The DCIT, Circle-9, Surat V. The Surat District Co.Op.Milk Producers Union Ltd., Surat

ITA 367/AHD/2010

• Counselvise Citation: 36720514 RSA 2010
• Duration Of Justice: 3 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-06-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: MITESH MODI
• Keywords: Depreciation; Opportunity of being heard; Earning of tax free income; Additional evidence
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMADABAD BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NOS. 367 & 3386/AHD/2010 ASSESSMENT YEARS : 2006-07 & 2007-08 & ITA NOS. 1739/AHD/2011 ASSESSMENT YEAR : 2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-9, ROOM NO.423, AAYAKAR BHAVAN, MAJURA GATE, SURAT. V/S . THE SURAT DISTRICT CO.OP MILK PRODUCER UNION LTD., SUMUL DAIRY ROAD, STATION ROAD, SURAT. PA N NO. A AAA S3450M (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI T. SANKAR, SR. D.R. /BY ASSESSEE SHRI MITESH MODI, A.R. /DATE OF HEARING 17.06.2013 /DATE OF PRONOUNCEMENT 02.08.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THESE THREE APPEALS ARE FILED BY THE REVENUE WHICH HAVE EMANATED FROM THE ORDERS OF CIT(A)-V, SURAT, DATED 23.10.200 9 FOR A.Y. 2006-07, DATED 15.09.2010 FOR A.Y. 2007-08 & DATED 15.03.2010 FOR A.Y. 2008-09. THESE THREE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY WAY OF THIS COMMON ORDER BECAUSE FACTS ARE COMMON IN ALL APPEAL S AND FOR THE SAKE OF CONVENIENCE. THE EFFECTIVE GROUNDS OF REVENUES AL L APPEALS ARE AS UNDER: ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 2 GROUNDS OF ITA NO.367/AHD/2010 (A.Y. 06-07) 1. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN A CCEPTING FRESH EVIDENCES WITHOUT AFFORDING AN OPPORTUNITY TO THE A SSESSING OFFICER TO REBUT THE SAME THEREBY VIOLATING THE PRO VISIONS OF RULE 46A OF THE IT ACT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND IN FACT IN C ONCLUDING THAT THERE IS NO NEXUS BETWEEN THE INTEREST/DIVIDEND INC OME EARNED FROM THE CO-OP. SOCIETIES AND THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON BORROWED FUNDS ON THE G ROUND THAT THERE IS NO PROOF OF THE INVESTMENT OF SUCH IN TEREST BEARING FUNDS TO EARN THE SAID INCOME WITHOUT APPRE CIATING THE FACT THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE T HE ABOVE IN FULL MEASURE WITH PROPER EVIDENCES. GROUNDS OF ITA NO.3386/AHD/2010 (A.Y. 07-08) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT (A) HAS ERRED IN CONCLUDING THAT THERE IS NO NEXUS BETWEEN THE INTEREST/DIVIDEND INCOME EARNED FROM TH E CO-OP. SOCIETIES AND THE INTEREST EXPENDITURE INCURRED BY THE ASSESSES ON BORROWED FUNDS ON THE GROUND THAT THERE IS NO PROOF OF THE INVESTMENT OF SUCH INTEREST BEARING FU NDS TO EARN THE SAID INCOME WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE THE ABOVE IN FU LL MEASURE WITH PROPER EVIDENCES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE EAS E AND IN LAW. THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO AT RS.1,74,82,509/-ON EXCESS DEDUCTION CLAIMED U/S.80P(2)(D), DESPITE THE FACT THAT THE ASSESSEE H AD FAILED TO NET THE EXPENSES INCURRED TOR EARNING THE EXEMPT IN COME. ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 3 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE EAS E AND IN LAW, THE ID.CIT(A) HAS ERRED IN HOLDING THAT NO EXPENSES WERE INCURRED FOR EARNING SUCH INCOME ON WHICH ASSESSEE HAS CLAIMED DEDUCTION U/S 80P DESPITE THE FACT THAT THE ASSESSEE HAD BEEN USING INTEREST BEARING FUNDS FOR ITS BUSIN ESS ACTIVITY KEEPING SUCH INCOME INTACT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ID.CIT(A) HAS ERRED IN HOLDING THAT AS SUCH INC OME ON WHICH ASSESSEE HAS CLAIMED DEDUCTION U/S 80 P, WAS EARNED FROM INVESTMENTS MADE IN EARLIER YEARS IT COULD BE HELD TO HAVE NO EXPENSES ATTACHED TO IT, DESPITE THE TACT T HAT THE ASSESSEE HAD TO USE INTEREST BEARING FUNDS FOR ITS DAY TO DAY BUSINESS ACTIVITIES CLAIMING DOUBLE DEDUCTION IN THE FORM OF INTEREST EXPENSES AS WELL AS DEDUCTION ON SUCH INCO ME. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THERE CAN BE INCOME WITHOUT INCURRING EXPENSES. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION M ADE AFTER DISALLOWING THE EXCESS DEPRECIATION OF RS.2,95,924/ - DESPITE THE FACT THAT THE CONCERNED ITEMS WERE ELECTRICAL G OODS NOT COMPUTER PARTS/PERIPHERALS, THEREFORE LIABLE FOR DE PRECIATION @ 10% NOT 60% AS CLAIMED BY THE ASSESSEE. GROUNDS OF ITA NO.1739/AHD/2011 (A.Y. 08-09) [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,15,30,155/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE U/S.80AB OF THE ACT. ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 4 [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .14,20,334/- MADE BY THE A.O. ON ACCOUNT OF INSURANCE EXPENSES. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER. 2. GROUND NO.1 & 2 IN A.Y. 06-07, GROUND NO.1,2,3,4 & 5 FOR A.Y. 07-08 AND GROUND NO.1 IN A.Y. 08-09 ARE AGAINST NOT ALLOW ING THE DEDUCTION U/S. 80P(2)(D) AND IN A.Y. 06-07 AT RS.81,13,580/-, IN A .Y. 07-08 AT RS.1,75,41,509/- AND IN A.Y. 08-09 AT RS.2,15,30,15 5/-. 2(I). THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGIST ERED UNDER GUJARAT CO- OPERATIVE SOCIETY ACT, ENGAGED IN THE BUSINESS OF P ROCUREMENT, PROCESSING AND MARKING OF MILK PRODUCTIONS, CATTLE FOOD ETC. THE ASSESSEE SOCIETY CLAIMED DEDUCTION U/S.80P(2)(D) OF THE ACT GROSS IN TEREST AND DIVIDEND INCOME EARNED FROM OTHER CO-OPERATIVE SOCIETIES OF RS.1,55 ,75,371/- IN A.Y. 06-07, RS.1,74,82,509/- IN A.Y. 07-08 & RS.2,16,10,539/- I N A.Y. 08-09. THE LD. A.O. OBSERVED THAT THE ASSESSEE HAD EARNED TOTAL INTERES T OF DIVIDEND INCOME AS UNDER: ASST. YEAR DEDUCTION U/S.80P(2)(D) INTEREST EXPENDITURE INCURRED 2006-07 RS.1,55,75,378/- RS.1,38,66,436/- 2007-08 RS.1,74,82,509/- RS.2,07,17,824/- 20 08 - 09 RS. 2 , 16 , 10 ,5 3 9/ - RS.2,07,17,824/ - LD. A.O. OBSERVED THAT THE APPELLANT HAD SHOWN TOTA L INTEREST AND DIVIDEND INCOME OF RS.2,88,18,922/- IN A.Y. 06-07 AND INCURR ED INTEREST EXPENSES AT RS.1,38,66,436/- WHICH WERE SHOWN IN THE DEBIT SIDE OF THE P&L ACCOUNT. THE ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 5 APPELLANT HAD CLAIMED DEDUCTION U/S. 80P(2)(D) ON T HE GROSS FIGURE OF INTEREST AND DIVIDEND INCOME OF RS.1,55,75,371/- BUT IGNORED INTEREST EXPENSES AT RS.1.38 CRORE. THE LD. A.O. ANALYZED THE SECTION 8 0AB INCLUDING THE CHAPTER C ON DEDUCTION IN RESPECT OF CERTAIN INCOME AND CON CLUDED THAT DEDUCTION UNDER CHAPTER VIA IS WITH REFERENCE TO THE INCOME C OMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT IN FORM OF THE GROS S TOTAL INCOME AND NOT WITH REFERENCE TO THE FULL AMOUNT OF SUCH INCOME I.E. DE DUCTION IS AVAILABLE IN RESPECT OF NET INCOME AS COMPUTED UNDER THE PROVISI ONS OF THE ACT AFTER ALLOWING THE EXPENSES AND NOT IN RESPECT OF THE GRO SS INCOME SINCE GROSS INCOME IS NOT INCLUDED IN THE TOTAL INCOME BUT THE NET INCOME. ON THIS ISSUE, THE LD. A.O. GAVE THE REASONABLE OPPORTUNITY OF BEI NG HEARD WHICH WAS REPLIED BY THE APPELLANT. THE APPELLANT RELIED UPON THE FO LLOWING DECISIONS BEFORE THE A.O.: I. CIT VS. HARYANA STATE CO-OPERATIVE HOUSING SOCIE TY (1998) 234 ITR 714 (P&H) II. CIT VS. U. P. RAJYA SAHKARI BHUMI VIKAS BANK LT D. (1994) 208 ITR 758 (ALL) THE LD. A.O. CONSIDERED ASSESSEES REPLY AND ALSO H E RELIED UPON FOLLOWING DECISIONS: I. DISTRIBUTORS (BARODA) P. LTD. VS. UNION OF INDIA & ORS. (1985) 155 ITR 120 (SC) II. CIT VS. SHRI DIGVIJAY CEMENT CO. LTD. (1986) 13 8 ITR 45 (GUJ) III. CIT VS. MAGANLAL CHHAGANLAL (P) LTD. (1999) 23 6 ITR 456 (BOM) ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 6 IV. WILLIAMSON FINANCIAL SERVICES LTD. VS. CIT & AN R. (2007) 295 ITR 372 (GAU) AND HELD THAT CLAIM DEDUCTION U/S. 80P(2)(D) IS AVA ILABLE ON NET AFTER DEDUCTING THE INTEREST EXPENSES ON THE INVESTMENT. THUS, HE ALLOWED THE DEDUCTION U/S. 80P(2)(D) AT RS. 81,13,880/- IN A.Y. 06-07. IN A.Y . 07-08, THE LD. A.O. ALSO APPLIED THE SECTION 14A AND RULE 8D ON EXEMPT INCOM E DISALLOWED INTEREST U/S. 14A AT RS. 19,08,803/- AND UNDER CHAPTER VIA A T RS.1,75,41,509/-. THE LD. A.O. ALSO APPLIED SECTION 80AB ON IT. HE ALSO R ELIED UPON SAME CASE LAWS WHICH WERE RELIED UPON IN A.Y. 06-07. THE SIMILAR F INDINGS GIVEN BY THE A.O. FOR A.Y. 08-09 AND DIFFERENCE U/S. 80P/80AB WAS ALS O MADE AT RS.1,15,30,155/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL IN ALL THE YEARS. THE OPERATIVE PORTION IN A.Y. 2006-07 IS AS UNDER: 6. I HAVE PERUSED THE VIEW TAKEN BY THE ASSESSING OFFICER AND ALSO SUBMISSION MADE BY THE A.R. OF THE APPELLANT. THE TOTAL INTEREST AND DIVIDEND INCOME OF THE APPELLANT DURIN G THE YEAR 2,88,18,922/- WHICH INCLUDES DIVIDEND AND INTEREST INCOME FROM OTHER COOPERATIVE SOCIETIES FOR RS.1,55,75,371/-. THE TOTAL BREAK UP IS AS UNDER:- PARTICULARS AMOUNT (RS.) 1. DIVIDEND INCOME RECEIVED FROM OTHER CO- OPERATIVE SOCIETIES. 49,20,450/- 2. INTEREST INCOME FROM DEPOSITS WITH THE SURAT DIST. CO - OP. BANK LTD. 1,06,54,921/- TOTAL DEDUCTION CLAIMED U/S 80P(2)(D) 1,55,75,371/- ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 7 6.1 INTEREST EXPENSES DEBITED TO PROFIT AND LOSS AC COUNT IS RS.1,38,66,351/-. THE BREAK UP IS GIVEN ON PARA 5 ABOVE. THERE ARE TWO ISSUES FOR DETERMINATION, FIRST WHETHER THE DEDUCTION U/S.80P(2)(D) IS AVAILABLE ON THE GROSS AMOUNT OR T HE NET AMOUNT, SECOND WHETHER IN THE FACTS OF THE CASE, THERE IS ANY EXPENDITURE ATTRIBUTABLE TO THE INCOME EARNE D BY WAY OF DIVIDEND AND INTEREST INCOME FROM OTHER COOPERATIVE SOCIETIES. AS FAR AS FIRST ISSUE IS CONCERNED, THE LAW IS VERY CL EAR. SECTION 80AB STIPULATES THAT WHERE ANY DEDUCTION IS REQUIRED TO BE ALLOWED UNDER ANY SECTION INCLUDED IN CHAPTER VIA, THE AMOUNT OF INCOME COMPUTED IN ACCORDANCE WITH THE PROVISION OF THIS A CT WHICH ALONE BE DEEMED TO BE THE AMOUNT OF INCOME WHICH IS DERIV ED AND RECEIVED BY THE ASSESSEE AND WHICH IS INCLUDED IN H IS GROSS TOTAL INCOME. THEREFORE, AS CLEARLY ELABORATED BY THE ASS ESSING OFFICER, THERE IS NO DOUBT THAT THE ASSESSEE IS ELIGIBLE TO AVAIL DEDUCTION ON THE NET INCOME I.E. AFTER ALLOWING EXPENSES FROM TH E GROSS AMOUNT AS DEDUCTION UNDER ANY SECTION IN CHAPTER VIA WHICH INCLUDES 80P(2)(D). HAVING SAID THIS, THEN THE NEXT ISSUE AR ISES IS THE QUANTUM OF DEDUCTION IN THE PRESENT CASE. THE ASSES SING OFFICER HAS TAKEN A VERY SIMPLISTIC STAND WHEREBY HE HAS COMPUT ED THE PROPORTIONATE EXPENSES OF INTEREST RELATABLE TO THE INTEREST AND DIVIDEND INCOME RECEIVED FROM OTHER COOPERATIVE SOC IETIES, THEREBY PRESUMING THAT THE ASSESSEE HAS INCURRED INTEREST E XPENSES FOR EARNING THE INTEREST AND DIVIDEND INCOME FROM OTHER COOPERATIVE SOCIETIES. THIS STAND DOES NOT FIND SUPPORT FROM F ACTS OF THE CASE. AS SUBMITTED, THE APPELLANT SOCIETY HAS BEEN STATUT ORILY INVESTING ITS SURPLUS FUNDS RIGHT FROM 1951-52 WITH OTHER COOPERA TIVE SOCIETIES. ON SUCH INVESTMENTS, THE APPELLANT HAS BEEN RECEIVI NG INTEREST AND DIVIDEND WHICH HAVE BEEN CLAIMED AS DEDUCTION U/S. 80P(2)(D). IT IS NOT A CASE WHERE THIS INCOME HAS BEEN DERIVED OUT O F INVESTMENTS ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 8 MADE DURING THE YEAR FOR WHICH THE ASSESSEE HAS INC URRED ANY EXPENDITURE DIRECTLY OR INDIRECTLY. AN ANALYSIS OF INTEREST EXPENSES WOULD SHOW THAT THE SAME HAS BEEN INCURRED BY WAY O F INTEREST PAID TO MEMBERS' SOCIETIES SAVINGS ACCOUNTS, MEMBERS SO CIETIES FD ACCOUNT, BANK COMMISSION AND INTEREST AND DEBENTURE S TO MEMBERS OF THE SOCIETIES AND TOWARDS OVER DRAFTS FACILITIES FROM BANKS. IT IS EVIDENT FROM THE DETAILS OF INTEREST EXPENSES FILED THAT THERE IS NO DIRECT OR INDIRECT NEXUS BETWEEN SUCH EXPENSES ARID INTEREST AND DIVIDEND EARNED FROM INVESTMENTS MADE WITH OTHER CO OPERATIVE SOCIETIES. THE ASSESSING OFFICER SHOULD HAVE EXAMIN ED THE FACTS TO FIND THE EXISTENCE OF SUCH LINKAGE IF ANY. THE PRO RATE ALLOCATION OF INTEREST EXPENSES RESULTING IN PART DISALLOWANCE OF DEDUCTION HAS BEEN DONE WITHOUT EXAMINING THE ISSUE IN DETAILS OR APPRECIATING THE FACTS IN ITS CORRECT PROSPECTIVE. THEREFORE, THE D EDUCTION CLAIMED BY THE APPELLANT IS IN ORDER AND IN ABSENCE OF ANY EXP ENSES DIRECTLY OR INDIRECTLY CORRELATED TO SUCH INCOME PART DISALLOWA NCE OF DEDUCTION U/S.80P(2)(D) BY THE ASSESSING OFFICER IS DELETED. LD. CIT(A) GAVE THE SIMILAR FINDINGS IN A.Y. 07-08 AND FOLLOWED THE PREDECESSOR CIT(A) ORDER FOR A.Y. 06-07 & 07-08 AND ALLOWED THE APPEAL. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. SUBMI TTED THAT CIT(A) HAD ADMITTED THE ADDITIONAL EVIDENCE DURING THE APPELLA TE PROCEEDING IN A.Y. 06- 07 AND NO OPPORTUNITY WAS GIVEN TO THE A.O. HE DRA WN OUR ATTENTION ON PAGE NO.4 AND ARGUED THAT THE PARTICULARS OF THE BANK DE POSIT AND INTEREST EXPENSES WERE NOT GIVEN TO THE A.O. HE RELIED UPON THE CASE OF PUNJAB STATE CO- OPERATIVE MILK PRODUCERS FEDERATION LTD. VS. CIT-I I [2011] 336 ITR 495 (PUNJ. & HAR.), WHEREIN IT WAS HELD THAT DEDUCTION U./S. 80P(2)(D) IS ALLOWABLE AFTER EXCLUDING EXPENDITURE ATTRIBUTABLE TO THE EARNING O F ELIGIBLE INCOME . THUS, HE ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 9 REQUESTED TO SET ASIDE THE ORDER TO THE A.O. LD. C IT(A) WAS NOT RIGHT ON ALLOWING THE APPEAL ON THE BASIS OF NO NEXUS BETWEE N INTEREST FREE FUND AND INVESTED IN EXEMPT INCOME. SIMILAR ARGUMENT FOR A. Y. 07-08 AND 08-09 WAS PUT FORTH AT THE TIME OF HEARING FOR DELETING THE A DDITION MADE BY THE A.O. IN A.Y. 06-07 AT RS.81,31,580/-, IN A.Y. 07-08 AT RS.1 ,74,42,509/- & IN A.Y. 08- 09 AT RS.2,15,30,155/-. 4(I). AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT CONTENDED THAT THE APPELLANT SOCIETY HAD EARNED INCOME BY WAY OF DIVIDEND AND IN TEREST FROM INVESTMENT MADE WITH OTHER CO-OPERATIVE SOCIETY AS PROVIDED IN SECTION 71 OF THE GUJARAT CO-OPERATIVE SOCIETY ACT. THIS INVESTMENT HAD BEEN MADE SINCE LONG BACK FROM THE YEAR 1951-52 TO MARCH 2006 OUT OF SURPLUS FUND OF THE SOCIETY. IT WAS FURTHER ARGUED THAT THE INCOME BY WAY OF DIVIDE ND AND INTEREST FROM OTHER SOCIETY HAD NOT BEEN RESULTED OUT OF INVESTMENT MAD E DURING THE YEAR NEITHER BY MAKING ANY DIRECT OR INDIRECT EXPENDITURE FOR EA RNING SUCH. THE LD. A.O. HAD ERRONEOUSLY PRESUMED LINKAGE BETWEEN INTEREST E XPENDITURE INCURRED WITH INCOME OF INTEREST AND DIVIDEND FROM INVESTMENT WIT H OTHER SOCIETY WHILE IN FACT THERE WAS NO SUCH DIRECT OR INDIRECT EXPENDITU RE FOR EARNING SUCH INCOME ELIGIBLE U/S.80P(2)(D) OF THE ACT. HE FURTHER DRAW N OUR ATTENTION ON VARIOUS PAPER BOOK FILED BY WHICH HE HAD DEMONSTRATED THAT INVESTMENT IN SHARES AND DEPOSIT WITH OTHER SOCIETIES WERE MADE IN MUCH BEFO RE YEAR UNDER CONSIDERATION. HE FURTHER RELIED UPON FOLLOWING CA SES: ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 10 I. ITO VS. PETLAD TALUKA PURCHASE & SALES UNION LTD . [1992] 42 ITD 442 (AHMEDABD) (SMC) ON INTEREST PAID LATE PAYMENT OF P URCHASE WHETHER ADJUSTABLE AGAINST THE INTEREST INCOME EARNED BY TH E SOCIETY HELD NO. II. PUNJAB STATE FEDERATION OF CO.OP HOUSING BUILDI NG SOCIETIES LTD. VS. ITO (1982) 2 ITD 617 (CHD.), WHETHER INTEREST RECEI VED ON SAVING BANK DEPOSIT THAT ANOTHER CO-OPERATIVE SOCIETY FOR QUALI FY FOR DEDUCTION AS INCOME FROM INVESTMENT AS CONTEMPLATED IN SECTION 80P(2)(D ) HELD YES. III. CIT VS. ANAKAPALLI CO-OPERATIVE MARKETING SOCI ETY (1988) 40 TAXMAN 127 (AP), WHETHER AMOUNT DEDUCTIBLE U/S.80P IN RESP ECT OF A CO-OPERATIVE SOCIETY IS GROSS TOTAL INCOME ATTRIBUTABLE TO ACTIV ITIES OF THE NATURE DEFINED U/S.80P, VIZ., GROSS TOTAL INCOME AS DEFINED IN SEC TION 80(B)(5) HELD YES. IV. CIT VS. HARYANA CO-OPERATIVE SUGAR MILLS LTD. [ 1989] 180 ITR 631 (PUNJ. & HAR.), DEPOSIT WITH CO-OPERATIVE BANK FOR SHORT, PERIOD AND INTEREST EARNED ON IT IS QUALIFIED FOR DEDUCTION U/S. 80P(2) (D). V. CIT VS. KRIBHCO [2012] 349 ITR 618 (DELHI), DISA LLOWANCE OF EXPENDITURE INCURRED IN EARNING OF NON TAXABLE INCO ME DIFFERENCE BETWEEN EXEMPTION AND SPECIAL DEDUCTION. SECTION 14A IS NO T APPLICABLE IN CASE OF SPECIAL DEDUCTION GIVEN UNDER CHAPTER VIA. HE FURTHER ARGUED THAT IN A.Y. 04-05 & 05-06, THE L D. A.O. HAD ALLOWED THE DEDUCTION U/S. 80P(2)(D) AS CLAIMED IN THE RETURN A CCEPTED BY HIM U/S. 143(3) OF THE IT ACT IN SCRUTINY ASSESSMENT. THEREAFTER C ASE WAS RE-OPENED BY THE A.O. IN A.Y. 04-05 ON THE GROUND OF THAT DEDUCTION U/S. 80P(2)(D) IS ALLOWABLE ON NET OF INCOME EARNED AND EXPENDITURE INCURRED ON EARNING. BUT HONBLE ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 11 GUJARAT HIGH COURT IN SPECIAL CIVIL APPLICATION NO. 18592/2011 HELD THAT THERE WAS NO FAILURE ON THE PART OF THE PETITIONER TO DIS CLOSE FULLY AND DULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. THEREFORE , REOPENING IS BAD IN LAW AND SLP FILED BY THE REVENUE HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT. HE FURTHER ARGUED THAT CHAPTER VIA CONSTIT UTES A SEPARATE CODE DEALING WITH DEDUCTION TO BE MADE IN COMPUTING TOTA L INCOME. CHAPTER VIA REFERENCE TO SPECIAL DEDUCTION FOR THE NATURE OF AC TIVITY WHICH ARE DISTINCT, DIFFERENT, INDEPENDENT AND SEPARATE TO EACH OTHER H AS SPECIFIED UNDER SUB- SECTION 2 OF SECTION 80P OF THE ACT WHICH INTER ALI A COVERS THE DEDUCTION U/S. 80P(2)(A)(I) FOR THE ACTIVITY OF PROVIDING CREDIT F ACILITY TO ITS MEMBER BY THE CO- OPERATIVE SOCIETY AND ALSO THE DEDUCTION U/S. 80P(2 )(D) FOR THE INCOME BY WAY OF INTEREST AND DIVIDEND FROM THE INVESTMENT IN OTH ER CO-OPERATIVE SOCIETY. HE RELIED UPON CIT VS. IQBALPUR CO.OP. CANE DEVELOPMENT UNION LTD. (2009) 315 ITR 441 (UTTARAKHAND). HE FURTHER ARGUED THAT THERE IS A RESTRICTION IMPOS ED U/S. 80P AIMING TO ENSURE THAT THE DEDUCTION DOES N OT EXCEED THE NET INCOME UNDER PARTICULAR SOURCE. THE LANGUAGE OF SECTION 8 0P(2)(D) MADE IT CLEAR THAT PROFIT ATTRIBUTABLE TO SPECIFY ACTIVITY IS TO BE DE DUCTED FROM THE GROSS TOTAL INCOME AS HELD IN CASE OF CIT VS. AGENCY MARKETING CO.OP. SOCIETIES LTD. (1993) 201 ITR 881 (ORI.) AND REQUESTED TO CONFIRM THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE APPELLANT H AD INVESTED SURPLUS FUND RIGHT FROM 1951 WITH OTHER CO-OPERATIVE SOCIETY. ON SUCH INVESTMENT THE APPELLANT HAD BEEN RECEIVING INTEREST AND DIVIDEND WHICH HAD BEEN CLAIMED AS ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 12 DEDUCTION 80P(2)(D). IT IS NOT A CASE THAT APPELLA NT HAD EITHER EARNED INCOME OR BORROWED FUND AND INVESTED IN THIS INVESTMENT AN D DEPOSITS. AS CLAIMED BY THE LD. SR. D.R. THAT THESE DETAILS WERE SUBMITTED BEFORE LD. CIT(A) NOT BEFORE THE A.O. IS NOT ACCEPTABLE. THE APPELLANT HAD GIVE N ALL THE DETAILS BEFORE THE A.O. ON WHICH LD. A.O. CONCLUDED OTHERWISE. THE BA LANCE SHEET AS WELL AS P&L ACCOUNT WERE AVAILABLE IN ALL THE YEARS THAT TH E A.O. GAVE THESE FIGURES ON WHICH THE LD. CIT(A) RELIED UPON, HAD TAKEN FROM EI THER BALANCE SHEET OR P&L ACCOUNT. THUS, THERE IS NO ADDITIONAL EVIDENCE SUB MITTED BY THE APPELLANT BEFORE THE CIT(A) IN A.Y. 2006-07. WE DISMISS THE APPEAL ON GROUND NO.1 IN A.Y. 06-07. FURTHER THE A.O. CONSIDERED HONBLE SU PREME COURT DECISION IN DISTRIBUTORS (BARODA) P. LTD. VS. UNION OF INDIA [1985] 155 ITR 120 (SC), WHEREIN, IT WAS HELD THAT DEDUCTION U/S.80M IS TO B E CALCULATED WITH REFERENCE TO AMOUNT ON DIVIDEND COMPUTED IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT AND FORMING ON THE GROSS TOTAL INCOME AND NOT WITH REFERENCE TO FULL AMOUNT OF DIVIDEND RECEIVED BY THE ASSESSEE. THE HONBLE SUP REME COURT DECISION IS SQUARELY APPLICABLE ON DEDUCTION UNDER ANY SECTION IN CHAPTER VIA AND IS TO BE ALLOWED ON THE NET INCOME. HOWEVER, IN THE ASSE SSEES CASE, INTEREST EXPENSES WERE INCURRED FOR ACQUIRING DEBENTURE, DEP OSIT WITH MEMBER SOCIETY, FIX DEPOSIT OF MEMBER SOCIETY, EMPLOYEE SA VING ACCOUNTS , INTEREST ON OVER DRAFT FACILITATE FROM BANK AND BANK COMMISS ION, WHICH WAS CLAIMED BY THE APPELLANT U/S. 80P(2)(D)(A)(I). FOR THE SAKE OF CONVENIENCE, WE ARE REPRODUCING SECTIONS AS UNDER: ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 13 SECTION 80P(2)(A)(I) - CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. SECTION 80P(2)(D) - IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOM E. AFTER CONSIDERING THE FACTUAL AS WELL AS LEGAL POSI TION ON THIS ISSUE, THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE ON THE E ARNING OF THE DIVIDEND AND INTEREST FROM OTHER CO-OPERATIVE SOCIETY AS THIS IN VESTMENT WAS MADE LONG BACK. NO NEW INVESTMENT HAD BEEN MADE BY THE APPEL LANT DURING THE YEAR UNDER CONSIDERATION. THUS, WE CONFIRM THE ORDER OF THE CIT(A) IN ALL THE YEARS. 6. GROUND NO.6 IN A.Y. 07-08 IS AGAINST DELETING TH E ADDITION MADE BY THE A.O. ON ACCOUNT OF EXCESS DEPRECIATION OF RS.2,95,9 24/-. THE FACTS OF THE CASE IS THAT THE APPELLANT HAD ADDED ASSETS AT RS. 86,17,183/- IN THE BLOCK OF COMPUTERS. THE APPELLANT HAD CLAIMED DEPRECIATION 60% ON ASSETS ADDED TO THE COMPUTERS. ON THIS ISSUE, THE A.O. GAVE REASON ABLE OPPORTUNITY OF BEING HEARD AND BIFURCATING THE NON COMPUTER ITEM SEPARAT ELY AND HE ALLOWED THE DEPRECIATION @ 10% ON ELECTRICAL ITEMS AND MADE ADD ITION OF RS.2,95,924/-. 7. THE CIT(A) ALLOWED THE APPEAL BY OBSERVING THAT THE COMPUTER PERIPHERALS PURCHASE AND PUT TO USE BY THE APPELLAN T SOCIETY OR THE PART AND PARCEL OF THE ELECTRIC DATA PROCESSING UNIT I.E. CO MPUTER HARDWARE THE RATE OF DEPRECIATION IS ALLOWABLE @ 60%. BY RELIED ON THE ITAT (SB), DELHI IN CASE OF AMWAY INDIA ENTERPRISES VS. DY. CIT, (2008) 111 ITD (SB) (DEL.), WHEREIN DEPRECIATION @ 60% ON THE ITEMS OF EDP UNIT PURCHAS ED AND PUT TO USE WERE ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 14 PRINTERS AND OTHER HARDWARE PERIPHERALS WHICH CANNO T BE, BY STRETCH OF ANY IMAGINATION, SAID TO BE THE ELECTRICAL GOODS. THE SR. D.R. AGAIN HEAVILY RELIED ON THE ORDER OF THE A.O. AND LD. COUNSEL FOR THE AP PELLANT ON THE ORDER OF THE CIT(A). THE FACTS AND CIRCUMSTANCES OF THE CASE SH OW THAT THESE COMPUTER ITEMS CANNOT BE USED FOR THE PURPOSE OF BUSINESS WI THOUT PERIPHERALS WHICH IS THE COMPOSITE ITEM AND CANNOT BE SEGREGATED. THUS, WE CONFIRM THE ORDER OF THE CIT(A). 8. GROUND NO.2 IN A.Y. 08-09 IS AGAINST DELETING TH E ADDITION OF RS.14,20,334/- MADE BY THE A.O. ON ACCOUNT OF INSUR ANCE EXPENSES. THE A.O. FOUND THAT THE ASSESSEE HAD CLAIMED PREPAID IN SURANCE EXPENSES OF RS.14,20,334/- ON THE BASIS OF BILL ISSUED BY THE I NSURANCE COMPANY, WHICH WAS NOT FOUND BY THE A.O. RELEVANT TO THE ASSESSMEN T YEAR UNDER CONSIDERATION. THUS, HE MADE ADDITION OF RS.14,20, 334/-. 9. THE CIT(A) ALLOWED THE APPEAL BY OBSERVING THAT THE LIABILITY TO PAY THE INSURANCE PREMIUM IS NOT FIXED FOR EVERY YEAR AND T HIS IS ACCOUNTED AS AND WHEN THE NOTICE OF PAYMENT IS RECEIVED. HE, AFTER RELYING VARIOUS CASES REFERRED AT PAGE NO.11 OF HIS ORDER. THE LD. SR. D .R. REITERATED THE FACT AS AND RELIED UPON THE ORDER OF THE A.O., WHEREAS LD. COUN SEL FOR THE APPELLANT ARGUED THAT THE INSURANCE COMPANY HAD RAISED THE BI LL EVERY YEAR AND CLAIMED THESE EXPENSES REPEATEDLY AND CONSISTENTLY AS PER T HEIR BILLS. ACCORDINGLY, THE EXPENSES ARE ACCOUNTED FOR. THE EXPENDITURES H AD BEEN CRYSTALLIZED DURING THE YEAR AND HAD CLAIMED BY THE ASSESSEE CON SISTENTLY ON THE BASIS OF BILLS ISSUED BY THE INSURANCE COMPANY IN PRECEDING YEARS AND SUBSEQUENT ITA NOS. 367 & 3386/AHD/10 & 1739/AHD/2011 A.Y. 06-07, 07-08 & 08-09 PAGE 15 YEARS. THUS, NO INTERFERENCE IS REQUIRED IN THE OR DER OF CIT(A). WE UPHOLD THE ORDER OF THE CIT(A). 10. IN THE RESULT, REVENUES APPEALS IN ALL YEARS A RE DISMISSED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 02.08.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * <