M/s Kakinada Co-Oprative Building Society Ltd., Kakinada V. THE ADDL. CIT, Kakinada

ITA 348/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2158 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Assessee Lawyers: C V S MURTHY
• Keywords: Business income; Revised return
• Section: 143(3)

Judgement Text

ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.348&349/VIZAG/2013 ( / ASSESSMENT YEARS : 2007-08 & 2009-10) M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD. KAKINADA VS. ADDL. CIT KAKINADA [ PAN: AAAAT7000L ] ( ) / APPELLANT) ( *+) / RESPONDENT ) ./ I.T.A.NO.386/VIZAG/2013 ( / ASSESSMENT YEARS : 2007-08) DCIT CIRCLE - 1 KAKINADA VS. M/S. KAKINADA CO - OPERATIVE BUILDING SOCIETY LTD. KAKINADA ( ) / APPELLANT) ( *+) / RESPONDENT ) ' # / APPELLANT BY : SHRI C.V.S. MURTHY, AR &'' # / RESPONDENT BY : SHRI M.K. SETHI, DR # + / DATE OF HEARING : 30.11.2015 # + / DATE OF PRONOUNCEMENT : 22.01.2016 ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE TWO APPEALS ARE FILED BY THE ASSESSEE, ONE A GAINST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 22.3.2013 FOR THE AS SESSMENT YEAR 2007-08 AND THE SECOND AGAINST THE ORDER OF CIT(A)- 11, MUMBAI CAMP OFFICE VISAKHAPATNAM DATED 26.2.2013 FOR THE ASSESS MENT YEAR 2009-10. THE CROSS APPEAL WAS FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2007-08 AGAINST THE ORDER OF CIT(A), VISAKHAPA TNAM. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A CO-OPE RATIVE BUILDING SOCIETY LIMITED, ENGAGED IN COLLECTING DEPOSITS, LE NDING LOANS TO ITS MEMBERS FOR PURCHASE OF SITES, BUILDINGS AND CONSTR UCTION OF HOUSES. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, I.E. A SSESSMENT YEAR 2007-08, ASSESSEE HAS FILED A RETURN OF INCOME DECL ARING TOTAL INCOME OF RS.10,88,140/-. THE A.O. HAS COMPLETED THE ASSESSM ENT U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS TH E ACT) ON 30.12.2009 BY DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.60,98,516/-. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT(A) AND RAISED MAINLY TWO GROUNDS OF APPEALS. THE FIRS T GROUND RELATING TO DEDUCTION U/S 80P OF THE ACT AND THE SECOND RELATIN G TO TAXABILITY OF INTEREST INCOME. ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 3 3. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT BY M ISTAKE THE ASSESSEE CREDIT SOCIETY DID NOT CLAIM THE DEDUCTION U/S 80P OF THE ACT AND REQUESTED THE A.O. TO ALLOW THE DEDUCTION U/S 8 0P OF THE ACT. THE A.O. REJECTED THE REQUEST OF THE ASSESSEE ON THE GR OUND THAT THE ASSESSEE DID NOT FILE A REVISED RETURN TO MAKE THE CLAIM AND ALSO IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LIMITED. IT IS FURTHER CONTENDED BEFORE TH E LD. CIT(A) THAT THE ASSESSEE BEING A CO-OPERATIVE SOCIETY RECEIVING DEP OSITS FROM THE MEMBERS AND PROVIDING CREDIT FACILITIES TO ITS MEMB ERS SHOULD BE ALLOWED AS A DEDUCTION U/S 80P OF THE ACT. HE FURTHER CONT ENDED THAT THE ASSESSEE BEING A CO-OPERATIVE SOCIETY RECEIVING DEP OSITS AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS SHOULD BE ALLOWED DEDUCTION U/S 80P OF THE ACT AND CONTENDED THAT THE A.O. DID NOT CONSIDE R DEDUCTION ON TECHNICAL GROUNDS AND ALSO SUBMITTED THAT FOR THE A SSESSMENT YEAR 2009-10, A.O. HAS GRANTED EXEMPTION U/S 80P OF THE ACT. THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASS ESSEE HE HAS OBSERVED THAT I FIND FROM THE ASSESSMENT ORDER THAT THE DEDUCTION U/S 80P OF THE ACT WAS NOT ALLOWED AS IT WAS NOT CLAIME D IN THE RETURN OF INCOME FILED. HE FURTHER OBSERVED THAT THE ASSESSE E BEING A COOPERATIVE BANK AND PROVIDING CREDIT TO ITS MEMBERS WOULD BE E NTITLED TO DEDUCTION U/S 80P OF THE ACT, EVEN SUCH CLAIM WAS NOT MADE IN THE RETURN OF ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 4 INCOME OR BY WAY OF FILING THE REVISED RETURN BEFOR E ASSESSMENT. AS THE SAID SCHEME OF DEDUCTION IS IN THE NATURE OF RELIEF PROVIDED SPECIALLY IN THE STATUTE, THE ASSESSEE WOULD BE ENTITLED TO SUCH A DEDUCTION SUBJECT TO SATISFACTION OF THE ELIGIBILITY CONDITIONS PRESC RIBED IN THE STATUTE AND DIRECTED TO THE A.O. TO GRANT DEDUCTION U/S 80P OF THE ACT, SUBJECT TO VERIFICATION OF ELIGIBILITY CONDITIONS CONTAINED IN SECTION 80P OF THE ACT. 4. IN SO FAR AS TAXABILITY OF INTEREST ON FIXED DEP OSIT IS CONCERNED, IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESS EE COLLECTS THE DEPOSITS FROM MEMBERS AND LENDS MONEY TO MEMBERS FO R INTEREST AND WHILE CARRYING OUT SUCH ACTIVITY, IT HAS PARKED CER TAIN FUNDS AS A FIXED DEPOSITS IN THE BANKS. THEREFORE, MERELY BECAUSE T HE FUNDS WERE PARKED IN A BANK DEPOSIT, THE INCOME GENERATED FROM SUCH DEPOSITS COULD NOT BE DENIED A CHARACTER OF BUSINESS INCOME AS THE ACTIVITY OF SOCIETY IS TO EARN INTEREST INCOME BY COLLECTING TH E DEPOSITS FROM THE MEMBERS. THE LD. CIT(A) AFTER CONSIDERING THE ABOV E SUBMISSIONS OF THE ASSESSEE AND BY FOLLOWING THE DECISION OF THE A SSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10, HE HAS HELD THAT INTER EST INCOME EARNED FROM THE BANK DEPOSITS IS INCOME FROM OTHER SOURCES AND DISMISSED THE GROUND RAISED BY THE ASSESSEE. ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 5 5. ON BEING AGGRIEVED ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) IN RES PECT OF INTEREST INCOME. THE REVENUE ALSO CARRIED MATTER IN APPEAL AGAINST THE ORDER OF CIT(A) IN RESPECT OF ALLOWABILITY OF DEDUCTION U/S 80P OF THE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ASSESSEE COLLECTS THE DEPOSITS FROM THE MEMBERS AND LENDS MO NEY TO MEMBERS FOR INTEREST AND THIS IS THE ACTIVITY OF THE ASSESS EE AND THEREFORE THE INTEREST INCOME EARNED BY THE ASSESSEE HAS TO BE TR EATED AS A BUSINESS INCOME OF THE ASSESSEE AND ACCORDINGLY IT IS ELIGIB LE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. HE FURTHER SUBMITTED THAT WHEN THE ASSESSEE RECEIVED THE DEPOSIT FROM ITS MEMBERS, IF THE DEPOS IT IS NOT REQUIRED IMMEDIATELY FOR THE PURPOSE OF BUSINESS I.E. LENDIN G TO MEMBERS OF THE SOCIETY, THE ASSESSEE KEEPS MONEY IN THE BANK AND E ARNED THE INTEREST INCOME AND SUBMITTED THAT THE INTEREST INCOME EARNE D BY THE ASSESSEE IS IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE, THEREFORE, IT IS A BUSINESS INCOME AND NOT AN INCOME FROM OTHER SOURCE S. 7. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED TH AT THE INTEREST INCOME EARNED BY THE ASSESSEE IS INCOME FROM OTHER SOURCES NOT THE BUSINESS INCOME AND STRONGLY SUPPORTED THE ORDER PA SSED BY THE A.O. ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 6 8. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ISSUE INVOLVED IN THIS APPEAL SQUARELY COVERED BY THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ANDHRA PRADESH STATE CO-OPER ATIVE BANK LTD. (2011) 336 ITR 516 (AP) AND ALSO RELIED ON THE HON BLE KARNATAKA HIGH COURT JUDGEMENT IN THE CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO (2015) 66 (I) ITCL 343 (KARN-H C). 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A SSESSEE IS KAKINADA CO-OPERATIVE BUILDING SOCIETY ENGAGED IN THE BUSINE SS OF COLLECTING THE DEPOSITS, LENDING LOANS TO ITS MEMBERS FOR PURCHASE OF SITES, BUILDINGS AND CONSTRUCTION OF HOUSES. WHEN THE ASSESSEE SOCIE TY RECEIVES THE DEPOSITS FROM THE MEMBERS IN THE COURSE OF ITS BUSI NESS, IF THE DEPOSITS RECEIVED IS NOT NECESSARY FOR IMMEDIATE USE OF ITS BUSINESS I.E. LEND IT TO THE MEMBERS THE SAME IS DEPOSITED WITH THE BANK AND INTEREST INCOME IS EARNED. ACCORDING TO THE A.O., THE INTEREST INCOME EARNED BY THE ASSESSEE IS AN INCOME FROM OTHER SOURCES AND THE SA ME VIEW HAS BEEN CONFIRMED BY THE CIT(A). AFTER CAREFUL CONSIDERATI ON OF THE ORDERS OF THE AUTHORITIES BELOW AND ALSO CONSIDERING THE SECTION 80P(2)(A)(I) OF THE ACT, WE FIND THAT THE ASSESSEE HAS DEPOSITED SOME F UNDS IN THE KCTB AND DCCB AND OTHER BANKS WHEN THOSE FUNDS ARE NOT N ECESSARY FOR THE ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 7 IMMEDIATE BUSINESS PURPOSE. THEREFORE, THEY HAD DEPOSITED THE MONEY IN A BANK TO EARN THE INTEREST. THE SAID INT EREST INCOME WAS ATTRIBUTABLE TO THE CARRYING OF BUSINESS OF BANKING AND THEREFORE IT WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(2)(A) (I) OF THE ACT. THE HONBLE KARNATAKA HIGH COURT IN CASE OF GUTTIGEDARA RA CREDIT CO- OPERATIVE SOCIETY LTD. VS. ITO (SUPRA) BY FOLLOWING THE DECISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. ANDHRA PRADESH ST ATE CO-OPERATIVE BANK LTD. (SUPRA) HAS HELD THAT INTEREST EARNED ON THE DEPOSITS IN THE BANK BY THE ASSESSEE COOPERATIVE SOCIETY PROVIDING CREDIT FACILITY TO ITS MEMBERS WOULD BE QUANTIFIED FOR DEDUCTION U/S 80P O F THE ACT. WE THEREFORE RESPECTFULLY FOLLOWING THE JURISDICTIONAL HIGH COURT AS WELL AS THE JUDGEMENT OF THE KARNATAKA HIGH COURT, ALLOW TH IS GROUND OF APPEAL RAISED BY THE ASSESSEE. 10. SO FAR AS CROSS OBJECTION FILED BY THE REVENUE IS CONCERNED IN ITA NO.386/VIZAG/2013, THE LD. CIT(A)O HAS OBSERVED THA T THE ASSESSEE BY MISTAKE HAS NOT CLAIMED DEDUCTION U/S 80P OF THE AC T. THE A.O. FOR THE ASSESSMENT YEAR 2008-09 HAS ALREADY ALLOWED THE CLA IM OF THE ASSESSEE U/S 80P OF THE ACT AND THEREFORE DIRECTED THE A.O. TO GRANT THE DEDUCTION U/S 80P OF THE ACT SUBJECT TO FULFILLING THE CONDITIONS. WE FIND ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 8 NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THIS APPEAL RAISED BY THE REVENUE IS DISMISSED. 11. SO FAR AS IN APPEAL NO.349/VIZAG/2013 FOR THE A SSESSMENT YEAR 2009-10, FACTS AND THE ISSUE INVOLVED IS SIMILAR TO THE ASSESSMENT YEAR 2007-08 IN ITA NO.348/VIZAG/2013. IN VIEW OF THE A BOVE, THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. 12. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E VIDE ITA NOS.348 & 349/VIZAG/2013 ARE ALLOWED AND THE CROSS APPEAL FIL ED BY THE REVENUE VIDE ITA NO.386/VIZAG/2013 IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND JAN16. SD/- SD/- ( . ) (. ) ( G. MANJUNATHA) ( V. DURGA RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / /VISAKHAPATNAM: 3 / DATED : 22.01.2016 VG/SPS # & 5/ 6// COPY OF THE ORDER FORWARDED TO :- 1. ' / THE APPELLANT M/S. KAKINADA CO-OP. BUILDING SOCIETY LTD., D.NO. 13-14-13, RAMAYYA STREET, SURYARAOPETA, KAKINADA 2. &'' / THE RESPONDENT ADDL. CIT, KAKINADA RANGE, KAKINADA 3. THE DCIT CIRCLE-1, KAKINADA 4. 8 / THE CIT, VISAKHAPATNAM ITA NOS.348,349&386/VIZAG/2013 M/S. KAKINADA CO-OPERATIVE BUILDING SOCIETY LTD., K AKINADA 9 5. 8 ( ) / THE CIT(A), VISAKHAPATNAM 6. / & =, + = , / / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // AB = ( SR.PRIVATE SECRETARY ) + = , / / ITAT, VISAKHAPATNAM