CHURU ZILA SAHKARI BHOOMI VIKAS BANK LTD., CHURU V. ACIT, CIRCLE, JHUNJHUNU

ITA 29/JPR/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0438 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 29-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GIVING LOANS
• Keywords: Depreciation; Capital expenditure
• Section: 32; 80P

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh fot; iky jko] U;kf;d lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 29/JP/2021 fu/kZkj.k o"kZ@Assessment Year: 2014-15 Churu Zila Sahkari Bhoomi Vikas Bank Ltd., C/o- G. Mehta & Co. “PARAS” 127, Hari Marg, Civil Lines, Jaipur-302006. cuke Vs. A.C.I.T., Jhunjhunu. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCA 3585 C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by: Shri G.M. Mehta (CA) jktLo dh vksj ls@ Revenue by : Smt. Monisha Choudhary (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 06/01/2022 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 07/01/2022 vkns'k@ ORDER PER: VIJAY PAL RAO, J.M. This appeal by the assessee is directed against the order dated 12/03/2021 of ld. CIT(A), National Faceless Appeal Centre, Delhi (NFAC) for the A.Y. 2014-15. The assessee has raised following grounds of appeal: “1. Ld. CIT(A) had erred in law on facts in sustaining disallowance of interest aggregating Rs. 5,66,036/- received on loans and advance to employees under various heads, holding it as not eligible for deductible u/s 80P(2)(a)(i) of IT Act, ignoring the finding of the ld. CIT(A) in assessee’s own case in A.Y. 2010-11 and A.Y. 2012-13 ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 2 being final finding against which ld. AO did not prefer second appeal before this Hon’ble ITAT. 2. Ld. CIT(A) was not justified in not agreeing to the Exp.5 to Section 32 of IT Act and thereby rejecting the alternate claim of the assessee in not allowing depreciation @ 10% amounting to Rs. 4,58,960/- on addition of Rs. 45,89,604/- to building-put in use by the assessee co-operative bank in its day to day work.” 2. Ground No. 1 of the appeal is regarding disallowance of deduction U/s 80P(2)(a)(i) of the Income Tax Act, 1961 (in short, the Act) in respect of interest received by the assessee on loans and advances to the employees. During the course of assessment proceedings, the A.O. noted that the assessee cooperative society has credited various income which are treated as income from its Member and other cooperative societies. The A.O. further noted that some of the income are earned by the assessee from other than its Members, the details of which are as under: (i) Interest from CCL employees Rs. 4,83,607/- (ii) Interest from Home Loan Rs. 62,053/- (iii) Interest from Vehicle Loan Rs. 8,518/- (iv) Interest Grant Rs. 11,858/- Total Rs. 5,66,036/- Thus, the A.O. was of the view that the interest income to the extent of Rs. 5,66,036/- received on loans and advances to the employees is not eligible for deduction U/s 80P of the Act and consequently the same was ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 3 added to the total income of the assessee. The assessee has challenged the action of the A.O. before the ld. CIT(A) but could not succeed. 3. Before the Tribunal, the ld. AR of the assessee has submitted that the assessee is a cooperative society and not having any license from RBI to do the business of banking, therefore, the assessee is eligible for deduction/exemption U/s 80P of the Act. He has further submitted that for the A.Y. 2010-11 and 2012-13, the ld. CIT(A) has allowed the claim of deduction U/s 80P(2)(a)(i) of the Act in respect of the interest received from the employees. He has referred to the orders of the ld. CIT(A) for the A.Y. 2010-11 and 2012-13 and submitted that the department has not challenged the orders of the ld. CIT(A) for those assessment years and therefore, the same has attained finality. Thus, the ld. AR has submitted that the issue is covered by the orders of the ld. CIT(A) for the A.Y. 2010-11 and 2012-13. He has also relied upon the decision of the Hon’ble Supreme Court in the case of Citizen Co- operative Society Ltd. Vs ACIT (2017) 397 ITR 1 (SC) and submitted that Section 80P of the Act is benevolent provisions which was enacted in order to encourage and promote the growth of the cooperative sector. Once the assessee is entitled to avail the deduction, the entire amount of profit and gains of business that are attributable to any one or more activities mentioned in sub-Section (2) of Section 80P must be ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 4 given by way of deduction. The ld. AR has further submitted that the Jaipur Bench of Tribunal in the case of Rajasthan Rajya Sahakari Bhoomi Vikas Bank Vs DCIT (2003) 29 Tax World (JP) 286 has held that earning of interest on advances to staff is incidental to regular business of Cooperative Society and therefore, exempt U/s 80P of the Act. Thus, the ld. AR has submitted that the interest amount received from the loans and advances to given to the employees of the assessee society is eligible for deduction U/s 80P(2)(a)(i) of the Act. 4. On the other hand, the ld. DR has submitted that this is not an income earned by the assessee from the regular business activity of the assessee but this is an income earned by the assessee by giving loans and advances to the employees of the assessee society who are not the Membes of the assessee cooperative society. The ld. DR has submitted that the ld. CIT(A) has decided this issue by following the decision of the Hon’ble Jurisdictional High Court in the case of CIT Vs S.B.V. Bank Ltd. (2010) 321 ITR 533 (Raj), therefore, the issue is covered by the decision of Hon’ble Jurisdictional High Court against the assessee. In rejoinder, the ld. AR has submitted that the decision of the Hon’ble High Court in the case of CIT Vs S.B.V. Bank Ltd. (supra) has been challenged in the SLP before the Hon’ble Supreme Court and the SLP filed by the assessee has been admitted by the Hon’ble Supreme Court. He has filed details of ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 5 the reported decision of the Hon’ble Supreme Court whereas the SLP has been admitted against the order of the Hon’ble High Court. 5. I have considered the rival submissions as well as the relevant material on record. There is no dispute that the assessee has earned interest income in question on the loans and advances given to the employees of the assessee cooperative society. So far as the eligibility of assessee to claim deduction U/s 80P of the Act is concerned, there is no dispute that on this issue, as the A.O. has disallowed only one part of the assessee’s income which is not earned from the business activity of the assessee with the Members of the assessee society but the said income was earned from the loan and advances to the non-members. The assessee is a Primary Cooperative Agricultural & Rural Land Development Society registered under the Rajasthan Cooperative Societies Act, 1965. The A.O. has accepted the status of the assessee as a cooperative society and not as the bank having license from the RBI to do the banking business which is hit by sub-Section (4) of Section 80P of the Act, therefore, there is no dispute regarding status of the assessee and eligibility of the deduction U/s 80P of the Act. The limited controversy in the appeal of the assessee is regarding disallowance of the claim of deduction U/s 80P(2)(a)(i) of the Act in respect of interest ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 6 on the loan and advances given to the employees/non-members. The ld. CIT(A) has decided this issue in para 7.1 to 7.3 as under: “7.1 I have carefully considered the relevant and material facts on record, in respect of the second issue raised in this ground of appeal, as brought out in the assessment order and submissions made during appeal proceedings. The moot point is whether the activity of earning interest income on loans given by the appellant bank to its employees, can be said to be incidental to the regular business activity of the appellant bank of providing credit facilities to its members, for the purposes of claim of exemption under section 80P(2)(a)(i) of the Act. 7.2 This question came up for consideration before the jurisdictional High Court in the case of CIT Vs Sirohi S.B.V. Bank Ltd. (2010) (321 ITR 533) (Raj), wherein the Hon'ble High Court, on identical facts, has held as under:- "25. In our view, an advancement of loan to the employee was not in the capacity of the banker, but was in the capacity of it being an employer to its employees, in the form of loan against PF deposits, and for the loan for house building. Admittedly, interest in question has been received from the employees who are not its members. 26. We may at this place also refer one of the judgment of the Tribunal as well of Jaipur Bench being dated 30-6-1986, reported in Rajasthan Rajya Sahakari Bhoomi Vikas Bank Ltd. v. ITO [1986] 19 ITD 674 , wherein para 10, it has been held by the Tribunal, in respect of interest on advances to its staff, and sale of old newspapers, that it would be difficult to treat them at par with the monies that are lent to the customers. The assessee, having been formed with a view to enlarge co- operative movement, and that too as a bank, the staff, could not be said to be members as such, and, therefore, interest on loan given to staff, cannot be said to be relatable to banking business. 27. The net result of the aforesaid discussion is that substantial question involved is required to be, and is, answered against the assessee, and in favour of the revenue, ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 7 and it is held, that the amount of interest earned by the assessee on various loans extended to its employees, on PF and house building loan, is not eligible to be exempted under section 80P(2)(a)(1). I further find that this binding judicial precedent of jurisdictional High Court has not been considered by the CIT (Appeals)-3, Jaipur in the appellate orders for earlier years i.e. Assessment Years 2011-11 & 2012-13. Therefore, I do not concur with the view taken by the erstwhile CIT (Appeals) on the issue of addition of interest incomes received by the appellant from employees. 7.3 In view of the facts and circumstances of the case, and the prevailing position of law applicable on such facts, I find that the addition of interest incomes received by the appellant from its employees, aggregating to Rs 5,66,036/-, has been correctly made by the AO, on the ground that the same does not qualify for exemption under section 80P(2)(a)(i) of the Act. The action of AO does not call for any interference. Accordingly, the total addition of Rs 5,66,036/- made by the AO on this account is confirmed. This ground of appeal is dismissed.” Thus, it is clear that the ld. CIT(A) has relied upon the decision of Hon’ble Jurisdictional High Court in the case of CIT Vs S.B.V. Bank Ltd. (supra) which is a binding precedent. Though the Hon’ble Supreme Court had admitted the SLP filed by the assessee in the said case, however, no stay was granted by the Hon’ble Supreme Court against the decision of the Hon’ble High Court, therefore, so long the decision of the Hon’ble High Court is in operation and holds the field, the same is binding on this Tribunal. Hence, I do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue and I uphold the same. ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 8 6. Ground No. 2 of the appeal is regarding depreciation on addition to the building account. In the return of income, the assessee has claimed Rs. 5.00 lacs under the head provision for building fund. Since this was in the capital field as well as provisions, therefore, the A.O. disallowed this claim of Rs.5.00 lacs. On appeal, the assessee has made an alternative claim as depreciation on the building and submitted that as per provisions of Section 32 r.w. explanation (5), the A.O. has to allow the depreciation irrespective of the claim made by the assessee in the return of income. The ld. CIT(A) has dismissed this ground of appeal by holding that the claim for provision for building fund is not allowable being capital in nature. 7. Before the Tribunal, the ld. AR has submitted that though the assessee has mistakenly claimed Rs. 5.00 lacs as provision for building fund but before the ld. CIT(A), the assessee has claimed depreciation on the building account which is otherwise allowed @ 10%. He has further submitted that the A.O. is duty bound to allow depreciation even if the assessee has not claimed the depreciation in the return of income. He has supported his contention with the provisions of Explanation (5) to Section 32 of the Act. The ld. AR has also relied upon various decisions on this issue that after the amendment and insertion of Explanation (5) to Section 32 of the Act, the A.O. is bound to allow the depreciation ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 9 irrespective of the claim made by the assessee in the return of income. The ld. AR has referred to the balance sheet of the assessee as part of audit report and submitted that once the assessee has shown the asset under the head of building then the depreciation is an allowable claim. 8. On the other hand, the ld. DR has submitted that the assessee has not claimed any depreciation in the return of income nor during the assessment proceedings but this is a fresh claim made by the assessee before the ld. CIT(A) as well as before this Tribunal. The A.O. has disallowed the claim of provision made for building fund which is not challenged by the assessee but the assessee has made a new claim of depreciation. She has relied upon the orders of the authorities below. 9. I have considered the rival submissions as well as the relevant material on record. There is no dispute that in the return of income, the assessee has claimed Rs. 5.00 lacs being provision for building fund which was disallowed by the A.O. on the ground that this provision is not allowable and secondly it is capital expenditure. The assessee has not disputed the fact that this is a capital expenditure and therefore, the assessee has raised an alternate plea of allowance of depreciation on building which is duly reflected in the balance sheet of the assessee. Since the A.O. is otherwise bound to consider and allow the depreciation ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 10 on the fixed assets which are eligible for depreciation as per Explanation (5) to Section 32 of the Act, therefore, non-consideration of the claim of depreciation on the part of the A.O. as well as on the part of the ld. CIT(A) is not justified and contrary to the provisions of Section 32 of the Act. This issue of depreciation is to be considered after verifying the eligible assets and the satisfaction of the conditions of Section 32 of the Act being an asset has been brought into existence and used in the business of the assessee or at least ready to use for the business of the assessee. Accordingly, in the facts and circumstances of the case, this issue is set aside to the record of the A.O. to consider and decide the same after giving an opportunity of hearing to the assessee. 10. In the result, this appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 07 th January, 2022. Sd/- ¼fot; iky jko½ (VIJAY PAL RAO) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 07 th January, 2022. *Ranjan vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Churu Zila Sahkari Bhoomi Vikas Bank Ltd., Jaipur. 2. izR;FkhZ@ The Respondent- The A.C.I.T., Jhunjhunu. ITA 29/JP/2021 Churu Zila Sahkari Bhoomi Vikas Bank Ltd. Vs ACIT 11 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr¼vihy½@The CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 29/JP/2021) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar