The Posun Co. Op. Credit Society Ltd., Baroda V. The Income Tax Officer, Ward-3(1)(5), Baroda

ITA 3360/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7789 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 14-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard
• Section: 56

Judgement Text

SMC-ITA NO. 3360/AHD/2016 THE POSUN CO. OP. CREDIT SOC LTD VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD [ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ] ITA NO.3360/AHD/2016 ASSESSMENT YEAR: 2013-14 THE POSUM CO. OP. CREDIT SOCIETY LTD ......... ......APPELLANT PRATAP ROAD, RAOPUR, BARODA [DIST : AAAAP 0501 A] VS. INCOME TAX OFFICER ............................ RESPONDENT WARD 3(1)(5),BARODA APPEARANCES BY: SAMIR PARIKH, FOR THE APPELLANT JAMES KURIAN, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 24.04.2018 DATE OF PRONOUNCING THE ORDER : 23.07.2018 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 19 TH AUGUST, 2016, FOR THE ASSESSMENT YEAR 2013-14, ON THE FOLLOW GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING DED UCTION U/S 80P AND MADE ADDITION AMOUNTING TO RS.29,01,766/- 2. ASSESSEE IS IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND IS COVERED UNDER SECTION 80P AND HAS RIGHTLY CLAIMED D EDUCTION UNDER SECTION 80P(2)(A)(I) OF THE I.T. ACT, 1961. 3. THE ASSESSEE PRAY THAT DEDUCTION UNDER SECTION 8 0P(2)(A)(I) OF THE ACT IS ELIGIBLE, HENCE ADDITION OF RS.29,01,766/- MADE BY LD. AO IS UNWARRANTED AND BAD IN LAW AND THEREFORE BE DELETED. 2. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE IS SUE, TO THE EXTENT OF NETTING OF INTEREST, IS COVERED IN FAVOUR OF THE ASSESSEE BY A DIVISION BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF SHRI FRIENDS CO-OPERATIVE C REDIT SOCIETY LTD VS. ITO (ITA NO.2752/AHD/2016; ORDER DATED 21.12.2017) WHEREIN I T WAS, INTER ALIA , OBSERVED AS FOLLOWS:- 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON RECORD CAREFULLY. WE OBSERVED THAT HON'BLE HIGH COURT OF GUJARAT IN T HE CASE OF STATE BANK OF INDIA SMC-ITA NO. 3360/AHD/2016 THE POSUN CO. OP. CREDIT SOC LTD VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 2 OF 4 (SBI) VS. COMMISSIONER OF INCOME TAX (2016) 72 TAXM ANN.COM 64 HAS HELD THAT INTEREST DERIVED BY THE CO-OPERATIVE SOCIETY BY DEP OSITING SURPLUS FUND WITH THE BANK NOT BEING ATTRIBUTABLE TO BUSINESS CARRIED ON BY THE SOCIETY CANNOT BE DEDUCTED U/S 80P. AS PER THE HON'BLE HIGH COURT OF GUJARAT INTEREST EARNED FROM INVESTMENT MADE IN ANY BANK, NOT BEING A CO-OPERATI VE SOCIETY, IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(D).IN VIEW OF DECISION OF HON' BLE HIGH COURT OF GUJARAT AS SUPRA WE CONSIDERED THAT THE AO HAS CORRECTLY MADE DISALLOWANCE OF CLAIM OF DEDUCTION OF RS. 10,64,672/- U/S 80P OF THE IT ACT BY TREATING THE SAME AS INCOME FROM OTHER SOURCES ON THE GROUND THAT THIS AMOUNT O F INTEREST INCOME AS EARNED ON DEPOSITS WITH BANK OF BARODA AND MGVCL IS NOT TH E BUSINESS INCOME WHICH IS ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT. THE LD. COUNSEL HAS CONTENDED THAT BENEFIT OF NETTING OF INTEREST SHOULD BE PROVIDED T O THE ASSESSEE AS PROVIDED BY THE DIFFERENT BENCHES OF THE ITAT ON IDENTICAL ISSU ES THEREFORE, WE HAVE CONSIDERED THE DECISION OF THE CO-ORDINATE BENCH OF THE ITAT IN THE CASE OF DHAN LAXMI CREDIT CO-OPERATIVE SOCIETY VIDE ITA NO. 2426 /AHD/2013 DATED 24TH JAN, 2017. IN THE ABOVE DECISION, THE COORDINATE BENCH H AS DECIDED ON IDENTICAL ISSUE ON THE CLAIM OF THE ASSESSEE FOR PRO RATA EXPENSES FOR EARNING INTEREST INCOME. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER:- 10. WE FURTHER OBSERVE THAT DURING THE COURSE OF H EARING BEFORE US, ID. AR ACCEPTED THAT ASSESSEE IS NOT ELIGIBLE TO CLAIM DED UCTION U/S 80P(2)(A)(I) OF THE ACT ON THE INTEREST EARNED ON SURPLUS DEPOSITS/ INVESTMENTS HELD WITH SCHEDULED/NATIONALIZED BANK BUT URGED FOR ALLOWING DEDUCTION ON PRO RATA EXPENSES INCURRED FOR EARNING THE INTEREST INCOME A ND ALSO FOR ALLOWING STATUTORY DEDUCTION OF RS.50,000/- U/S 80P(2)(C)(II ) OF THE ACT. LD. AR ALSO SUBMITTED THAT A TOTAL EXPENSES INCURRED FOR THE YE AR STOOD AT RS.28,60,298/- AND PRO RATA EXPENSES FOR EARNING IN TEREST INCOME OF RS.8,55,854/- AS AGAINST TOTAL INTEREST INCOME OF R S.42,39,515/- WILL BE CALCULATED AT RS.5,77,423/-. 11. WE OBSERVE THAT ID. AR HAS REFERRED TO THE DECI SION OF THE CO-ORDINATE BENCH IN THE CASE OF KHERAVA CO-OP. CREDIT SOCIETY LTD. VS. LTO, WARD-4, MEHSANA IN ITA NO.2704/AHD/2015 FOR ASST. YEAR 2012 -13 WHEREIN SIMILAR ISSUE OF ALLOWING PRO RATA EXPENSES AND ALLOWING ST ATUTORY DEDUCTION OF RS.50,000/- U/S 80P(2)(C)(II) OF THE ACT HAS BEEN A DJUDICATED BY THE CO- ORDINATE BENCH BY OBSERVING AS UNDER :- 10. FROM GOING THROUGH THE ALTERNATE SUBMISSIONS MA DE BY THE ASSESSEE WE FIND THAT MAJOR PORTION OF INTEREST INCOME IS FR OM GOVERNMENT SECURITIES AND ARE NOT IN THE NATURE OF SHORT TERM DEPOSITS. T HEREFORE, THE FACTS OF THE CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACTS DIS CUSSED IN THE CASE OF TOTAGARS CO-OP. SALE SOCIETY LTD. VS. ITO (SUPRA) A ND THAT OF CO-ORDINATE BENCH IN THE CASE OF JAFARI MOMIN VIKAS CO-OP. CRED IT SOCIETY LTD. (SUPRA) AS WELL AS IN THE CASE OF DHANALAXMI CREDIT CO-OP. SOCIETY LTD. VS. ITO (SUPRA). THIS INTEREST INCOME IS ON INVESTMENTS NOT OF SHORT TERM NATURE EXCEPT BANK INTEREST WHICH TOO INCLUDES INTEREST ON FIXED DEPOS ITS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT AS THE ASSES SEE SUO MOTO HAS GIVEN A PROPOSITION OF TAXING THE INTEREST AND COMM ISSION INCOME ON INVESTMENTS TO BE TAXED U/S 56 OF THE ACT AND HAS A LSO SHOWN THAT SMC-ITA NO. 3360/AHD/2016 THE POSUN CO. OP. CREDIT SOC LTD VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 3 OF 4 PROPORTIONATE EXPENSES OF RS.3,31,828/- HAVE BEEN I NCURRED TO EARN THE ABOVE INCOME AND THE SAME HAS DULY BEEN ACCEPTED BY THE ASSESSING AUTHORITY, SO WE FIND IT JUSTIFIED THAT ASSESSING O FFICER HAS RIGHTLY TAXED THE INTEREST INCOME OF RS.2,16,689/- AS INCOME FROM OTH ER SOURCES. HOWEVER, DEDUCTION U/S 80P(2)(C) OUGHT TO HAVE BEEN ALLOWED TO THE ASSESSEE AS SECTION 80P(2)(C) READS AS UNDER:- SECTION 8OP(2)(C) (C) IN THE CASE OF A CO- OPERATIVE SOCIETY ENGAGED IN ACTIVITIES OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) (EITHER INDEPENDENTLY OF, OR IN ADDITION TO, ALL OR ANY OF THE ACTIVITIES SO SPECIF IED), SO MUCH OF ITS PROFITS AND GAINS ATTRIBUTABLE TO SUCH ACTIVITIES AS DOES N OT EXCEED,- (I) WHERE SUCH CO- OPERATIVE SOCIETY IS A CONSUMERS ' CO- OPERATIVE SOCIETY, ONE HUNDRED THOUSAND RUPEES; AND (II) IN ANY OTHER CASE, FIFTY THOUSAND RUPEES. EXPLANATION.- IN THIS CLAUSE,' CONSUMERS' CO- OPERA TIVE SOCIETY' MEANS A SOCIETY FOR THEBENEFIT OF THE CONSUMERS;] FROM GOING THROUGH THE ABOVE PROVISIONS IT IS VERY CLEAR THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OF RS.50,000/- U/S 80P(2) (A)(I) OF THE ACT AND THE SAME SHOULD HAVE BEEN ALLOWED BY THE ASSESSING AUTH ORITY.. 11. THEREFORE, IN VIEW OF OUR ABOVE DISCUSSION, WE QUASH THE ORDER OF ID. CIT(A) ENHANCING THE ADDITION AND ALSO PARTLY ALLOW THE APPEAL OF ASSESSEE AND ACCORDINGLY THE ADDITION MADE BY ASSESSING OFFI CER SHALL BE REDUCED TO RS.1,68,305/- [RS.2,16,689/- MINUS RS.50,000/- DEDU CTION U/S 80P(2)(C)]. 11. RESPECTFULLY FOLLOWING THE JUDGMENT OF HON. JUR ISDICTIONAL HIGH COURT AND EXAMINING THE FACTS OF THE CASE AS ALSO IN THE LIGHT OF DECISION OF THE CO-ORDINATE BENCH DISCUSSED IN THE ABOVE PARAGRAPHS , WE ARE OF FOLLOWING VIEW :- (1) ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P( 2)(A)(I) OF THE ACT ON THE INTEREST INCOME EARNED FROM SURPLUS DEPOSITS HELD W ITH NATIONALIZED/SCHEDULED BANKS. (2) ASSESSEE WILL BE ELIGIBLE TO STATUTORY DEDUCTIO N OF RS.50,000/-U/S 80P(2)(II) OF THE ACT. (3) ASSESSEE WILL ALSO BE ELIGIBLE TO CLAIM PRO RAT A EXPENSES FOR EARNING INTEREST INCOME OF RS.8,55,854/- ASSESSEE'S CLAIM O F PRO RATA EXPENSES OF RS.5,77,423/- AGAINST THE INTEREST INCOME OF RS.8,5 5,854/- AFTER DUE VERIFICATION BY THE LEARNED ASSESSING OFFICER. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO VERI FY ASSESSEE'S CLAIM OF PRO RATA EXPENSES BY EXAMINING THE RECORD TO BE SHOWN F OR VERIFICATION BY THE ASSESSEE. NEEDLESS TO MENTION PROPER OPPORTUNITY OF BEING HEARD IS TO BE GIVEN TO THE ASSESSEE. WE ORDER ACCORDINGLY. THE AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. IN VIEW OF THE ABOVE MENTIONED FACTS AND DECISION O F THE CO-ORDINATE BENCH OF ITAT, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASS ESSEES CLAIM ON PRO RATA EXPENSES AFTER EXAMINATION OF RECORD TO BE PRODUCED BY THE ASSESSEE FOR COMPUTING THE DEDUCTION U/S. 80P IN RESPECT OF INTE REST EARNED FROM DEPOSIT HELD WITH BANK OF BARODA AND MGVCL. THEREFORE, THE APPEA L OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. SMC-ITA NO. 3360/AHD/2016 THE POSUN CO. OP. CREDIT SOC LTD VS. ITO ASSESSMENT YEAR: 2013-14 PAGE 4 OF 4 3. THE VIEWS SO EXPRESSED BY THE DIVISION BENCH BIN D ME. 4. IN VIEW OF THE ABOVE POSITION, I DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR GIVING RELIEF BY WAY O F NETTING OF INTEREST. ORDERED, ACCORDINGLY. 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIS TICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON THE 23 RD DAY OF JULY, 2018. SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) AHMEDABAD, THE 23 RD DAY OF JULY, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ..ORDER PREPARED AS PER 2 PA GES MANUSCRIPT OF HONBLE AM WHICH ARE ATTACHED IN ITA NO.3359/AHD/2016...........23.07.2018....... ........ 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ..23.07.2018. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: ... 23.07.2018..... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: ... 23.07.2018.... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 23.07.2018 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 8. DATE OF DESPATCH OF THE ORDER: ......