The ACIT, Circle-5, Baroda V. The Nimeta Bid Samudayak Sahakari Kheti Mandli Ltd., Baroda

ITA 3444/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6424 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMIR TEKRIWA LA
• Assessee Lawyers: BHAVIN J MARFATIA
• Keywords: Business income
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D.AGRAWAL, V.P. & HONBLE SHRI T.K. SHARMA, J.M.) I.T.A. NO. 3444/AHD./2009 ASSESSMENT YEAR : 2006-2007 A.C.I.T., CIRCLE-5, BARODA .(APPELLANT) VS- THE NIMETA BID SAMUDAYAK SAHAKARI KHETI MANDLI LTD. , BARODA (PAN : AAAAB 5678B) (RESPONDENT) APPELLANT BY : SHRI SAMIR TEKRIWA LA, SR.D.R. RESPONDENT BY : SHRI BHAVIN J. MARFAT IA, A.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER DATED 26-10-2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-V, BARO DA FOR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSEE IS AN AGRARIAN CO-OPERATIVE SOCIETY INVOLVED IN COLLECTION AND MARKETING OF AGRICULTURA L PRODUCTS ON A CO-OPERATIVE BASIS FOR THE MEMBERS OF THE CO-OPERATIVE SOCIETY ON A NO N-PROFIT BASIS. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ON 12.03.2007 DECLARING THE TOTAL INCOME AT NIL. THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE I.T.ACT, 1961 ON 12.12.2008 DETERMINING THE TOTAL INCOME AT RS.33,85,463/-. IN THIS ASSESSMENT ORDER, THE AO DISALLOWED THE DEDUCTION OF RS. 33,85 ,463/- CLAIMED BY THE ASSESSEE UNDER SECTION 80P ON INTEREST INCOME ON WHICH TDS W AS DEDUCTED BY SSNL. THE AO STATED THAT THE INTEREST INCOME HAS ARISEN ON THE C OMPENSATION AMOUNT RECEIVED ON ACCOUNT OF COMPULSORY ACQUISITION OF LAND BY SSNL A ND THAT THE SAID INCOME HAS NOT ATTRIBUTABLE TO THE ACTIVITIES OF THE CO-OPERATIVE SOCIETY. THEREFORE, THE ASSESSEE IS NOT ITA NO.3444/AHD/2009 2 ENTITLED TO THIS CLAIM OF RS. 33,85,463/- UNDER SE CTION 80P OF THE I.T. ACT AND HENCE, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. 3. ON APPEAL BEFORE THE LD. CIT(A), IT WAS CONTEND ED THAT CO-OPERATIVE SOCIETY IS OPERATING FOR THE BENEFIT AND WELFARE OF THE FARMER S ON NO-PROFIT NO-LOSS BASIS AND THAT THE INTEREST ON COMPENSATION HAD DIRECT BEARING TO THE LAND HOLDING OF THE SOCIETY AND THE DEDUCTION UNDER SECTION 80P WAS ALLOWABLE. WITH OUT PREJUDICE, IT WAS FURTHER CONTENDED THAT IF AT ALL THE INTEREST INCOME IS TO BE TAXED, ONLY THE INTEREST INCOME PERTAINING TO THE RELEVANT ASSESSMENT YEAR BE TAXED AND THE BALANCE BE TAXED IN RESPECTIVE YEARS ON ACCRUAL BASIS. 3.1 AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A), FOLLOWING THE DECISIONS OF THE HONBLE APEX COURT IN THE CASES OF T.N.K. GOVINDARAJULU CHETTY, RAMABHAI VS- CIT REPORTED IN 181 ITR 400 AND K.S. KRISHNA RAO VS- CIT REPORTED IN 181 ITR 408 (SC), HELD THA T ONLY THE ACCRUED INTEREST FOR THE ASSESSMENT YEAR 2006-07 WAS TAXABLE PROVIDED NECESS ARY DETAILS ARE SUBMITTED BEFORE THE AO. HE, ACCORDINGLY DIRECTED THE AO TO ALLOW ON LY PROPORTIONATE CREDIT FOR TDS FOR THE RELEVANT FINANCIAL YEAR, IN VIEW OF PROVISI ONS OF SECTION 199. THE REASONING GIVEN BY THE LD. CIT(A) IS CONTAINED IN PARA 4.3 OF THE IMPUGNED ORDER, WHICH READS AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS OF THE APPELLANT. I AM IN AGREEMENT WITH THE AO THAT I NTEREST ON COMPENSATION CANNOT BE SAID TO BE INCOME ARISING FROM THE BUSINESS ACTIVITIES OF THE APPELLANT, AS APPELLANT IS NOT IN THE BUSINESS OF S ALE OF AGRICULTURAL LAND AND THERE IS NO DIRECT NEXUS BETWEEN THE INTEREST INCOME AND THE MARKETING ACTIVITIES OF THE SOCIETY. SINCE THE INTEREST INCOM E IS NOT THE BUSINESS INCOME OF THE APPELLANT NO DEDUCTION U/S. 80P IS ALLOWABLE. H OWEVER, I AM IN AGREEMENT WITH THE ALTERNATE PLEA OF APPELLANT THAT THE INTER EST ACCRUED ON ADDITIONAL COMPENSATION WAS TO BE SPREAD OVER DIFFERENT YEARS IN LIGHT OF DECISION OF APEX COURT IN THE CASE OF T.N.K. GOVINDARAJULU CHETTY, R AMABHAI VS CIT 181 ITR 400 & K.S. KRISHNA RAO VS. CIT - 181 ITR 408(SC) AN D THAT ONLY THE ACCRUED INTEREST FOR A.Y. 2006-07 WAS TAXABLE PROVIDED NECE SSARY DETAILS ARE SUBMITTED BEFORE THE AO. FURTHER, ONLY PROPORTIONATE CREDIT F OR TDS FOR THE RELEVANT FINANCIAL YEAR BE GIVEN IN VIEW OF PROVISIONS OF SE CTION 199. THE FINANCE ACT 2009 W.E.F. A.Y. 2010-11 ONWARDS HAS MANDATED THAT SUCH INTEREST INCOME BE ASSESSED AS INCOME FROM OTHER SOURCES U/S. 56 IN TH E YEAR IN WHICH IT IS ITA NO.3444/AHD/2009 3 RECEIVED SUBJECT TO DEDUCTION U/S. 57. SINCE THE RE LEVANT ASSESSMENT YEAR IS 2006-07, THE AMENDED PROVISIONS ARE NOT APPLICABLE. IN VIEW OF ABOVE, GROUND NO. 1 IS PARTLY ALLOWED. 4. AGGRIEVED WITH THE ABOVE ORDER, THE REVENUE IS I N APPEAL BEFORE THE TRIBUNAL WITH THE FOLLOWING GROUNDS: 1(I). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN ACCEPTING THE ASSESSEE'S ALTERNATE PLEA AN D DIRECTING THE ASSESSING OFFICER TO TAX THE ACCRUED INTEREST ON ADDITIONAL C OMPENSATION IN DIFFERENT YEARS. 1(II). THE LD. CIT(A) FAILED TO APPRECIATE THAT NOW HERE THE ASSESSEE HAS MENTIONED WHETHER IT HAS ADOPTED THE METHOD OF ACCO UNTING AS CASH BASIS OR MERCANTILE BASIS. THE AMOUNT AS AND WHEN RECEIVED B Y THE ASSESSEE IN THE A.Y. 2006-07 (F.Y. 2005-06) WAS TREATED AS INCOME OF THE RELEVANT ASSESSMENT YEAR. RELIEF CLAIMED IN APPEAL. THE ORDER OF THE CIT(A) ON THE ABOVE ISSUES BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI BHAVIN J. MARFATIA APPEARED AND POINTED OUT THAT CONTROVERSY INVOLVED IN THIS GROUNDS OF APPEAL STANDS COVERED BY THE DECISION OF THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF SAJJANSINH N. CHAUHAN VS- ITO REPORTED IN 232 CTR 268 (GUJ.) WHEREIN IT WAS HELD THAT INTEREST ON ENHANCED COMPENSATION RECEIVED FOR ACQUISITION OF LAND ACCRUES FROM YEAR TO YEAR AND HAS TO BE SPREAD OVER RESPECTIVE Y EARS. HE ACCORDINGLY CONTENDED THAT THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 6. ON THE OTHER HAND, SHRI SAMIR TEKRIWALA, SR.D.R. , APPEARING ON BEHALF OF THE REVENUE, COULD NOT CONTROVERT THE AFORESAID SUBMISS IONS OF THE LD. COUNSEL OF THE ASSESSEE. THE GRIEVANCE OF THE LD. D.R. IS ONLY THA T THE LD. CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAS NOT MENTIONED WHETHER IT HAS ADOPTED THE METHOD OF ACCOUNTING AS CASH BASIS OR MERCANTILE BASIS. THE AMOUNT AS AN D WHEN RECEIVED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2006-07 I.E. FINANCIAL YEAR 200 5-06 WAS TREATED AS INCOME OF THE RELEVANT ASSESSMENT YEAR. ITA NO.3444/AHD/2009 4 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THI S INTEREST INCOME OF RS. 33,85,463/- IS A RESULT OF AN AWARD BY THE HONBLE GUJARAT HIGH COUR T. THE ASSESSEE GOT COMPENSATION ON ACCOUNT OF COMPULSORY ACQUISITION OF LAND BY SSN L ON WHICH IT GOT INTEREST OF RS. 33,85,463/- ON ACCOUNT OF DELAY IN COMPENSATION AMO UNT. IN THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT THE ASSESSEE IS NOT ENTITLED T O DEDUCTION UNDER SECTION 80P BUT HE HAS ACCEPTED THE ALTERNATE PLEA OF THE ASSESSEE TO TAX THE ACCRUED INTEREST IN THE RELEVANT ASSESSMENT YEARS. HENCE, THE VIEW TAKEN BY THE LD. CIT(A), LOOKING TO THE FACTS, IS FAIR AND REASONABLE. WE, THEREFORE, INCLI NE TO UPHOLD THE ORDER OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OP EN COURT ON 14.06.2011 SD/- SD/- (G.D.AGRAWAL) (T.K. SHARMA) VICE-PRESIDENT JUDICIAL MEMBER DATED : 14/06/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.