The DCIT, Panchmahal Circle, Panchmahal V. M/s. Balasinor Vikas Co. Op. Credit Society Ltd., Mahisagar

ITA 2573/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8605 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 07-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2573/AHD/2016 ( / ASSESSMENT YEAR : 2012-13) DEPUTY COMMISSIONER OF INCOME TAX PANCHMAHAL CIRCLE GODHRA / VS. M/S.BALASINOR VIKAS CO.OP.CREDIT SOCIETY LTD. RAJPUR DARWAJA BALSINOR DIST.MAHISAGAR, GUJARAT # ./ ./ PAN/GIR NO. : AAAAB4748H ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #& / APPELLANT BY : SHRI SAURABH SINGH, SR.DR '#&) / RESPONDENT BY : SHRI SUNIL TALATI, AR *+), / DATE OF HEARING 23/03/2018 -./0), / DATE OF PRONOUNCEMENT 09/ 04 /2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTAN CE OF THE REVENUE SEEKING TO ASSAIL THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)- 4, VADODARA [CIT(A) IN SHORT] DATED 19/05/2016 ARI SING IN THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (A O) DATED ITA NO.2573/AHD /2016 DCIT VS. M/S.BALASINOR VIKAS CO.OP.CREDIT SOC.LTD. ASST.YEAR 2012-13 - 2 - 27/02/2015UNDER S.143(3) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS 'THE ACT') RELEVANT TO ASSESSMENT Y EAR (AY) 2012-13. 2. THE REVENUE BY WAY OF ITS APPEAL HAS CHALLENGED THE RELIEF GRANTED BY THE CIT(A). THE SUBJECT MATTER OF DISP UTE IS ALLOWABILITY OF DEDUCTION UNDER S.80P OF THE ACT WITH REFERENCE TO INTEREST RECEIVED ON DEPOSITS PLACED WITH BANKS AND OTHER AGENCIES AGGRE GATING TO RS.43,12,518/-. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LD.A R FOR THE ASSESSEE IN THE REVENUES APPEAL SUBMITTED AT THE O UTSET THAT ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS PER THE BYE-LAWS OF SO CIETY AS APPROVED UNDER GOVERNMENT OF GUJARAT CO-OPERATIVE ACT. THE LD.AR THEREAFTER PLACED A BIFURCATION OF THE INTEREST AMOUNTING TO RS.43,1 2,518/- FOR WHICH THE DEDUCTION CLAIMED UNDER S.80P WAS DENIED BY THE AO. THE DETAILS OF THE INTEREST STATED TO BE EARNED IN RESPECT OF VARIOUS INVESTMENTS AS POINTED OUT BY THE ASSESSEE IS DETAILED HEREUNDER:- BANK OF BARODA RS.24,82,249/- STATE BANK OF INDIA RS.16,08,016/- THE KAIRA DISTRICT CENTRAL CO.OP.BANK (CO.OP.SOCIETY) RS.1,63,186/- AXIS BANK (SAVING A/C.) RS.32,733/- MGVCL DEPOSIT INTEREST RS.26,334/- TOTAL: RS.4 3,12,518/- ITA NO.2573/AHD /2016 DCIT VS. M/S.BALASINOR VIKAS CO.OP.CREDIT SOC.LTD. ASST.YEAR 2012-13 - 3 - 3.1. THE LD.AR FOR THE ASSESSEE FAIRLY SUBMITTED TH AT THE INTEREST EARNED FROM DEPOSITS PLACED WITH THE BANK OF BARODA (RS.24,82,249/-), STATE BANK OF INDIA (RS.16,08,016/-) AND AXIS BANK (RS.32,733/-) ARE NOT SUSCEPTIBLE TO DEDUCTION UNDER S.80P OF THE ACT ANY LONGER IN VIEW OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF THE CITIZENS CO- OPERATIVE SOCIETY LTD. VS. ACIT RENDERED ON 08/08/2 017. IN RESPONSE TO THE QUERY PUT BY THE BENCH, THE LD.AR ACCEPTED IN T HIS REGARD THAT THE TEST OF MUTUALITY ENVISAGED UNDER S.80P(2)(A)(I) OF THE ACT IS NOT SATISFIED IN THE COURSE OF ITS BUSINESS OF PROVIDING CREDIT F ACILITIES TO ITS MEMBERS. HOWEVER, AS REGARDS THE INTEREST EARNED ON DEPOSITS PLACED WITH OTHER CO- OPERATIVE SOCIETY; NAMELY, KAIRA CENTRAL CO-OPERATI VE BANK AMOUNTING TO RS.1,63,186/-, THE LD.AR REFERRED TO THE PROVISI ONS OF SECTION 80P(2)(D) AND SUBMITTED THAT THE INCOME DERIVED ON SUCH DEPOSITS IS ELIGIBLE FOR DEDUCTION UNDER S.80P OF THE ACT. SIM ILARLY, THE LD.AR CONTENDED THAT INTEREST AMOUNTING TO RS.26,334/- TO WARDS DEPOSITS PLACED WITH ELECTRICITY COMPANY; NAMELY MGVCL IS ALSO ENTI TLED FOR DEDUCTION. 4. THE LD.DR RELIED UPON THE ORDER OF THE AO. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE C ONTROVERSY TOWARDS ELIGIBILITY OF DEDUCTION UNDER S.80P TOWARD S INTEREST EARNED ON FIXED DEPOSITS WITH BANKS IS REQUIRED TO BE SEEN IN THE LIGHT OF THE RECENT ITA NO.2573/AHD /2016 DCIT VS. M/S.BALASINOR VIKAS CO.OP.CREDIT SOC.LTD. ASST.YEAR 2012-13 - 4 - DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F THE CITIZENS CO- OPERATIVE SOCIETY LTD.(SUPRA). CLEARLY THE ASSESSE E CO-OPERATIVE SOCIETY HAS NOT DERIVED THE INTEREST INCOME FROM CREDIT FAC ILITIES TO ITS MEMBERS BUT FROM THE BANK. THEREFORE, PRINCIPLES OF MUTUAL ITY ARE NOT SATISFIED. CONSEQUENTLY, THE ORDER OF THE CIT(A) TOWARDS ALLOW ABILITY OF DEDUCTION WITH REFERENCE TO INTEREST ON FIXED DEPOSITS WITH B ANKS IS REQUIRED TO BE REVERSED AND THE ORDER OF THE AO IS REQUIRED TO BE UPHELD. THUS, THE AGGREGATE INTEREST AMOUNTING TO RS.41,22,998/- DERI VED FROM DEPOSITS PLACED WITH BANKS IS RIGHTLY HELD TO BE NOT ELIGIBL E FOR DEDUCTION UNDER S.80P OF THE ACT BY THE AO. 6. AS REGARDS, THE DEPOSITS PLACED WITH OTHER COOPE RATIVE SOCIETY AMOUNTING TO RS.1,63,186/-, WE NOTE THE PLEA OF TH E ASSESSEE THAT DEPOSITS WITH KAIRA DISTRICT CENTRAL CO-OPERATIVE B ANK IS GOVERNED BY REGIONAL RURAL DEVELOPMENT BANK 1976. THIS BEING S O, WE FIND MERIT IN THE PLEA OF THE ASSESSEE FOR ELIGIBILITY OF DEDU CTION IN VIEW OF SECTION 80P(2)(D) OF THE ACT. THE ORDER OF THE CIT(A) IS T HEREFORE NOT INTERFERED. AS REGARDS INTEREST OF RS.26,334/- ON ELECTRICITY D EPOSITS, WE FIND THAT, FIRSTLY, THE INCOME DOES NOT ARISE FROM OPERATIONAL ACTIVITIES AND DO NOT BEAR THE CHARACTER OF PROFITS AND GAINS OF BUSINESS . THUS, IN THE LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F TOTGARS CO- OPERATIVE SALE SOCIETY LTD. VS. ITO 322 ITR 283 (SC ), SUCH INTEREST INCOME IS NOT QUALIFIED FOR DEDUCTION UNDER S.80P O F THE ACT. SECONDLY, ITA NO.2573/AHD /2016 DCIT VS. M/S.BALASINOR VIKAS CO.OP.CREDIT SOC.LTD. ASST.YEAR 2012-13 - 5 - THE TEST OF MUTUALITY IS ALSO ABSENT. THE INCOME SO DERIVED IS THUS NOT ELIGIBLE IN VIEW OF THE SCHEME OF SECTION 80P OF TH E ACT. 7. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 09 / 0 4 /201 8 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 09/ 04 /2018 4 ..*,.*../ T.C. NAIR, SR. PS !'#' / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-4, VADODARA 5. 9:;,*67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9 ,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 2.4.18(DICTATION-PAD 13- PAG ES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 3.4.18 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.9.4.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9.4.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER