M/s Kalpatharu Credit Co-operative Society Limited , Davangere V. The Income Tax Officer Ward-1(5), Davangere

ITA 2576/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4083 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S PALANI KUMAR
• Assessee Lawyers: MALLAH A RAO K
• Section: 234B; 6; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO S . 257 6 & 257 5 /BANG/201 8 ASSESSMENT YEAR S : 20 1 4 - 15 & 2015 - 16 M/S. KALPATHARU CREDIT CO- OPERATIVE SOCIETY LTD., 1359/6, OPP. DISTRICT STADIUM COMPLEX, 2 ND MAIN, HADADI ROAD, P J EXTENSION, DAVANGERE. PAN: AAFAS2028E VS. THE INCOME TAX OFFICER, WARD 1 (5), DAVANGERE. APPELLANT RESPONDENT ASSESSEE BY : SHRI MALLAHARAO .K, ADVOCATE REVENUE BY : DR. S. PALANI KUMAR, ADDL. CIT (DR) DATE OF HEARING : 1 6 . 10 .2018 DATE OF PRONOUNCEMENT : 26 . 10 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A), DAVANGERE BOTH DATED 25.06.2018 FOR ASSESSMENT YEARS 2014-15 AND 2015-16. BOTH THESE A PPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMEN T YEAR 2014-15 IN ITA NO. 2576/BANG/2018 ARE AS UNDER. 1. THE LEARNED CIT (A) ERRED IN PASSING THE ORDER I N THE MANNER HE DID. 2. ON THE FACTS, THE LEARNED CIT (A) FAILED TO APPR ECIATE THAT SECTION 80(2)(A)(I) OF THE ACT PROVIDES DEDUCTION OF INCOME OF CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING OR PROV IDING CREDIT FACILITIES TO OTHER MEMBERS CARRYING ON BUSINESS OF BANKING AND COVER LENDING TO MEMBERS AND INTEREST EARNED ON DEPOSIT I N THE NORMAL COURSE OF BUSINESS ACTIVITY AND THUS THE ADDITION A S MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT (A) IS UNCALLED FO R AND AGAINST LAW. 3. ON THE FACTS, THE LEARNED CIT (A) FAILED TO APPR ECIATE THAT INTEREST RECEIVED BY THE APPELLANT-SOCIETY IS EXEMPT UNDER S ECTION 80P(2)(D) OF THE ACT AND THUS THE ADDITION AS MADE AND CONFIR MED BY THE CIT (A) IS UNCALLED FOR AND LIABLE TO BE DELETED. ITA NOS. 2576 & 2575/BANG/2018 PAGE 2 OF 5 4. ON THE FACTS, THE LEARNED CIT (A) ERRED IN RELYI NG ON THE JUDGMENTS AND CONFIRMING THE ADDITIONS AS MADE BY THE AO IS T OTALLY UNCALLED FOR AND FURTHER FAILED TO APPRECIATE THAT THE JUDGMENTS RELIED ON BY HIM WERE DISTINGUISHABLE ON THE FACTS OF THE APPELLANT' S CASE. 5. WITHOUT PREJUDICE, THE ADDITIONS AS SUSTAINED BY THE LEARNED CIT (A) ARE ARBITRARY, EXCESSIVE AND LIABLE TO BE DELET ED IN TOTO. 6. THE LEARNED CIT (A) ERRED IN CONFIRMING THE INTE REST CHARGED UNDER SECTIONS 234A & 234B OF THE ACT. 7. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 3. THE GROUNDS RAISED BY THE ASSESSEE FOR ASSESSMEN T YEAR 2015-16 IN ITA NO. 2575/BANG/2018 ARE AS UNDER. 1. THE LEARNED CIT (A) ERRED IN PASSING THE ORDER I N THE MANNER HE DID. 2. ON THE FACTS, THE LEARNED CIT (A) FAILED TO APPR ECIATE THAT SECTION 80(2)(A)(I) OF THE ACT PROVIDES DEDUCTION OF INCOME OF CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING OR PROV IDING CREDIT FACILITIES TO OTHER MEMBERS CARRYING ON BUSINESS OF BANKING AND COVER LENDING TO MEMBERS AND INTEREST EARNED ON DEPOSIT I N THE NORMAL COURSE OF BUSINESS ACTIVITY AND THUS THE ADDITION A S MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT (A) IS UNCALLED FO R AND AGAINST LAW. 3. ON THE FACTS, THE LEARNED CIT (A) FAILED TO APPR ECIATE THAT INTEREST RECEIVED BY THE APPELLANT-SOCIETY IS EXEMPT UNDER S ECTION 80P(2)(D) OF THE ACT AND THUS THE ADDITION AS MADE AND CONFIR MED BY THE CIT (A) IS UNCALLED FOR AND LIABLE TO BE DELETED. 4. ON THE FACTS, THE LEARNED CIT (A) ERRED IN RELYI NG ON THE JUDGMENTS AND CONFIRMING THE ADDITIONS AS MADE BY THE AO IS T OTALLY UNCALLED FOR AND FURTHER FAILED TO APPRECIATE THAT THE JUDGMENTS RELIED ON BY HIM WERE DISTINGUISHABLE ON THE FACTS OF THE APPELLANT' S CASE. 5. WITHOUT PREJUDICE, THE ADDITIONS AS SUSTAINED BY THE LEARNED CIT (A) ARE ARBITRARY, EXCESSIVE AND LIABLE TO BE DELET ED IN TOTO. 6. THE LEARNED CIT (A) ERRED IN CONFIRMING THE INTE REST CHARGED UNDER SECTIONS 234A & 234B OF THE ACT. 7. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 4. AT THE VERY OUTSET, IT WAS SUBMITTED BY LD. AR O F ASSESSEE THAT THERE WAS A DELAY OF 15 DAYS IN FILING THESE APPEALS BEFORE THE TRIBUNAL. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS SUBMITTED AN APPLIC ATION FOR CONDONATION OF ITA NOS. 2576 & 2575/BANG/2018 PAGE 3 OF 5 DELAY IN BOTH THESE YEARS ALONG WITH AN AFFIDAVIT O F SHRI D.R. SRINIVAS, CEO OF THE ASSESSEE SOCIETY. HE FURTHER SUBMITTED THAT BECAUSE OF HIS ILL HEALTH, HE COULD NOT APPROACH THE CONCERNED CA IN DAVANGERE AND THE ADVOCATE IN BANGALORE IN CONNECTION WITH FILING OF APPEAL BEFOR E THE TRIBUNAL AND AFTER RECOVERY FROM HIS ILL HEALTH, HE APPROACHED TO THE CONCERNED ADVOCATE TO PREPARE AND FILE APPEALS BEFORE THE TRIBUNAL. HE S UBMITTED THAT UNDER THESE FACTS, THE DELAY OF 15 DAYS IN FILING THE APPEALS B EFORE THE TRIBUNAL SHOULD BE CONDONED. THE LD. DR OF REVENUE OBJECTED TO THE CO NDONATION OF DELAY. BUT IN THE FACTS OF PRESENT CASE, I CONDONE THE DELAY A ND ADMIT BOTH THESE APPEALS. 5. IN THE COURSE OF HEARING OF THESE APPEALS, THE B ENCH POINTED OUT THAT THE ASSESSEE SHOULD FURNISH THE COPY OF REGISTRATION CE RTIFICATE ISSUED BY REGISTRAR OF CO-OPERATIVE SOCIETY TO FIND OUT AS TO WHETHER THE ASSESSEE IS A SOUHARDHA OR A CO-OPERATIVE SOCIETY. THE LD. AR OF ASSESSEE SUBMITTED THE COPY OF THE CERTIFICATE DATED 10.11.1999 ALONG WITH ITS ENGLISH TRANSLATED COPY AND SUBMITTED THAT THE CERTIFICATE WAS ISSUED BY REGISTRAR OF CO- OPERATIVE SOCIETY, DAVANGERE AND THE ASSESSEE SOCIE TY WAS REGISTERED AS A CO-OPERATIVE SOCIETY UNDER THE CO-OPERATIVE SOCIETI ES ACT, 1959. 6. REGARDING THE MERIT OF THE CASE, HE SUBMITTED A COPY OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF BANASHANKARI CREDIT CO-OPER ATIVE SOCIETY LTD. VS. ITO IN ITA NO. 2874/BANG/2017 DATED 12.03.2018 AND POINTED OUT THAT IN THIS CASE ALSO, SIMILAR ISSUE WAS INVOLVED AND THE MATTER WAS RESTORED BACK BY THE TRIBUNAL TO THE FILE OF AO FOR FRESH DECISIO N AND HE SUBMITTED THAT PARA NOS. 4 TO 6 OF THIS TRIBUNAL ORDER ARE RELEVAN T AND HE ALSO SUBMITTED THAT IN THE PRESENT CASE ALSO, THE MATTER MAY BE RE STORED BACK TO THE FILE OF AO FOR FRESH DECISION WITH SIMILAR DIRECTIONS IN BO TH YEARS. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, I REPRODUCE PARA NOS. 4 TO 6 FROM THE TRIBUNAL ORDER RENDERED IN THE CASE O F BANASHANKARI CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO (SUPRA). THESE P ARAS ARE AS UNDER. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CAS E OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) IS JUDGMENT DATED 28.10.2014 WHEREAS THE JUDGMENT OF H ON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT A ND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA) IS A JUD GMENT DATED ITA NOS. 2576 & 2575/BANG/2018 PAGE 4 OF 5 16.06.2017. IN THE FIRST JUDGMENT, THE ISSUE IN DI SPUTE WAS DECIDED BY HON'BLE KARNATAKA HIGH COURT IN FAVOUR OF THE ASSES SEE WHEREAS IN THE LATER JUDGMENT, THE ISSUE IN DISPUTE WAS DECIDE D IN FAVOUR OF THE REVENUE. HENCE I HAVE TO FIRST SEE AND DECIDE AS T O WHETHER THERE IS ANY CONTRADICTION IN THESE TWO JUDGMENTS OF HON'BLE KARNATAKA HIGH COURT. WHEN I DO SO, I FIND THAT IN THE CASE OF TU MKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA), I T IS NOTED BY HON'BLE KARNATAKA HIGH COURT IN PARA 10 OF THAT JU DGMENT THAT THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBER AND IT WAS NOT LIABILITY A ND IT WAS NOT SHOWN AS LIABILITY IN THE ACCOUNTS OF THE ASSESSEE AND IT IS ALSO NOTED IN THE SAME PARA I.E. PARA 10 THAT IN FACT, THE AMO UNT WAS IN THE NATURE OF PROFITS AND GAINS AND IT WAS NOT IMMEDIAT ELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS AND THEREFORE, THE ASSESSEE HAS DEPOSITED THE MONEY IN A BANK TO EARN INTEREST. UNDER THESE FACTS, IT WAS HELD BY HON'BL E KARNATAKA HIGH COURT THAT THE SAID INTEREST 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. 5. NOW I EXAMINE THE FACTS AND BASIS OF JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT A ND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA). IN THI S CASE, IT IS NOTED BY HON'BLE KARNATAKA HIGH COURT THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF MARKETING THE AGRICULTURAL PRODUCE OF I TS MEMBERS AND IT RETAINS THE SALE PROCEEDS IN MANY CASES. IT IS THIS 'RETAINED AMOUNT' WHICH WAS PAYABLE TO ITS MEMBERS, FROM WHOM PRODUCE WAS BOUGHT, WHICH WAS INVESTED IN SHORT-TERM DEPOSITS/SECURITIE S AND SUCH AN AMOUNT, WHICH WAS RETAINED BY THE ASSESSEE-SOCIETY AND IT WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE-SHEET ON THE LIABILITY-SIDE. AFTER NOTING THESE FACTS, IT WAS HELD BY HON'BLE KA RNATAKA HIGH COURT TO THAT TO THAT EXTENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SE CTION 80P(2)(A)(I) OF THE ACT OR IN SECTION 80P(2)(A)(III) OF THE ACT. H ENCE IT IS SEEN THAT THERE IS NO CONTRADICTION IN THESE TWO JUDGMENTS OF HON'BLE KARNATAKA HIGH COURT. THE CONCLUSION IS DIFFERENT BECAUSE TH E FACTS ARE DIFFERENT. IN THE CASE OF TUMKUR MERCHANTS SOUHARD A CREDIT COOPERATIVE LTD. VS. ITO (SUPRA), IT WAS NOTICED TH AT THE MONEY DEPOSITED IN BANK WAS NOT LIABILITY OF THE ASSESSEE AND IT WAS ASSESSEES OWN MONEY WHEREAS IN THE CASE OF PCIT AN D ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA), IT WAS NOTED THAT THE AMOUNT WHICH WAS INVESTED WAS NOT THE OWN MONEY OF THE ASSESSEE BUT WAS LIABILITY OF THE ASSESSEE. HENCE I FIND THAT T HERE IS NO CONTRADICTION IN THESE TWO JUDGMENTS AND THE CONCLU SION IS DIFFERENT BECAUSE THE FACTS ARE DIFFERENT. HENCE THE FACTS O F THE PRESENT CASE ARE TO BE EXAMINED WITH THE FACTS OF THESE TWO JUDGMENT S AND IF IT IS FOUND THAT THE FACTS OF THE PRESENT CASE ARE SIMILAR TO T HE FACTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. V S. ITO (SUPRA), THEN ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. IF THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE CASE OF PCIT ITA NOS. 2576 & 2575/BANG/2018 PAGE 5 OF 5 AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA) THEN THE ISSUE SHOULD BE DECIDED AGAINST THE ASSESSEE. 6. ON A SPECIFIC QUERY FROM THE BENCH, IT WAS SUBMI TTED BY LD. AR OF ASSESSEE THAT NECESSARY FACTS ON THIS ASPECT ARE NO T READILY AVAILABLE AND THERE IS NO FINDING OF ANY OF THE AUTHORITIES B ELOW ON THIS ASPECT. UNDER THESE FACTS, I FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION AFTER EXAMINING THIS ASPEC T OF THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THESE TWO JUDGMENTS AN D IN THE LIGHT OF ABOVE OBSERVATIONS. HENCE I SET ASIDE THE ORDER OF CIT (A) AND RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORT UNITY OF BEING HEARD TO ASSESSEE. 8. IN THE PRESENT CASE ALSO, I RESPECTFULLY FOLLOW THIS TRIBUNAL ORDER AND SET ASIDE THE ORDER OF CIT (A) IN BOTH YEARS AND RESTOR E BACK THE MATTER TO THE FILE OF AO FOR FRESH DECISION WITH SIMILAR DIRECTIO NS. NEEDLESS TO SAY, THE AO SHOULD PROVIDE REASONABLE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. IN VIEW OF THIS DECISION, NO ADJUDICATION IS CALLED FO R REGARDING THE MERIT OF THE CASE AT THE PRESENT STAGE. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 26 TH OCTOBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.