Citizens Co. Op. Credit Society Ltd., Vadodara V. The Income Tax Officer, Ward-3(1)(1), Vadodara

ITA 3518/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8326 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 27-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Keywords: Business income
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER CITIZENS CO - OP. CREDIT SOCIETY LTD. VISWAKARA BHUVAN, DADI, BATWADA, VADODARA - 390001 PAN: AAAAC0414F (APPELLANT) VS THE ITO, WARD - 3(1)(1)(1), VADODARA (RESPONDENT) REVENUE BY : S H RI SAU RABH SINGH , SR. D . R. ASSESSEE BY: NONE DATE OF HEARING : 10 - 05 - 2 018 DATE OF PRONOUNCEMENT : 18 - 05 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2013 - 14 , ARIS ES FROM ORDER OF THE CIT(A) - 3, VADODARA DATED 19 - 08 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEALS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF YOUR APPELLANT, THE LD. CIT(A) HAS ERRED IN TREATING THE BANK FD INTEREST EARNED BY A CO - OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AS INCOME FROM OTHER SOURCES U/S 56 OF THE ACT AND THEREBY DISALLOWING DEDUCTION U/S 80 P OF THE ACT ON THE SAID FD INTEREST. THEREFORE YOUR APPELLANT PRAYS YOUR GOODSELF TO CONSIDER THE INTEREST INCOME EARNED ON THE BANK FD AS THE BUSINESS INCOME AND ALLOW THE DEDUCTION U/S 80P OF THE AC T. I T A NO . 35 18 / A HD/20 16 A SSESSMENT YEAR 2013 - 14 I.T.A NO. 3518 /AHD/20 16 A.Y. 2013 - 14 PAGE NO CITIZENS CO - OP CREDIT SOCIETY LTD. VS. ITO 2 3. THE BRIEF FACT OF THE ACT IS THAT ASSESSE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. NIL ON 10 TH DEC, 2013. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF 2 ND SEP, 2014. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS EARNED INTEREST INCOME TOTALING TO RS. 28 , 12 , 358/ - FROM NATIONALIZED BANK AND CO - OPERATIVE BANKS. HE HAS FURTHER NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION UNDER CHAPTER VI A OF THE A CT U/S. 80P(2)(A)(I) IN RESPECT OF AFORESAID INTEREST INCOME OF RS. 28 ,1 2 , 35 8/ - DERIVED FROM INVESTMENT IN FIXED DEPOSIT WITH COMMERCIAL AND CO - OPERATIVE BANKS. THE ASSESSIN G OFFICER OBSERVED THAT IN T H E CASE OF ASSESSEE EXEMPTION U/S. 80P(2)(A)(I) IS AVA ILABLE ON INCOME WHICH IS ATTRIBUTABLE TO ITS BUSINESS OPERATION OF THE ASSESSEE CO - OPERATIVE SOCIETY. HOWEVER, THE INTEREST EARNED ON THE FUND INVESTED WITH THE BANK IS NOT OPERATIONAL INCOME OF THE ASSESSEE EARNED FROM PROVIDING CREDIT FACILITIES TO I TS MEMBER S . THEREFORE, HE HAS TREATED THE INTEREST INCOME OF RS. 28 , 12 , 358/ - AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT AND DISALLOWED THE CLAIM OF DEDUCTION U/S. 80P ON THE AFORESAID INCOME. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AFTER PLACING RELIANCE ON THE DECISION OF HON BLE HIGH COURT OF GUJARAT IN THE CASE OF SBI VS. CIT (2016) 72 TAXMANN.COM 64 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSING OFFICER HAS NOTICED THAT IN ADDITION TO THE INTEREST INCOME EARNED ON LOAN AND ADVANCES TO ITS MEMBERS, THE ASSESSE HA S CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON I NTEREST INCOME EARNED FROM THE FIXED DEPOSIT MAINTAINED WITH THE COMMERCIAL BANK. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER THE AFORESAID PROVIS ION ON INTEREST LEARNED FROM SURPLUS FUNDS DEPOSITED WITH THE NATIONALIZED BANKS IN THE FORM OF FIXED DEPOSIT. WE ARE I.T.A NO. 3518 /AHD/20 16 A.Y. 2013 - 14 PAGE NO CITIZENS CO - OP CREDIT SOCIETY LTD. VS. ITO 3 INCLINED WITH THE FINDINGS OF THE LD. CIT(A) THAT INVESTING SURPLUS FUNDS IN A BANK IS NO PART OF THE BUSINESS OF PROVIDING CREDIT FACIL ITIES TO ITS MEMBERS WHICH IS DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT, AND THE INTEREST DERIVED BY DEPOSITING SURPLUS FUNDS WITH THE NATIONALIZED BANK NOT BEING ATTRIBUTABLE TO THE BUSINESS CARRIED ON BY THE ASSESSEE AND THE SAME CANNOT BE DEDUCTE D U/S. 80 P(2)(A)(I). W E FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVENUE VIDE STATE BANK OF INDIA VS. CIT (2016) 72 T AXMANN.COM 64 (GUJARAT) THAT INTEREST INCOME ON DEPOSIT PLACED WITH THE COMMERCIAL BANKS IS NOT EXEMPT U/S. 80P(2)(A)(I) OF THE ACT. HOWEVER AS DECIDED IN THE VARIOUS DECISION OF THE CO - ORDINATE BENCHES OF ITAT, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEE S CLAIM ON PRO RATA EXPENSES BY EXAMINING/RECORDING AND AFFORDING ADEQUATE OPPORTUNITY TO ALLOW IT PRO RATA EXPENSES FOR COMPUTING THE DEDUCTION U/S. 80P IN RESPECT OF INTEREST EARNED FROM DEPOSIT HELD WITH NATIONALIZED BANK. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 18 - 05 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 18 /05 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,