Apollo Tyres Employees Multipuropse Consumer Co. Operative Credit Society Ltd., Vadodara V. The Dy. Commissioner of Income Tax, Circle-3(1), Baroda

ITA 2696/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7976 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 18-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I MAHAVIR PRASAD , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER APOLLO TYRES EMPLOYEES MULTI - PURPOSE CONSUMER CO - OP CREDIT SOCIETY LTD. WAGHODIA, VADODAR PAN:AAAAA2305H (APPELLANT) VS THE DCIT, CIRCLE - 3(1), BARODA (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI BANDISH SOPARKAR , A.R. DATE OF HEARING : 05 - 12 - 2 017 DATE OF PRONOUNCEMENT : 18 - 12 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS A SSESSEE S APPEAL FOR A.Y. 2013 - 14 , AR IS ES FROM ORDER OF THE CIT(A) - 3, VADODARA DATED 23 - 08 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 2696 / A HD/20 16 A SSESS MENT YEAR 2013 - 14 I.T.A NO. 2696 /AHD/20 16 A.Y. 2013 - 14 PAGE NO APOLLO TYRES EMPLOYEES MULTIPURPOSE CONSUMER CO - OP. CREDIT SOCIETY VS. DCIT 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - THE LEARNED C IT (APPEALS) - 3 HAS ERRED IN ERRED IN LAW AND ON THE FACTS IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER HOLDING THAT THE AMOUNT OF INTEREST INCOME EARNED ON FIXED DEPOSITS MADE WITH NATIONALIZED BANKS AND CO - OPERATIVE BANKS IS NOT PROFITS AND GAINS ATTR IBUTABLE TO THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO MEMBERS AND HENCE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. NIL W A S FILED ON 30 TH OCTOBER, 2013. SUBSEQUENTLY, THE CA SE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 2 ND SEPTEMBER, 2014. THE ASSESSEE IS A CO - OPERATIVE SOCI ETY AND ENGAGED IN PROVIDING CREDIT FACILITY TO ITS MEMBERS. HE HAS FURTHER NOTICED THAT ASSESSEE HAS C LAIMED DEDUCTIO N UNDER CHAPTER VIA OF THE ACT U/S. 80P TO THE AMOUNT OF RS. 32 , 19 , 788/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE DETAILS SUBMITTED BY THE ASSESSEE, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAD EARNED INTEREST INCOM E OF RS. 21,56,912/ - FROM NATIONALIZED BANKS AND RS. 15,789/ - FROM CO - OPERATIVE BANKS. AFTER VERIFICATION OF THE AFORESAID DETAILS, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS NOT DERIVED AFORESAID PARTS OF INTEREST INCOME FROM ITS ACTIVITY OF PROVI DING CREDIT FACILITIES TO ITS MEMBERS OR FROM ITS INVESTMENT IN ANY OTHER CO - OPERATIVE SOCIETY. THEREFORE, THE I NTEREST INCOME EARNED FROM BANK /CO - OPERATIVE BANK S AMOUNTING TO RS. 21 , 72 , 70 1 / - WAS TREATED AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT. THE REAFTER, THE ASSESSING OFFICER HELD THAT THE NET INTEREST INCOME FROM BANK OF RS. 21 , 72 , 701/ - WOULD NOT QUALIFY FOR DEDUCTION U/S. 80P OF THE AC T , THEREFORE, DEDUCTION U/S. 80P WAS NOT A LLOWED FOR INTEREST INCOME OF RS . 21 , 72 , 701/ - . I.T.A NO. 2696 /AHD/20 16 A.Y. 2013 - 14 PAGE NO APOLLO TYRES EMPLOYEES MULTIPURPOSE CONSUMER CO - OP. CREDIT SOCIETY VS. DCIT 3 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 5. I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMISSIONS OF THE APPELLANT AND THE AO'S OBSERVATIONS. THE ENTIRE SUBMIS SION DATED 17.08.2016 OF THE APPELLANT AS REPRODUCED IN EARLIER PARAGRAPH OF THIS APPEAL ORDER CANNOT BE ACCEPTED IN VIEW OF RECENT JUDGMENT OF HON'BLE HIGH COURT OF GUJARAT AS GIVEN IN THE CASE OF STATE BANK OF INDIA (SBI ) VS. COMMISSIONER OF INCOME TAX ( 2016) 72 TAXMANN.COM 64. IN THIS REFERRED CASE, THE ASSESSEE WAS A CO - OPERATIVE SOCIETY REGISTERED WITH THE OBJECT OF ACCEPTING DEPOSITS FROM SALARIED PERSONS OF STATE BANK OF INDIA, GUJARAT REGION WITH A VIEW TO ENCOURAGE THRIFT AND PROVIDING CREDIT FACIL ITY TO THEM. THIS ASSESSEE FOR A.Y.2009 - 10 HAD DECLARED NIL INCOME AFTER CLAIMING DEDUCTION U/S.80P. THE AO ALLOWED THIS CLAIM OF DEDUCTION OF THE APPELLANT. SUBSEQUENTLY, THE COMMISSIONER INVOKED POWERS U/S.263 OF THE ACT ORI THE GROUND THAT INTEREST INCO ME FROM THE STATE BANK OF INDIA WAS NOT EXEMPT U/S 80P(2)(D). ON APPEAL, THE TRIBUNAL HELD THAT INTEREST INCOME EARNED ON EXTENDING CREDIT FACILITIES BY THE ASSESSE TO ITS MEMBERS WOULD BE BUSINESS INCOME AS THERE EXISTED NEXUS BETWEEN THE INCOME AND THE B USINESS OF THE SOCIETY, WHICH WAS EXTENDING CREDIT FACILITIES TO ITS MEMBERS. THE TRIBUNAL FURTHER HELD THAT HOWEVER IT COULD NOT BE SAID THAT THERE WAS SUCH NEXUS BETWEEN THE INTEREST EARNED ON DEPOSITS MADE IN STATE BANK OF INDIA AND THEREFORE SUCH INTER EST WOULD NOT BE EXEMPT U/S.80P. THE ASSESSEE FILED AN APPEAL TO THE HIGH COURT OF GUJARAT AGAINST THE ORDER OF THE TRIBUNAL. THE QUESTION AROSE BEFORE THE HON'BLE HIGH COURT OF GUJARAT AS TO WHETHER IN THE CASE OF SOCIETY ENGAGED IN PROVIDING CREDIT FACIL ITIES TO ITS MEMBERS, IT IS ONLY INTEREST DERIVED FROM CREDIT PROVIDED TO ITS MEMBERS WHICH IS DEDUCTIBLE U/S.80P(2)(A)(I) AND INTEREST DERIVED BY DEPOSITING SURPLUS FUNDS WITH THE BANK NOT BEING ATTRIBUTABLE TO BUSINESS CARRIED ON BY THE SOCIETY, CANNOT B E DEDUCTED U/S.80P(2)(A)(I). THE ANSWER OF THE HON'BLE HIGH COURT OF GUJARAT WAS 'YES'. IN OTHER WORDS, AS PER THE HON'BLE HIGH COURT OF GUJARAT INTEREST DERIVED BY THE CO - OPERATIVE SOCIETY BY DEPOSITING SURPLUS FUND WITH THE BANK NOT BEING ATTRIBUTABLE TO BUSINESS CARRIED ON BY THE SOCIETY CANNOT BE DEDUCTED U/S.80P. 5.1 THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF SBI VS. CIT AS REFERRED TO IN JUST EARLIER PARAGRAPH OF THIS APPEAL ORDER HAS DISCUSSED THE DECISION OF HON'BLE SUPREME COURT AS GIVEN IN T HE CASE OF TOTGAR'S CO OPERATIVE SALE SOCIETY VS. ITO (2010) 233 ITR 383 AND IN THE LIGHT OF OBSERVATION OF HON'BLE SUPREME COURT IT HAS HELD THAT IN THE CASE OF SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, INCOME FROM INVESTMENTS MADE IN THE BANKS DOES NOT FALL IN ANY OF THE CATEGORIES - MENTIONED U/S .80P(2)(A). THE HON BLE HIGH COURT OF GUJARAT HAS HELD THAT IN THE LIGHT OF THE PRINCIPLES ENUNCIATED BY THE SUPREME COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY (SUPRA), IN CASE OF A SOCIETY E NGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, INCOME FROM INVESTMENTS MADE IN BANKS DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN SECTION 80P(2)(A). AS PER THE HON'BLE HIGH COURT OF GUJARAT HOWEVER, SECTION 80P(2)(D) SPECIFICALLY EXEMPTS INTEREST EARNED FROM FUNDS INVESTED IN CO - OPERATIVE SOCIETIES. AS PER THE HON'BLE HIGH COURT OF GUJARAT THEREFORE, TO THE EXTENT OF THE INTEREST EARNED FROM INVESTMENTS MADE BY IT WITH ANY CO - OPERATIVE SOCIETY, A CO - OPERATIVE SOCIETY IS ENTITLED TO DEDUCTI ON OF THE WHOLE OF SUCH INCOME UNDER SECTION 80P(2)(D). AS PER I.T.A NO. 2696 /AHD/20 16 A.Y. 2013 - 14 PAGE NO APOLLO TYRES EMPLOYEES MULTIPURPOSE CONSUMER CO - OP. CREDIT SOCIETY VS. DCIT 4 THE HON'BLE HIGH COURT OF GUJARAT HOWEVER, INTEREST EARNED FROM INVESTMENT MADE IN ANY BANK, NOT BEING A CO - OPERATIVE SOCIETY, IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(D). 5.2 IN VIEW OF DECISION OF HON'BLE HIGH COURT OF GUJARAT AS GIVEN IN THE CASE OF STATE BANK OF INDIA VS. COMMISSIONER OF INCOME TAX, 72 TAXMANN.COM 64, IT IS HELD THAT THE AO HAS CORRECTLY MADE DISALLOWANCE OF CLAIM OF DEDUCTION OF RS.21,72,701/ - OF THE APPELLANT AS MADE U/S 80 P BY TREATING THE SAME AS INCOME FROM OTHER SOURCES ON THE GROUND THAT THIS AMOUNT OF INTEREST INCOME AS EARNED ON DEPOSITS WITH BANK IS NOT THE BUSINESS INCOME WHICH IS ELIGIBLE FOR DEDUCTION U/S.SOP AND THEREFORE SUCH DISALLOWANCE IS HEREBY CONFIRMED. THU S, THE GROUNDS OF APPEAL OF THE APPELLANT AS REPRODUCED IN INITIAL PARAGRAPH OF THIS APPEAL ORDER ARE DISMISSED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. DURING T HE COURSE OF APPELLATE PROCEEDINGS BEFORE US, WE OBSERVE D THAT THE LD. CIT(A) HAS CORRECTLY DECIDED THE ISSUE AFTER TAKING INTO CONSIDERATION THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT ON THE IDENTICAL ISSUE IN THE CASE OF THE SBI VS. CIT (2016) 72 TAXMAN.COM 64. HOWEVER, LD. COUNSEL HAS CONTENDED THAT IN RESPECT OF CLAIM PRO RATA EXPENSES FOR EARNING INTEREST INCOME , HE PLACED RELIANCE ON THE DECISION OF CO - ORDINATE BENCH OF THE ITAT RENDERED IN THE CASE OF DHAN LAXMI CREDIT CO - OPERATIVE SOCIETY VIDE ITA NO. 2426/AHD/2013 DATED 24 TH JAN, 2017. IN THE A BOVE DECISION, THE CO - ORDINATE BENCH HAS DECIDED ON IDENTICAL ISSUE ON THE CLAIM OF THE ASSESSEE FOR PRO RATA EXPENSES FOR EARNING INTEREST INCOME. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER: - 10. WE FURTHER OBSERVE THA T DURING THE COURSE O F HEARING B EFORE US, ID. AR ACCEPTED THAT ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80P(2)(A)(I) OF THE ACT ON THE INTEREST EARNED ON SURPLUS DEPOSITS/INVESTMENTS HELD WITH SCHEDULED/NATIONALIZED BANK BUT URGED FOR ALLOWING DEDUCTION ON PRO RATA EXPE NSES INCURRED FOR EARNING THE INTEREST INCOME AND ALSO FOR ALLOWING S TATUTORY DEDUCTION OF RS.50,000/ - U/S 80P(2)(C)(II) OF THE ACT. LD. AR ALSO SUBMITTED THAT A TOTAL EXPENSES INCURRED FOR THE YEAR STOOD AT RS.28,60,298/ - AND PRO RATA EXPENSES FOR EARNING INTEREST INCOME OF RS.8,55,854/ - AS AGAINST TOTAL INTEREST INCOME OF RS.42,39,515/ - WILL BE CALCULATED AT RS.5,77,423/ - . 11. WE OBSERVE THAT ID. AR HAS REFERRED TO THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE OF KHERAVA CO - OP. CREDIT SOCIETY LTD. VS. LTO, WARD - 4, MEHSANA IN ITA NO.2704/AHD/2015 FOR ASST. YEAR 2012 - 13 WHEREIN SIMILAR ISSUE OF ALLOWING PRO RATA I.T.A NO. 2696 /AHD/20 16 A.Y. 2013 - 14 PAGE NO APOLLO TYRES EMPLOYEES MULTIPURPOSE CONSUMER CO - OP. CREDIT SOCIETY VS. DCIT 5 EXPENSES AND ALLOWING STATUTORY DEDUCTION OF RS.50,000/ - U/S 80P(2)(II) OF THE ACT HAS BEEN ADJUDICATED BY THE CO - ORDINATE BENCH BY OBSERVING AS UNDER : - 10. FROM GOING THROUGH THE ALTERNATE SUBMISSIONS MADE BY THE ASSESSEE WE FIND THAT MAJOR PORTION OF INTEREST INCOME IS FROM GOVERNMENT SECURITIES AND ARE NOT IN THE NATURE OF SHORT TERM DEPOSITS. THEREFORE, THE FACTS OF THE CASE ARE CLEARLY DISTI NGUISHABLE FROM THE FACTS DISCUSSED IN THE CASE OF TOTAGARS CO - OP. SALE SOCIETY LTD. VS. ITO (SUPRA) AND THAT OF CO - ORDINATE BENCH IN THE CASE OF JAFARI MOMIN VIKAS CO - OP. CREDIT SOCIETY LTD. (SUPRA) AS WELL AS IN THE CASE OF DHANALAXMI CREDIT CO - OP. SOCIE TY LTD. VS. ITO (SUPRA). THIS INTEREST INCOME IS ON INVESTMENTS NOT OF SHORT TERM NATURE EXCEPT BANK INTEREST WHICH TOO INCLUDES INTEREST ON FIXED DEPOSITS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT AS THE ASSESSEE SUO MOTO HAS GIVEN A PROPOSITION OF TAXING THE INTEREST AND COMMISSION INCOME ON INVESTMENTS TO BE TAXED U/S 56 OF THE ACT AND HAS ALSO SHOWN THAT PROPORTIONATE EXPENSES OF RS.3,31,828/ - HAVE BEEN INCURRED TO EARN THE ABOVE INCOME AND THE SAME HAS DULY BEEN ACCEPTED BY THE ASSESSING AUTHORI TY, SO WE FIND IT JUSTIFIED THAT ASSESSING OFFICER HAS RIGHTLY TAXED THE INTEREST INCOME OF RS.2,16,689/ - AS INCOME FROM OTHER SOURCES. HOWEVER, DEDUCTION U/S 80P(2)(C) OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE AS SECTION 80P(2)(C) READS AS UNDER : - SECTIO N 8OP(2)(C) (C) IN THE CASE OF A CO - OPERATIVE SOCIETY ENGAGED IN ACTIVITIES OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) (EITHER INDEPENDENTLY OF, OR IN ADDITION TO, ALL OR ANY OF THE ACTIVITIES SO SPECIFIED), SO MUCH OF ITS PROFITS AND GAINS AT TRIBUTABLE TO SUCH ACTIVITIES AS DOES NOT EXCEED, - (I) WHERE SUCH CO - OPERATIVE SOCIETY IS A CONSUMERS' CO - OPERATIVE SOCIETY, ONE HUNDRED THOUSAND RUPEES; AND (II ) IN ANY OTHER CASE, FIFTY THOUSAND RUPEES. EXPLANATION. - IN THIS CLAUSE,' CONSUMERS' CO - OPE RATIVE SOCIETY' MEANS A SOCIETY FOR THE BENEFIT OF THE CONSUMERS;] FROM GOING THROUGH THE ABOVE PROVISIONS IT IS VERY CLEAR THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS.50,000/ - U/S 80P(2)(A)(I) OF THE ACT AND THE SAME SHOULD HAVE BEEN ALLOWED BY THE ASSESSING AUTHORITY.. 11. THEREFORE, IN VIEW OF OUR ABOVE DISCUSSION, WE QUASH THE ORDER OF ID. CIT(A) ENHANCING THE ADDITION AND ALSO PARTLY ALLOW THE APPEAL OF ASSESSEE AND ACCORDINGLY THE ADDITION MADE BY ASSESSING OFFICER SHALL BE REDUCED TO RS.1,68,30 5/ - [RS.2,16,689/ - MINUS RS.50,000/ - DEDUCTION U/S 80P(2)(C)]. 11. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. JURISDICTIONAL HIGH COURT AND EXAMINING THE FACTS OF THE CASE AS ALSO IN THE LIGHT OF DECISION OF THE CO - ORDINATE BENCH DISCUSSED IN THE ABOVE PA RAGRAPHS, WE ARE OF FOLLOWING VIEW : - (1) ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT ON THE INTEREST INCOME EARNED FROM SURPLUS DEPOSITS HELD WITH NATIONALIZED/SCHEDULED BANKS. (2) ASSESSEE WILL BE ELIGIBLE TO STATUTORY DEDUCTION OF RS.50,000/ - U/S 80P(2)(II) OF THE ACT. (3) ASSESSEE WILL ALSO BE ELIGIBLE TO CLAIM PRO RATA EXPENSES FOR EARNING INTEREST INCOME OF RS.8,55,854/ - ASSESSEE'S CLAIM OF PRO RATA EXPENSES OF RS.5,77,423/ - AGAINST THE INTEREST INCOME OF RS.8,55,854/ - AFTER DUE VERIFICATION BY THE LEARNED ASSESSING OFFICER. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEE'S CLAIM OF PRO RATA EXPENSES BY EXAMINING THE RECORD TO BE SHOWN FOR VERIFICATION BY THE ASSESSEE. NEEDLESS TO MENTION PROPER OPPORTUNITY OF BEI NG HEARD IS TO BE GIVEN TO THE ASSESSEE. WE ORDER ACCORDINGLY. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE MENTIONED FACTS AND DECISION OF THE CO - ORDINATE I.T.A NO. 2696 /AHD/20 16 A.Y. 2013 - 14 PAGE NO APOLLO TYRES EMPLOYEES MULTIPURPOSE CONSUMER CO - OP. CREDIT SOCIETY VS. DCIT 6 BENCH OF ITAT, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEE S CLAIM ON PRO RATA EXPENSES BY EXAMINING THE RECORD AFTER A FFORDING ADEQUATE OPPORTUNITY AND ALLOW PRO RATA EXPENSES FOR COMPUTING THE DEDUCTION U/S. 80P IN RESPECT OF INTEREST EARNED FROM SERVICES DEPOSIT HELD WITH NATIONALIZED BANK. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 18 - 12 - 201 7 SD/ - SD/ - ( MAHAVIR PRASAD ) ( AMARJIT SINGH ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD : DATED 18 /12 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,