State Bank of India Supervising Official's Co.Operative Credit Society Ltd., Ahmedabad V. The Income Tax Officer, Ward-3(4), Ahmedabad

ITA 347/AHD/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2371 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Assessee Lawyers: M K PATEL
• Keywords: Revision of order
• Section: 143(3); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AN D SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA NO. 347/AHD/2014 / ASSESSMENT YEAR: 2010-11 STATE BANK OF INDIA SUPERVISING OFFICIALS CO-OPERATIVE CREDIT SOCIETY LTD, 4 TH FLOOR, SBI BUILDING, LAL DARWAJA, BADRA, AHMEDABAD .. APPELL ANT PAN : AACAS 3596 E VS THE INCOME TAX OFFICER, WARD 3 (4), AHMEDABAD .. RESPONDENT ASSESSEE(S) BY : SHRI M.K. PATEL, AR REVENUE BY : SHRI R.I PATEL, CIT-DR / DATE OF HEARING 11/02/2016 /DATE OF PRONOUNCEMENT 31/03/2016 / O R D E R PER SHAILENDRA K. YADAV, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX, AHMEDABAD-1, AHMEDABAD, DATED 28.11.2013 FOR ASSESSMENT YEAR 2010-11, ON THE FOLL OWING GROUNDS:- (1) THAT ON FACTS, AND IN LAW, THE LEARNED CIT-AHMEDAB AD-I, HAS GRIEVOUSLY ERRED IN ASSUMING JURISDICTION U/S 263 O F THE ACT. (2) THAT ON FACTS, AND IN LAW, THE LEARNED CIT-AHMEDABA D-I, HAS GRIEVOUSLY ERRED IN HOLDING THAT APPELLANT IS NOT E NTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST INCOME OF RS.42,14,854/-. ITA NO. 347/AHD/2014 STATE BANK OF INDIA SUPERVISING OFFICIALS CO-OP. CREDIT SOCIETY LTD VS. ITO AY : 2010-11 2 (3) THAT ON FACTS AND IN LAW, IT OUGHT TO HAVE BEEN HEL D THAT ENTIRE INCOME OF APPELLANT IS DEDUCTIBLE U/S 80P(2)(A)(I) OF THE ACT, AS PRAYED FOR. (4) THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND ANY GROUND OF APPEAL. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY ENGAGED I N PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ORIGINAL RETU RN OF INCOME WAS FILED ON 25.09.2010 DECLARING TOTAL INCOME AT RS. NIL. TH E ORDER U/S 143(3) DATED 05.11.2012 WAS PASSED AFTER DISALLOWING A DED UCTION U/S 80P(2) TO THE EXTENT OF RS.1,09,632/- WHICH WAS INCOME DER IVED FROM GUESTHOUSE. THE ASSESSED INCOME, AS PER ASSESSMENT ORDER DATED 05.11.2012, WAS RS.1.09,632/-. 2.1. SUBSEQUENTLY, IT WAS FOUND THAT THE ASSESSEE HAD EARNED INTEREST INCOME OF RS.42,14,854/- FROM SBI. THE ASSESSEE HAS CLAIMED THIS INTEREST INCOME FROM SBI AS DEDUCTIBLE U/S 80P OF T HE ACT. AS PER THE PROVISIONS OF SECTION 80P(2)(D), ANY INCOME BY WAY OF INTEREST/DIVIDEND DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENT WITH ANY OTHER COOPERATIVE SOCIETY IS AL LOWABLE AS A DEDUCTION. IN THIS CASE, THE CIT OBSERVED THAT THE ASSESSEE HAD DERIVED INTEREST INCOME OF RS.42.14 LACS FROM SBI WHICH IS NOT A CO-OPERATIVE SOCIETY AND HE ACCORDINGLY HELD THAT ASSESSEE WAS N OT ELIGIBLE TO CLAIM DEDUCTION U/S 80P ON INTEREST OF RS.42,14,854/- REC EIVED FROM SBI. THE CIT ISSUED A SHOW-CAUSED NOTICE TO THE ASSESSEE AND HAVING CONSIDERED THE CONTENTIONS ON BEHALF OF THE ASSESSE E, THE CIT IN CONCLUDING PARAGRAPH OF HIS ORDER HELD AS UNDER:- ITA NO. 347/AHD/2014 STATE BANK OF INDIA SUPERVISING OFFICIALS CO-OP. CREDIT SOCIETY LTD VS. ITO AY : 2010-11 3 8. CONSIDERING THE ABOVE FACTS AND FINDINGS, IT IS AMPLY CLEAR THAT THE AO HAS ERRED IN TREATING THE INTEREST INCO ME DERIVED BY THE ASSESSEE FROM SBI AS DEDUCTIBLE U/S 80P(2) IN C ONTRAVENTION OF THE PROVISIONS OF SECTION 80P(2)(D), WHICH ARE A PPLICABLE TO ALL CO-OPERATIVE SOCIETIES. AS A RESULT THEREOF, THERE WAS SUBSTANTIAL LOSS OF REVENUE TO THE EXCHEQUER SINCE THE INTEREST INCOME OF RS.42,14,854/- WAS NOT BROUGHT TO TAX. ACCORDINGLY , IT IS HELD THAT THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 0 5.11.2012 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. HENCE, THE SAID ASSESSMENT FOR AY 2010-11 DATED 05.11.2012 IS CANCELLED AND THE AO IS DIRECTED TO MAKE FRESH ASSESSMENT OF THE TOTAL INCOME OF THE ASSESSEE FOR THE SAID ASSESSMENT YEAR . 2.2 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE ORDER OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD VS. ITO, REPORTED IN [2015] 55 TAXMANN.COM 447 (KARNATAKA), WHEREIN IN S IMILAR SET OF FACTS, THE HONBLE KARNATAKA HIGH COURT HELD AS UNDER:- A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUS INESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS P ROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS M EMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT I MMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEE P THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIE S TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE B USINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABL E TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME U NDER SECTION 80P OF THE ACT. [PARA 8] ITA NO. 347/AHD/2014 STATE BANK OF INDIA SUPERVISING OFFICIALS CO-OP. CREDIT SOCIETY LTD VS. ITO AY : 2010-11 4 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVES TED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBE RS. 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 LENDIN G MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THE Y HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTERES T. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED I N TERMS OF SECTION 80P(1) OF THE ACT. (PARA 10] IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION ON THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. [PARA 10] 2.3 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE O N BEHALF OF THE REVENUE. IN THE PRESENT CASE, IT IS UNDISPUTED THAT THE AMOUNT IN QUESTION, WHICH WAS INVESTED IN SBI TO EARN INTERES T, WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILIT Y. IT WAS ALSO NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. 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 TAKE RS. THEREFORE, THE ASSESSEE HAD DEPOSITED THE MONEY IN SBI SO AS TO EA RN INTEREST. THE SAID INTEREST INCOME WAS ATTRIBUTABLE TO CARRYING O N THE BUSINESS OF BANKING AND THEREFORE IT WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. 2.4 IN VIEW OF ABOVE LEGAL DISCUSSION, WE ARE NOT I NCLINED TO CONCUR WITH THE FINDINGS OF THE CIT. THEREFORE, RESPECTFU LLY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CAS E OF TUMKUR ITA NO. 347/AHD/2014 STATE BANK OF INDIA SUPERVISING OFFICIALS CO-OP. CREDIT SOCIETY LTD VS. ITO AY : 2010-11 5 MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA), WE SET ASIDE THE ORDER OF THE CIT AND ALLOW THIS APPEAL OF THE ASSES SEE. 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 31ST MARCH 2016 AT AHMEDABAD. SD/- SD/- N.K. BILLAIYA SHAILENDRA K. YADAV (ACCOUNTANT MEMBER) (JUDICI AL MEMBER) AHMEDABAD; DATED 31/03/2016 BIJU T., PS !'!# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' ' # / CONCERNED CIT 4. ' ' # ( ) / THE CIT(A) 5. &'( ! , ' ! , / DR, ITAT, AHMEDABAD 6. (- . / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD