Chatrapati Shivaji Co-operative Credit Society Limited , Bagalkot V. Income Tax Officer Ward-2 , Bagalkot

ITA 2619/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9924 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 19-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NANDINI DAS
• Keywords: Business income; Opportunity of being heard; Source of fund; Co-operative Credit Society

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI N.V VASUDEVAN, VICE PRE SIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.2619/BANG/2018 ASSESSMENT YEAR : 2015-16 CHATRAPATI SHIVAJI CO-OPERATIVE CREDIT SOCIETY LTD., UMARAMESHWAR COMPLEX, JAMAKHANDI BAGALKOT. PAN AAAAC 7565 M. VS. THE INCOME-TAX OFFICER, WARD-2, BAGALKOT. APPLICANT RESPONDENT APPELLANT BY : SHRI VEERANNA M MURGOD, C.A RESPONDENT BY : SMT. SRI NANDINI DAS, ADDL. CIT DATE OF HEARING : 26.11.2018 DATE OF PRONOUNCEMENT : .12.2018 O R D E R PER SHRI N.V VASUDEVAN, VICE PRESIDENT : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 26.6.2018 OF CIT(A)-BELAGAVI, RELATING TO AY 2015-1 6. ITA NO.2619/B/18 2 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL BY THE ASSESSEE IS AS TO WHETHER THE REVENUE AUTHORITIES W ERE JUSTIFIED IN ALLOWING THE BENEFIT OF DEDUCTION U/S/80P(2)((A)(I) OF THE INCOME TAX ACT, 1961 (ACT) TO THE ASSESSEE ON INTEREST INCOME EARNED ON INVESTMENT IN BAGALKOT DISTRICT CENTRAL CO-OPERATIV E BANK AND INTEREST EARNED ON SAVINGS BANK ACCOUNT, FD WITH JA MKHANDI SUGARS LTD. IS ELIGIBLE FOR DEDUCTION U/S.80-P(2)(A)(I)/80 P(2)(D) OF THE INCOME TAX ACT, 1961 (ACT). THE ASSESSING OFFICER DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT INTEREST INCOME EARNED BY MAKING INVESTMENT OF SURPLUS FUNDS HAS TO BE ASSESSED UNDE R THE HEAD INCOME FROM OTHER SOURCES AND NOT INCOME FROM BUS INESS AND SINCE INTEREST INCOME IS NOT ASSESSED AS BUSINESS INCOME, THE CLAIM FOR DEDUCTION CANNOT BE ALLOWED. IN COMING TO THE ABOV E CONCLUSION, THE AO RELIED ON THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF THE TOGARS CO-OPERATIVE SALES SOCIETY LTD. VS. ITO 322 ITR 283(SC) WHEREIN THE HONBLE SUPREME COURT HELD THAT THE BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT IS ONLY ON IN COME WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. IN TEREST EARNED ON INVESTMENT OF SURPLUS FUNDS NOT IMMEDIATELY REQUIRE D IN SHORT TERM DEPOSITS AND SECURITIES BY A CO-OPERATIVE SOCIETY P ROVIDING CREDIT FACILITIES TO MEMBERS OR MARKETING AGRICULTURAL PRO DUCE TO MEMBERS IS NOT BUSINESS INCOME BUT INCOME FROM OTHER SOURCES A ND THE SOCIETY IS NOT ENTITLED TO SPECIAL DEDUCTION. ON APPEAL BY TH E ASSESSEE, THE CIT(A) ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSE E THE CIT(A) CONFIRMED THE ORDER OF THE AO. ITA NO.2619/B/18 3 3. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE GROUND S RAISED BY THE ASSESSEE IN THIS APPEAL READS THUS: 1.THE LEARNED ASSESSING OFFICER'S ORDER IS OPPOSED TO THE FACTS OF THE CASE AND LAW. 2. BECAUSE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AS WELL AS ON FACTS WHILE DISALLOWING THE DEDUCTION CLAIMED UNDER SECTION 8013(2)(A)(I) OF THE INCOME TAX ACT, 1961 AND CONCLUDING THAT THE INTEREST EARNED ON DEPOSITS WIT H COOPERATIVE AND NATIONALISED BANKS AS INCOME FROM OTHER SOURCES. 3. BECAUSE, THE LEARNED LOWER AUTHORITIES HAVE ERRE D IN DENYING THE DEDUCTION CLAIMED UNDER SECTION 8013(2)(A)(I) OF INCOME TAX ACT, 1961. 4. THE ASSESSEE CRAVES LEAVE TO ADD I ALTER ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 4. THE LEARNED AR RELIED ON THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF TUMUKUR MERCHANTS SOUHARD A CREDIT CO- OPERATIVE LTD. 230 TAXMAN 309 (KARN), THE DR RELIED ON A SUBSEQUENT DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. 395 ITR 611 (KARN.). WE HAVE CAREFULLY GONE THROUGH THE SAID JUDGMENT. THE FACTS OF THE CASE BEFORE THE HONBLE KARNATAKA HIGH COURT WAS THAT TH E HONBLE COURT WAS CONSIDERING A CASE RELATING TO ASSESSMENT YEARS 2007-2008 TO 2011- 2012. IN CASE DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF THE VERY SAME ASSESSEE, THE ASSESSMENT YEAR S INVOLVED WAS AY 1991-92 TO 1999-2000. THE NATURE OF INTEREST IN COME FOR ALL THE ITA NO.2619/B/18 4 AYS WAS IDENTICAL. THE BONE OF CONTENTION OF THE A SSESSEE IN AY 2007-08 TO 2011-12 WAS THAT THE DEDUCTION UNDER SEC TION 80P(2) OF THE ACT IS CLAIMED BY THE RESPONDENT ASSESSEE UNDER SECTION 80P(2)(D) OF THE ACT AND NOT UNDER SECTION 80P(2)(A) OF THE A CT WHICH WAS THE CLAIM IN AY 1991-92 TO 1999-2000. THE REASON GIVEN BY THE ASSESSEE WAS THAT IN AY 2007-08 TO 2011-12 INVESTMENTS AND D EPOSITS AFTER THE SUPREME COURT'S DECISION AGAINST THE ASSESSEE TOTGA R'S CO-OPERATIVE SALE SOCIETY LTD. (SUPRA), WERE SHIFTED FROM SCHEDU LE BANKS TO CO- OPERATIVE BANK. U/S.80P(2)(D) OF THE ACT, INCOME B Y WAY OF INTEREST OR DIVIDENDS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INTEREST OR DIVIDEND INCOME. THE CLA IM OF THE ASSESSEE WAS THAT CO-OPERATIVE BANK IS ESSENTIALLY A CO-OPER ATIVE SOCIETY AND THEREFORE DEDUCTION HAS TO BE ALLOWED UNDER CLAUSE (D) OF SEC.80P(2) OF THE ACT. THE HONBLE KARNATAKA HIGH COURT FOLLOW ED THE DECISION OF THE SUPREME COURT IN THE TOTGARS CO-OPERATIVE SA LES SOCIETY LTD. (SUPRA) AND HELD THAT INTEREST EARNED FROM SCHEDULE BANK OR CO- OPERATIVE BANK IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE THE PROVISIONS OF SEC.80P(2)(D)OF THE ACT WAS NOT APPLICABLE TO SUCH INTEREST INCOME. IT IS THUS CLE AR THAT THE SOURCE OF FUNDS OUT OF WHICH INVESTMENTS WERE MADE REMAINED T HE SAME IN AY 2007-08 TO 2011-12 AND IN AY 1991-92 TO 1999-2000 D ECIDED BY THE HONBLE SUPREME COURT. THEREFORE WHETHER THE SOURCE OF FUNDS WERE ASSESSEES OWN FUNDS OR OUT OF LIABILITY WAS NOT SU BJECT MATTER OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE DECISION CITED BY ITA NO.2619/B/18 5 THE LEARNED DR. TO THIS EXTENT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMUKUR MERCHANTS SOUHARD A CO-OPERATIVE LTD. (SUPRA) STILL HOLDS GOOD. HENCE, ON THIS ASPE CT, THE ISSUE SHOULD BE RESTORED BACK TO THE AO FOR A FRESH DECISION AFT ER EXAMINING THE FACTS IN THE LIGHT OF THESE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF THE TOTGARS CO-OPERATIVE SA LE SOCIETY LTD. (SUPRA) AND OF HONBLE KARNATAKA HIGH COURT RENDERE D IN THE CASE OF TUMUKUR MERCHNTS SOUHARDA CO-OPERATIVE LTD. (SUPRA) . 5. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND FILING APPROPRIATE EVIDENCE, IF DESIRED, BY THE ASSESSEE TO SUBSTANTIATE ITS CASE, BEFORE DECIDING THE ISSUE BE FORE DECIDING THE ISSUE. 6. IN THE RESULT, APPEAL BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DECEMBER, 2018 . SD/- SD/- (JASON P BOAZ) (N.V VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE DATED : /12/2018 VMS ITA NO.2619/B/18 6 COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGI STRAR, ITAT, BANGALORE ITA NO.2619/B/18 7 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S ... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT.. 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..