JAI MATAJI CO OPERATIVE CREDIT SOCIETY LTD, MUMBAI V. ITO 30(1)(5), MUMBAI

ITA 3334/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0436 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Keywords: Business income; Business expenditure
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT ITA N O. 3334/MUM./2017 (ASSESSMENT YEAR: 2012 - 1 3 ) M/S. JAI MATAJI CO - OPERATIVE CREDIT SOCIETY LTD., 4, KODAY APARTMENTS, DATTA MANDIR ROAD, MALAD WEST, MUMBAI 400 097 PAN NO:AAAAJ3554B . APPELLANT V/S ITO 30 (1)(5) R.NO.607, 6 TH FLOOR, C - 13, BKC BANDRA MUMBAI 400 051 . RESPONDENT ASSESSEE BY : SHRI. RAMESH S. IYER REVENUE BY : SHRI. V. JANARDHANAN DATE OF HEARING 28/06/2017 DATE OF ORDER - 14 .0 8 .2017 O R D E R PER: SHAMIM YAHYA THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LD. CIT - A DATED 07/02/2017 AND PERTA INS TO ASSESSMENT YEAR 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER: - 1. THE LD. CIT(APPEALS), 41 , MUMBAI HAS ERRED IN NOT ALLOWING DEDUCTION U/S 80P(2)(A)(I) AVAILABLE TO THE APPELLANT BEING A CO - OPERATIVE CREDIT SOCIETY. 2. THE LD. CIT(APPEALS), 41, MUMBAI HAS ERRED IN DISALLOWING PROVISIONS FOR EXPENSES AS BUSINESS EXPENSES. 3. THE LD. CIT (APPEALS), 41, MUMBAI ERRED IN NOT CONSIDERING DISALLOWANCES AS PART OF BUSINESS INCOME AND HENCE ALLOWABLE AS DEDUCTION U/S 80P(2)(A)(I). 4. THE LD. CIT(APPEALS), 41, MUMBAI ERRED IN NOT CONSIDERING INTEREST INCOME RECEIVED ON INVESTMENTS I N CO - OPERATIVE BANKS AS BUSINESS INCOME AND HENCE ALLOWABLE AS DEDUCTION U/S 80P(2)(A)(I) ITA NO. 3334/MUM/2017 JAI MATAJI CO - OPERATIVE CREDIT SOCIETY LTD., 2 5. THE APPELLANT FURTHER RESERVE THE RIGHT TO ADD, AMEND OR ALTER THE AFORESAID GROUNDS OF APPEAL AS THEY MAY THINK FIT BY THEMSELVES OR BY THEIR REPRESENTATIVES. 3 . THE STATEMENT OF FACTS IN THIS CASE READS AS UNDER: - THE ASSESSEE IS A CO - OP CREDIT SOCIETY HAVING THE BUSINESS OF ACCEPTING DEPOSITS AND LENDING MONEY TO THE MEMBERS OF THE SOCIETY. AS PER THE REGISTRATION CERTIFICATE, THE CO - OPERATIVE SOCIETY HAS BEEN CLASSIFIED AS RESOURCE SOCIETY AND SUB - CLASSIFIED AS LOAN GIVING RESOURCE SOCIETY. THE SOCIETY IS GOVERNED BY THE PRINCIPLE OF MUTUALITY. THE ASSESSEE FILED ITS INCOME TAX RETURN FOR THE ASSESSMENT YEAR 2014 - 2015 DECLARING TOTAL INCOME OF RS, 9,48 ,421/ - AND CLAIMED THE ENTIRE INCOME AS DEDUCTION UNDER SECTION 80(P)(2)(A)(I) OF THE INCOME TAX ACT, 1961. THE CASE WAS SELECTED FOR ASSESSMENT AND NOTICES U/S 142(1) WERE ISSUED. THE LD AO DENIED DEDUCTION U/S 80P(2)(A)(I) AVAILABLE TO A CO - OPER ATIVE CREDIT SOCIETY BY STATING THE SOCIETY IS A CO - OPERATIVE BANK AND HENCE GOVERNED BY SECTION SOP (4). THE APPELLANT FOLLOWS MERCANTILE BASIS OF ACCOUNTING AND HENCE HAD CREATED PROVISIONS FOR OUTSTANDING EXPENSES TO BE PAID AFTER MARCH 31. THE LD. AO DISALLOWED OUTSTANDING AUDIT FEES, OUTSTANDING STAFF BONUS FUND, OUTSTANDING STAFF PROVIDENT FUND AND VEHICLE FUND. THE APPELLANT DURING THE YEAR HAD RECEIVED INTEREST ON DEPOSITS WITH OTHER CO OPERATIVE BANKS WHICH WAS ELIGIBLE FOR DEDUCT ION U/S 80P(2)(D). HOWEVER THE SOCIETY FOLLOWED CBDT CIRCULAR NO 18/2015 DATED 2 ND NOVEMBER, 2015 AND CONSIDERED THE INTEREST AS BUSINESS INCOME AND HENCE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). THE LD AO CONSIDERED THE INTEREST INCOME AS INCOME FROM OTHE R SOURCES AND ERRED IN NOT CONSIDERING THE SAME AS BUSINESS INCOME AND HENCE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). AGGRIEVED BY THE ASSESSMENT ORDER PASSED BY THE LD. AO, THE SOCIETY FILED AN APPEAL WITH COMMISSIONER OF INCOME TAX (APPEALS),36. THE LD. CIT (APPEAL S), 41, MUMBAI DISMISSED ALL THE GROUNDS AND UPHELD THE ORDER PASSED BY THE LD.AO. 4. I N THIS CASE THE ASSESSING OFFICER DENIED THE DEDUCTION UNDER SECTION 80P (2)(A)(I) TO THE ASSESSEE HOLDING I T TO BE CO - OPERATIVE BANK AND ACCORDINGLY NOT ELIGIBLE FOR THE SAID DEDUCTION AS PER SECTION 80(4) . LEARNED CIT - A ALSO CONFIRMED THIS ACTION. 5. AGAINST THIS ORDER , ASSESSEE IS IN APPEAL BEFORE THE ITAT. ITA NO. 3334/MUM/2017 JAI MATAJI CO - OPERATIVE CREDIT SOCIETY LTD., 3 6. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS . I FIND THAT THIS ISSUE NOW IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONOURABLE APEX COURT IN CIVIL APPEAL NUMBER 10245 OF 2017 IN THE CASE OF THE CITIZEN COOPERATIVE SOCIETY LTD BY ACIT VIDE ORDER DATED 8 TH OF AUGUST 2017. THE HONOURABLE APEX COURT IN THIS CASE HAS EXPOUNDED THAT IF ONE HAS TO GO BY THE DEFINITION OF COOPERATIVE BANK THE ASSESSEE DOES NOT GET COVERED THEREBY. THAT IT IS ALSO A MATTER OF COMMON KNOWLEDGE THAT IN ORDER TO DO THE BUSINESS OF A COOPERATIVE BANK, IT IS IMPERATIVE TO HAVE A LICENCE FROM THE RESERVE BANK OF INDIA WHICH THE ASSESSEE DOES NOT POS S E S S. IN THE PRESENT CASE BEFORE ME ALSO THE ASSESSEE COOPERATIVE SOCIETY IS NOT LICENSED FROM THE RESERVE BANK OF INDIA TO ACT AS CO - OPERATIVE BANK. HENCE AS PER THE RATIO EMANATING FROM THE AFORESAID HONOURABLE APEX COURT JUDGEMENT THE ASSESSEE IS NOT AFFECTED BY THE PROVISIONS OF SECTION 80P(4). 7. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION AND PR ECEDENT , I SET ASIDE THE ORDER OF AUTHORITIES BELOW AND HOLD THAT ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80 P(2)(A)(I). 8. THE A SSESSING O FFICER HAS ALSO HELD WITHOUT PREJUDICE TO HIS ABOVE ORDER THAT ASSESSEE WAS NOT ENTITLED TO TREAT INTEREST INCOME RECEIVED FROM INVESTMENT AS BUSINESS INCOME BY REFERRING TO HONOURABLE APEX COURT DECISION IN THE CASE OF T O TGARS COOPERATIVE SOCIETY LTD. 9. I FIND THAT THIS REASONING OF THE ASSESSING OFFICER CONFIRMED BY THE LEARNED CIT - A IS ALSO FLAWED. THE DECISION OF HONOURABLE APEX COURT I N THE DECISION ITA NO. 3334/MUM/2017 JAI MATAJI CO - OPERATIVE CREDIT SOCIETY LTD., 4 REFERRED BY THE A SSESSING O FFICER IS NOT AT ALL APPLICABLE ON THE FACTS OF THE CASE. THE T O TGARS SOCIETY WAS NOT ENGAGED INTO THE BUSINESS OF ACCEPTING DEPOSIT AND GRANTING CREDIT. RATHER IT WAS ENGAGED IN THE ACTIVITY FOR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. HENCE THIS CASE LAWS IS NOT AT ALL APPLICABLE ON THE FACTS OF THE PRESENT CASE 10. IN THE PRESENT CASE ASSESSEE IS ENGA GING IN TO THE BUSINESS OF ACCEPTING DEPOSITS AND GRANTING CREDIT TO ITS MEMBERS. THE ASSESSEE WAS UTILISING SURPLUS FUND IN INVESTMENTS TO EARN INCOME. THIS ACTIVITY HAS DIRECT & PROXIMATE CONNECTION OR NEXUS TO THE EARNING OF THE ASSESSEE SOCIETY . O N THIS REASONI NG T HIS ACTIVITY OF THE ASSESSEE HAS BEEN HELD TO BE BUSINESS ACTIVITY AND THE RESULT ANT INCOME IS TREATED AS BUSINESS INCOME. THERE ARE SEVERAL DECISIONS IN SUPPORT OF THIS PROPOSITION INCLUDING THAT FROM ACIT VS. BULDHANA URBAN C OOPERATIVE CREDIT SOCIETY LTD 32 TAXMAN.COM 69. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT I HOLD THAT THE INTEREST INCOME IN THIS CASE IS TO BE TREATED AS BUSINESS INCOME. OTHER ISSUES RAISED BY THE ASSESSEE IN THIS APPEAL ARE NOW OF ACADEMIC INTER EST. HENCE, I AM NOT ENGAGING INTO THE SAME. 11. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 .0 8 .2017 SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 3334/MUM/2017 JAI MATAJI CO - OPERATIVE CREDIT SOCIETY LTD., 5 MUMBAI, DATED: 14 .0 8 .2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI