ACIT, Karimnagar, Karimnagar V. Co-Operative Electric Supply Society Ltd., Karimnagar, Karimnagar

ITA 283/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91736 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 20-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Keywords: Diversion of income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NOS. 280, 281, 282 & 283/HYD/2015 ASSESSMENT YEAR: 2007-08, 2008-09, 2009-10 & 2011-1 2 ASST. COMMISSIONER OF INCOME- TAX, KARIMNAGAR. VS. M/S COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD., SIRICILLA, KARIMNAGAR DT. PAN AAAAC 0346H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAMAKRISHNA BANDI ASSESSEE BY : NONE DATE OF HEARING 04-06-2015 DATE OF PRONOUNCEMENT 19-06-2015 O R D E R PER BENCH.: THESE APPEALS BY DEPARTMENT ARE DIRECTED AGAINST S EPARATE ORDERS OF LD. CIT(A)-2, HYDERABAD, ALL DATED 30/01/ 2015, FOR THE AY 2007-08, 2008-09, 2009-10 & 2011-12. AS THE FACTS A ND ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THEY WERE CLU BBED AND HEARD TOGETHER, THEREFORE, THE SAME ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IT IS SEEN FROM RECORD THAT NOTICE OF HEARING WA S SERVED ON RESPONDENT-ASSESSEE ON 20/04/2015. HOWEVER, AT THE TIME OF HEARING NO ONE IS PRESENT FOR ASSESSEE. EVEN ASSESSEE HAS A LSO NOT FILED ANY PETITION SEEKING ADJOURNMENT OF THE CASE. IN THE AF ORESAID 2 ITA NO. 280 TO 283 /HYD/2015 COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD. CIRCUMSTANCES, CONSIDERING THE NATURE OF DISPUTE, W E PROCEED TO DISPOSE OF THE APPEALS AFTER HEARING LEARNED DR AND ON MERITS. 3. THE EFFECTIVE GROUNDS RAISED BY THE DEPARTMENT, WHICH ARE COMMON IN ALL THE APPEALS, ARE AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF CIT(A)-II IS AGAINST THE PROVISIONS OF IT ACT, 1 961 AND THEREFORE IS UNSUSTAINABLE IN LAW. 2. THE CIT(A) ERRED IN APPRECIATING THE FACT THAT T HE INTEREST EARNED ON SPECIAL FUND INVESTMENTS IS NOT OFFERED TO TAX EITHER IN THE HANDS OF ASSESSEE OR BY THE REC. 4. SINCE THE FACTS AND ISSUES ARE COMMON IN ALL THE APPEALS, FOR THE SAKE OF BREVITY, WE DEAL WITH THE FACTS AS INVO LVED IN AY 2007-08 BEING ITA NO. 280/HYD/2015. 5. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, ASSESSEE A COOPERATIVE SOCIETY IS CARRYING ON BUSINESS OF PURC HASE, SUPPLY AND DISTRIBUTION OF ELECTRICAL ENERGY/POWER TO THE PUBL IC IN CERTAIN ASSIGNED AREAS. FOR THE AY UNDER CONSIDERATION, ASS ESSEE FILED ITS RETURN OF INCOME ON 31/10/2007 DECLARING NIL INCO ME. IN COURSE OF ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE HAS EARNED ACCRUED INTEREST OF RS. 76,78,387 ON INVESTMENTS MA DE BY IT WITH COMMERCIAL BANKS AND RURAL ELECTRIFICATION CORPORA TION (REC) BONDS. HOWEVER, ASSESSEE HAS NOT SHOWN SUCH INTEREST INCOM E IN THE P&L A/C, BUT, INSTEAD HAS SHOWN THE SAME AS LIABILITY I N ITS BALANCE SHEET. WHEN CALLED UPON BY AO TO EXPLAIN THE REASON FOR NO T SHOWING SUCH INCOME, ASSESSEE STATED THAT INTEREST ACCRUING ON T HE SPECIAL FUND INVESTMENTS CREATED AS PER THE DIRECTIONS OF REC, D OES NOT FORM PART OF ASSESSEES INCOME ON THE PRINCIPLE OF DIVERSION OF INCOME BY OVERRIDING TITLE. AO, HOWEVER, OBSERVING THAT SIMIL AR INTEREST INCOME WAS BROUGHT TO TAX IN THE HANDS OF ASSESSEE FOR THE PRECEDING ASSESSMENT YEARS I.E. 1999-2000 TO 2006-07, REOPENE D THE ASSESSMENT AND ULTIMATELY TREATED INTEREST AMOUNT O F RS. 76,78,387 AS INCOME OF ASSESSEE FOR THE IMPUGNED AY. ASSESSME NTS IN SIMILAR 3 ITA NO. 280 TO 283 /HYD/2015 COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD. MANNER WERE ALSO COMPLETED FOR THE OTHER ASSESSMENT YEARS IN APPEAL. BEING AGGRIEVED OF THE ASSESSMENT ORDER, SO PASSED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 6. BEFORE LD. CIT(A), IT WAS SUBMITTED BY ASSESSEE THAT THE ISSUE RELATING TO TAXATION OF THE ACCRUED INTEREST AT THE HANDS OF ASSESSEE FOR THE AYS 1999-00 TO 2006-07 WAS SUBJECT MATTER O F APPEAL BEFORE ITAT, HYDERABAD BENCH AND WHILE DISPOSING OF THE AP PEALS OF ASSESSEE, THE TRIBUNAL HAS HELD THAT INTEREST ACCRU ED ON THE SPECIAL FUND CREATED IS NOT TAXABLE AT THE HANDS OF ASSESSE E AS IT IS THE INCOME OF REC. ON THE BASIS OF THE SUBMISSIONS MAD E, LD. CIT(A) CALLED FOR A REMAND REPORT FROM AO. IN THE REMAND R EPORT, THOUGH, AO ACCEPTED THE FACT THAT WHILE DECIDING THE ISSUE FOR PRECEDING AYS, ITAT HAS HELD THAT ACCRUED INTEREST CANNOT BE TAXED AT THE HANDS OF ASSESSEE, BUT, AT THE SAME TIME, HE OBSERVED THAT A S THE DEPARTMENT HAS CHALLENGED THE ORDER OF ITAT BEFORE THE HONBL E AP HIGH COURT, ADDITION MADE MAY BE SUSTAINED. WHEN LD. CIT(A) INV ITED ASSESSEES OBJECTION ON THE REMAND REPORT SUBMITTED BY AO, IT WAS STATED BY ASSESSEE THAT SINCE THE ISSUE IS COVERED BY THE DEC ISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE PRE CEDING AYS, JUDICIAL DISCIPLINE DEMANDS THAT THE ORDER OF THE T RIBUNAL HAS TO BE FOLLOWED. LD. CIT(A) AFTER CONSIDERING THE SUBMISSI ONS OF ASSESSEE AND THE COMMENTS OF THE AO AS WELL AS GOING THROUGH THE ORDER OF ITAT PASSED IN ASSESSEES OWN CASE FOR THE PRECEDIN G AYS HELD THAT SINCE THE ORDER OF THE TRIBUNAL HAS NOT BEEN STAYED BY HONBLE HIGH COURT, INTEREST AMOUNT CANNOT BE TAXED AT THE HANDS OF ASSESSEE IN VIEW OF THE ORDER OF THE TRIBUNAL. ACCORDINGLY, HE DELETED THE ADDITION OF RS. 76,78,387 MADE BY AO. BEING AGGRIEVED, REVE NUE IS BEFORE US. 7. LD. DR RELYING UPON THE GROUNDS RAISED SUBMITTED BEFORE US, SINCE THE INTEREST HAS ACCRUED ON THE DEPOSITS MADE BY ASSESSEE IT IS TAXABLE AT THE HANDS OF ASSESSEE. FURTHER, IT WAS S UBMITTED, NEITHER 4 ITA NO. 280 TO 283 /HYD/2015 COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD. ASSESSEE NOR REC HAS OFFERED INTEREST INCOME WHICH HAS BEEN NOT TAKEN NOTE OF BY LD. CIT(A). 8. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERIA LS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. AS CA N BE SEEN, THE ISSUE IN DISPUTE IS WHETHER THE ACCRUED INTEREST ON INVESTMENTS MADE BY ASSESSEE OF THE LOAN AMOUNT RECEIVED FROM REC IS TAXABLE AT THE HANDS OF ASSESSEE. AS CAN BE SEEN FROM THE ASSESSME NT ORDER, AO SIMPLY ON THE BASIS THAT SIMILAR INCOME WAS ASSESSE D AT THE HANDS OF ASSESSEE FOR AYS 1999-00 TO 2006-07 HAS ADDED IT AT THE HANDS OF ASSESSEE. HOWEVER, AS CAN BE SEEN, THE ISSUE RELATI NG TO TAXABILITY OF INTEREST INCOME IN AYS 1999-00 TO 2006-07 CAME UP F OR CONSIDERATION BEFORE ITAT, HYDERABAD BENCH IN APPEALS FILED BY AS SESSEE. THE TRIBUNAL AFTER CONSIDERING THE SUBMISSIONS OF THE P ARTIES, HELD AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY . WE HAVE PERUSED THE COPY OF THE REVISED GUIDELINES ISSUED B Y M/S REC DT. 30TH JAN., 1997. WE FIND THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF PURCHASE AND DI STRIBUTION OF ELECTRICAL ENERGY TO THE PUBLIC AT LARGE IN THE SPE CIFIED AREA. THE ASSESSEE WAS GRANTED LOAN BY THE RURAL ELECTRIFICAT ION CORPORATION OF INDIA LTD. (REC) AND INTEREST WAS PA YABLE AT THE SPECIFIED RATE TO M/S REC BY THE ASSESSEE. M/S REC HAS ISSUED GUIDELINES AND INSTRUCTIONS ON THE CONSTITUTION AND ADMINISTRATION OF A SPECIAL FUND CREATED OUT OF THE INTEREST PAYABLE BY THE ASSESSEE-SOCIETY TO M/S REC ON THE A MOUNT OF REMITTANCES GRANTED BY REC. AS PER THESE RULES, THE AMOUNT PAYABLE ON ACCOUNT OF INTEREST ON THE REMITTANCES G RANTED BY M/S REC, A SPECIAL SAVINGS FOUND ACCOUNT IN A NATIO NALIZED/CO- OPERATIVE BANK WITH THE SPECIFIC PROVISION WITH THE BANK THAT IT SHALL PERMIT WITHDRAWAL FROM THE SAID ACCOUNT BY TH E ASSESSEE- SOCIETY OF SUCH AMOUNT AS MAY BE AUTHORIZED BY M/S REC. THE ONLY ISSUE BEFORE US IS WHETHER THE OWNERSHIP OF TH E AMOUNT IN SPECIAL FUND ACCOUNT SO CREATED WAS OF THE ASSESSEE -SOCIETY OR M/S REC AND WHETHER THE INTEREST THEREON ACCRUES TO THE ASSESSEE-SOCIETY. WE FIND THAT THE OVERALL FACTS AN D CIRCUMSTANCES OF THE CASE HAS TO BE CONSIDERED ALON G WITH VARIOUS PROVISIONS OF THE SPECIAL FUND RULES FRAMED BY M/S REC FOR THE CONSTITUTION AND ADMINISTRATION OF THE SPEC IAL FUND. THE REVISED RULES ON THE CONSTITUTION AND ADMINISTRATIO N OF SPECIAL FUND DT. 30TH JAN., 1997 PROVIDES THAT, THE BANK SH ALL PERMIT 5 ITA NO. 280 TO 283 /HYD/2015 COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD. WITHDRAWAL FROM THE SPECIAL SAVINGS FUND ACCOUNT BY THE ASSESSEE-SOCIETY OF SUCH AMOUNTS AS MAY BE AUTHORIZ ED BY THE CORPORATION THROUGH A LETTER OF AUTHORITY TO BE SIG NED BY THE NOMINATED OFFICERS OF M/S REC. IT PROVIDES THAT THE AMOUNTS SHALL BE TRANSFERRED FROM SAVINGS BANK ACCOUNT TO F IXED DEPOSIT ACCOUNT AUTOMATICALLY IN EXCESS OF RS. 1,000 FOR TH E MINIMUM PERIOD ATTRACTING THE MAXIMUM RATE OF INTEREST AND THAT THE ASSESSEE-SOCIETY SHALL HAND OVER ALL THE FD RECEIPT S IN ORIGINAL TO THE CHIEF PROJECT MANAGER OF M/S REC IN THE CONC ERNED STATES. THE CL. (1) OF THE SAID SPECIAL FUND RULE P ROVIDES THAT THE AMOUNT DEPOSITED BY THE ASSESSEE-SOCIETY IN THE SPE CIAL FUND SHOULD BE STRICTLY UTILIZED FOR THE PURPOSE WHICH A RE APPROVED BY M/S REC. UNDER THESE RULES, THE SPECIAL FUND SHALL BE MANAGED AND OPERATED BY THE SOCIETY SUBJECT TO THE RULES FR AMED BY M/S REC. CLAUSE 1.2 OF THE SAID RULES PROVIDES THAT NO AMOUNT OUT OF THE SPECIAL FUND SHALL BE WITHDRAWN OR PAID WITH OUT SPECIFIC WRITTEN PERMISSION BY THE CORPORATION FOR BONA FIDE PURPOSES AS SPECIFIED UNDER THESE RULES. CLAUSE 2.1.4 OF THE SA ID RULE PROVIDES THAT SPECIAL FUND ACCOUNT (INCLUDING THE A MOUNT CONVERTED TO FDS), SHALL BE ASSIGNED TO M/S REC AND THAT M/S REC SHALL HAVE A LIEN ON IT. CLAUSE (3) OF THE SAID RULE PROVIDED THAT THE FIRST CHARGE ON THE SPECIAL FUND SHALL BE THAT OF M/S REC. CLAUSE (4) PROVIDES THAT M/S REC WOULD CONSIDE R THE REQUEST OF THE ASSESSEE-SOCIETY FROM TIME TO TIME F OR PERMITTING THE SOCIETY TO UTILIZE UPTO 40 PER CENT OF THE AMOU NT AVAILABLE IN SPECIAL FUND FOR ANY ONE OR MORE FOR THE SPECIFIC P URPOSES. THESE PURPOSES ARE, ON MEMBER EDUCATION-CUM-MEMBER SERVICES PROGRAMME, FOR OPENING A RETAIL SHOP FOR V ARIOUS ELECTRICAL GOODS, FOR SETTING UP OF A SMALL WORKSHO P FOR MANUFACTURE OF CROSS-ARMS AND SUCH OTHER MINOR ITEM S RELATED TO THE BUSINESS, FOR ADVANCEMENT OF LOANS TO THE ME MBERS OF THE SOCIETY FOR IMPROVING THE SYSTEM BY USING CAPAC ITORS, ETC. FOR CONSTRUCTION OF OFFICE BUILDINGS, WORKSHOPS, GO DOWNS, STAFF QUARTERS, ETC., FOR IMPROVING THE OPERATIONAL EFFIC IENCY OF THE SOCIETY, FOR PROVIDING SERVICE CONNECTIONS TO THE H ARIJANS, SCS/STS AND LANDLESS LABOURERS WITHOUT COLLECTING S ERVICE CHARGES, SECURITY DEPOSITS, ETC., AND LIKEWISE, OTH ER PURPOSES SPECIFIED THEREIN. CLAUSE (5) OF THE SAID RULE PROV IDES THAT NO RELAXATION IN THESE RULES WOULD BE PERMISSIBLE EXCE PT TO THE EXTENT APPROVED BY M/S REC. THESE RULES FURTHER PRO VIDED THAT THE SUITABLE AMOUNT NOT EXCEEDING 60 PER CENT OF TH E FUND AVAILABLE AT ANY TIME SHALL BE EARMARKED AS RESERVE S BY REC. THIS AMOUNT SHOULD BE KEPT 61 MONTHS FD IN A CO-OPE RATIVE BANK/NATIONALIZED BANK. THE AMOUNT SHALL BE USED ON THE EXPRESS WRITTEN INSTRUCTIONS OF M/S REC AND THE FIR ST CHARGE ON IT SHALL BE THE OUTSTANDING LOAN ON THE SOCIETY. 7. A MERE PERUSAL OF THESE RULES FRAMED BY REC CLEARL Y ESTABLISHES THE CASE OF THE ASSESSEE THAT THE ASSES SEE IS 6 ITA NO. 280 TO 283 /HYD/2015 COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD. MERELY A CUSTODIAN OF THE AMOUNT IN THE SPECIAL FUN D CREATED AS PER THE INSTRUCTIONS AND RULES FRAMED BY REC FOR TH E ADMINISTRATION OF THE SPECIAL FUND AND THE OWNERSHI P OF THE FUNDS CONTINUES WITH THE REC. WE FIND THAT THE ASSE SSEE IS NOT ALLOWED ANY WITHDRAWAL FROM THE SAID SPECIAL FUND W ITHOUT WRITTEN PERMISSION FROM THE REC. THE FD RECEIPTS IN ORIGINAL WERE HANDED OVER TO THE CHIEF PROJECT MANAGER OF RE C IN THE CONCERNED STATES AND CL. 2.1.4 OF THE SAID RULES CL EARLY PROVIDES THAT SPECIAL FUND ACCOUNT (INCLUDING THE AMOUNT CON VERTED TO FDS) SHALL BE ASSIGNED TO M/S REC BY THE ASSESSEE A ND M/S REC SHALL HAVE A LIEN ON IT. CLAUSE (3) OF THE SAID RULES PROVIDES THAT THE FIRST CHARGE ON THE SPECIAL FUND SHALL BE THAT OF M/S REC. THE AMOUNT NOT EXCEEDING 60 PER CENT OF TH E SAID AMOUNT HAS TO BE KEPT IN 61 MONTHS FD IN A CO-OPER ATIVE BANK/NATIONALIZED BANK AND IT COULD BE USED ONLY ON THE EXPRESS WRITTEN INSTRUCTIONS OF M/S REC AND THE FIR ST CHARGE ON IT SHALL BE THE OUTSTANDING LOAN ON THE SOCIETY. WE FIND THAT CL. (4) PROVIDES FOR UTILIZATION OF UPTO 40 PER CENT OF THE AMOUNT AVAILABLE ON SPECIAL FUND ONLY WITH THE PERMISSION OF M/S REC FOR SPECIFIC PURPOSES DETAILED THEREIN AND THESE PU RPOSES MERELY IMPROVED THE EFFICIENCY OF THE ASSESSEE-SOCI ETY DIRECTLY OR THROUGH ITS MEMBERS BUT IN OUR CONSIDERED OPINIO N, IT DOES NOT CONFIRM THE OWNERSHIP RIGHT OVER THE SAID FUND AMOUNT TO THE ASSESSEE-SOCIETY AND, ACCORDINGLY, IT COULD NOT BE SAID THAT THE INTEREST ON SUCH SPECIAL FUND HAS ACCRUED TO THE AS SESSEE- SOCIETY. MERELY BECAUSE THE MANAGEMENT OF THE SPECI AL FUND HAS BEEN ASSIGNED TO THE ASSESSEE-SOCIETY WITH THE PREVIOUS PRIOR WRITTEN PERMISSION FROM REC, IT COULD NOT BE THE SAID THAT THE OWNERSHIP OF THE SPECIAL FUND VEST IN THE ASSES SEE SOCIETY. WE FIND THAT THE DECISION OF THE HONBLE SUPREME CO URT IN ASSOCIATED POWER CO. LTD.S CASE (SUPRA) RELIED UPO N BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IS DISTINGUISHA BLE ON FACTS AS IN THIS CASE, IT WAS FOUND THAT THE POWER COMPAN Y WAS THE OWNER OF THE FUND AND INCOME THEREOF. 8. COMING TO THE ISSUE WHETHER THERE WAS ANY DIVERSIO N OF INCOME BY OVERRIDING TITLE IN THIS CASE, WE FIND TH AT THE INCOME FROM THE SPECIAL FUND HAS NOT ACCRUED TO THE ASSESS EE AND, THEREFORE, THE ASSESSEE COULD NOT BE TAXED THEREON. IN NUCLEAR POWER CORPORATION OF INDIA LTD. VS. JT. CIT (2007) 15 SOT 451 (MUMBAI), THE MUMBAI BENCH OF THE TRIBUNAL AFTER CO NSIDERING PLETHORA OF JUDGMENTS ON THE ISSUE HAS LAID DOWN TH E FOLLOWING TESTS TO DECIDE WHETHER IN A GIVEN CASE THERE WAS A NY DIVERSION OF INCOME BY OVERRIDING TITLE : ..................... '(I) THERE MUST BE INCOME ARISING OUT OF THE CORPUS HELD BY THE ASSESSEE. 7 ITA NO. 280 TO 283 /HYD/2015 COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD. (II) A PORTION OF THE INCOME SO GENERATED MUST BE C HARGED TO THE SOURCE ITSELF BY AN OVERRIDING TITLE IN FAVOUR OF A THIRD PARTY OR, IN OTHER WORDS, THE OBLIGATION MUST ATTACH TO THE SOUR CE OF INCOME IN THAT THE INCOME ITSELF SHOULD NOT ACCRUE TO THE RECEIVER AND NOT TO THE RECEIVER OF THE INCOME TO APPLY IT IN A PARTICULAR MANNER. (III) THE INCOME SO CHARGED MUST BE PASSED ON OR IS REQUIRED TO BE PASSED OR, IN OTHER WORDS, IS REQUIRED TO BE DIV ERTED IN FAVOUR OF A THIRD PARTY BEFORE IT REACHES THE ASSES SEE ITSELF; AND (IV) THE ASSESSEE, AFTER THE INCOME STANDS DIVERTED AT SOURCE BY A SUPERIOR TITLE, IS NO LONGER CONCERNED WITH TH AT INCOME OR, IN OTHER WORDS, THE ASSESSEE MUST BE COMPLETELY DIV ESTED OF ANY KIND OF DOMINION OVER THE INCOME.' APPLYING THE AFORESAID TESTS TO THE FACTS OF THE CA SE BEFORE US, IT IS CLEAR THAT THERE IS NO DIVERSION OF INCOME BY OV ERRIDING TITLE BY M/S REC IN FAVOUR OF THE ASSSESSEE-SOCIETY. THE INCOME BY WAY OF INTEREST, ETC., HAS ACCRUED TO M/S REC IN IT S OWN RIGHT. THE AMOUNT SO COLLECTED WAS RETAINED BY M/S REC AND WAS AVAILABLE WITH IT FOR USE AND APPLICATION AS PER IT S DIRECTIONS. THE INCOME IN THIS CASE NEVER REACHED THE ASSESSEE BY VIRTUE OF ANY OVERRIDING TITLE. A READING OF VARIOUS CLAUS ES OF THE REVISED RULES ON THE CONSTITUTION AND ADMINISTRATIO N OF SPECIAL FUND DT. 30TH JAN., 1997 MAKES IT CLEAR THAT THE FI RST CHARGE ON THE SPECIAL FUND ACCOUNT SHALL BE OF M/S REC AND TH AT IT SHALL BE THE OUTSTANDING LOAN AGAINST THE ASSESSEE AND TH E ASSESSEE IS MERELY A CUSTODIAN OF THE AMOUNT IN THE SPECIAL FUND CREATED AS PER INSTRUCTIONS AND RULES FRAMED BY M/S REC. IN THESE FACTS OF THE CASE, WE HELD THAT THERE IS NO DIVERSION OF INCOME AT SOURCE BY OVERRIDING DUE BY M/S REC IN FAVOUR OF TH E ASSESSEE- SOCIETY AND THE OWNERSHIP AT THE SPECIAL FUND REMAI NS WITH M/S REC AND, THEREFORE, THE INCOME FROM THE SPECIAL FUN D AMOUNT DOES NOT ACCRUE TO THE ASSESSEE. IN THIS VIEW OF TH E MATTER, WE HOLD THAT THE INTEREST ACCRUED ON THE SPECIAL FUND AMOUNT INCLUDING THE FDS MADE THEREFROM DOES NOT ACCRUE TO THE ASSESSEE-SOCIETY AND THE ASSESSEE IS ACCORDINGLY NO T LIABLE TO PAY TAX THEREON. ACCORDINGLY, THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN ITS APPEALS ARE ALLOWED. A READING OF THE EXTRACTED PORTION FROM THE ORDER O F THE TRIBUNAL, AS AFORESAID, CLEARLY INDICATES THAT THE ISSUE IN DISP UTE IS SQUARELY COVERED BY THE SAID DECISION. AO, AS IT APPEARS FRO M THE REMAND REPORT, HAS NOT FOLLOWED THE DECISION OF ITAT SIMPL Y FOR THE REASON THAT DEPARTMENT HAS CHALLENGED THE DECISION OF ITAT BEFORE THE 8 ITA NO. 280 TO 283 /HYD/2015 COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD. HONBLE HIGH COURT. HOWEVER, IN OUR VIEW, THAT CANN OT BE A GROUND TO NOT FOLLOW THE DECISION OF THE TRIBUNAL, WHICH IS B INDING ON AO. MOREOVER, LD. DR HAS NOT BROUGHT ANY OTHER MATERIAL TO OUR NOTICE TO INDICATE THAT FACTS OF THE IMPUGNED AYS ARE IN ANY WAY DIFFERENT FROM THE FACTS CONSIDERED BY THE TRIBUNAL WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE. FURTHER, THE DEPARTMENTS CONTENTION T HAT INTEREST INCOME HAS NOT BEEN SHOWN BY REC CANNOT JUSTIFY THE ADDITION AT THE HANDS OF ASSESSEE. IN THE AFORESAID VIEW OF THE MAT TER, FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE PRECEDING AYS, WE UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUNDS RAISED BY THE DEPARTMENT IN ALL THE APPEALS UNDER CONSIDERATION. 9. IN THE RESULT, ALL THE APPEALS OF DEPARTMENT ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19 TH JUNE, 2015. SD/- SD/- (INTURI RAMA RAO) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 19 TH JUNE, 2015 KV COPY TO:- 1) ACIT, AAYAKAR BHAVAN, KARIMNAGAR 2) M/S COOPERATIVE ELECTRIC SUPPLY SOCIETY LTD., 5- 4-91, SIRICILLA, KARIMNAGAR DIST. 3) CIT(A)-2, HYDERABAD 4) CIT-2, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.