Jila Sahkari Kendriya Bank Maryadit, Ujjain V. The ACIT, 1(1), Ujjain

ITA 375/IND/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1489 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 14-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Assessee Lawyers: S S DESHPANDE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAABT0014F I.T.A.NO. 375 /IND/201 2 . A.Y. : 2007 - 08 JILA SAHKARI KENDRIYA BANK MARYADIT, 84, TILAK MARG, UJJAIN VS A CIT, 1(1), INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SHRI K. K. SINGH, CIT DR DATE OF HEARING : 02.01 . 2 01 3 DATE OF PRONOUNCEMENT : 12 . 0 2 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), UJJAIN, DATED 12.03.2012, FOR THE ASSES SMENT YEAR 2007-08. -: 2: - 2 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - 1. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 80P(2)(A)(I) ARE NOT APPLICAB LE TO THE ASSESSEE SINCE IT IS A SOCIETY AND NOT A COOPERATIVE BANK AND THE PROVISIONS OF SECTION 80P(4) ARE NOT APPLICABLE. 1.1 THE ASSESSEE IS A SOCIETY AND PROVISIONS OF SECTION 80P(2)(A)(I) ARE APPLICABLE AND THE WHOLE INCOME OF THE BANK IS EXEMPT. 2. THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 1,47,53,051/- ON THE GROUND THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE DEDUCTION U/S 80P(2)(D) R.W. SECTION 80P(4). 3. THE DEDUCTION CLAIMED BY THE ASSESSEE MAY PLEASE BE ALLOWED. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A COOPERATIVE BANK AND THE MAIN OBJECT OF WHICH IS TO FINANCE TO THE BRANCHES TO DISTRIBUTE FUNDS TO THE PRIMARY AGRICUL TURAL SOCIETIES. IN THE RETURN OF INCOME, THE ASSESSEE CL AIMED -: 3: - 3 DEDUCTION U/S 80P(2)(D) IN RESPECT OF INTEREST EARN ED ON FDR WITH COOPERATIVE BANKS. AS PER ASSESSING OFFICER, T HE ASSESSEE IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80P(2) I N VIEW OF INSERTION OF SUB CLAUSE 4 IN 80P, WHICH PROVIDES TH AT THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELAT ION TO ANY COOPERATIVE BANK, OTHER THAN THE PRIMARY AGRICULTUR AL SOCIETY OR THE PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. BY THE IMPUGNED ORDER, THE LD. CI T(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OB SERVING THAT PROVISIONS OF SECTION 80P(4) ARE CLEARLY APPLICABLE TO THE ASSESSEE AND THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S 80P(2)(A)(I) IN THE COMPUTATION OF INCOME. THE LD. CIT(A) ALSO RECORDED A FINDING TO THE EFFECT THAT THE ASSE SSEE COULD NOT PRODUCE ANY EVIDENCE BEFORE THE ASSESSING OFFICER O R DURING THE APPELLATE PROCEEDINGS, WHICH COULD ESTABLISH TH AT IT IS A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY AG RICULTURAL COOPEATIVE AND RURAL DEVELOPMENT BANK AS PER THE REQUIREMENT OF THIS SECTION. AGAINST THIS ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. -: 4: - 4 4. THE LD. AUTHORIZED REPRESENTATIVE, SHRI S. S. DESHPANDE, APPEARED ON BEHALF OF ASSESSEE AND SUBMI TTED AS UNDER :- THE ASSESSEE IS COOPERATIVE SOCIETY DOING THE BUSINESS OF BANKING. THE REGULAR RETURNS ARE BEING FILED. THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS FILED DECLARING THE TOTAL INCOME AT RS. 2,50,06,530/-. IN THE RETURN, THE ASSESSEE CLAIMED DEDUCTION U/S 80P(2)(D) OF RS. 1,47,53,051/- BEING THE INTEREST ON FDR. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80P(2)(D). THE LD. ASSESSING OFFICER HELD THAT THE ACTIVITY OF THE BANK CANNOT BE CALLED AS PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK AND AS SUCH THE ASSESSEE DOES NOT QUALIFY FOR DEDUCTION U/S 80P(2)(D). IN APPEAL THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION U/S 80P(2)(A)(I) AND HAS DECLARED THE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND HAS PAID TAXES ON THE SAME. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE -: 5: - 5 ANY EVIDENCE TO ESTABLISH THAT IT IS PRIMARY AGRICULTURAL CREDIT SOCIETY OR THE PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK AS PER THE REQUIREMENT OF SECTION 80P(4). THE LD. CIT(A) THUS DISMISSED THE ASSESSEES APPEAL. FROM THE BALANCE SHEET AND THE INCOME AND EXPENDITURE ACCOUNT, IT WOULD BE SEEN THAT THE MAIN INCOME OF THE ASSESSEE IS THE INTEREST RECEIVED ON AGRICULTURAL LOANS. THE PROVISIONS OF SECTION 80P(4) (P-44 OF PAPER BOOK ) ARE STATED HERE UNDER : THE PROVISIONS OF THIS SECTION SHALL NOT APPLY IN RELATION TO ANY COOPERATIVE BANK OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY OR A PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK. EXPLANATION. FOR THE PURPOSES OF THIS SUB- SECTION,- (A) CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION AC, 1949 (10 OF 1949). (B) PRIMARY CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK -: 6: - 6 MEANS A SOCIETY HAVING ITS AREA OF OPERATION CONFINED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG-TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIVITIES. THUS, THE EXPLANATION (A) STATES THAT THE COOPERATIVE BANK AND PRIMARY AGRICULTURE CREDIT SOCIETY SHALL HAVE THE MEANING ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT. PART V OF THE BANKING REGULATION ACT (P-46 OF THE PAPER BOOK ) DEFINES THE WORD PRIMARY AGRICULTURE CREDIT SOCIETY WHICH MEANS A CO- OPERATIVE SOCIETY,- (1) THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS TO PROVIDE FINANCIAL ACCOMMODATION TO ITS MEMBERS FOR AGRICULTURAL PURPOSES OR FOR PURPOSES CONNECTED WITH AGRICULTURAL ACTIVITIES (INCLUDING THE MARKETING OF CROPS) (2) THE BYE-LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER COOPERATIVE SOCIETY AS MEMBER. PROVIDED THAT THIS SUB-CLAUSE SHALL NOT APPLY TO THE ADMISSION OF A CO-OPERATIVE BANK AS A MEMBER BY REASON OF SUCH CO-OPERATIVE BANK SUBSCRIBING TO THE SHARE CAPITAL OF SUCH CO- -: 7: - 7 OPERATIVE SOCIETY OUT OF FUNDS PROVIDED BY THE STATE GOVERNMENT FOR THE PURPOSE. THE ASSESSEE GETS THE LOAN FROM MADHYA PRADESH RAJYA SAHAKARI BANK FOR DISTRIBUTING IT TO THE AGRICULTURIST (P-52 TO 52C). THE OBJECT OF THE SOCIETY IS MAINLY FINANCING TO THE AGRICULTURIST ( P-54 OF THE PAPER BOOK ). IT TAKES FUNDS FROM APEX BANK AND PROVIDE FINANCE TO AGRICULTURAL CREDIT CO-OPERATIVE SOCIETIES WHO BECOME THE MEMBER OF THE ASSESSEE SOCIETY. THESE AGRICULTURAL COOP. SOCIETIES ULTIMATELY LEND MONEY TO FARMERS FOR PURCHASE OF SEEDS, FERTILIZERS AND FOR WORKING CAPITAL NEED ETC. THESE CREDIT SOCIETIES SUBSCRIBE THE SHARE CAPITAL OUT OF THE FUNDS PROVIDED BY STATE GOVT. AND ALSO AVAILABLE WITH THEM. WE ARE HEREWITH FILING THE NECESSARY NOTIFICATION OF GOVT. AUTHORITIES WHICH CLOSELY STATES THAT THE GOVT. AGENCIES ARE PROVIDING FUNDS TO VARIOUS -: 8: - 8 AGRICULTURAL SOCIETIES FOR CONTRIBUTING THE SHARE CAPITAL FOR GETTING LOANS. 5. ON THE OTHER HAND, THE LD. CIT DR, SHRI K.K.SINGH, APPEARED ON BEHALF OF THE REVENUE AND VEHEMENTLY AR GUED THAT THE MAIN SOURCE OF INCOME OF THE ASSESSEE WAS NOT FROM ADVANCING FOR AGRICULTURAL ACTIVITIES, THEREFORE, T HE ASSESSEE BANK IS NOT ENTITLED FOR CLAIM OF DEDUCTION U/S 80P IN SO FAR AS THE ASSESSEE IS NEITHER A PRIMARY AGRICULTURAL CRED IT SOCIETY NOR A PRIMARY COOP. AGRICULTURAL AND RURAL DEVELOPM ENT BANK. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. W E HAD ALSO PERUSED THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE BANK TO VERIFY THE MAIN SOURCE OF EARNING AND ALSO ITS BALA NCE SHEET TO VERIFY THE APPLICATION OF FUND OF ASSESSEE AS TO WH ETHER FINANCING TO THE FARMERS OR DEPOSIT WITH OTHER BANK ETC. MAIN PLEA OF LD. AUTHORIZED REPRESENTATIVE WAS THAT MAI N INCOME OF ASSESSEE WAS INTEREST ON AGRICULTURAL LOANS. FROM T HE AUDITED PROFIT AND LOSS ACCOUNT AS PLACED ON RECORD, WE FIN D THAT THE -: 9: - 9 INTEREST INCOME FROM AGRICULTURAL ADVANCING WAS RS. 9.76 CRORES OUT OF TOTAL INCOME OF BANK OF RS. 15.20 CRO RES. THUS, THE INTEREST INCOME FROM AGRICULTURAL ADVANCES WORK S OUT TO BE ONLY 64.21 % WHEREAS FOR TREATING THE MAIN SOURCE O F INCOME AS FROM AGRICULTURAL ADVANCE, IT SHOULD HAVE BEEN M ORE THAN 75 % OF ITS TOTAL INCOME. EVEN THE UTILIZATION OF FUNDS WERE SUBSTANTIALLY NOT FOR AGRICULTURAL PURPOSES. AS PER FINDINGS RECORDED BY THE LOWER AUTHORITIES, THE ASSESSEE IS NOT A PRIMARY AGRICULTURAL CREDIT SOCIETY NOR A PRIMARY C OOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK, THEREFORE, COVERED BY SUB SECTION 4 OF SECTION 80P INSERTED W.E.F. 1.4 .2007 AND APPLICABLE FOR THE RELEVANT ASSESSMENT YEAR 2007-08 UNDER CONSIDERATION. NOW COMING TO THE NATURE OF INCOME F OR WHICH DEDUCTION HAS BEEN CLAIMED U/S 80P(2)(D), WE FOUND THAT IT WAS FDR INTEREST FROM APEX COOP. BANK AT RS. 1,47,5 3,051/-. INTEREST INCOME ON FDR FROM APEX BANK IS NOT AT PAR WITH THE INTEREST INCOME RECEIVED FROM AGRICULTURISTS IN RES PECT OF LOANS GIVEN TO THE FARMERS FOR AGRICULTURAL PURPOSES. SUC H FDR INTEREST INCOME IS NOT ELIGIBLE FOR DEDUCTION U/S 8 0P(2)(D). -: 10: - 10 7. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DISALLOWING CL AIM OF DEDUCTION U/S 80P(2)(D) IN RESPECT OF INTEREST INCO ME EARNED BY ASSESSEE FROM FDR WITH APEX COOP. BANK. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY, 2013. SD/ - SD/ - (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED : 12 TH FEBRUARY, 2013. CPU* 141122