M/s Herga Vyavasaya Seva Sahakari Sangha, Udupi V. Income Tax Officer Ward-3 , Udupi

ITA 2893/BANG/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4175 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 22-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VENKATESH
• Assessee Lawyers: U B AJITH KUMAR
• Keywords: Opportunity of being heard; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN , VICE PRESIDENT ITA NO. 2893/BANG/2018 ASSESSMENT YEAR : 2014 - 15 HERGA VYAVASAYA SEVA SAHAKARI SANGHA NIYAMITHA, 1, SAHAKARI MANDIRA, PARKALA, UDUPI 7. P AN: AAAAH 1234L VS. THE INCOME TAX OFFICER, WARD III, UDUPI. APP ELLANT RESPONDENT APP ELLANT BY : SHRI U.B. AJITH KUMAR, CA RESPONDENT BY : SHRI S. VENKATESH, J DIT DATE OF HEARING : 23 . 01.2019 DATE OF PRONOUNCEMENT : 15 . 0 2 . 201 9 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE O RDER DATED 03.07.2018 RELATING TO ASSESSMENT YEAR 2014-15. 2. IN THIS APPEAL, THE ASSESSEE WHICH IS A CO-OPER ATIVE SOCIETY, HAS CHALLENGED THE ACTION OF THE REVENUE AUTHORITIES IN NOT ALLOWING DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P(2)(A)(I) OF THE INC OME TAX ACT, 1961 (THE ACT) ON A SUM OF RS.1,07,738/-. THE DEDUCTION CA LMED BY THE ASSESSEE WAS NOT ALLOWED BY THE REVENUE AUTHORITIES FOR THE REASON THAT THE INCOME WHICH WAS CLAIMED AS DEDUCTION WAS INTEREST INCOME WHICH WAS EARNED BY THE ASSESSEE ON DEPOSITS AND IN VIEW OF THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY ITA NO. 2893/BANG/2018 PAGE 2 OF 4 LTD., 83 TAXMANN.COM 140 , INTEREST INCOME HAD TO BE REGARDED AS INCOME FROM OTHER SOURCES. SINCE INTEREST INCOME WAS NOT INCOME DERIVED FROM THE BUSINESS OF CO-OPERATIVE SOCIETY, THE DEDUCTION CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED. 3. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4. I HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED AR RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO 230 TAXMAN 309 (KARN) WHEREIN THE HONBLE KARNATAKA HIGH COURT CONSIDERE D THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF THE TOTGARS CO- OPERATIVE SALES SOCIETY (SUPRA) AND HELD THAT INTEREST INCOME IN RESPECT OF TEMPORARY PARKING OF OWN SURPLUS FUNDS NOT IMMEDIAT ELY REQUIRED IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE LEAR NED DR RELIED ON A SUBSEQUENT DECISION OF THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. 395 ITR 611 (KARN.) . 5. I HAVE CAREFULLY GONE THROUGH THE JUDGMENT RELIE D BY THE LEARNED DR. THE FACTS OF THE CASE BEFORE THE HONBLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE LEARNED DR WAS THAT THE HONB LE COURT WAS CONSIDERING A CASE RELATING TO ASSESSMENT YEARS 200 7-08 TO 2011-12. IN CASE DECIDED BY THE HONBLE SUPREME COURT IN THE CA SE OF THE VERY SAME ASSESSEE, THE ASSESSMENT YEARS INVOLVED WAS AY 1991 -92 TO 1999-2000. THE NATURE OF INTEREST INCOME FOR ALL THE AYS WAS I DENTICAL. THE BONE OF CONTENTION OF THE ASSESSEE IN AY 2007-08 TO 2011-12 WAS THAT THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT IS CLAIME D BY THE RESPONDENT- ASSESSEE UNDER SECTION 80P(2)(D) OF THE ACT AND NOT UNDER SECTION 80P(2)(A) OF THE ACT 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 ITA NO. 2893/BANG/2018 PAGE 3 OF 4 INVESTMENTS AND DEPOSITS AFTER THE SUPREME COURT'S DECISION AGAINST THE ASSESSEE TOTGAR'S CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) , WERE SHIFTED FROM SCHEDULE BANKS TO CO-OPERATIVE BANK. U/S.80P( 2)(D) OF THE ACT, INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SO CIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INTEREST OR DIVIDEND INCOME. THE CLAIM OF THE ASSESSEE WAS THAT CO-OPERATIVE BANK IS ESSENTIA LLY A CO-OPERATIVE SOCIETY AND THEREFORE DEDUCTION HAS TO BE ALLOWED U NDER CLAUSE (D) OF SEC.80P(2) OF THE ACT. THE HONBLE KARNATAKA HIGH C OURT FOLLOWED THE DECISION OF THE SUPREME COURT IN THE TOTGARS CO-OPERATIVE SALES 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 TH E ACT WAS NOT APPLICABLE TO SUCH INTEREST INCOME. IT IS THUS CLEAR THAT THE SOURCE OF FUNDS OUT OF WHICH INVESTMENTS WERE MADE REMAINED THE SAME IN AY 2007-08 TO 2011- 12 AND IN AY 1991-92 TO 1999-2000 DECIDED BY THE HO NBLE SUPREME COURT. THEREFORE, WHETHER THE SOURCE OF FUNDS WERE ASSESSEES OWN FUNDS OR OUT OF LIABILITY WAS NOT SUBJECT MATTER OF THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE L EARNED DR. TO THIS EXTENT, THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA) STILL HOLDS GOOD. HENCE, ON THIS ASPECT, THE ISSUE SHOULD BE RESTORED BACK TO THE AO FOR A FRESH DECISION AFTER EXAMINING THE FACTS IN THE LIG HT OF THESE JUDGMENTS OF THE HONBLE APEX COURT RENDERED IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) AND OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA) . 6. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND FILING APPROPRIATE EVIDENCE, IF DESIRED BY THE ASSE SSEE, TO SUBSTANTIATE ITS CASE, BEFORE DECIDING THE ISSUE. ITA NO. 2893/BANG/2018 PAGE 4 OF 4 7. IN THE RESULT, APPEAL BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY, 2019. SD/- ( N.V. VASUDEVAN ) VICE PRESIDENT BANGALORE, DATED, THE 15 TH FEBRUARY, 2019. / D ESAI S MURTHY / COPY TO: 1 . APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.