M/s Malnad Areca Marketing Co-operative Society Limited , Shivamogga V. Assistant Commissioner of Income Tax Circle-1 , Shivamogga

ITA 256/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1670 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-12-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 12-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KANNAN NARAYAN
• Assessee Lawyers: S KRISHNA SWAMY
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.256 & 257/BANG/2019 ASSESSMENT YEAR : 2013 14 & 2014-15 THE ASST. COMMISSIONER INCOME TAX, CIRCLE-1, SHIVAMOGGA. VS. M/S MALNAD ARECA MARKETING CO-OPERATIVE SOCIETY, (MAMCOS), APMC YARD, SHIVAMOGGA. PAN AAAJM 0788 P APPELLANT RESPONDENT APPELLANT BY : SHRI S KRISHNASWAMY, C.A RESPONDENT BY : SHRI KANNAN NARAYAN, JCIT (DR) DATE OF HEARING : 10-12-2020 DATE OF PRONOUNCEMENT : 11-12-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEALS ARE FILED BY REVENUE AGAINST ORDER DATED 22/04/2016 AND 25/01/2017 PASSES BY LD.CIT(A), DAVA NGERE FOR ASSESSMENT YEARS 2013-14 AND 2014-15 RESPECTIVELY. 2. REVENUE HAS RAISED IDENTICAL GROUNDS IN BOTH THE SE APPEALS. FOR SAKE OF CONVENIENCE, GROUNDS PERTAINING TO ASSE SSMENT YEAR 20113-14 ARE REPRODUCED HEREWITH: 1THE ORDER OF THE CIT(A), DAVANGERE IS OPPOSED TO THE LAW AND NOT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) HAS NOT CONSIDERED THE FACT THAT IN O RDER TO BE ELIGIBLE FOR DEDUCTION U/S 57, IT IS NECESSARY TO ESTABLISH THAT THE EXPENDITURE WAS PAGE 2 OF 5 ITA NO.256 & 257/BANG/2019 INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING THE CORRESPONDING INCOME. RS.1,02,64,770 3. THE CIT(A) HAS ERRED IN NOT CONSIDERING THE FACT THAT DIRECT NEXUS BETWEEN THE EXPENDITURE ALLOWED AND INCOME EARNED I S NOT ESTABLISHED. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED UP ON, THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT ASSESSMENT ORDE R BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OTHER GROUNDS ON OR BEFORE HEARING OF THE APPEAL. BRIEF FACTS OF THE CASE ARE AS UNDER: 3. IT HAS BEEN NOTED BY LD.AO THAT ASSESSEE IS A CO OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF MARKETING AGRICU LTURAL PRODUCE MAINLY ARECA NUTS GROWN BY ITS MEMBERS. LD. AO OBSERVED THAT ASSESSEE CLAIMED DEDUCTION U/S.80P(2) (A)(III) I.E; INCOME FROM MARKETING OF AGRICULTURAL PRODUCE OF ME MBERS AND 80P(2)(D) I.E; INCOME BY WAY OF INTEREST OR DIVIDEN D DERIVED BY ASSESSEE FROM INVESTMENTS WITH ANY OTHER COOPERATIV E SOCIETY. 4. LD.AO DISALLOWED HE ENTIRE INTEREST INCOME CLAIM ED BY ASSESSEE U/S.80 P(2)(D) OF THE ACT. 5. AGGRIEVED BY DISALLOWANCE MADE IN ASSESSMENT ORD ER, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A). 6. LD.CIT(A) ALLOWED ENTIRE INTEREST INCOME EARNED BY ASSESSEE. AGGRIEVED BY ORDER OF LD.CIT(A), REVENUE IS IN APPE AL BEFORE US NOW. 7. LD.SR.DR SUBMITTED THAT ASSESSEE EARNED INTEREST INCOME AS UNDER: AMOUNT IN RS. INTEREST INCOME FROM CO OPERATIVE BANKS (SDCC BANK) 2,74,41,235/- INTEREST FROM COMMERCIAL BANKS 22,33,243/- TOTAL INTEREST EARNED 2,96,74,478/- PAGE 3 OF 5 ITA NO.256 & 257/BANG/2019 8. LD.SR.DR SUBMITTED THAT LD.CIT(A) WITHOUT VERIFY ING THE CLAIM IN LIGHT OF VARIOUS DECISIONS OF THIS TRIBUNAL AS WELL AS HONBLE KARNATAKA HIGH COURT GRANTED DEDUCTION TO ASSESSEE. HE SUBMITTED THAT THE ISSUE MAY BE REMANDED TO LD.AO F OR CONSIDERING THE CLAIM IN ACCORDANCE WITH THE VIEW T AKEN BY THIS TRIBUNAL ON THIS ISSUE. 9. LD.AR ON THE CONTRARY RELIED ON ORDER PASSED BY LD.CIT(A). 10. WE HAVE PERUSED THE SUBMISSIONS OF BOTH SIDES I N LIGHT OF RECORDS PLACED BEFORE US. 11. WE NOTE THAT LD.CIT(A) HAS NOT FOLLOWED THE RAT IO OF VARIOUS JUDGMENTS FOR COMPUTING ALLOWABLE INTEREST U/S.80 P (2) (D). THERE IS NO DOUBT THAT ASSESSEE IS ELIGIBLE TO CLAIM DEDU CTION U/S.80 P(2)(D) OF THE ACT. HOWEVER THE QUANTUM THAT IS ALL OWABLE IS TO BE COMPUTED IN ACCORDANCE WITH THE RATIO LAID DOWN BY FOLLOWING DECISIONS. WE THEREFORE REMAND THIS ISSUE TO LD.AO FOR COMPUTING THE DEDUCTION AS DIRECTED HEREIN. 12. LD.AO IS DIRECTED TO EXAMINE THE FACTS IN THE L IGHT OF DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD VS ITO , REPORTED IN 230 TAXMANN 309 , WHEREIN DECISION BY HONBLE SUPREME COURT IN CASE OF TOTGARS CO-COPERATIVE SALE SOCIETY LTD., REPORTED IN 322 ITR 283 HAS BEEN DULY CONSIDERED. WE NOTE THAT HONBLE KARNATAKA HIGH COURT IN CASE OF PR.CIT VS TOTGARS CO-OPERATIVE SALE SOCIETY REPORTED IN 392 ITR 74 CONFIRMED THE ORDER OF THIS TRIBUNAL ALLOWING DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT ON PAGE 4 OF 5 ITA NO.256 & 257/BANG/2019 INTEREST RECEIVED ON INVESTMENTS MADE IN CO-OPERATI VE BANK. THIS DECISION WAS HOWEVER NOT FOLLOWED IN THE SUBSEQUENT JUDGMENT IN CASE OF PR.CIT VS TOTGARS CO-OPERATIVE SALE SOCIETY REPORTED IN 395 ITR 611. 13. WE THEREFORE RESTORE THE ISSUE BACK TO LD.AO FOR FRESH CONSIDERATION IN THE LIGHT OF ABOVE DECISIONS AFTER PROVIDING ORDER QUIT OPPORTUNITY OF BEING HEARD TO ASSESSEE IN ACCO RDANCE WITH LAW. ACCORDINGLY GROUNDS RAISED BY ASSESSEE STANDS ALLOW ED FOR STATISTICAL PURPOSES. IN THE RESULT APPEAL FILED BY ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DEC, 2020 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 11 TH DEC, 2020. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE