The Market Yard Merchants Co.Op. Credit Society Ltd., Sidhpur V. The Income Tax Officer, Ward-2, Patan

ITA 2474/AHD/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 3557 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMIT KR VERMA
• Assessee Lawyers: P B PARMAR
• Keywords: Principle of natural justice
• Section: 271(1)(c); 143(3); 80P; 201; 143(2); 64; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHRI RAJPAL YADAV , JUDICIAL MEMBER AND AMARJIT SINGH, ACCOUNTANT MEMBER THE MARKET YARD MERCHANTS CO - OP. CREDIT SOCIETY LTD. 45, MARKET YARD , SIDHPUR - 384151 PAN: AAAAT6665K (APPELLANT) VS THE ITO, WARD - 2, PATAN - 384265 (RESPONDENT) REVENUE BY : S H R I SUMIT KR. VERMA , SR. D . R. ASSESSEE BY: S H RI P.B. PARMAR , A.R. DATE OF HEARING : 23 - 07 - 2 018 DATE OF PRONOUNCEMENT : 27 - 09 - 2 018 / ORDER P ER : AMARJIT SINGH , ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2011 - 12 , ARIS ES FROM ORDER OF THE CIT(A), GANDHINAGAR, AHMEDABAD DATED 04 - 05 - 2015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FO LLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF LEARNED AO IN TREATING INTEREST OF RS.8,26,838/ - , EARNED OUT OF STATUTORY DEPOSITS AS 'INCOME FROM OTHER SOURCES' I.E. U/S 56 OF THE ACT INSTEAD OF TREATING IT AS INCOME ATTRIBUTABLE TOWARDS BUSINESS OF PROVIDING CREDIT FACILITIES TO MEMBERS. 2. ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE, IN CASE THE INTEREST IS TO BE TAXED AS INCOME FROM OTHER SOURCES, THE EXPENDIT URE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING INTEREST MAY KINDLY BE ALLOWED U/S 57 OF THE ACT. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF LEARNED AO IN HOLDING THAT NET BANK INTEREST OF RS.3,78,776/ - IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2) OF THE ACT. 4. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERL Y APPRECIATING THE FACT AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN I T A NO . 2474 / A HD/20 15 A SSESSMENT YEAR 2011 - 12 I.T.A NO. 2474 /AHD/20 15 A.Y. 2011 - 12 PAGE NO THE MARKET YARD MERCHANTS CO - OP. CREDIT SOCIETY LTD. VS. ITO 2 CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO B E QUASHED. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234A/B/C/D OF THE ACT. 6. THE LEARNED C1T(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN INITIATING PENALTY U/S 271(1)(C) OF THE ACT. 3. THE GROUNDS OF APPEAL NO. 1 TO 4 ARE ADJUDICATED TOGETHER AS INTERCONNECTED TO THE COMMON ISSUE OF TREATING INTEREST EARNED ON DEPOSIT WITH COMMERCIAL BANKS AS INCOME FROM OTHER SOURCES . TH E BRIEF FACT IS THAT ASSESSE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. NIL . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISS UING OF NOTICE U/S. 143(2) ON 06.08. 2013 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) IN RESPECT OF INTEREST INCOME DERIVED FROM INVESTMENT IN FIXED DEPOSIT WITH COMMERCIAL BANKS. THE ASSESSING OFFICER OBSERVED THAT EXEMPTION U/S. 80P(2)(A)(I) IS AVAILABLE ON INCOME WHICH IS ATTRIBUTABLE TO BUSINESS OPERATION OF THE ASSESSEE CO - OPERATIVE SOCIETY AND THE INTEREST EARNED ON THE FUND INVESTED WITH THE COMMERCIAL BANK IS NOT OPERATIONAL INCOME FROM PROVIDING CREDIT FACILITIES TO ITS MEMBERS. CONSEQUENTLY, HE HAS TREATED THE INTER EST INCOME OF RS 8,26,838 AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT AND DISALLOWED THE CLAIM OF DEDUCTION U/S. 80P ON THE AFORESAID INTEREST INCOME. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOW ANCE AFTER PLACING RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF TOTGARS CO - OP SOCIETY LTD. 188 TAXMAN 282 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER HAS NOTICED THAT IN ADDITION TO THE INTEREST INCOME EARNED ON LOAN AND ADVANCES TO ITS MEMBERS, THE ASSESSE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON INTEREST INCOME EARNED F ROM FIXED DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. AS PER SECTION 80P(2)(A)(I) OF THE I.T.A NO. 2474 /AHD/20 15 A.Y. 2011 - 12 PAGE NO THE MARKET YARD MERCHANTS CO - OP. CREDIT SOCIETY LTD. VS. ITO 3 ACT THE INTEREST INCOME EARNED ON PROVIDING CREDIT FACILITY TO ITS MEMBERS IS DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE ACT , HOWEVER, THAT DEDUCTION U/S 80P(2)(A)(I) IS NO T AVAILABLE ON THE INTEREST EARNED ON DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVENUE VIDE STATE BANK OF INDIA VS. CIT (2016) 72 TAXMANN.COM 64 (GUJAR AT) WHEREIN IT IS HELD THAT INTEREST INCOME ON DEPOSIT PLACED WITH THE COMMERCIAL BANKS IS NOT EXEMPT U/S. 80P(2)(A)(I) OF THE ACT. IN VIEW OF THE ABOVE FACTS AND LEGAL FINDINGS WE ARE INCLINED WITH THE DECISION OF THE LD. CIT(A) THAT INVESTING SURPLUS FUN DS IN A COMMERCIAL BANK IS NO PART OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS WHICH IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER AS DECIDED IN THE VARIOUS DECISION OF THE CO - ORDINATE BENCHES OF ITAT AHMEDABAD WE DIREC T THE ASSESSING OFFICER TO ALLOW PRO RATA EXPENSES IN RESPECT OF INTEREST EARNED FROM DEPOSIT HELD WITH NATIONALIZED BANK TO THE ASSESSEE FOR COMPUTING THE DEDUCTION U/S. 80P AFTER EXAMINING/VERIFICATION AND AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. THEREFORE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6 . THE GROUND NO. 5 RE LAT ES TO LEVYING OF INTEREST U/S 234A/B/C/D OF THE ACT . WE OBSERVE THAT CHARGING OF INTEREST IS MANDATORY AS PER THE AFORESAID PROVISIONS OF THE A CT , THEREFORE THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED . WE CONSIDER THAT T HE GROUND OF APPEAL NO.6 PERTAINING TO INITIATING PENALTY U/S 271(1)(C) OF THE ACT IS PREMATURE AT THIS STAGE, THEREFORE , THE SAME IS ALS O STANDS DISMISSED. 7 . IN THE RE SULT , GROUNDS OF APPEAL 1 TO 4 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND GROUNDS NO. 5 & 6 ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 27 - 09 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMB ER ACCOUNTANT MEMBER I.T.A NO. 2474 /AHD/20 15 A.Y. 2011 - 12 PAGE NO THE MARKET YARD MERCHANTS CO - OP. CREDIT SOCIETY LTD. VS. ITO 4 AHMEDABAD : DATED 27 /09 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,