RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LIMITED, Jaipur V. ITO, Jaipur

ITA 29/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5373 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DHK
• Assessee Lawyers: SANJAY GHIYA
• Keywords: Business income

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 29 & 142/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 & 2011-12 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD., NEHRU SAHKAR BHAWAN, BAIS GODOWN, JAIPUR. CUKE VS. THE INCOME-TAX OFFICER, WARD 6(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAAR 5761 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 98 & 174/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 & 2011-12 THE INCOME-TAX OFFICER, WARD 6(2), JAIPUR. CUKE VS. RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD., NEHRU SAHKAR BHAWAN, BAIS GODOWN, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAAR 5761 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SANJAY GHIYA, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27.04.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 29/04/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THESE ARE FOUR CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE AGAINST TWO SEPARATE ORDERS OF LD. CIT (A)-II, JAIP UR DATED 10.11.2014 2 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. AND 15.12.2014 FOR THE ASSESSMENT YEARS 2010-11 & 2 011-12. THE GROUNDS RAISED IN THE ASSESSEES APPEAL FOR AY 2010 -11 ARE AS UNDER :- ASSESSEES GROUNDS (ITA NO. 29/JP/15) : 1) THAT THE LEARNED ASSESSING OFFICER WAS WRONG, ARBIT RARY, ILLEGAL AND UNJUSTIFIED IN NOT ALLOWING DEDUCTION U /S 80P OF THE FOLLOWING INCOME AND MAKING THE FOLLOWING ADDIT IONS IN THE TOTAL INCOME: A) INTEREST ON ADVANCE TO STAFF RS. 19,22,894/- B) MISC. INCOME RS. 3,58,858/- 2) THE LEARNED ASSESSING OFFICER WAS WRONG, ILLEGAL AR BITRARY AND UNJUSTIFIED IN DISALLOWING THE FOLLOWING EXPEND ITURES WHILE CALCULATING THE ALLOWABLE PROPORTIONATE EXPEN DITURE : A) PROVISION FOR ESTABLISHMENT EXPENDITURE RS. 3,18,50 ,000/- B) PROVISION FOR GRATUITY RS. 55,63,817/- C) PROVISION FOR GLES RS. 50,00,000/- REVENUES GROUNDS (ITA NO. 98/JP/15) : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING THE DED UCTION U/S 80P AND DELETING THE FOLLOWING ADDITIONS OF (A) RS. 8,77,21,611/- ON ACCOUNT OF INTEREST ON GENERAL INVESTMENT. (B) RS. 1,39,70,800/- ON ACCOUNT OF INTEREST ON DEBENTU RE REDEMPTION FUND INVESTMENT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN ALLOWING DEDUCTION OF RS. 50,000/- U/S 80P(2)(C)(II). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF PROVIDING CREDI T FACILITY TO ITS MEMBERS. THE ASSESSEE SOCIETY PROVIDES FINANCE TO ITS MEMBERS WHICH 3 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. ARE MOSTLY DISTRICT LAND DEVELOPMENT BANKS. THE AS SESSEE HAS CLAIMED DEDUCTION U/S 80P IN RESPECT OF ITS ENTIRE INCOME O F RS. 19,66,27,990/-. THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 14 3(3), VIDE LETTER DATED 24.09.2012 THE ASSESSEE WAS REQUIRED TO GIVE BASIS OF DEDUCTION U/S 80P. IN COMPLIANCE, VIDE REPLY DATED 09.10.20 12 IT WAS STATED THAT THE ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING C REDIT FACILITY TO ITS MEMBERS. THE ENTIRE INCOME OF THE BANK IS EXEMPT U/ S 80P OF THE INCOME TAX ACT. THE REPLY WAS CONSIDERED. ON PERUSAL OF THE DETA ILS PLACED ON RECORD, THE AO NOTICED THAT DURING THE RE LEVANT PERIOD, THE ASSESSEE HAD EARNED INTEREST OF RS. 19,22,894/- ON ADVANCES GIVEN TO EMPLOYEES AND MISC. INCOME OF RS. 3,58,858/- AND IN TEREST OF RS. 8,77,21,611/- ON GENERAL INVESTMENT AND INTEREST OF RS. 1,39,70,800/- ON DEBENTURES ETC. HE HELD THAT THIS IS NOT INCOME EARNED FROM PROVIDING CREDIT FACILITY TO ITS MEMBERS. THEREFOR E, THE ASSESSEE VIDE LETTER DATED 18.02.2013 WAS REQUIRED TO SHOW CAUSE AS TO WHY THE DEDUCTION U/S 80P(2)(A) CLAIMED BY IT ON THESE INCO MES MAY NOT BE DISALLOWED. IN RESPONSE, THE ASSESSEE FURNISHED REP LY ON 26.02.2013 WHICH HAS BEEN REPRODUCED BY THE AO IN HIS ORDER AT PAGES 4 AND 5. THE AO CONSIDERED THE REPLY BUT COULD NOT FOUND IT ACCEPTABLE. HE DISCUSSED THE MATTER WITH RELEVANT PROVISIONS OF LA W AT PAGES 5 TO 7 OF 4 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. HIS ORDER AND RESULTANTLY DISALLOWED DEDUCTION U/S 80P OF RS. 19,22,894/- ON INTEREST ON ADVANCES TO STAFF AND RS . 3,58,858/- ON MISCELLANEOUS INCOME. 3. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFOR E LD. CIT (A), WHO CONFIRMED THE ACTION OF THE AO IN RESPECT OF INTERE ST ON ADVANCES TO STAFF BY OBSERVING AS UNDER :- 3.3.2. AS REGARDS INTEREST ON ADVANCES TO STAFF, THIS ISSUE IS NOW COVERED IN FAVOUR OF REVENUE BY THE OR DER OF ITAT IN THE APPELLANTS CASE FOR A.Y. 2006-07 WHERE IN THE ITAT, FOLLOWING THE ORDER OF THE RAJASTHAN HIGH COUR T IN THE CASE OF SIROHI SAHKARI BHUMI VIKAS BANK LTD., HAS H ELD THAT ADVANCING OF LOAN TO ITS EMPLOYEES CANNOT BE SAID T O BE A PART OF BANKING ACTIVITY AND, THEREFORE, IS NOT ELI GIBLE FOR DEDUCTION U/S 80P(2)(A)(I). THESE ORDERS HAVE BEEN FOLLOWED BY THE CIT (A)-II, JAIPUR (IN APPEAL NO. 343/11-12 DATED 03.04.2014) IN THE APPELLANTS CASE FOR A.Y. 2009-1 0. IN VIEW OF THE ABOVE ORDERS OF THE ITAT, JAIPUR AND THE RAJA STHAN HIGH COURT, IT IS HELD THAT INTEREST ON ADVANCES TO STAFF IS NOT ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FA CILITIES TO ITS MEMBERS. THEREFORE, DEDUCTION U/S 80P CANNOT BE ALL OWED ON THIS INCOME. THE ACTION OF THE ASSESSING OFFICER IS UPHELD. 5 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. IN RESPECT OF ISSUE REGARDING ALLOWABILITY OF DEDUC TION U/S 80P(2)(A)(I) ON MISCELLANEOUS INCOME OF RS. 3,58,858/-, THE LD. CIT (A) CONFIRMED THE DISALLOWANCE MADE BY THE AO BY OBSERVING AS UND ER :- 3.3.4. THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80P(2)(A)(I) ON MISCELLANEOUS INCOME IS COVERED BY THE DECISION OF CIT (A)-II, JAIPUR (IN APPEAL NO. 343/1 1-12 DATED 03.04.2014) IN THE APPELLANTS CASE FOR A.Y. 2009-1 0 AGAINST THE APPELLANT. FOLLOWING THE ABOVE ORDER IT IS HEL D THAT DEDUCTION U/S 80P(2)(A)(I) IS NOT ALLOWABLE ON MISC ELLANEOUS INCOME. 4. NOW THE ASSESSEE IS BEFORE US. 4.1. THE LD. A/R FOR THE ASSESSEE FAIRLY ACCEPTED T HAT THE ISSUE REGARDING INTEREST ON ADVANCES TO STAFF IS NOW AGAI NST THE ASSESSEE. HE FURTHER SUBMITTED THAT EARLIER THIS VERY ISSUE WAS DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEARS 200 4-05 AND 2005-06 BUT SUBSEQUENTLY THE ORDER OF THE ITAT WAS REVERSED DUE TO HONBLE RAJASTHAN HIGH COURT DECISION DATED 04.09.2008 IN TH E CASE OF SIROHI SAHAKARI BHOOMI VIKAS BANK LTD. 4.2. ON THE OTHER HAND, THE LD. D/R SUPPORTED THE O RDERS OF THE LOWER AUTHORITIES. 6 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE ISSUE REGARDING INTEREST ON ADVANCE TO STAFF HAS RECENTLY BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNA L IN THE ASSESSEES OWN CASE IN ITA NO. 488 & 460/JP/2014 DATED 10.11.2 015 WHEREIN TAKING INTO CONSIDERATION THE JUDGMENT OF THE HONBL E RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SIROHI SAHKARI BHOOMI VIKAS BANK LTD. IN APPEAL NOS. 31/2007, 105/2006 & 56/2007 ORDER DATED 04.09.2008, DECIDED THE ISSUE AGAINST THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISION, SUPRA, WE CONFIRM TH E ORDER OF THE LD.CIT (A) ON THE ISSUE OF INTEREST ON ADVANCE TO STAFF, A GAINST THE ASSESSEE. THE GROUND NO. 1(A) DISMISSED. 4.4. IN RESPECT OF GROUND NO. 1(B) RELATING TO MISC ELLANEOUS INCOME IS CONCERNED, THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT IT CONSIST MOSTLY INTEREST INCOME WHICH IS RELATED TO THE ACTIVITIES ANCILLARY TO THE OPERATIONS OF THE SOCIETY. THE MISCELLANEOUS INCOME IS RELATED TO BANKING ACTIVITY AND CANNOT BE TREATED AS NON BANKI NG INCOME. THE DETAILS OF THE MISCELLANEOUS INCOME ARE AS UNDER :- S.NO. NATURE OF INCOME AMOUNT 1. RTI 158/ - 2. INTEREST ON SAVING BANK A/C 111856/ - 3. SALE OF VEHICLE 246228/ - 4. KISTI BANDI REGISTER 616/ - TOTAL 3,58,858/ - 7 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. THE LD. A/R SUBMITTED THAT FROM THE ABOVE DETAILS, IT IS CLEAR THAT INCOME HAS BEEN EARNED FROM THE ACTIVITIES THAT ARE ANCILL ARY OF THE BUSINESS OF THE SOCIETY. IN RESPONSE TO QUERY FROM THE BENCH, T HE LD. A/R SUBMITTED INCOME FROM SALE OF VEHICLES IS IN RESPECT OF SEIZE D VEHICLES AS PART OF THE BANKING ACTIVITY. THE ASSESSEE IS BOUND BY ITS BYE LAWS AND CAN NOT CARRY ON ANY ACTIVITY OTHER THAN BANKING ACTIVITY. 4.5. ON THE OTHER HAND, THE LD. D/R SUPPORTED THE O RDERS OF THE LOWER AUTHORITIES. 4.6. WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT NATURE OF INCOME I S MAINLY INTEREST INCOME AND INCOME FROM SALE OF SEIZED VEHICLES AS P ART OF THEIR NORMAL BANKING ACTIVITY. WE ALSO FIND THIS GROUND RELATING TO MISCELLANEOUS INCOME IS COVERED BY THE EARLIER ITAT ORDER OF THE TRIBUNAL. IN THE LIGHT OF ABOVE, WE ALLOW THIS GROUND OF THE ASSESSEE AND ALLOW DEDUCTION OF MISCELLANEOUS INCOME OF RS. 3,58,858/-. 5. GROUND NO. 2 RELATES TO DISALLOWING PROVISION FO R ESTABLISHMENT EXPENDITURE RS. 3,18,50,000/-, PROVISION FOR GRATU ITY RS. 55,63,817/- AND PROVISION FOR GLES RS. 50,00,000/-. 8 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. 5.1. THE AO CONSIDERED THE DETAILS FILED IN THE PRO FIT AND LOSS ACCOUNT AND SUBSEQUENT SUBMISSION FILED BY THE LD. A/R. THE AO HELD THAT IN THE ASSESSEES CASE THE ABOVE MENTIONED EXPENSES CLAIME D ARE NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AN D PROVISIONS HAVE BEEN MADE ON ESTIMATE BASIS WHERE THE LIABILITIES A RE NOT ASCERTAINED. ON SIMILAR GROUNDS CERTAIN OTHER PROVISIONS WERE DI SALLOWED IN THE PRECEDING YEARS AS SUCH KEEPING IN VIEW THE FACTS O F THE PRESENT CASE AS WELL AS PAST HISTORY OF THE ASSESSEE, THE AO DISALL OWED THE PROVISIONS MADE AND ADDED THE AMOUNTS TO THE TOTAL INCOME OF T HE ASSESSEE. 5.2. ON APPEAL, THE LD. CIT (A) ALLOWED THE CLAIM O F THE ASSESSEE BY OBSERVING AS UNDER :- 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE ASS ESSING OFFICER HAS NOT ALLOWED DEDUCTION OF PROPORTIONATE EXPENDITURE AGAINST INCOME WHICH IS NOT ELIGIBLE FO R DEDUCTION U/S 80P. IT HAS BEEN STATED BY THE APPELL ANT THAT THIS DEDUCTION HAS BEEN ALLOWED BY THE ASSESSING OF FICER IN A.Y. 2010-11 AND BY THE CIT (A)-II, JAIPUR IN A.Y. 2009-10. THIS DEDUCTION OF PROPORTIONATE EXPENDITURE HAS ALS O BEEN ALLOWED BY THE ITAT IN THE APPELLANTS CASE FOR A.Y . 1986-87, 1987-88, 1988-89 & 1978-79,1981-82. THE RELEVANT EX TRACT OF THE ORDER OF CIT(A)-II, JAIPUR (APPEAL NO. 343/1 1-12 DATED 03.04.2014) FOR A.Y. 2009-10 IS AS UNDER APPELLANT SUBMITTED THAT ASSESSING OFFICER REJCTE D DEDUCTION UNDER SECTION 80P(2) WITHOUT DEDUCTING EX PENSES ATTRIBUTABLE TO SUCH INCOME. APPELLANT SUBMITTED TH AT IN ASSESSMENT YEAR 2006-07, ITAT BY ORDER DATED 26.8.2 011, SET-ASIDE THE ISSUE TO THE FILE OF AO TO ALLOW THE CLAIM OF 9 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. EXPENSE. APPELLANT FURTHER STATED THAT ASSESSING OF FICER WHILE PASSING ASSESSMENT ORDER FOR ASSESSMENT YEAR 2010-1 1 HIMSELF ALLOWED PROPORTIONATE EXPENSES OUT OF TAXAB LE INCOME. SINCE ASSESSING OFFICER MADE ADDITION IN RE SPECT OF ENTIRE INTEREST RECEIVED ON STAFF ADVANCES AND MISC ELLANEOUS INCOME, THE SAME IS NOT THE INCOME BUT GROSS RECEIP T. APPELLANT CLAIMED DEDUCTION IN RESPECT OF INCOME, T HE PART OF WHICH WAS CONSIDERED TO BE NOT ALLOWABLE UNDER SECT ION 80P, THEREFORE THE DISALLOWANCE HAS TO BE IN RESPECT OF INCOME ONLY AND NOT OF GROSS RECEIPT. WHEN EXPENDITURES AR E DEDUCTED FROM THE GROSS RECEIPT, INCOME IS ARRIVED AT. IN THE CASE OF COMMON EXPENSES, EXPENSES ARE WORKED OUT ON PROPORTIONATE BASIS. SINCE ASSESSING OFFICER HIMSEL F ALLOWED PROPORTIONATE EXPENSES BEFORE DISALLOWING CLAIM OF DEDUCTION UNDER SECTION 80P IN ASSESSMENT YEAR 2010-11 AND IT AT IN PRINCIPLE ALLOWED CLAIM OF EXPENSES OUT OF THESE IN COME, ASSESSING OFFICER IS DIRECTED TO ALLOW PROPORTIONAT E EXPENSES BEFORE DISALLOWING CLAIM UNDER SECTION 80P IN RESPE CT OF INTEREST ON STAFF ADVANCES AND MISCELLANEOUS INCOME . THIS GROUND IS ACCORDINGLY ALLOWED. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 6.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT (A) FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE. WE FIN D THAT THE ISSUE IS COVERED BY THE ORDER OF COORDINATE BENCH OF THE TRI BUNAL FOR THE A.Y. 2009-10 WHEREIN THE ISSUE WAS DECIDED AGAINST THE R EVENUE BY OBSERVING AS UNDER :- 7. APROPOS REVENUE APPEAL, IN OUR CONSIDERED VIEW THE DENIAL OF DEDUCTION U/S 80P(2) MEANS DENIAL OF NET INCOME & NOT GROSS INCOME. THIS CORRECT POSITION IS WELL SET TLED IN ASSESSEES OWN CASE BY ITAT ORDER IN A.Y. 1978-79, 1981-82 10 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. AND 2006-07, WHICH HAS BEEN FOLLOWED BY THE LD. CIT (A). CONSEQUENTLY, WE SEE NO INFIRMITY IN THE ORDER OF T HE LD. CIT (A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW PRO PORTIONATE EXPENSES QUA GROUND NO. 1 OF THE ASSESSEE I.E. INTE REST ON ADVANCE GIVEN TO STAFF ON THE BASIS OF FORMULA LAID DOWN BY THE ITAT. THIS GROUND OF REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISI ON, WE CONFIRM THE ORDER OF LD. CIT (A). THE GROUND OF THE ASSESSEE IS ALLOWED. 7. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. REVENUES GROUNDS (ITA NO. 98/JP/15) : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING THE DED UCTION U/S 80P AND DELETING THE FOLLOWING ADDITIONS OF (C) RS. 8,77,21,611/- ON ACCOUNT OF INTEREST ON GENERAL INVESTMENT. (D) RS. 1,39,70,800/- ON ACCOUNT OF INTEREST ON DEBENTU RE REDEMPTION FUND INVESTMENT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN ALLOWING DEDUCTION OF RS. 50,000/- U/S 80P(2)(C)(II). 8. THE CLAIM OF THE ASSESSEE ON ACCOUNT ABOVE INTER EST ON GENERAL INVESTMENT AND INTEREST ON DEBENTURE REDEMPTION FUND INVESTMENT WA S REJECTED BY THE AO AS DISCUSSED HEREINABOVE. 8.1. ON APPEAL, THE LD. CIT (A) ALLOWED THE CLAIM O F THE ASSESSEE BY OBSERVING AS UNDER :- 3.3.3. INTEREST ON GENERAL INVESTMENT AND INTEREST ON DEBENTURE REDEMPTION FUND INVESTMENT COMPRISES OF INTEREST FR OM GOVERNMENT 11 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. SECURITIES, NABARD BONDS, FDRS AND STDRS. IT HAS B EEN STATED BY THE APPELLANT THAT DEDUCTION U/S 80P(2)(A)(I) WAS ALLOW ED BY THE ASSESSING OFFICER ON SUCH INTEREST INCOME IN THE ORDER U/S 14 3(3) OF THE I.T. ACT FOR A.YS. 2007-08 TO 2009-10. IT HAS BEEN STATED BY THE APPELLANT THAT THIS MATTER IS COVERED IN ITS FAVOUR BY THE DECISIO N OF THE ITAT (DATED 01.06.2004) IN ITS OWN CASE FOR A.Y. 1986-87, 1987- 88, 1990-91 AND 1991-92 AND IS COVERED BY THE JUDGMENTS IN THE CASE OF CIT VS. KARNATAKA STATE COOPERATIVE APEX BANK (SUPRA), CIT VS. GULSHAN MERCANTILE URBAN CO-OPERATIVE BANK LTD. (SUPRA) AND CIT VS. BANGALORE DISTT. CO-OP. CENTRAL BANK LTD. (SUPRA). FOLLOWING THE ABOVE ORDERS, IT IS HELD THAT INTEREST ON GENERAL INVESTMENT AND INT EREST ON DEBENTURE REDEMPTION FUND INVESTMENT ARE ATTRIBUTABLE TO THE BUSINESS OF BANKING AND PROVIDING CREDIT FACILITY TO ITS MEMBER S. THEREFORE, THIS INCOME WILL QUALIFY FOR DEDUCTION U/S 80P(2)(A)(I). 9. NOW THE REVENUE IS IN APPEAL BEFORE US. 9.1. THE LD. D/R FOR THE REVENUE HAS SUPPORTED THE ORDER OF THE A.O. AND REQUESTED THAT DISALLOWANCE OF DEDUCTION BE CON FIRMED. 9.2. ON THE OTHER HAND, LD. A/R FOR THE ASSESSEE SU BMITTED THAT AS REGARDS THE INTEREST ON GENERAL INVESTMENT AND DEBE NTURE REDEMPTION FUND INVESTMENT ARE CONCERNED, IT IS MANDATORY FOR THE CO-OPERATIVE SOCIETY TO MAKE THESE INVESTMENTS AS PER THEIR BYE LAWS AND REGULATIONS. FURTHER THE INCOME FROM THESE INVESTMENTS WERE MADE TAXABLE EARLIER AND THE ASSESSEE HAS GOT FULL EXEMPTION U/S 80P(2)( A)(I) BY THE HONBLE ITAT IN ASSESSEES OWN CASE FOR THE A.Y. 1986-87, 8 7-88 TO 88-89 AND 1990-91 AND 91-92 DATED 01.06.2004. FURTHER THE ORD ER OF ITAT IN RESPECT OF REFERENCE APPLICATION FOR THE A.Y. 1979- 80, 1980-81 DATED 13.02.1987 IN THE ASSESSEE CASE CATEGORICALLY STATE S THAT INVESTMENT OF 12 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. RESERVE AND OTHER FUNDS IS RELATABLE TO BANKING ACT IVITY AND THE INCOME EARNED THERE FROM IS EXEMPT U/S 80P(2)(A)(I). THE L D. A/R FURTHER SUBMITTED THAT CBDT HAS CLARIFIED VIDE ITS CIRCULAR NO. 18/2015 DATED 02.11.2015 THAT THE INVESTMENTS MADE BY A BANKING CONCERN ARE PART OF THE BUSINESS OF BANKING. THEREFORE, INCOME ARISING FROM SUCH INVESTMENTS IS ATTRIBUTABLE TO THE BUSINESS OF BANK ING FALLING UNDER THE PROFIT AND GAINS OF BUSINESS AND PROFESSION. EVEN THOUGH THE ABOVE MENTIONED DECISION WAS IN TH E CONTEXT OF COOPERATIVE SOCIETIES/BANKS CLAIMING DEDUCTION U/S 80P(2)(A)(I) OF THE ACT, THE PRINCIPLE IS EQUALLY APPLICABLE TO ALL BAN KS/COMMERCIAL BANKS. THE A/R SUBMITTED THAT ENTIRE ACTIVITY OF MAKING OF INVESTMENT IS RELATED TO BANKING ACTIVITIES ONLY. THERE IS NO CHANGE IN T HE FACTUAL POSITION IN THE PREVIOUS YEAR AS COMPARED TO ABOVE REFERRED ORD ERS I.E. PRECEDING AND SUCCEEDING YEARS. IN SUPPORT OF HIS SUBMISSION S, THE LD. A/R PLACED RELIANCE ON THE MATTER OF CIT VS. NAWANSHAHAR CENTR AL CO-OPERATIVE BANK LTD. 160 TAXMAN 48 (SC) AND CIT VS. KARNATAKA STATE COOPERATIVE APEX BANK, 251 ITR 194 (SC). HE, THEREFORE, PRAYED THAT ORDER OF LD. CIT (A) BE CONFIRMED ON THIS GROUND. 9.3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IS SQUAR ELY COVERED IN FAVOUR 13 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. OF THE ASSESSEE BY EARLIER ORDERS OF THE TRIBUNAL F OR THE ASSESSMENT YEARS 1986-87 TO 1988-89. RESPECTFULLY FOLLOWING T HE COORDINATE BENCH DECISION, SUPRA, WE DISMISS THE REVENUES GROUND NO . 1. 10. GROUND NO. 2 RELATES TO MAKING DISALLOWANCE OF RS. 50,000/- BY THE AO. THE AO HAS DISCUSSED THE MATTER AT PAGES 1 TO 3 OF HIS ORDER. ON APPEAL, THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE BY DISMISSING THE GROUND OF THE REVENUE BY OBSERVING A S UNDER :- 5.2. SINCE, THE APPELLANT IS ENGAGED IN ACTIVITIES (OTHER THAN AND) IN ADDITION TO ACTIVITIES SPECIFIED IN SECTION 80P(2)(A)(I) RESULTING IN INCOME FROM INTEREST TO STAFF MEMBERS AND MISCELLANEOUS INCOME, THE ASSESSING OFFICER IS DIRE CTED TO ALLOW DEDUCTION U/S 80P(2)(C)(II) OF RS. 50,000/-. 10.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE COORDINATE BENCH DECISION FOR THE A.Y.2009-10 IN ITA NO. 488 & 460/JP/2014 DATED 10.11.2015 WHEREIN THE GROUND OF THE REVENUE HAS BE EN DISMISSED. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N, SUPRA, WE DISMISSED THE GROUND OF THE REVENUE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 14 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. ASSESSEES GROUNDS (ITA NO. 142/JP/15) : 1. THAT THE LEARNED ASSESSING OFFICER WAS WRONG, ARBIT RARY, ILLEGAL AND UNJUSTIFIED IN NOT ALLOWING DEDUCTION U/S 80P OF TH E FOLLOWING INCOME AND MAKING THE FOLLOWING ADDITIONS IN THE TOTAL INC OME: A) INTEREST ON ADVANCE TO STAFF RS. 22,41,235/- B) MISC. INCOME RS. 12,60,035/- C) INTEREST ON IT REFUND RS. 2,54,064/- 2. THAT THE LEARNED CIT (APPEALS) HAS NOT DECIDED THE ISSUE SPECIFICALLY RAISED BEFORE HIM REGARDING DEDUCTABILITY OF INCOME U/S 80P(2)D OF IT ACT. 3. THE LEARNED ASSESSING OFFICER WAS WRONG, ILLEGAL AR BITRARY AND UNJUSTIFIED IN DISALLOWING THE ASCERTAINED LIABILIT Y, MAKING IT AN ADDITION TO THE GROSS TOTAL INCOME : D) PROVISION FOR OD INTEREST RS. 3,91,81,000/- E) GRATUITY CONTRIBUTION RS. 70,66,207/- F) OTHER EXPENSES (DISALLOWANCE RS. 4,42,279/- U/S 40(A)(IA) 12. AS REGARDS GROUND NO. 1(A), WE HAVE ALREADY DEC IDED THIS ISSUE FOR THE ASSESSMENT YEAR 2010-11 HEREIN ABOVE WHEREI N WE HAVE CONFIRMED THE ORDER OF LD. CIT (A) AND DISMISSED TH E GROUND OF THE ASSESSEE. SINCE THE FACTS AND CIRCUMSTANCES FOR TH E ASSESSMENT YEAR 2011-12 ARE SAME, WE DISMISS THIS GROUND OF THE ASS ESSEE FOR THIS YEAR ALSO. 13. AS REGARDS GROUND NO. 1(B), WE HAVE DECIDED THI S ISSUE FOR THE ASSESSMENT YEAR 2010-11 HEREIN ABOVE IN ASSESSEES APPEAL WHEREIN WE HAVE ALLOWED THE CLAIM OF THE ASSESSEE. THE FACTS AND CIRCUMSTANCES IN 15 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. THE YEAR UNDER CONSIDERATION ARE SAME, THEREFORE, W E ALLOW THIS GROUND OF THE ASSESSEE. 14. AS REGARDS GROUND NO. 1(C), WE FIND THAT THE IS SUE IS SQUARELY COVERED BY EARLIER DECISION OF THE TRIBUNAL FOR THE A.Y. 2004-05 & 05-06 IN ITA NOS. 1023 & 1088/JP/2008 WHEREIN THE GROUND OF THE REVENUE WAS REJECTED BY OBSERVING AS UNDER :- .WE FIND THAT THE LD. CIT (A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WHILE FOLLOWING THE DECISION OF THE TRIBUNAL IN THIS REGARD IN THE CASE OF ASSESSEE ITS ELF FOR THE ASSESSMENT YEAR 1991-92 (ORDER DATED 8.5.2003) WHIC H DECISION UNDER SECTION 80P HAS BEEN ALLOWED ON INTE REST INCOME RECEIVED ON THE ADVANCE GIVEN TO THE STAFF AS WELL AS ON THE INTEREST INCOME RECEIVED ALONG WITH THE INCOME TAX REFUND. A COPY OF THIS ORDER DATED 8.5.2003 OF THE TRIBUNAL I N ITA NO. 354/JP/2007 HAS BEEN PLACED ON RECORD FOR READY REF ERENCE. THE TRIBUNAL FOLLOWING THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF BANGALORE DISTRICT COOPERATIVE BANK, 23 3 ITR 282 (SC) HAS HELD THAT THE INTEREST EARNED ON SECURITIE S KEPT WITH ANOTHER BANK WHO DEDUCTED TDS AS PER LAW IS ATTRIBU TABLE TO THE BANKING BUSINESS OF THE ASSESSEE AND ASSESSEE H AS NO CONTROL OVER THE ANOTHER BANK WHO HAD DEDUCTED TDS ON THE INTEREST EARNED ON SECURITIES KEPT BY THE ASSESSEE WITH THEM. IT IS A REGULAR FEATURE OF EVERY YEAR TO DEDUCT THE TD S. IF TDS WAS DEDUCTED IN EXCESS, THE ASSESSEE IS ENTITLED TO GET THE REFUND ALONG WITH THE INTEREST AS PER LAW. THE TRIBUNAL HA S OBSERVED THAT IT IS THE STATUTORY COMPULSION FOR WHICH ASSES SEE CANNOT BE HELD RESPONSIBLE. THE INTEREST INCOME IN THE PRESEN T CASE IS INCIDENTAL TO THE BUSINESS INCOME OF THE ASSESSEE. THEREFORE, INTEREST ON REFUND OF TDS CANNOT BE TREATED AS INCO ME FROM OTHER SOURCES. RATHER IT CAN BE TREATED AS INCIDENT AL TO THE BUSINESS INCOME, WHICH IS ALREADY EXEMPTED FROM TAX UNDER SECTION 80-P OF THE ACT. IN VIEW OF THIS DECISION O F THE TRIBUNAL ON AN IDENTICAL ISSUE IN THE CASE OF ASSESSEE ITSEL F, WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER ALLOWIN G THE CLAIMED 16 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. DEDUCTION UNDER SECTION 80P OF THE ACT. THE SAME IS UPHELD. THE GROUND IS ACCORDINGLY REJECTED. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N, SUPRA, WE ALLOW THE CLAIM OF THE ASSESSEE. THE GROUND NO. 1(C) IS A LLOWED. 15. GROUND NO. 2 & 3 IN ASSESSEES APPEAL ARE NOT P RESSED. HENCE THE SAME ARE DISMISSED AS NOT PRESSED. 16. IN THE RESULT, APPEAL IS PARTLY ALLOWED. REVENUES GROUNDS (ITA NO. 174/JP/15 : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING THE DEDUCTION OF RS. 1,25,00,000/- ON A/C OF PROVISION FOR RECOVERY/ASSI STANCE OF PLDBS WITHOUT APPRECIATING THE FACT THAT IT IS AN ASCERTA INED LIABILITY OF FUTURE DATES. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN ALLOWING THE DEDUC TION U/S 80P AND DELETING THE FOLLOWING ADDITIONS OF (A) RS. 11,39,16,929/- ON ACCOUNT OF INTEREST ON GENERA L INVESTMENT. (B) RS. 49,01,678/- ON ACCOUNT OF INTEREST ON DEBENTURE S REDEMPTION FUND INVESTMENT. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DIRECTING TO ALLOW CLAIM OF PROPORTIONATE EXPENSES AGAINST THE INTEREST INCOME AND MISCELLANEOUS INCOME EVEN WHEN THERE IS NOT DIRECT NEXUS OF EXPENSES WITH INCOME EARNED. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN ALLOWING DED UCTION OF RS. 50,000/- U/S 80P(2)(C)(II). 17 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. 17. THE ISSUE IN RESPECT OF GROUND NO. 1 RELATING T O DISALLOWANCE OF PROVISION FOR RECOVERY /ASSISTANCE TO PLDBS, THE LD . CIT (A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 6.3.2. AS REGARDS, PROVISION FOR RECOVERY ASSISTAN CE TO PDLBS IS CONCERNED, IT HAS BEEN STATED BY THE APPEL LANT THAT THESE EXPENSES HAVE TO BE REIMBURSED BY THE APPELLA NT TO THE PRIMARY BANK WHO HAVE INCURRED LOAN RECOVERY EX PENSES. SINCE THIS PROVISION RELATES TO AN OBLIGATION DUE T O A PAST EVENT WHICH WILL RESULT IN OUTFLOW OF RESOURCES WHI CH CAN BE ESTIMATED, THIS PROVISION IS ALLOWABLE AS A DEDUCTI ON IN VIEW OF THE PRINCIPLE RELATING TO PROVISIONS, LAID DOWN BY THE APEX COURT IN THE CASE MENTIONED ABOVE. THE DISALLOWANCE OF THIS PROVISION IS THEREFORE, DIRECTED TO BE DELETED. 17.1. WE HAVE HEARD RIVAL SUBMISSIONS. AFTER CONSID ERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PRINCIPLES LAID D OWN HONBLE SUPREME COURT AS DISCUSSED BY LD.CIT (A), WE FIND NO INFIRM ITY IN THE ORDER OF LD. CIT (A), THE SAME IS CONFIRMED. THE GROUND NO. 1 IS DISMISSED. 18. THE ISSUE IN RESPECT OF GROUND NO. 2 RELATES TO ALLOWING DEDUCTION U/S 80P ON ACCOUNT OF INTEREST ON GENERAL INVESTMEN T AND INTEREST ON DEBENTURE REDEMPTION FUND INVESTMENT. 18.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY EARLIER ORDERS OF THE TRIBUNAL F OR THE ASSESSMENT 18 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. YEARS 1986-87 TO 1988-89. RESPECTFULLY FOLLOWING T HE COORDINATE BENCH DECISION, SUPRA, WE DISMISS THE REVENUES GROUND NO . 2. 19. IN RESPECT OF GROUND NO. 3 RELATING TO DIRECTIO N TO ALLOW CLAIM OF PROPORTIONATE EXPENSES AGAINST THE INTEREST INCOME AND MISCELLANEOUS INCOME, WE FIND THAT THE ISSUE IS COVERED BY THE OR DER OF COORDINATE BENCH OF THE TRIBUNAL FOR THE A.Y. 2009-10 WHEREIN THE ISSUE WAS DECIDED AGAINST THE REVENUE BY OBSERVING AS UNDER : - 7. APROPOS REVENUE APPEAL, IN OUR CONSIDERED VIEW THE DENIAL OF DEDUCTION U/S 80P(2) MEANS DENIAL OF NET INCOME & NOT GROSS INCOME. THIS CORRECT POSITION IS WELL SET TLED IN ASSESSEES OWN CASE BY ITAT ORDER IN A.Y. 1978-79, 1981-82 AND 2006-07, WHICH HAS BEEN FOLLOWED BY THE LD. CIT (A). CONSEQUENTLY, WE SEE NO INFIRMITY IN THE ORDER OF T HE LD. CIT (A) IN DIRECTING THE ASSESSING OFFICER TO ALLOW PRO PORTIONATE EXPENSES QUA GROUND NO. 1 OF THE ASSESSEE I.E. INTE REST ON ADVANCE GIVEN TO STAFF ON THE BASIS OF FORMULA LAID DOWN BY THE ITAT. THIS GROUND OF REVENUE IS DISMISSED. 19.1 RESPECTFULLY FOLLOWING THE COORDINATE BENCH D ECISION, WE CONFIRM THE ORDER OF LD. CIT (A). THE GROUND OF THE REVENUE IS DISMISSED. 20. IN RESPECT OF GROUND NO. 4 RELATING TO ALLOWING DEDUCTION OF RS. 50,000/- U/S 80P(2)(C)(II), WE HAVE GONE THROUGH SU BMISSIONS MADE BY THE RIVAL PARTIES. AFTER CONSIDERING THE MATERIAL A VAILABLE ON RECORD AND PERUSING ORDER OF LD. CIT (A), WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A), THE SAME IS CONFIRMED. 19 ITA NOS. 29, 98, 142 & 174/JP/2015 RAJASTHAN RAJYA SAHAKARI BHOOMI VIKAS BANK LTD. 21. IN THE RESULT, APPEALS OF THE ASSESSEE AND REVE NUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29/04/2 016. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 29/04/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- RAJSTHAN RAJYA SAHAKARI BHOOM VIKAS BANK LTD. 2. THE RESPONDENT- THE ITO WARD 6(2), JAIPUR. 3. THE CIT(A).2, JAIPUR 4. THE CIT, 2, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.29, 98, 142 & 174/JP/2015). VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR