Panvel Peoples Nagari Sahakari Pat. Maryadit, Panvel V. Income-tax Officer, Ward - 5, Panvel

ITA 2935/PUN/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0286 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-12-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 08-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: IS DIRECTED AGAINS T PASSED

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.2935/PUN/2017 / ASSESSMENT YEAR : 2012-13 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT, E-1/13/C/01, GROUND FLOOR, SECTOR-14, NEW PANVEL 410 206 PAN : AAJFP6696C VS. ITO, WARD-5, PANVEL (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-2, THANE ON 05-06-2017 IN RELATION TO THE ASSESSMENT YEAR 2012-13. 2. THE FIRST GROUND IS AGAINST NOT ALLOWING DEDUCTION U/S. 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED AS THE ACT) IN RESPECT OF MSEB COMMISSION INCOME AND INTEREST RECEIVED ON FDRS WITH BANK. APPELLANT BY MS. PRIYANKA V. JADHAV RESPONDENT BY SHRI M.K. VERMA DATE OF HEARING 06-12-2018 DATE OF PRONOUNCEMENT 07-12-2018 ITA NO.2935/PUN/2017 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT 2 3. BRIEFLY STATED, THE FACTS OF THE CASE, ARE THAT THE ASSESS EE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKIN G, PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE RETURN WAS FILED DECLARING TOTAL INCOME OF RS.14,050/-. AFTER CLAIMING DEDUCTION OF CERTAIN EXPENSES, THE ASSESSEE DECLARED NET P ROFIT OF RS.3,61,567/- AS AGAINST THE GROSS RECEIPTS OF RS.70,12,976/-. DEDUCTION U/S. 80P WAS CLAIMED AND THE ASSESSEE OFFERED TOTAL INCOME OF RS.14,050/-. THE AO OBSERVED THAT THE ASSESSEE EARNED INCOME BY WAY OF COMMISSION AMOUNTING TO RS.1,33,390/- FOR COLLECTING MSEB BILLS FROM CUSTOMERS ON BEHALF OF MSEB. THE ASSESSEE CLAIMED DEDUCTION U/S. 80P IN RESPECT OF SUCH AMOUNT BY RELYING ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN CIT VS. AHMEDNAGAR DISTRICT CENTRAL CO-OPERATIVE LTD. (2003) 264 ITR 38 (BOM.) . THE AO DID NOT GRANT THE BENEFIT OF DEDUCTION ON SUCH COMMISSION INCOME. THE ASSESSEE W ENT IN APPEAL BEFORE THE LD. CIT(A) CHALLENGING THE ACTION OF TH E AO ON THIS SCORE. THE LD. CIT(A) NOTICED THAT THE ASSESSE E INCURRED EXPENDITURE OF RS.1,50,000/- AGAINST EARNING MSE B COMMISSION OF RS.1,33,390/-. AS SUCH, IT WAS HELD THAT N O FURTHER DEDUCTION WAS PERMISSIBLE. ITA NO.2935/PUN/2017 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT 3 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN PRINCIPLE, ANY INCOME EAR NED BY THE ASSESSEE-SOCIETY BY WAY OF COMMISSION/FEE FOR COLLECTING ELECTRICITY CHARGES FOR AND ON BEHALF OF ELECTRICITY BOARDS/PUBLIC UNDERTAKINGS, ATTRIBUTABLE TO BUSINESS OF BANKING, ENTITLES AN ASSESSEE TO DEDUCTION UNDER S. 80P(2)(A )(I) AS HAS BEEN HELD IN THE CASE OF AHMEDNAGAR DISTRICT CENTRAL CO-OPERATIVE LTD. (SUPRA). IN THE EXTANT CASE, I AM CONFRONTED WITH A SITUATION IN WHICH THE ASSESSEE AGREED BEFORE THE LD. CIT(A) THAT IT INCURRED EXPENSES OF RS.1,50,000/- FOR E ARNING GROSS RECEIPTS OF MSEB COMMISSION AMOUNTING TO RS.1,33,390/-. THIS DECIPHERS THAT THE AMOUNT OF GROSS RE CEIPT IS LESS THAN THE AMOUNT OF EXPENSES INCURRED FOR EARNING S UCH INCOME. THE ASSESSEE CLAIMED DEDUCTION OF SUCH EXPENSE S OF RS.1,50,000/- WHICH HAS NOT BEEN DISPUTED BY THE AO. UN DER SUCH CIRCUMSTANCES, THE QUESTION ARISES AS TO WHETHER THE ASSESSEE CAN STILL CLAIM DEDUCTION U/S. 80P IN RESPECT OF GRO SS RECEIPT OF COMMISSION INCOME WHEN THERE IS, IN FACT, A LOSS IN THIS ACTIVITY. 5. SECTION 80AB PROVIDES THAT : WHERE ANY DEDUCTION IS REQUIRED TO BE MADE OR ALLOWED UNDER ANY SECTION INCLUDED IN ITA NO.2935/PUN/2017 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT 4 THIS CHAPTER UNDER THE HEADING `C- DEDUCTIONS IN RESPECT OF CERTAIN INCOMES IN RESPECT OF ANY INCOME OF THE NATURE SPECIFIED IN THAT SECTION WHICH IS INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN THAT SECTION, FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER THAT SECTION, THE AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT (BEFORE MAKING ANY DEDUCTION UNDER THIS CHAPTER) SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE WHICH IS DERIVED OR RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN HIS GROSS TOTAL INCOME. IT IS MANIFEST FROM THE ABOVE PROVISION THAT WHERE DEDUCTION IS REQUIRED TO BE MADE U/S. 80P, WHICH IS COVERED UNDER CHAPTER-VI-A - C, IT IS TH E AMOUNT OF INCOME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT, WHICH SHALL BE CONSIDERED AS ELIGIBLE FOR DEDUCTION. THE TERM INCOME NEEDS TO BE DISTINGUISHED FROM GROSS RECEIPTS. WHEREAS THE LATER REFER S TO THE GROSS AMOUNT RECEIVED BY THE ASSESSEE, THE FORMER TA KES INTO CONSIDERATION THE NET AMOUNT REMAINING AFTER ADJUSTING EXPENSES AGAINST THE RECEIPTS FROM THE ACTIVITY. THE HONB LE SUPREME COURT IN MOTILAL PESTICIDES (I) (P) LTD. VS. CIT (2000) 243 ITR 26 (SC) , AFTER APPLYING THE PROVISIONS OF ITA NO.2935/PUN/2017 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT 5 SECTION 80AB HAS HELD THAT DEDUCTION U/S 80HH SHOULD BE ALLOWED ON THE NET INCOME AND NOT ON THE GROSS INCOME. THE HONBLE BOMBAY HIGH COURT IN CIT VS. ASIAN CABLE CORPORATION LTD. (2003) 262 ITR 537 (BOM) , AFTER APPLYING THE PROVISIONS OF SECTION 80AB, HAS HELD THAT DEDUCTION UNDE R S. 80-O SHOULD BE ALLOWED WITH REFERENCE TO NET RECEIPTS AN D NOT ON GROSS RECEIPTS. IT, ERGO, BECOMES PALPABLE THAT THE ELIGIBLE AMOUNT FOR DEDUCTION CAN BE THE `INCOME AND NOT THE `GROSS RECEIPTS FROM THE SPECIFIED SOURCE. SINCE THE AMO UNT OF GROSS RECEIPT FROM MSEB COMMISSION IN THIS CASE IS LESS THAN THE AMOUNT OF EXPENSES INCURRED FOR EARNING SUCH COMMISSION AND DEDUCTION HAS BEEN SEPARATELY ALLOWED BY THE AO IN RESPECT OF SUCH EXPENSES, THERE CAN BE NO DISTINCT DEDUCTION U/S. 80P BECAUSE OF THE NEGATIVE INCOME EARNED B Y THE ASSESSEE FROM THIS ACTIVITY. I, THEREFORE, COUNTENANCE TH E VIEW POINT OF THE FIRST APPELLATE AUTHORITY ON THIS POINT. 6. THE SECOND COMPONENT OF THE DISALLOWANCE OF DEDUCTION IS INTEREST RECEIVED BY THE ASSESSEE ON FDR WITH IDBI BANK AMOUNTING TO RS.3,01,034/-. HERE AGAIN, IT IS NOTICED THAT THE ASSESSEE EARNED INTEREST INCOME OF RS.3,01,034/-. AS P ER ASSESSEES OWN VERSION GIVEN TO THE AUTHORITIES, IT INCURRED COST ITA NO.2935/PUN/2017 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT 6 OF FUNDS AT RS.3,32,967/- FOR EARNING SUCH INTEREST INCOM E. ONCE AGAIN, IT IS CLEAR THAT THE DEDUCTION FOR A SUM OF RS.3,32,967/- HAS BEEN ALLOWED BY THE AO. THE AMOUNT OF GROSS INTEREST INCOME, BEING LESS THAN THE AMOUNT OF EXPENSE S INCURRED, CANNOT ENTITLE THE ASSESSEE TO QUALIFY FOR SEPAR ATE DEDUCTION U/S. 80P ON THE AMOUNT OF GROSS INTEREST RECEIVED . I, THEREFORE, APPROVE THE VIEW TAKEN BY THE LD. CIT(A) ON THIS SCORE. 7. THE SECOND ALTERNATE GROUND RAISED BY THE ASSESSEE IS THAT EXPENSES OF RS.1,50,000/- INCURRED AGAINST EARNING OF M SEB COMMISSION AND COST OF FUNDS OF RS.3,32,967/- INCURRED AGAINST THE INTEREST RECEIVED ON FDRS SHOULD BE ALLOWED AS DEDUCTION. IN THIS REGARD, IT IS OBSERVED THAT THE LD. CIT(A) HAS CATEGORICALLY NOTICED THAT THE ASSESSEE WAS ALLOWED DEDUCTION FOR THESE TWO EXPENSES. I AM OF THE CONSIDERED OPINION , IT WOULD BE JUST AND FAIR IF THE AO VERIFIES THE ASSESSEES CONTENTION FOR ALLOWING DEDUCTION OF THESE TWO EXPENSES. IN CASE, THE DEDUCTION IS FOUND TO HAVE BEEN ALLOWED FOR THE SE TWO SUMS, THEN THERE IS NO SCOPE FOR ALLOWING ANY FURTHER DEDUCTION. IN CASE, THE FINDING OF THE LD. CIT(A) IS FOUND TO BE WANTING, THEN THE DEDUCTION SHOULD BE ALLOWED TO THE EXTENT OF ITA NO.2935/PUN/2017 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT 7 EXPENSES INCURRED, NAMELY, RS.1,50,000/- AND RS.3,32 ,967/-. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH DECEMBER, 2018. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 07 TH DECEMBER , 2018 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-2, THANE 4. / THE PR. CIT-2, THANE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.2935/PUN/2017 PANVEL PEOPLES NAGRI SAHAKARI PATSANSTHA MARYADIT 8 DATE 1. DRAFT DICTATED ON 06-12-18 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 07-12-18 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *