The Narsanda Mercantile Co. Op. Credit Society Ltd., Kheda V. The Income Tax Officer, Ward-5, Nadiad

ITA 358/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8367 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 09-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: SUBHAM BHAI
• Keywords: Business income; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE NARSANDA MERCANTILE CO.OP. CREDIT SOCIETY LTD. SARDAR BHAVAN, NARSANDA - 387345 DIST: KHEDA PAN: AAAAT4514H (APPELLANT) VS THE ITO, WARD - 5, ROOM NO. 203, 2 ND FLOOR, AAYAKAR BHAVAN PIJ ROAD, NADIAD - 387002 (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: S H RI SUBHAM BHAI , A.R. DATE OF HEARING : 20 - 03 - 2 018 DATE OF PRONOUNCEMENT : 26 - 04 - 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) - 2, VADODARA DATED 08 - 12 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASS ESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - (1) THE ORDER PASSED U/S 250 OF THE ACT ON 08/12/2016 FOR A.Y. 2013 - 14 BY CIT (A) - 2, BARODA UPHOLDING THE DISALLOWANCE U/S 80P(2)(A)(I) OF THE ACT RS.36,40,975/ - INSTEAD OF RS.74,44,8407 - MADE BY ASSESS ING OFFICER IS ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. (2)(I) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LEARNED CIT (A) OUGHT NOT TO HAVE UPHELD DISALLOWANCE OF RS.36,40,975/ - U/S 80P(2)(A)(I) OF THE A CT. I T A NO . 358 / A H D/20 17 A SSESSMENT YEAR 2013 - 14 I.T.A NO. 358/AHD/ 2017 A.Y. 2013 - 14 PAGE NO NARSANDA MERCANTILE CO.OP. CREDIT SOCIETY LD. VS. ITO 2 (2 ) (II) THAT LEARNED CIT (A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS CONFIRMING THE DISALLOWANCE OF RS.36,40,975/ - U/S 80P(2)(A)(I) OF THE ACT. (3) THE APPELLANT PRAYS LEAVE TO ADD, TO AMEND OR TO ALTER OR TO DELETE ANY OF THE ABOVE GROUND OF APPEAL AS MAY BE DEEMED NECESSARY ON OR BEFORE THE FINAL HEARING OF APPEAL. RELIEF CLAIM IN APPEAL: IT IS THEREFORE PRAYED THAT THE ADDITION UPHELD BY CIT (A) TO THE EXTENT OF RS.36,40,975/ - MAY KINDLY BE DELETED AND DEDUCTION U/S 80P(2)(A)(I) OF THE ACT B E ALLOWED NOW FOR THE INTEREST INCOME EARNED FROM INVESTMENT IN OTHER BANKS OF THE SOCIETY WITHOUT DISTINGUISHING THE ACTIVITY IN TO TWO PARTS. 3. ALL THE GROUNDS OF APPEAL ARE INTER - CONNECTED THEREFORE, THEY ARE ADJUDICATED TOGETHER BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 4. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF NIL WAS FILED ON 6 TH SEP, 2013. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) ON 2 ND SEP, 2014. DURING THE COURSE OF SCRUTINY ASSE SSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EARNED INTEREST INCOME OF RS. 74 , 44 , 841/ - ON INVESTMENT MADE WITH THE SCHEDULED/NATIONALIZED BANK AND CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. ON SCRUTINY T HE ASSESSING OFFICER OBSERVED THAT THE BUSINESS OF THE ASSESSEE IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY , THEREFORE, INTEREST INCOME EARNED ON FD WITH NATIONALIZED BANK IS NOT ITS BUSINESS INCOME BUT INCOME FROM OTHER SOURCES. CONSEQUENTLY, THE ASSESSING OFFICER HAS DISALLOWED D EDUCTION U/S. 80P(2)(D) OF THE ACT ON INTEREST INCOME OF RS.74 , 44 , 841/ - OF THE ACT. 5. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE THAT T HE ASSESSED INCOME CANNOT EXCEED THE GROS S TOTAL INCOME OF RS. 36 , 40 , 975/ - . T HEREFORE, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ASSESS THE TOTAL INCOME AT RS. 36 , 40 , 975/ - AS IT IS CLEAR THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) T O THE EXTENT OF RS. 36 , 4 0, 975/ - RESULTING INTO T OTAL INCOME OF RS. NIL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE ASSESSEE HA S EARNED INTEREST INCOME OF RS.74 , 44 , 841/ - ON I.T.A NO. 358/AHD/ 2017 A.Y. 2013 - 14 PAGE NO NARSANDA MERCANTILE CO.OP. CREDIT SOCIETY LD. VS. ITO 3 INVESTMENT MADE WITH SCHEDULED/NATIONAL BANK THEREFORE, T HE ASSESSING OFFICER DISAL LOWED AN AMOUNT OF RS.74 , 44 , 84 1 / - US/. 80P(2)(A)(I) OF T HE ACT. HOWEVER, THE GROSS SURPLUS PROFIT IN THE CASE OF THE ASSESSEE IS ONLY RS.36 , 40 , 975/ - AS PER P & L A/C. THEREFORE , ENTIRE GROSS INCOME OF RS. 74 , 44 , 841/ - CANNOT BE TAXED UNDER THE HEAD BUSIN ESS OR UNDER THE HEAD OTHER SOURCES AS GROSS SURPLUS. HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA VS. CIT (2016) 72 TAXMAN. COM 64 (GUJARAT) HELD T H AT IN THE CASE OF A SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMB ER IN TEREST DERIVED FROM CREDIT PROVIDED TO ITS MEMBERS IS ONLY DEDUCTIBLE U/S. 80P(2)(A)(I) AND NOT INTEREST DERIVED FROM SURPLUS FUNDS DEPOSITED WITH THE SCHEDULED/NATIONALIZED BANK. CONSIDERING THE ABOVE FACTS AND DECISION OF JURISDICTIONAL HIGH COURT, WE U PHOLD THE DECISION OF LD. CIT(A) . HOWEVER AS DECIDED IN A N U M BER OF DECISIONS BY THE BENCH OF ITAT , WE DIRECT THE ASSESSING OFFICER TO ALLOW IT PRO RATA EXPENSES FOR COMPUTING THE DEDUCTION U/S. 80P IN RESPECT OF INTEREST EARNED FROM DEPOSIT HELD WITH NAT IONALIZED BANK AFTER VERIFICATION AND AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE . 7. IN THE RESULT , THE APPEAL OF THE ASSESSE IS PARTLY ALLOWED . ORDER PR ONOUNCED IN THE OPEN C OURT ON 26 - 04 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 26 /04 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. I.T.A NO. 358/AHD/ 2017 A.Y. 2013 - 14 PAGE NO NARSANDA MERCANTILE CO.OP. CREDIT SOCIETY LD. VS. ITO 4 BY ORDER/ , / ,