The DCIT, Circle-1(2), Baroda V. M/s Baroda Dist. Co. Op. Milk Producers Union Ltd., Baroda

ITA 3080/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8271 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Business expenditure; Earning of tax free income; Competent authority
• Section: 143(3); 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 1(2), BARODA (APPELLANT) VS M/S. BARODA DIST. CO - OP. MILK PRODUCERS UNION LTD. MAKARPURA ROAD, BARODA - 390009 PAN: AAAAB4510B (RESPONDENT) REV ENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 20 - 03 - 2 018 DATE OF PRONOUNCEMENT : 14 - 05 - 2 018 / ORDER P ER : AMARJIT SINGH, AC COUNTANT MEMBER : - THESE THREE REVENUE S APPEAL S FOR A.Y. 2011 - 12 TO 2013 - 14 , AR ISE FROM ORDER OF THE CIT(A) - 5 , VADODARA DATED 16 - 08 - 2016 & 28 - 09 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - ITA NO. 3080/AHD/2016 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 80P(2)(D) I.E. GROSS INTEREST OF RS. 23,65, 747/ - AND DIVIDEND OF RS. 34,62,601 - RECEIVED BY THE ASSESSEE FROM OTHER COOPERATIVE SOCIETIES, WITHOUT APPRECIATING THE FACT THAT THE AO HAS RIGHTY JUSTIFIED IN I T A NO S . 3080, 3560 TO 3561 / A HD/20 16 A SSESSMENT YEAR 2011 - 12 TO 2013 - 14 I.T.A NO S . 3080, 3560 TO 3561 / AHD/2016 A.Y. 2011 - 12 TO 2013 - 14 PAGE NO DCIT VS. M/S. BARODA DIST. CO - OP. MILK PRODUCERS UNION LTD. 2 DISALLOWING THE SAME AS THE ASSESSEE HAS IGNORED ITS EXPENSES I.E . PA YMENT OF INTEREST TO VARI OUS CO. OP SOCIETIES AND HAS TAKEN ONLY INTO ACCOUNT INCOME FROM INVESTMENTS I.E. ON ITS OWN INVESTMENTS WITH VARIOUS OTHER CO.OP SOCIETIES. THEREFORE THE DEDUCTION U/S 80(P)(2) OF THE ACT IS ALLOWABLE ONLY ON THE NET AMOUNT AND NOT ON THE GROSS INCOME AS H ELD IN THE CASE OF SABARKANTHA ZILLA KHARID V. SANGH LTD. V. CIT [1993] 69 TAXMAN 619 (SC). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF DONATION OF RS. 2,00,0 00/ - MADE TO VADODARA JILA SAHAKARI SANGH. 3. AS THE FACTS IN ALL THE THREE APPEALS OF GROUND NOS. 1 TO 2 EXCEPT OF GROUND NO. 2 OF ITA NO. 3561/AHD/2016 ARE COMMON, THEREFORE, THEY ARE ADJUDICATED TOGETHER FOR THE SAKE OF CONVENIENCE AND GROUND NO. 2 OF 3561/AHD/2016 IS ADJUDICATED SEPARATELY. GROUND NO 1. OF ITA NOS. 3080, 3560 & 3561/AHD/2016 4 . IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 2 , 95 , 0 3,620/ - WAS FILED ON 26 TH SEP, 2010. SUBSEQUENTLY, THE C ASE WAS SELECTED UNDER SCRUTINY BY ISSUI NG OF NOTICE U/S. 143(2) OF THE ACT. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER CHAPTER 6A U/S. 80P(2)(D) IN RESPECT OF INTEREST INCOME OF RS. 23,65,747 / - AND DIVIDEND OF RS. 3 4 , 62 , 601/ - ON DEPOSIT S AND INVESTMENT S WITH OTHER CO - OPERATIVE SOCIETIES. THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAS ALSO INCURRED INTEREST EXPENSEST EXPENSES OF RS. 1,12,81,322/ - ON DEPOSIT RECEIVED FROM CO - OPERATIVE SOCIETY WHICH IS REQUIRE D TO BE ADJUSTED AGAINST THE INTEREST AND DIVIDEND INCOME EARNED BY THE ASSESSEE FOR THE CLAI M OF DEDUCTION U/S. 80P(2)(D) OF THE ACT. CONSEQUENTLY, THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEDUCTION U/S. 80P(2)(D) OF THE ACT ON THE GROUND THA T AFTER NETTING THE CORRESPONDING EXPENSES , THERE REMAINS NO INCOME WHICH IS ELIGIBLE FOR DEDUCTION. 5 . AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE PLAC ING RELIANCE ON THE DECISION OF HON B LE GU JARAT HIGH COURT IN THE CASE OF SURAT VANKAR SAHKARI SANGH LTD VS. ACIT IN I.T.A NO S . 3080, 3560 TO 3561 / AHD/2016 A.Y. 2011 - 12 TO 2013 - 14 PAGE NO DCIT VS. M/S. BARODA DIST. CO - OP. MILK PRODUCERS UNION LTD. 3 ITA NO. 93 TO 96/AHD WHERE IN IT IS HELD THAT T HE ASSESSE IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)(D) IN RESPECT OF GROSS INTEREST RECEIVED FROM CO - OPERATIVE BANK WITHOUT ADJUSTIN G THE INTEREST 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD CAREFULLY. THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P(2)(D) OF CHAPTER VI OF THE ACT IN RESPECT OF INCOME BY WAY OF INTEREST AND DIVIDEND ON DEPOSITS AND INVESTME NTS MADE WITH OTHER CO - OPERATIVES SOCIETIES. THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSE AFTER PLACING RELIANCE ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF SURAT VANKAR SAHAKARI SANGH LTD. VS. ACIT IN ITA 93 TO 96 OF 2008. WE HA VE PERUSED THE ABOVE CITED DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT WHEREIN IT IS HELD THAT SECTION 80P(2)(D) OF THE ACT ALLOWS WHOLE DEDUCTION OF AN INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE COOPERATIVE SOCIETY FROM HIS INVESTMENT WI TH ANY OTHER COOPERATIVE SOCIETY. IT IS IMMATERIAL WHERE ANY INTEREST PAID TO THE CO - OPERATIVE SOCIETY EXCEEDS THE INTEREST RECEIVED FROM ITS INVESTMENT. THE HON BLE HIGH COURT HAS ALSO HELD THAT PROVISION OF SECTION 80P(2)(D) DOES NOT INDICATE ANY ADJ USTMENT TO BE MADE AS SOUGHT BY THE REVENUE. IN VIEW OF THE DECISION OF THE HON BLE GUJARAT COURT IN THE CASE OF SURAT VANKAR SHAKARI SANGH LTD. VS. ACIT IN ITA NO. 93 TO 96 OF 2008 AS ELABORATED IN THE FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY INFIR MITY IN THE DECISION OF THE LD. CIT(A), THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED ON THIS ISSUE. GROUND NO. 2 OF ITA NOS. 3080 & 3560/AHD/2016 7 . ON SCRUTINY, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS. 2 LA CS AS DONA TION GIVEN TO M/S. VADODARA ZEELA SAHKARI SANGH LTD. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF DEDUCTION ON THE GROUND THAT ASSESSE E HAS NOT EXPLAINED UNDER WHICH PROVISION OF THE ACT IT IS ELIGIBLE FOR SUCH DEDUCTION. IN THE APPEAL, THE LD. CIT (A) HAS ALLOWED THE CLAIM OF I.T.A NO S . 3080, 3560 TO 3561 / AHD/2016 A.Y. 2011 - 12 TO 2013 - 14 PAGE NO DCIT VS. M/S. BARODA DIST. CO - OP. MILK PRODUCERS UNION LTD. 4 DEDUCTION AFTER PLACING RELIANCE ON THE DECISION OF MEHSANA DIST. CO - OPERATIVE MILK PRODUCERS UNION LTD. (2003) 132 TAXMAN. COM 40 (GUJ). 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. S ECOND GROUND OF APPEAL OF THE REVENUE IS AGAINST THE DECISION OF LD. CIT(A) TO ALLOW DEDUCTION FOR RS. 2 LACS OF DONATION GIVEN BY THE ASSESSE TO M/S VADODAR JILA SHARI SANGH. THE LD. CIT(A) HAS STATED THAT SIMILAR CONTRIBUTION WAS ALLOWED BY THE RE VENUE IN ASSESSMENT YEAR 2009 - 10. WE HAVE FURTHER NOTICED FROM THE FINDING OF THE LD. CIT(A) THAT M/S. VADODARA JILA SAHKARI SANGH LTD IS APPROVED BY THE COMPETENT AUTHORITY U/S. 69 OF THE GUJARAT CO - OPERATIVE SOCIETY ACT FOR CONTRIBUTION TO EDUCATION F UND OF THE GUJARAT STATE CO - OPERATIVE UNION. HON BLE GUJARAT HIGH COURT HAS IN THE CASE OF MEHSANSA DIST CO - OPERATIVE MILK PRODUCERS UNION LTD. (2003) 132 AXMAN 40 (GUJ) HELD THAT THE CONTRIBUTION MADE TO STA T E CO - OPERATIVE FEDERAL EDUCATION FUND AS PER P ROVISION OF SECTION 69 OF THE GUJARAT RAJYA CO - OPERATIVE SOCIETY ACT, 1961 IS ALLOWABLE AS BUSINESS EXPENDITURE U/S. 37(1) OF THE ACT. CONSIDERING THE ABOVE DECISION OF THE HON BLE HIGH COURT OF GUJARAT AS ELABORATED IN THE FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A). THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. GROUND NO. 2 OF ITA 3561 /AHD/2016 9 . D URING THE COURSE OF SCRUTINY, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS NOT DISALLOWE D ANY EXPENSES PERTAINING TO EXEMPT INCOME AS PER SECTION 14A OF THE ACT. THEREAFTER, ASSESSING OFFICER HAS COMPUTED DISALLOWANCE OF RS . 7 , 98 , 033/ - U/S. 14 R.W. RULE 8D OF THE ACT. 10 . AGGRIEVE D ASSESSEE FILED APPEAL BEFORE T H E LD. CIT(A). THE LD. CIT(A ) HELD THAT ASSESSING OFFICER HAS NOT DISPROVED THE CLAIM OF THE ASSESSEE THAT IT HAS NOT USED ANY INTEREST BEARING FUND FOR MAKING INVESTMENT IN TAX FREE I.T.A NO S . 3080, 3560 TO 3561 / AHD/2016 A.Y. 2011 - 12 TO 2013 - 14 PAGE NO DCIT VS. M/S. BARODA DIST. CO - OP. MILK PRODUCERS UNION LTD. 5 INVESTMENT AFTER PLACING RELIANCE ON THE DECISION OF CO - ORDINATE BENCH O F ITAT IN THE CASE OF ADITY A MEDI S ALES LTD. VS. ACIT (2016) 67 TAXMAN.COM 270 (AHD. TRIB) THAT FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S. 14A AMOUNT OF NET INTEREST IS TO BE TAKEN INTO CONSIDERATION AND NOT GROSS INTEREST . 11 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD CAREFULLY. THE ASSESSING OFFICER HAS COMPUTED DISALLOWANCE U/S. 14A OF THE ACT AS PER RULE 8D OF THE IT RULE TO THE AMOUNT OF RS. 7,98,033/ - . THE ASSESSEE HAS SUBMITTED THAT DISALLOWANCE U/S. 14A IS NOT CORRECT AS IT HAS USED ITS OWN FUND FOR INVESTMENT. THE LD. CIT(A) AFTER PLACING RELIANCE ON THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT IN THE CASE OF ADITYA MEDISALES LTD. VS. ACIT (2016) 67 TAXMANN.COM 270 HELD THAT FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S. 14A AMOUNT OF NET INTEREST IS TO BE TAKEN INTO CONSIDERATION AND NOT GROSS INTEREST. T HE ASSESSING OFFICER DID NOT CONTROVERT THAT THE ASSESSEE HAD NOT USED INTEREST BEARING FUNDS TO INVEST IN TAX EXEMPT BEARING INVESTMENT. THEREFORE WE UPHOLD THE DECISION OF THE LD. CIT(A) OF DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE DISALLOWANCE U/S 14 A OF THE ACT WITH REFERENCE TO NET INTEREST EXPENSES OF THE ASSESSEE. ACCORDINGLY , THE APPEAL OF THE REVENUE IS DISMISSED . 12. IN THE RESULT, ALL THE THREE APPEALS FILED B Y REVENUE ARE DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 14 - 05 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 14 /05 /20 18 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD I.T.A NO S . 3080, 3560 TO 3561 / AHD/2016 A.Y. 2011 - 12 TO 2013 - 14 PAGE NO DCIT VS. M/S. BARODA DIST. CO - OP. MILK PRODUCERS UNION LTD. 6 6. GUARD FILE. BY ORDER/ , / , I.T.A NO S . 3080, 3560 TO 3561 / AHD/2016 A.Y. 2011 - 12 TO 2013 - 14 PAGE NO DCIT VS. M/S. BARODA DIST. CO - OP. MILK PRODUCERS UNION LTD. 7 ST RENGTHENED PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF DICTATION 03 /05 /201 8 2) DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER & OTHER MEMBER 04 /05 /2018 3) DATE O N WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 14 /05 / 20 1 8 4) DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 14/05 /201 8 5) DATE O N WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 14/05 /201 8 6) DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15/05 /201 8 7) DATE ON WHICH THE FILE GOES THE HEAD CLERK 8) DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9) DATE OF DISPATCH OF THE ORDER A.K