUNT IS PAYAB LE AT THE END OF THE YEAR. THEREFORE, THE PROPOSITION OF THE LD.CIT(A) THAT PR OVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE AMOUNTS PAID DU RING THE YEAR AND IS APPLICABLE ONLY TO THE OUTSTANDING AMOUNTS HAS TO D ECIDED AGAINST THE ASSESSEE. HOWEVER, AS MENTIONED IN PARAGRAPH 4.1 O F THE IMPUGNED ORDER WE HAVE ALREADY HELD THAT THE CIT(A) HAS HELD THAT THE ASSESSEE CREDIT SOCIETY IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) AND THE REVENUE IS NOT IN APPEAL AGAINST THE SAID OBSERVATION OF THE CIT(A). THEREFORE, THE ASSESSEE CREDIT SOCIETY IS ELIGIBLE FOR DEDUCTION U/S.80P(2) (A)(I). 11.2 NOW THE QUESTION THAT ARISES IS AS TO WHETHER THE ADDITION IF ANY SUSTAINED U/S. 40(A)(IA) IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I). IN OUR OPINION, THE ANSWER IS IN THE AFFIRMATIVE. WE FIND THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ITO VS. KEVAL CONSTRUCTIO N REPORTED IN 354 ITR 13 HAS HELD THAT WHEN ANY DISALLOWANCE U/S.40(A )(IA) OF THE ACT IS MADE IT WILL INCREASE THE BUSINESS INCOME OF THE AS SESSEE AND IN CASE THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80IB(10) THE ENTIRE PROFIT WILL QUALIFY FOR DEDUCTION U/S.80IB(10). SIMILAR VIEW HAS BEEN TAKEN BY THE PUNE 12 BENCH OF THE TRIBUNAL IN THE CASE OF PHARANDE DEVEL OPERS VS. ITO AND VICE VERSA VIDE ITA NOS. 715/PN/2009 AND 175/PN/201 1 ORDER DATED 25- 06-2013 FOR A.YRS. 2005-06 AND 2006-07 RESPECTIVELY . THE OPERATIVE PORTION OF THE ORDER OF THE TRIBUNAL READS AS UNDER : 22. IN OUR CONSIDERED OPINION, THE STAND OF THE ASSESSE E IS FULLY COVERED BY THE JUDGEMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF KEVAL CONSTRUCTION (SUPRA). THE FOLLOWING DISCUSSION IN THE OR DER OF THE HON'BLE GUJARAT HIGH COURT IS WORTHY AT NOTICE :- 'HAVING HEARD COUNSEL ON BOTH THE QUESTION TODAY IN T HIS APPEAL, WE FIND NO ERROR IN THE TRIBUNAL'S ULTIMATE CONCLUSION. EVEN IF A CERTAIN EXPENDITURE WHICH WAS INCURRED BY THE ASSESSEE FOR THE P URPOSE OF ENVELOPING HOUSING PROJECT WAS NOT ALLOWABLE BY VIRTU E OF SECTION 40(A)(IA) OF THE ACT, SINCE THE ASSESSEE HAD NOT DEDUCTE D THE TAX AT SOURCE AS REQUIRED UNDER LAW, IT CANNOT BE DENIED THA T SUCH DISALLOWANCE WOULD ULTIMATELY GO TO INCREASE THE ASSESSEE 'S PROFIT FROM THE BUSINESS OF DEVELOPING HOUSING PROJECT. WHATEV ER BE THE ULTIMATE PROFIT OF ASSESSEE AS COMPUTED EVEN AFTER MAKI NG DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, WOUL D QUALIFY FOR DEDUCTION AS PROVIDED UNDER THE LAW.' 23. IN THE PRESENT CASE, THE ONLY SOURCE OF PROFITS DE CLARED BY THE ASSESSEE DURING THE YEAR IS FROM UNDERTAKING DEVELOPMENT OF ITS HOUSING PROJECT 'LAKSHDWEEP'. THEREFORE, EVEN IF THE EXPENDI TURE OF RS.5,22,600/- IS FOUND TO BE NOT ALLOWABLE ON ACCOUNT OF SECTION 4 0(A)(IA) OF THE ACT AS ASSESSEE HAS NOT COMPLIED WITH THE REQUIREMENTS OF DEDUCT ING/DEPOSITING THE TDS, IT CANNOT BE DENIED THAT SUCH DISALLOWANCE U LTIMATELY INCREASES THE PROFITS OF THE ASSESSEE DERIVED FROM ITS HOUSING PROJ ECT 'LAKSHDWEEP'. ACCORDING TO THE PARITY OF REASONING LAID DOWN BY TH E HON'BLE GUJARAT HIGH COURT IN THE CASE OF KEVAL CONSTRUCTION (SUPRA) THE AF ORESAID PROFIT REFLECTED BY THE DISALLOWANCE UNDER SECTION 40(A)(IA ) OF THE ACT, QUALIFIED FOR DEDUCTION UNDER SECTION 80-IB(10) OF THE ACT IN THE PRESENT CASE. THUS, ON THIS ASPECT, ASSESSEE HAS TO SUCCEED. 11.3 RESPECTFULLY FOLLOWING THE ABOVE DECISIONS WE HOLD THAT WHATEVER ADDITION IS MADE U/S.40(A)(IA) HAS TO BE ALLOWED AS DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT. IN THIS VIEW OF THE MATTER, THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 12. SO FAR AS THE SECOND GROUND IS CONCERNED WE FIN D THE AO MADE THE ENTIRE ADDITION OF RS.2,27,109/- WHICH IS THE GROSS AMOUNT OF MSEB COMMISSION AND HE HAS NOT ALLOWED THE EXPENDITURE F OR EARNING THE SAID COMMISSION. WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE 13 ASSESSEE THAT PRO-RATA EXPENDITURE SHOULD BE ALLOWE D TO THE ASSESSEE FOR EARNING THE COMMISSION SINCE THE ASSESSEE HAS TO IN CUR VARIOUS EXPENDITURE AND SUCH PRO-RATE EXPENDITURE COMES TO 91.40%. IF THE SAID RATE IS APPLIED THEN THE NET INCOME FROM MSEB COMMI SSION AFTER CONSIDERING THE EXPENDITURE WORKS OUT TO RS.19,531/ - WHICH IS BELOW RS.50,000/- AND IS ELIGIBLE FOR DEDUCTION U/S.80P(2 )(C). IN THIS VIEW OF THE MATTER, WE ALLOW THE CLAIM OF THE ASSESSEE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30-05-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 30 TH MAY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-I, NASHIK 4. THE CIT-I, NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE