Sahyog Co. Op. Credit Society Ltd., Mahisagar V. The Income tax Officer, Lunawada

ITA 279/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8252 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 02-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: SHUBHANBHAI
• Keywords: Principle of natural justice
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SAHYOG CO - OP. CREDIT SOCIETY LTD. SAHYOG BHAVAN, VIRPUR ROAD, BALASINOR - 388255 (DIST. M A HISAGAR) PAN; AABAS0346M (APPELLANT) VS THE ITO, LUNAWADA (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: S H RI SHUBHANBHAI , A.R. DATE OF HEARING : 20 - 03 - 2 018 DATE OF PRONOUN CEMENT : 10 - 05 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASS ESSEE S APPEAL FOR A.Y. 2013 - 14 , ARIS ES FROM ORDER OF THE CIT(A) - 4, VADODARA DATED 30 - 09 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - (1) THE ORDE R PASSED U/S 250 OF THE ACT ON 30/09/2016 FOR A.Y. 2013 - 14 BY CIT (A) - 4,BARODA UPHOLDING THE DISALLOWANCE U/S 80P(2)(A)(I) OF THE ACT RS.89,97,370/ - MADE BY ASSESSING OFFICER IS ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. (2)(I) THAT THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT (A) OUGHT NOT TO HAVE UPHELD DISALLOWANCE OF RS. 89,97,370/ - U/S 80P(2)(A)(I) OF THE ACT. (2)(II) THAT LEARNED CIT (A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS CONFIRMING THE DISA LLOWANCE OF RS. 89,97,370/ - U/S 80P(2)(A)(I) OF THE ACT. ADDITIONAL GROUND OF APPEAL : - WITHOUT PREJUDICE TO THE OTHER GROUNDS, LD. CIT(A) HAS ERRED IN CONSIDERING TO TAX THE WHOLE INTEREST INCOME U/S. 56 OF THE ACT RECEIVED BY APPELLANT FROM INTERE ST RECEIVED FROM I T A NO . 279 / A HD/2 0 17 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 279 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SAHYOG CO.OP CREDIT SOCIETY LTD. VS. ITO 2 NATIONALIZED BANKS WITHOUT APPRECIATING THE FACT THAT EXPENDITURE INCURRED FOR EARNING SUCH INCOME MUST BE ALLOWED U/S 57 OF THE ACT AND PRO - RATA INTEREST RECEIVED FROM NATIONALIZED BANKS ONLY CAN BE TAXED. IT IS SUBMITTED THAT SAME BE ALL OWED NOW. SINCE THE ABOVE IS LEGAL GROUND, IT IS HUMBLY REQUESTED TO KINDLY PERMIT THE ABOVE ADDITIONAL GROUND AS PER INCOME TAX APPELLATE TRIBUNAL RULES AND OBLIGE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAS CLAIMED DEDUCTION U/S 80P(2)(A)(I) OF THE ACT O N INTEREST EARNED ON FIXED DEPOSIT MAINTAINED WITH COMMERCIAL BANK TO THE AMOUNT OF 89 ,9 8 , 088/ - . THE ASSESSING OFFICER HAS DISALLOWED THIS CLAIM OF THE ASSESSEE ON THE GROUND THAT ASSESSEE IS A CO - O PERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND CLAIMING DEDUCTION ON INTEREST INCOME EARNED FROM FIXED DEPOSIT MAINTAINED WITH COMMERCIAL BANK IS NOT ATTRIBUTABLE TO THE BUSINESS ACTIVITY OF THE ASSESSEE. 4. AGGRIEVED ASSESSE E FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE AFTER PLACING RELIANCE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA VS. CIT (2016) 72 TAXMAN.COM 64 (GUJ) THAT INTEREST EARNED BY THE AS SESSEE ON INVESTMENT ON SURPLUS AMOUNT WITH BANKS IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P OF THE ACT. HE HAS FURTHER STATED THAT THE BU SINESS OF THE SOCIETY IS LIMITED TO PROVIDING CREDIT TO ITS MEMBERS AND THE INCOME I.E. EARNED FROM PROVIDING SUCH CREDI T FACILITIES TO ITS MEMBERS IS DEDUCTIBLE U/S. 80P(2)(A)(I). HOWEVER, INVESTING ITS SURPLUS FUND WITH THE NATIONALIZED BANK IS NO PART OF BUSINESS OF THE ASSESSEE OF PROVIDING CREDIT TO ITS MEMBERS. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER HAS NOTICED THAT IN ADDITION TO THE INTEREST INCOME EARNED ON LOAN AND ADVANCES TO IT S MEMBERS , THE ASSESSE HAS CLA IMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON INTEREST INCOME OF RS. 89,98,088/ - EARNED FROM THE FIXED DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. AS PER I.T.A NO. 279 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SAHYOG CO.OP CREDIT SOCIETY LTD. VS. ITO 3 SECTION 80P(2)(A)(I) OF THE ACT, THE ASSESSEE IS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMB ERS, THEREFORE, THE INTEREST INCOME EARNED ON PROVIDING CREDIT FACILITY TO ITS MEMBERS IS DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE ACT EXCLUDING THE INTEREST EARNED ON DEPOSIT MAIN TAINED WITH THE COMMERCIAL BANK. T HE ASSESSEE HAS CLAIMED DEDUCTION UNDER THE AF ORESAID PROVISION ON INTEREST LEARNED FROM SURPLUS FUNDS DEPOSITED WITH THE NATIONALIZED BANKS IN THE FORM OF FIXED DEPOSIT. WE ARE INCLINED WITH THE FINDINGS OF THE LD. CIT(A) THAT INVESTING SURPLUS FUNDS IN A BANK IS NO PART OF THE BUSINESS OF PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS WHICH IS DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT, AND THE INTEREST DERIVED BY DEPOSITING SURPLUS FUNDS WITH THE NATIONALIZED BANK NOT BEING ATTRIBUTABLE TO THE BUSINESS CARRIED ON BY THE ASSESSEE AND THE SAME CAN NOT BE DEDUCTED U/S. 80P(2)(A)(I). WE HAVE PERUSED ALL THE JUDICIAL PRONOUNCEMENT REFERRED BY THE ASSESSEE, HOWEVER, WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVENUE VIDE STATE BANK OF INDIA VS. C IT (2016) 72 TAXMANN.COM 64 (GUJARAT) THAT INTEREST INCOME ON DEPOSIT PLACED WITH THE COMMERCIAL BANKS IS NOT EXEMPT U/S. 80P(2)(A)(I) OF THE ACT. REGARDING THE OTHER PART OF GROUND OF APPEAL OF NOT ALLOWING THE DEDUCTION OF INTEREST EXPENDITURE INCURRED ON EARNING INTEREST INCOME FROM COMMERCIAL BANK BY THE ASSESSING OFFICER, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE ASSESSEE S CLAM ON PRO RATA EXPENSES BY EXAMINATION O F THE RECORD TO BE SHOWN FOR VERIFICATION BY THE ASSESSEE AND ACCORDINGLY NETTING OF TO BE ALLOWED BY THE ASSESSING OFFICER AS DECIDED IN A MEMBER OF JUDICIAL PRONOUNCEMENTS BY THE VARIOUS C O - ORDINATE BENCHES OF ITAT, AHMEDABAD. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6. IN THE RESULT, THE APP EAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 05 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER I.T.A NO. 279 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SAHYOG CO.OP CREDIT SOCIETY LTD. VS. ITO 4 AHMEDABAD : DATED 10 /05 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,