The C.D. Co-operative Credit Society Ltd, Mandi V. DCIT, Circle, Mandi

ITA 341/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4550 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-10-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 15-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revenue expenditure; Co-operative Credit Society
• Section: 80P; 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH !, ' # $ , . .. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NOS. 340 TO 343/CHD/2018 '* + ,+ / ASSESSMENT YEARS : 2009-10 & 2012-13 TO 2014-15 THE C.D CO-OPERATIVE CREDIT SOCIETY LTD. HO GOHAR, PO CHAIL CHOWK THE: CHACHIOT , MANDI HIMACHAL PRADESH THE DCIT CIRCLE MANDI HIMACHAL PRADESH ./ PAN NO: AAABT2301D / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI. PARIKSHIT AGGARWAL SHRI. B.M. MONGA SHRI. ROHIT KAURA / REVENUE BY : SHRI. RAM MOHAN SINGH ! ' # / DATE OF HEARING : 28/05/2019 $%&'() # / DATE OF PRONOUNCEMENT : 30/05/2019 '-/ ORDER PER BENCH: ALL THE ABOVE APPEALS HAVE BEEN FILED BY THE ASSESS EE AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A), PALAMPUR. 2. SINCE THE ISSUES RAISED IN ALL THE ABOVE APPEALS ARE COMMON THEREFORE THEY ARE BEING DISPOSED OFF BY WAY OF THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. WE SHALL DEAL WITH ITA NO. 340/CH.D/20 18 FOR A.Y. 2009-10 AS A LEAD CASE WHEREIN ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDIN G THE DISALLOWANCE OF THE INTEREST EARNED FROM NATIONALIZED BANKS BY HOLDING THAT 80P( 2)(A)(I) IS NOT APPLICABLE ON THE INTEREST EARNED FROM NATIONALIZED BANKS, BY SIM PLY RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS, CO-OP ERATIVE SALES SOCIETY LIMITED, 322 ITR 283 (SC) WHICH JUDGMENT IS NOT APP LICABLE TO THE CASE OF THE APPELLANT. 2 3. THAT THE LD.CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF THE INTEREST EARNED FROM NATIONALIZED BANKS BY HOLDING IT TO BE AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) AS HELD BY VARIOUS HONBLE HIGH COURTS AND VARIOUS BEN CHES OF ITATS, AND THE LAW FAVOURABLE TO ASSESSEE SHOULD HAVE BEEN FOLLOWED. 4. THAT THE LD. CIT(A), HAS ERRED IN DENYING THE DE DUCTION UNDER SECTION 80P(2)(A)(I), ON THE INCOME OF APPELLANT TO WHICH T HE APPELLANT-ASSESSEE IS ENTITLED AS PER LAW. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. 2.1 ASSESSEE HAS RAISED AN ADDITIONAL GROUND WHICH READS AS UNDER: 6. WITHOUT PREJUDICE TO OUR EARLIER GROUNDS OF APPE AL AND STRICTLY IN THE ALTERNATIVE, THE LD. CIT(A) HAS ERRED IN MAKING WRO NG COMPUTATION OF BENEFIT ALLOWABLE TO THE APPELLANT-ASSESSEE UNDER SECTION 5 7 IN RESPECT OF INTEREST EARNED ON DEPOSITS WITH NATIONALIZED BANKS. 3. BRIEF FACTS OF THE CASE TAKEN FROM THE ORDER OF THE LD. CIT(A) ARE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY DOING THE BUSINE SS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS. RETURN OF INCOME WAS FILED ON 30.09 .2009 DECLARING GROSS TOTAL INCOME OF RS. 40,41,266/- AND DEDUCTION OF THE SAME AMOUNT U/S 80P(2)(A)(I). THE RECEIPT AND EXPENDITURE WERE AS UNDER : INCOME BY REVENUE INCOME : RS. 9,67,645/- BY INTEREST INCOME : RS. 3,72,52,861/- TOTAL INCOME : RS. 3,82,20,506/- EXPENDITURE BY INTEREST PAID : RS. 2,46,81,996/- BY REVENUE EXPENDITURE : RS. 94,97,245/- TOTAL EXPENDITURE : RS. 3,41,79,241/- 4. THE ASSESSING OFFICER HELD THAT THE INTEREST IN COME SHOWN BY THE ASSESSEE INCLUDES INTEREST RECEIVED ON MEMBER LOANS, BANK DE POSITS AND INTEREST RECEIVED ON HEAD OFFICE ACCOUNT. IN THE RETURN OF I NCOME, THE ASSESSEE HAD 3 DECLARED ITSELF TO BE TAXABLE AND DID NOT CLAIM ANY DEDUCTION AND PAID ADVANCE TAX ON THE INCOME. HOWEVER, DURING ASSESSME NT, THE ASSESSEE SOCIETY CLAIMED ITS INCOME TO BE DEDUCTIBLE U/S 80P(2)(A)(I ) WHICH ACCORDING TO THE ASSESSING OFFICER COULD NOT BE ALLOWED IN VIEW OF SECTION 80P(4) INSERTED W.E.F. A.Y. 2008-09. SECTION 80P(4) LAYS DOWN THAT THE DED UCTION U/S 80P IS NOT AVAILABLE TO A CO-OPERATIVE BANK OTHER THAN A PRIMA RY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. 'PRIMARY AGRICULTURAL CREDIT SOCIETY' MEANS A CO-OP ERATIVE SOCIETY, THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSE OR FOR PURPOSE S CONNECTED WITH AGRICULTURAL ACTIVITIES (INCLUDING THE MARKETING OF CROPS) AND T HE BYE-LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO-OPERATIVE SOCIETY AS MEMBER. THE BYE LAWS OF THE SOCIETY DID NOT PROHIBIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY AS A MEMBER. ALSO, AS PER THE BIFURCATION OF LOANS PROVI DED BY THE ASSESSEE, THE ASSESSEE HAS GIVEN MEDIUM TERM LOANS OF RS. 6,69,84 ,995/-, VEHICLE LOANS OF RS. 3,13,82,316/-, HOUSE LOAN OF RS. 1,06,80,878/- AND OTHER MEDIUM TERMS LOANS OF RS. 1,23,79,980/- WHICH ARE NOT ALL CONNECTED WITH AGRI CULTURAL ACTIVITIES OR MARKETING OF CROPS. THE ASSESSEE WAS THUS MAINLY PROVIDING SH ORT TERM AND MEDIUM TERMS LOANS LARGELY FOR NON-AGRICULTURAL ACTIVITIES. ASSE SSEE'S PAID UP SHARE CAPITAL IS MORE THAN RS. 1 LAC. AS PER THE LIST OF ITS BRANCHE S PROVIDED BY THE ASSESSEE, IT IS NOT CONFINED TO ONE TALUKA. IN VIEW OF ABOVE, THE A SSESSEE WAS HELD TO BE NOT ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT. 5. THE LD. CIT(A) HAS DELETED THE ADDITION BY TAKIN G INTO CONSIDERATION THE PROVISIONS OF SECTION 80P APPLICABLE TO CO-OPERATIV E CREDIT SOCIETIES BASED ON THE ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ITA NO. 762/CHD/2013 DT. 07/07/2015 AND ALLOWED DEDUCTION UNDER SECTION 80P( 2)(A)(I) AND 80P(2)(D). 4 5.1 HOWEVER THE LD. CIT(A) HELD THAT INTEREST DERIV ED FROM INVESTMENT OF ITS SURPLUS FUNDS OTHER THAN CO-OPERATIVE BANKS / SOCIE TIES IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(D) OF ACT, AND HELD IT TO BE TAXABLE UNDER SECTION 56 OF THE INCOME TAX ACT,1961 IN VIEW OF TH E DECISION OF THE APEX COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALES SOCIETY L TD. VS. ITO (322 ITR 283) (SC). THE ASSESSEE HAS EARNED INTEREST AMOUNTING TO RS. 5 5,62,589/- FROM THE NATIONALIZED BANKS AND INCURRED INTEREST EXPENSES OF RS. 3,43,074/- AND OTHER EXPENDITURE APPORTIONED IN THE RATIO OF INCOME EARN ED OF RS. 13,81,849/- AND HENCE THE LD. CIT(A) DISALLOWED THE NET AMOUNT OF R S. 38,37,666/-. 6. BEFORE US, THE LD. AR WHO ARGUED THE MATTER HAS BROUGHT TO OUR NOTICE THE ORDERS OF THE COORDINATE BENCH OF THE ITAT CHAN DIGARH IN THE CASE OF TIARA CO-OPERATIVE AGRICULTURAL SERVICE SOCIETY LTD. VS. ITO IN ITA NO. 905 TO 908/CHD/2017 DT. 01/05/2015 AND ALSO THE CASE OF SU NAM PRIMARY COOPERATIVE INCOME AGRICULTURAL DEVELOPMENT BANK LTD. VS. ACIT IN ITA NO. 509/CHD/2018 DT. 07/09/2018 WHEREIN IT WAS HELD THAT, WHERE THE FDRS IN BANKS ARE MADE FROM THE OPERATIONAL FUNDS OF THE CO-OPERATIVE SOCIETY WHILE CARRYING OUT ITS ACTIVITY OF PROVIDING CREDIT TO ITS MEMBERS, THEN THE INTEREST EARNED THEREON WOULD BE CONSIDERED AS INCIDENTAL INCOME EARNED IN CARRYING OUT THE ACTIVITY OF PROVIDING CREDIT TO ITS MEMBERS AND HENCE THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF INCOME TAX ACT,1961. 7. HAVING SAID THAT, IT NEEDS TO BE ESTABLISHED FRO M THE RECORDS BY THE REVENUE AS WELL AS BY THE ASSESSEE , IF THE ASSESSE E IS INVOLVED IN THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THE DEPOSITS MADE IN THE BANK ARE INDEED WERE IN THE COURSE OF CARRYING OUT THESE ACT IVITIES OR NOT. HENCE WE RESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER TO DETERMINE THIS ISSUE AND QUANTIFY THE AMOUNT AFTER AFFORDING THE OPPORTUNITY TO THE ASSESSEE. THE 5 ASSESSEE IS HEREBY DIRECTED TO SUBMIT ALL THE NECES SARY DOCUMENTS REQUIRED BY THE REVENUE TO ARRIVE AT A CONCLUSION AS DIRECTED B Y THIS TRIBUNAL. 8. REGARDING THE ADDITIONAL GROUND TAKEN BY THE ASS ESSEE WE HEREBY HOLD THAT THE SET OFF WOULD BE AVAILABLE TO THE ASSESSEE AFTER ESTABLISHING THE DIRECT NEXUS BETWEEN THE INTEREST EXPENSES INCURRED BY THE ASSESSEE AND THE INTEREST INCOME EARNED BY THE ASSESSEE FROM THE FDRS. NO DOU BLE DEDUCTION WOULD BE ALLOWED IN CASE THE ASSESSEE HAS ALREADY CLAIMED TH E INTEREST EXPENSES IN THE P&L ACCOUNT / INCOME - EXPENDITURE STATEMENT. SINCE THIS ISSUE IS ALSO CLOSELY ASSOCIATED WITH THE ISSUE REFERRED ABOVE TO THE ASS ESSEE, WE HEREBY DIRECT THE ASSESSING OFFICER TO EXAMINE THE ISSUE OF NEXUS AND ALLOW THE INTEREST AS PER THE PROVISIONS OF INCOME TAX ACT,1961. 9. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . .. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 30/05/2019 *% + ,- . -(/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. * * ! // CIT 4. * * ! / ()/ THE CIT(A) 5. - 23 4, * # *4), 67839/ DR, ITAT, CHANDIGARH 6. 38 :'/ GUARD FILE