Amalsad Vibhag Vividh Karyakari Sahkari Khedut Mandli Ltd., Navsari V. The Income Tax officer, Navsari

ITA 3129/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2137 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 25-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINIWAS T BIDARI
• Keywords: Principle of natural justice; Question of law
• Section: 143(3); 80P

Judgement Text

AMALSAD V.V.K.S.KHEDUT MANDLI LTD. V. ITO, WARD-A, /I.T.A. NO.3129/AHD/2014/A.Y.:2010-1 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T.A NO.3129/AHD/2014/SRT /ASSESSMENT YEAR : 2010-11 AMALSAD VIBHAG VIVIDH KARYAKARI SAHKARI KHEDUT MANDLI LTD. AT & POST AMALSAD (W.RLY), TAL. GANDEVI, DIST. NAVSARI 396 445. [PAN: AAAAA 1043 N] VS. THE INCOME TAX OFFICER, WARD-1, NAVSARI. APPELLANT /RESPONDENT /ASSESSEE BY SHRI TUSHAR P. HEMANI, ADVOCATE /REVENUE BY SHRI SRINIWAS T. BIDARI, CIT - DR / DATE OF HEARING: 12 .0 7 .2018 /PRONOUNCEMENT ON 02 .0 8 .2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSAD (IN SHORT THE CIT (A)) DATED 17.10.2014 PERTAINING TO ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-1, NAVSARI (IN SHORT THE AO) DATED 28.01.2013 UNDER SECTION 143(3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). AMALSAD V.V.K.S.KHEDUT MANDLI LTD. V. ITO, WARD-A, /I.T.A. NO.3129/AHD/2014/A.Y.:2010-1 PAGE 2 OF 6 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS IN CONFIRMING THE ACTION OF AO IN NOT ALLOWING CLAIM OF DEDUCTION U/S 80P OF THE ACT IN THE SUM OF RS.21,76,660/- AND FURTHER ERRED IN HOLDING THAT THE SAID INCOME IS TAXABLE IN THE HANDS OF THE APPELLANT SEPARATELY AS INCOME FROM OTHER SOURCES. 2. BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRECIATING THAT INVESTMENTS IS AN INTEGRAL PART OF PROVIDING CREDIT FACILITIES AND THEREFORE, ANY INCOME EARNED BY CARRYING OUT THE SAID ACTIVITIES QUALIFIES FOR CLAIM OF DEDUCTION U/S 80P OF THE ACT. 3. ALTERNATIVELY AND WITHOUT PREJUDICE, BOTH THE LOWER AUTHORITIES OUGHT TO HAVE TAXED ONLY THE NET INCOME INSTEAD OF GROSS RECEIPTS. 4. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS IN NOT GRANTING FULL DEDUCTION U/S 80P(2)(D) OF THE ACT. 5. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS IN NOT GRANTING DEDUCTING U/S 80P(2)(D) OF THE ACT. 6. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACTS AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSION, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THE ACTION OF THE LOWER AUTHORITIES IS CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 7. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS OF THE CASE IN CONFIRMING ACTION OF LD. AO IN LEVYING INTEREST U/S 234A/B/C OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED IN THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, FERTILIZERS, PESTICIDES, LIVESTOCK AND OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS, MARKETING OF AGRICULTURAL PRODUCTS OF THE MEMBERS, PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.21,76,660/- AND CLAIMED DEDUCTION U/S 80P(2)(D) OF THE ACT. THE INTEREST INCOME WAS EARNED ON INVESTMENT MADE WITH AMALSAD V.V.K.S.KHEDUT MANDLI LTD. V. ITO, WARD-A, /I.T.A. NO.3129/AHD/2014/A.Y.:2010-1 PAGE 3 OF 6 PRIVATE BANKS, NATIONALIZED BANKS AND SARDAR SAROVAR NARMAD NIGAM LTD. ACCORDING TO THE ASSESSING OFFICER SECTION 80P(2)(D) OF THE ACT ENVISAGES DEDUCTION ONLY ON THE INVESTMENTS MADE WITH ANY CO-OPERATIVE SOCIETY. THE ASSESSEE SUBMITTED ONLY SURPLUS FUNDS WERE KEPT AS TEMPORARY DEPOSITS IN BANKS. THE AO OBSERVED THAT DURING THE YEAR DEPOSITS AGGREGATING RS.2.41 CRORES WERE INVESTED IN FDRS AND SECURITY WITH PRIVATE BANKS AND SARDAR SAROVAR NIGAM AND THE APPELLANT DID NOT SUBSTANTIATE THIS AMOUNT WAS INVESTED OUT OF SURPLUS FUNDS OF DEPOSITS RECEIVED FROM ITS MEMBERS AND IT WAS CONCLUDED THAT THESE FUNDS WERE AVAILABLE WITH THE APPELLANT FROM THE ACTIVITIES OTHER THAN THE PROVIDING OF CREDIT FACILITIES TO ITS MEMBERS. THE AO STRONGLY RELIED ON THE CASE OF HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (2010) 229 CTR 209 WHEREIN IT WAS HELD THAT A CO-OPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITY TO ITS MEMBERS, INTEREST EARNED BY INVESTING SURPLUS FUNDS IN SHORT TERM DEPOSITS AND GOVERNMENT SECURITIES FALL UNDER THE HEAD INCOME FROM OTHER SOURCES AND TAXABLE U/S.56 OF THE ACT. 4. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A). THE LD.AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE DETAILS OF INTEREST RECEIVED AND PAID ALONG WITH AMALSAD V.V.K.S.KHEDUT MANDLI LTD. V. ITO, WARD-A, /I.T.A. NO.3129/AHD/2014/A.Y.:2010-1 PAGE 4 OF 6 BALANCE SHEET, TRADING & PROFIT AND LOSS ACCOUNT. THE DISALLOWANCE FOR RS.21,76,660/- IS NOT CALLED FOR AND DEDUCTION OF THIS INCOME SHOULD BE ALLOWED U/S.80P OF THE ACT. HOWEVER, THE CIT(A) UPHELD THE ORDER OF THE AO. 5. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. THE AR OF THE ASSESSEE SUBMITTED THAT THE ISSUED RAISED IN THIS APPEAL IS COVERED BY THE DECISION HON'BLE ITAT AHMEDABAD D BENCH IN ASSESSEES OWN CASE IN ITA NO.1833/AHD/2013 FOR A.Y. 2009-10 WHEREIN SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. 6. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS SIMILAR TO ASSESSEES OWN CASE IN HON'BLE ITAT AHMEDABAD D BENCH IN ASSESSEES OWN CASE IN ITA NO.1833/AHD/2013 FOR A.Y. 2009-10, WHEREIN IT WAS HELD AS UNDER : 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ASSESSEE HAS RAISED VARIOUS GROUND NOS. 1 TO 4 BUT THE MAIN ISSUE IN ALL THESE GROUNDS IS REGARDING CLAIM OF DEDUCTION U/S 80P FOR INTEREST INCOME OF RS.24,24,071/- AND TAXING IT AS INCOME FROM OTHER SOURCES. WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THE CO-ORDINATE BENCH IN THE CASE OF ASSESSEE IN ITA NOS. 1710 & 1711/AHD/2011 FOR ASST. YEARS 2006-07 & 2007- 08, DT. 13.08.2015 HAS DECIDED THE ISSUE BY OBSERVING AS UNDER :- AMALSAD V.V.K.S.KHEDUT MANDLI LTD. V. ITO, WARD-A, /I.T.A. NO.3129/AHD/2014/A.Y.:2010-1 PAGE 5 OF 6 7, WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO GRANTING OF DEDUCTION UNDER 80P ON THE INTEREST EARNED ON THE DEPOSITS KEPT WITH BANK. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY. IT IS ASSESSEES SUBMISSION THAT THE AMOUNTS THAT WERE NOT IMMEDIATELY REQUIRED BY THE ASSESSEE WERE DEPOSITED IN THE BANK SO AS TO EARN INTEREST. THE AFORESAID SUBMISSION OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY REVENUE. WE FIND THAT THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER : 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE, THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION SOP (1) OF THE ACT. I FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V/S. ANDHRA PRADESH STATE CO-OPERATIVE BANK LTD., [2011] 200 TAXMAN 220/12 TAXMANN.COM 66. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8. WE ARE OF THE VIEW THAT THE FACTS OF THE CASE ARE IDENTICAL TO THAT IN THE CASE OF TUMKAR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) WHICH HAS BEEN DECIDED BY HON'BLE KARNATAKA HIGH COURT AND THEREFORE CONSIDERING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFORESAID DECISION OF HON'BLE KARNATAKA HIGH COURT AND IN THE ABSENCE OF ANY CONTRARY BINDING DECISION POINTED OUT BY REVENUE, WE ARE OF THE VIEW THAT THE INTEREST EARNED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 P. WE THEREFORE SET ASIDE THE ORDER OF A.O. IN THE RESULT THE GROUND OF THE ASSESSEE IS ALLOWED, 9. SINCE THE FACTS OF THE CASE FOR A.Y. 2007-08 ARE IDENTICAL TO THE FACTS FOR A.Y, 2006-07 AS ADMITTED BY BOTH THE PARTIES, WE THEREFORE FOR THE REASONS STATED HEREINABOVE WHILE DECIDING THE APPEAL OF ASSESSEE FOR A.Y. 2006-07 AND FOR SIMILAR REASONS ALLOW THE GROUNDS OF ASSESSEE RAISED BY ASSESSEE FOR ASSESSMENT YEAR 2007- 08. 8. WE FIND THAT SIMILAR ISSUE ALSO CAME UP BEFORE THE CO- ORDINATE BENCH IN THE CASE OF STATE BANK OF INDIA SUPERVISING OFFICIALS CO-OP. CREDIT SOCIETY LTD. VS. ITO (SUPRA) AS ALSO IN THE CASE OF ASSESSEE ITSELF, WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW, THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2010-11 (SUPRA) AND IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO-OP. CREDIT & SUPPLY SOCIETY LTD. (SUPRA) IS ON THE VALIDITY OF 263 PROCEEDINGS AND IS NOT A DECISION ON MERITS. THE DECISION ON THE IN THIS REGARD HAVE BEEN DECIDED BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD, BY ANDHRA PRADESH HIGH COURT IN THE CASE OF ANDHRA PRADESH STATE COOPERATIVE BANK LTD. AND BY ITAT IN THE CASES OF AMALSAD VIBHAG YIVIDH KARYAKARI SAHAKARI KHEDUT MANDALI LTD. AND MAROLI BAZAR VIBHAG VIVIDH KARYAKARI SAHKARI MANDI LIMITED. SINCE THESE AUTHORITIES UNEQUIVOCALLY SUPPORT THE CASE OF THE ASSESSEE, RESPECTFULLY FOLLOWING THEM, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I), WHICH IS AMALSAD V.V.K.S.KHEDUT MANDLI LTD. V. ITO, WARD-A, /I.T.A. NO.3129/AHD/2014/A.Y.:2010-1 PAGE 6 OF 6 ALLOWED. CONSEQUENTLY, SUCH INCOME CANNOT BE HELD AS INCOME FROM OTHER SOURCES. IN VIEW OF THE FOREGOING, WE DECIDE THIS GROUND IN FAVOUR OF THE ASSESSEE FOR ALL ASSESSMENT YEARS UNDER CONSIDERATION. 9. IN VIEW OF OUR ABOVE DISCUSSION, AND RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT FOR THE INTEREST INCOME OF RS.24,24,071/- AND ALLOW THE CLAIM OF ASSESSEE. WE ALSO OBSERVE THAT SUCH INCOME CANNOT BE HELD AS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN VIEW OF THE ABOVE, FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT FACTS ARE SIMILAR, THEREFORE WE FIND NO INFIRMITY IN THE ABOVE DECISION OF HON'BLE ITAT AHMEDABAD, THEREFORE WE UPHOLD THE SAME, AND ACCORDINGLY APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 02-08-2018. SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED : 3 RD AUG , 2018 COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT