M/s. Orissa State Co-operative Handicrafts Corporation Limited, Bhubaneswar V. DCIT, Circle-4(1), Bhubaneswar

ITA 378/CTK/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5628 (ITAT-CUTTACK)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 04-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: AMBIKA PRASAD MOHANTY
• Keywords: Business income; Revised return
• Section: 72(1); 142(1); 56(2); 56

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAV AN KUMAR GADALE, JM ITA NO . 37 8 /CTK/201 7 ( / ASSESSMENT YEAR : 20 1 3 - 20 1 4 ) M/S ORISSA STATE COOPERATIVE HANDIC RAFTS CORPORATION LIMITED, AT - D - 2/3, INDUSTRIAL ESTATE, RASULGARH, BHUBANESWAR VS. DCIT, CIRCLE - 4(1), BHUBANESWAR ./ ./ PAN/GIR NO. : A AAAO 0096 K ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI AMBIKA PRASAD MOHANTY, AR /REVENUE BY : SHRI D.K.PRADHAN , DR / DATE OF HEARING : 1 4 / 0 5 /201 8 / DATE OF PRONOUNCEMENT 17 / 05 /201 8 / O R D E R PER SHRI PAV AN KUMAR GADALE, JM : TH E ASS ESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(A) - 2 , BHUBANESWAR, DATED 28 .06.2017 , PASSED IN I.T.APPEAL NO. 00 39 / 2016 - 1 7 , U/S.143(3)/250 OF THE I.T.ACT FOR THE ASSESSMENT YEAR 201 3 - 201 4 . 2. AT THE TIME OF HEARING, LD. AR OF THE ASSESSEE HAS NOT PRESS ED THE GROUNDS NO.2 & 3 OF THE GROUNDS OF APPEAL. ACCORDINGLY, WE DISMISS THE GROUND NOS.2&3 AS NOT PRESSED. 3. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER : - 1. LD CIT (APPEALS) IS WRONG AND UNLAWFUL IN UPHOLDING THE DECISION OF ASSESSING OFFICER WITH R ESPECT TO DISALLOWANCE OF INTEREST CLAIMED BY THE ASSESSEE U/S 80P(2) (D). INTEREST INCOME FROM ORISSA STATE CO OPERATIVE BANK LTD BEING ANOTHER CO OPERATIVE SOCIETY TO THE TUNE OF RS. 30,37,898/ - . 4. T HUS LD CIT (APPEALS) IS WRONG IN HOLDING THAT, THE WHOLE OF RS. 44,02,128/ - INTEREST INCOME IS INCOME FROM FIXED DEPOSITS AND IS NEITHER DEDUCTIBLE U/S 80P(2)(D) NOR ELIGIBLE FOR SET OFF AGAINST CARRIED FORWARD LOSS FOR BEING INCOME FROM OTHER SOURCES. ITA NO. 37 8 /201 7 2 5. THE APPELLANT CRAVES LEAVE OF GRANTING PERMISSIO N OF CONSIDERING THE REVISED RETURN FILED BY THE ASSESSEE, BY THE A. O , WHICH HAS NOT BEEN CONSIDERED AT THE TIME OF ASSESSMENT , WHICH IS IN LINE WITH THE SUBJECT MATTER OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN AOP IS ENGAGED IN THE PROMOTION OF HANDICRAFTS AND HANDLOOM OF ODISHA AND FILED THE RETURN OF INCOME ELECTRONICALLY ON 17.09.2014 FOR ASSESSMENT YEAR 2013 - 2014 DECLARING TOTAL INCOME OF RS.NIL. SUBSEQUENTLY, THE RETURN WAS PROCESSED U/S.143(1) OF THE ACT AND THE CASE WAS S ELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S.143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. IN COMPLIANCE THE LD. AR OF THE ASSESSEE APPEARED AND SUBMITTED THE RELEVANT DETAILS. THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, ENQUIRIES MADE AND DOCUMENTS PLACED ON RECORD, FOUND THAT THE ASSESSEE IN THE SAID ASSESSMENT YEAR HAS DISCLOSED NET PROFIT OF RS.34,48,871/ - WHICH WAS ADJUSTED AGAINST BROUGHT FORWARD LOSS. ON FURTHER VERIFICATION THE AO FOUND THAT THE AS SESSEE HAS DISCLOSED RS.59,76,918/ - AS MISCELLANEOUS RECEIPTS. HOWEVER, ON ENQUIRY IT WAS FOUND THAT OUT OF THE SAID AMOUNT THE INTEREST ACCRUED OF RS. 44,02,128/ - HAS BEEN TAKEN UNDER MISCELLANEOUS RECEIPT AMOUNT OF RS.59,76,918/ - . THE AO FOUND THAT APPLYI NG THE PROVISIONS OF SECTION 56(2) OF THE ACT THE INTEREST ON BANK DEPOSITS AND LOANS IS TO BE TREATED UNDER THE HEAD INCOME FROM OTHER SOURCES AND DEALT ON THE PROVISIONS OF SECTION 72(1) OF THE ACT AND OBSERVED THAT THE ASSESSEE IS NOT ELIGIBLE TO BE SET OFF AGAINST CARRY FORWARD BUSINESS LOSS OF PREVIOUS YEAR AND TREATED THE INCOME FROM OTHER SOURCES AND MADE ADDITION OF RS.44,02,128/ - ALONG WITH OTHER ADDITIONS, ASSESSED THE TOTAL ITA NO. 37 8 /201 7 3 INCOME OF THE ASSESSEE AT RS.55,80,550/ - AND PASSED ORDER U/S.143(3) OF T HE ACT, DATED 31.03.2016. 4. ON APPEAL BEFORE THE CIT(A), LD. AR ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO. THE CIT(A) CONSIDERED THE GROUNDS OF APPEAL AND ON THE FIRST DISPUTED ISSUE WITH RESPECT TO THE TREATMENT OF INTEREST ON BANK DEPOSIT UNDER INCOME FROM OTHER SOURCES, LD. CIT(A) DEALT ON THE SUBMISSIONS AND ALSO FINDINGS OF AO AND COORDINATE BENCH DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2012 - 2013 OBSERVED THAT INTEREST INCOME HAS TO BE OFFERED UNDER INCOME FROM OTHER SOURCES AND BROUGHT FORWARD BUSINESS LOSS CANNOT BE ALLOWED FOR SET OFF AND DISMISS ED THE GROUND OF ASSESSEE AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 6 . LD. AR BEFORE US ARGUED THAT THE CIT(A) HAS ERRED IN CONSIDERING THAT THE INCOME FROM FIXED DEPOSITS IS NOT DEDUCTIBLE U/S.80P(2)(D) OF THE ACT AND NOR ELIGIBLE FOR SET OFF AGAINST CARRIED FORWARD LOSS. TO SUPPORT HIS ARGUMENTS, LD. AR FILED T HE PAPER BOOK. 7. CONTRA, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES AND SUBMITTED THAT CIT(A) HAS RIGHTLY RELIED ON THE COORDINATE BENCH DECISION OF THE TRIBUNAL IN ITA NO.66/CTK/2017. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON R ECORD. WE FIND THAT ON THE FIRST DISPUTED ISSUE WITH RESPECT TO DISALLOWANCE OF INTEREST CLAIMED BY THE ASSESSEE U/S 80P(2) (D) OF THE ITA NO. 37 8 /201 7 4 ACT, THE COORDINATE BENCH OF THE TRIBUNAL IN CASE IN ITA NO.66/CTK/2017(SMC), FOR THE ASSESSMENT YEAR 2012 - 2013, DATED 3 1.05.2017 HAS DEALT ON THIS ISSUE IN DETAIL AND UPHELD ORDER OF THE CIT(A) AND OBSERVED AT PARA 3 TO 6.5 AS UNDER : - 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF T HE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CREATED CERTAIN RESERVE FUNDSFROM YEAR TO YEAR AND PARKED ITS SURPLUS INCOME IN THE FORM OF FIXED DEPOSITS IN DIFFERENT BANKS RESULTING IN SUBSTANTIAL INTEREST INCOME. SINCE THE FUNDS CREATED BY SUCH RETENTION WAS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SECURITIES. THEREFORE, SUCH INTEREST INCOME IS ACTUALLY TO BE CONSIDERED AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS AS TREATED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. HE OBSERVED THAT THE INCOME WHICH IS ATTRIBUTABLE TO ANY OF THE SPECIFIED ACTIVITIES U/S.80P(2) IS ELIGIBLE FOR DEDUCTION. IN THE INSTANT CASE, THE ASSESSEE SOCIETY INVESTED FUNDS NOT IMMEDIATELY REQUIRED FOR BUSINE SS PURPOSES AND, THEREFORE, INTEREST ON SUCH INVESTMENTS, CANNOT FALL WITHIN THE MEANING OF THE EXPRESSION PROFIT AND GAINS OF BUSINESS AND CANNOT BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY. THE HONBLE APEX COURT IN THE CASE OF TOTGARS CO - OPERAT IVE SALES SOCIETY LTD VS ITO, 322 ITR 283 HAS HELD THAT THE INTEREST INCOME EARNED BY THE CO - OPERATIVES FROM THE FUND CREATED BY RETENTION WHICH IS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES FELL UNDER THE HEAD INCOME FROM OTHER SOURCES IS TAXABLE UN DER SECTION 56 OF THE I.T.ACT, 1961. THEREFORE, THE ASSESSING OFFICER DISALLOWED DEDUCTION U/S. 80P OF THE ASSESSEE OF INTEREST INCOME OF RS.7,14,513/ - WHICH WAS ENHANCED IN APPEAL BY THE CIT(A) TO RS.17,79,725/ - . 4. SIMILARLY, THE ASSESSING OFFICER OBSE RVED THAT THE ASSESSEE HAS EARNED RENTAL INCOME DURING THE YEAR UNDER APPEAL BY LETTING OUT OF SHOPS AND OFFICE PREMISES. HE OBSERVED THAT AS PER SECTION 80P(2)(E) THE WHOLE OF THE INCOME DERIVED BY CO - OPERATIVE SOCIETY FROM THE LETTING OF GODOWNS OR WARE HOUSES FOR STORAGE, PROCESSING OR FACILITATING THE MARKETING OF COMMODITIES IS DEDUCTIBLE THE TERM GODOWN AND WARE HOUSES IS VERY IMPORTANT AND HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. AHMEDABAD MASKATI CLOTH DEALERS CO - OPERATIVE WAREHOUSE SOCIET Y LTD., (1986) 162 ITR 142 HELD THAT THERE MUST BE A GODOWN OR WAREHOUSE WHICH SHOULD BE LET OUT FOR THE PURPOSE AS SPECIFIED IN THE CLAUSE (E) TO SECTION 80P(2) OF THE INCOME TAX ACT, 1961. IF THE GODOWN OR WAREHOUSE IS LET OUT FOR THE PURPOSE OF OTHER T HAN STORAGE, PROCESSING OR FACILITATING THE MARKETING COMMODITIES, THE INCOME DERIVED THERE FROM BY A CO - OPERATIVE SOCIETY WOULD NOT BE DEDUCTIBLE U/S. 80P. LATER, THE HONBLE SUPREME COURT IN THE CASE OF UDAIPUR ITA NO. 37 8 /201 7 5 SAHAKARIUPBHOKTATHOKBHANDAR LTD VS CIT, 18 2 TAXMAN 287 (SC) HAS HELD THAT DEDUCTION IS AVAILABLE IN RESPECT OF INCOME DERIVED FROM THE LETTING OUT OF GODOWNS AND WAREHOUSES ONLY WHERE THE PURPOSE OF LETTING IS STORAGE, PROCESSING OR FACILITATING MARKETING OF COMMODITIES. HE OBSERVED THAT IN THE C ASE OF THE ASSESSEE THE RENTAL INCOME EARNED FROM LETTING OUT SHOPS AND OFFICE PREMISES AND, THEREFORE, IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P(2) OF THE ACT AND HENCE, DISALLOWED DEDUCTION OF RS.15,52,966/ - , WHICH WAS ENHANCED IN APPEAL BY THE CIT(A) TO RS .17,79,725/ - . 5. ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY ENHANCING THE DISALLOWANCE UNDER THE HEAD INTEREST INCOME AND RENTAL INCOME BY RELYING ON THE FOLLOWING JUDICIAL DECISIONS: I) PUNJAB STATE CO - OPERATIVE MILK PRODUCERS FEDERATION LTD VS CIT, (2012 20 TAXMANN.COM 834 (P&H) II) MANTOLA CO - OPERATIVE THRIFT & CREDIT SOCIETY LTD VS CIT, (2014) 50 TAXMANN.COM 278 (DELHI) III) STATE BANK OF INDIA VS CIT, (2016) 72 TAXMANN.COM 64 (GUJ) IV) BIHAR RAJYASAHKARIBHOOMIVIKAS CO - OPERAT IVE BANK LTD VS CIT, (2010) 186 TAXMANN 54 (PAT) V) KOTTAYAM CO - OPERATIVE LAND MORTGAGE BANK LTD VS CIT, 40 TAXMAN 259(KER) VI) SINDHI SAHITI MULTIPURPOSE & TRANSPORT CO - OPERATIVE SOCIETY LTD VS CIT, 214 ITR 232 (MP) 6. LD A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE CIT(A). HE SUBMITTED THAT SPECIAL LEAVE PETITION HAS BEEN GRANTED BY THE HONBLE SUPREME COURT AGAINST THE ORDER OF HONBLE P&H HIGH COURT IN THE CASE OF PUN JAB STATE CO - OPERATIVE FEDERATION OF HOUSE BUILDING SOCIETY LTD VS CIT, (2016) 76 TAXMANN.COM 99 (SC), WHEREIN, IT WAS HELD THAT INTEREST EARNED BY CO - OPERATIVE SOCIETY BY INVESTING SURPLUS FUNDS IN SHORT TERM DEPOSIT OR INTEREST EARNED BY GIVING LOANS TO EMPLOYEES FOR HOUSING AND CONVEYANCE WOULD NOT BE ENTITLED TO SECTION 80P(2)(A) . FURTHER, HE SUBMITTED THAT SPECIAL LEAVE PETITION HAS BEEN GRANTED AGAINST THE DECISION OF HONBLEDELHI HIGH COURT IN THE CASE OFMANTOLA CO - OPERATIVE THRIFT & CREDIT SOCIE TY LTD VS CIT (2016) 70 TAXMANN.COM 296 (SC), WHEREIN, IT WAS HELD THAT THE CO - OPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, DEPOSITED SURPLUS FUNDS IN FIXED DEPOSITS AND EARNED INTEREST THEREON, SAID INTEREST WOULD BE ASSESSABLE AS INCOME FROM OTHER SOURCES AND, THUS, NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THUS, THE ASSESSEE BY OWN SUBMISSION ADMITS THAT THE DECISION OF ABOVE HONBLE HIGH COURTS ARE AGAINST THE ASSESSEE AND THERE IS NO DECISION OF H ONBLE SUPREME COURT REVERSING THE SAME. 6.1 HE ALSO RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SNAMPROGETTI S.P.A. VS ACIT (1981) 132 ITR 70 (DEL)), WHEREIN, IT WAS HELD THAT IF THE INTEREST INCOME WAS DERIVED FROM ITA NO. 37 8 /201 7 6 BUSINESS ACTIVI TY THEN THE MERE FACT THAT IT IS TAXED UNDER A DIFFERENT SECTION WILL MAKE NO DIFFERENCE. THE APPROACH TO THE PROBLEM HAS, THEREFORE, TO BE DISASSOCIATED FROM THE SECTION UNDER WHICH THE TAX IS IMPOSED ON THE FORM OF INCOME. 6.2 IN THE CASE OF THE ASSES SEE, IT IS NOT IN DISPUTE THAT INTEREST INCOME IS EARNED FROM FIXED DEPOSIT WITH BANK AND NOT FROM ANY BUSINESS ACTIVITY. HENCE, THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 6.3 HE FURTHER RELIED ON THE DECISION OF HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. A.P. INDUSTRIAL INFRASTRUCTURE CORPORATION LTD, 175 ITR 361 (AP), WHEREIN, IT WAS HELD THAT RECEIVING AND DISBURSING FUNDS INCLUDING THE GOVERNMENT FUNDS, PENDING DISBURSEMENT OF SUCH FUNDS WAS PLACED IN BANK DEPOSITS AND INTEREST THEREON WAS HELD TO BE BUSINESS INCOME. IN THE CASE OF THE ASSESSEE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS NOT RECEIVED ANY FUNDS FOR DISBURSEMENT FROM GOVERNMENT WHICH WAS KEPT IN THE BANK IN THE INTERVAL BETWEEN RECEIPT AND DISBURSEMENT. THEREFORE, THIS DECISION IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 6.4 THE LD A.R. FURTHER RELIED ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VSTIRUPATIWOOLLEN MILLS LTD., 193 ITR 252 (CAL) WHEREIN IT WAS HELD THAT THE TRIBUNAL HAD FOUND THAT THE INTEREST AROSE FROM UTILIZATION OF COMMERCIAL ASSET. THE FUNDS UTILIZED IN MAKING FIXED DEPOSIT WITH BANKS WERE BUSINESS FUNDS LYING TEMPORARILY SURPLUS WITH THE ASSESSEE. IT WAS THEREFORE ASSESSABLE AS BUSINESS INCOME AND RE VENUE EXPENDITURE COULD BE DEDUCTED FROM IT. IN THE CASE OF THE ASSESSEE, IT IS NOT THE CASE OF THE ASSESSEE THAT INTEREST INCOME WAS EARNED OUT OF UTILIZATION OF BUSINESS FUNDS LYING TEMPORARILY SURPLUS WITH THE ASSESSEE. THEREFORE, THIS CASE IS NOT APPL ICABLE TO THE FACTS OF THE ASSESSEES CASE. 6.5 FOR THE REASON GIVEN ABOVE, I FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND GROUNDS OF APPEAL OF THE ASSESSEE ARE DISMISSED. ON PERUSAL OF THE ABOVE ORDER OF C OORDINATE BENCH OF THE TRIBUNAL, WE FIND NO ERROR IN THE ORDER OF THE CIT(A) AND THE SAME IS UPHELD AND GROUND NO.4 OF THE ASSESSEE IS DISMISSED. 9. WITH RESPECT TO GROUND NO.1 & 5 , L D. AR ARGUED THE GROUND THAT THE INTEREST INCOME IS AS PER THE ORISSA ST ATE COOPERATIVE BANK, THIS BEING THE OTHER COOPERATIVE SOCIETY WHERE THE ASSESSEE CLAIMED INTEREST UNDER SECTION 80P(2)(D) OF THE ACT OF RS. 30,37,898/ - . AT THE TIME OF HEARING, WE ITA NO. 37 8 /201 7 7 FIND THAT THIS GROUND OF APPEAL DOES NOT EMANATES FROM THE ORDER OF CIT(A) A ND ALSO THE LD. AR SUBMITTED THAT REVISED RETURN FILED BY THE ASSESSEE HAS NOT BEEN CONSIDERED BY THE AO. WE ALSO FIND THAT THIS GROUND ALSO DOES NOT EMANATE FROM THE ORDER OF CIT(A). ACCORDINGLY, TO MEET THE END OF JUSTICE, WE REMIT BOTH THE DISPUTED ISSU ES TO THE FILE OF CIT(A), WHO SHALL PASS ORDER AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSEE SHALL BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING BEFORE PASSING THE ORDER. THUS, GROUND NO. 1 & 5 ARE ALLOWED FOR STATISTICAL PURPOSES. 1 0 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . O RDER PRONOU NCED IN THE OPEN COURT ON 17 / 05 / 201 8 . SD/ - ( N. S. SAINI ) SD/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 17 / 05 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - M/S ORISS A STATE COOPERATIVE HANDICRAFTS CORPORATION LIMITED, AT - D - 2/3, INDUSTRIAL ESTATE, RASULGARH, BHUBANESWA R 2. / THE RESPONDENT - DCIT, CIRCLE - 4(1), BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//