ACIT, Rewari V. M/s. Mundi Primary Agr. Co-Op Society Ltd., Haryana

ITA 39/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65760 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 07-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SEHGAL

Judgement Text

I.T.A. NO. 39/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 39/DEL/2012 A.Y. : 2008-09 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE, REWARI, MODEL TOWN, REWARI (HARYANA)-123401 VS. M/S MUNDI PRIMARY AGR. CO - OP SOCIETY LTD., VPO-MUNDI, DISTT. REWARI (PAN/GIR NO. : AABAM2255P) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : WRITTEN SUBMISSION. DEPARTMENT BY : SH. DEEPAK SEHGAL, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK DAT ED 25.10.2011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF I NCOME TAX (A) HAS ERRED IN LAW AND FACTS BY ALLOWING THE DEDUCTIO N UNDER SECTION 80P OF THE INCOME TAX ACT, 1961 AMOUNTING TO ` 16,55,500 /-. 3. THE ASSESSEE IS A PRIMARY AGRICULTURE CO-OP SOCI ETY LTD. (PACS) REGISTERED UNDER THE CO-OP SOCIETY ACT, HARYANA. I T IS ENGAGED IN CARRYING OUT BANKING ACTIVITIES LIKE BORROWING, RAI SING OR TAKING UP OF MONEY AND LENDING OR ADVANCING OF MONEY FOR THE PURPO SE OF AGRICULTURE, SALE AND PURCHASE OF SEEDS AND UREA ET C. THE ASSESSEE SOCIETY IS FINANCED BY DISTRICT CENTRAL CO-OP BANK T O PROVIDE FURTHER I.T.A. NO. 39/DEL/2012 2 CREDIT FACILITIES IN ITS AREA ON BEHALF OF STATE GO VT. TO FACILITATE THE FARMERS OF THE VILLAGES FOR THEIR CREDIT REQUIREMENT AS WELL AS TO FULFILL SEED, UREA ETC. REQUIREMENT. THE ASSESSEE SOCIETY RECEIVED LOANS FROM CO-OP BANK AND ADVANCE THE SAME TO THE FARMERS / VILLAGERS SITUATED IN RURAL AREA FOR AGRICULTURE PURPOSES. 3.1 THE ASSESSEE SOCIETY DECLARED NET PROFIT OF ` 2 0,60,678/- AND THE WHOLE OF THE PROFIT HAS BEEN CLAIMED AS DEDUCTION U /S. 80P (2)(A)(I) AND U/S. 80P(2)(A)(IV). SECTION 80P(2)(A)(I) WAS INT RODUCED TO PROVIDE TAX CONCESSION TO CO-OP SOCIETIES WHO ARE ENGAGED I N THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBER S AND SECTION 80P(2)(A)(IV) WAS INTRODUCED TO PROVIDE TAX CONCESS ION TO CO-OP SOCIETIES ENGAGED IN THE PURCHASE OF AGRICULTURAL I MPLEMENTS, SEEDS, LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTU RE FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS. 3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHETHER THE BANKI NG FACILITIES ARE EXCLUSIVELY PROVIDED TO MEMBERS ONLY OR TO NON-MEMBER S ALSO AND, IF SO, BIFURCATE THE INCOME AND EXPENDITURE RELATED TO MEMBERS AND NON MEMBERS SO THAT DEDUCTION CLAIMED U/S. 80P CAN BE RES TRICTED TO THAT EXTENT OTHERWISE DEDUCTION OF ONLY 50,000/- WILL BE ALLOWED. IN RESPONSE TO THIS, THE ASSESSEE SUBMITTED THAT IT AC CEPTED LOAN FROM CO-OP BANK AND ADVANCED THE SAME TO FARMERS / VILLA GERS SITUATED IN RURAL AREAS FOR AGRICULTURAL PURPOSES ONLY. FURTH ER, AGRICULTURE FERTILIZERS, SEEDS ETC. SUPPLIED BY THE GOVT. OF HARYANA HAVE BEEN DISTRIBUTED TO ITS MEMBERS AS PER THE INSTRUCTIONS OF HARYANA GOVT. THE ASSESSEE DERIVED INCOME FROM ITS MEMBERS ON BOTH THE ABOVE ACTIVITIES AND THEREFORE CLAIMED DEDUCTION U/S. 80P (2)(A)(I) AND U/S. I.T.A. NO. 39/DEL/2012 3 80P(2)(A)(IV). IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS ACCEPTING SOME DEPOSITS FOR SHORT TERM BASIS FROM NON MEMBERS ALSO WHICH IS ONLY IN THE NATURE OF BANKING ACTIVITY; THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO BIFURCATE THE EXPENDITURE INCURRED TOW ARDS DEPOSITS RECEIVED FROM MEMBERS AND NON MEMBERS; THAT NO CREDIT F ACILITY OR SUPPLY OF SEEDS ETC. WAS PROVIDED TO ANY NON MEMBERS . 3.3 THE ASSESSING OFFICER WAS NOT SATISFIED. HE H ELD THAT EXEMPTION U/S. 80P(2)(A)(I) AND U/S. 80P(2)(A)(IV) IS NOT AVAIL ABLE TO THE ASSESSEE. 3.4 ASSESSING OFFICER OBSERVED THAT ACCEPTANCE OF DEPOSITS FROM NON MEMBERS TANTAMOUNT TO PROVIDING BANKING FACILITI ES TO PERSONS OTHER THAN MEMBERS; THAT IF A SOCIETY IS ACCEPTING D EPOSITS FROM NON MEMBERS, THAT MONEY GETS CIRCULATED THROUGH ADVANCES TO ITS MEMBERS, WHO IN RETURN PAID INTEREST ON THE ADVANCES AND INCOME HAS BEEN GENERATED BY THE SOCIETY; THAT ONLY THOSE SOC IETIES ARE ALLOWED 100% DEDUCTION OF THEIR PROFIT U/S. 80P WHICH ARE EN GAGED IN PROVIDING FACILITIES ONLY TO THEIR MEMBERS; THAT THE ASSESSEE EXPRESSED ITS INABILITY TO BIFURCATE THE INCOME AND EXPENDITURE F ROM MEMBERS AND NON MEMBERS. RELYING UPON THE CASE LAWS OF (I) A .O. VS. GANESH CO- OP L/C SOCIETY, 67 ITD 436 ASSAM TRIBUNAL AND (II) NI LGIRI ENGINEERING CO-OP SOCIETY LTD. VS. C.I.T., 208 ITR 326 (ORISSA) , THE ASSESSING OFFICER DISALLOWED THE DEDUCTIONS CLAIMED U/S. 80P(2)(I) AND U/S. 80P(2)(A)(IV). 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) ASS ESSEE SUBMITTED THAT IN THE WORDS CARRYING ON THE BUSINE SS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IN SECTIO N 80P(2)(A)(I), THE WORD BUSINESS OF BANKING COVERS EVERYTHING EXCEPT T O COVER CREDIT FACILITY PROVIDED TO MEMBER OR NON MEMBER AND ACCORDI NGLY ACCEPTANCE OF DEPOSITS FROM NON MEMBERS IS PART OF B ANKING ACTIVITY. I.T.A. NO. 39/DEL/2012 4 THE CASE LAW OF APEX COURT IN THE CASE OF C.I.T. VS . KARNATAKA STATE CO- OPERATIVE APEX BANK (2001) 251 ITR 194 (SC) WAS RE LIED UPON WHEREIN IT HAS BEEN HELD THAT INTEREST INCOME ARISING FROM I NVESTMENT OF FUNDS WITH STATE BANK OR WITH RESERVE BANK OF INDIA IS B ANKING INCOME AND IS EXEMPT U/S. 80P(2)(A)(I) OF THE I.T. ACT. 4.1 CONSIDERING THE ABOVE, LD. COMMISSIONER OF INCOM E TAX (A) HELD AS UNDER:- I HAVE CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AUTHORISED REPRESENTATIVE. IT IS NOT I N DISPUTE THAT THE CREDIT FACILITIES AND SUPPLY OF SE EDS, UREA ETC. WERE GIVEN ONLY TO THE MEMBERS OF THE APPELLANT SOCIETY. ONLY WITH REGARD TO THE DEPOSI TS, THE APPELLANT ACCEPTED FROM NON-MEMBERS ALSO. ACCEPTANCE OF DEPOSITS FROM NON MEMBERS DOES NOT IN ANY WAY AFFECT THE REVENUE GENERATED BY THE APPELLANT IN PROVIDING CREDIT FACILITIES AND SUPPLY OF SEEDS, UREA ETC. TO THE MEMBERS. FURTHER, MERELY BECAUSE THE APPELLANT IS UNABLE TO BIFURCATE THE EXPENDITURE FOR THE DEPOSITS FROM THE MEMBERS AND NON MEMBERS, DEDUCTION U/S. 80P(2)(A)(I) AND U/S. 80O(2)(A)(IV) CANNOT BE DISALLOWED. THE RATIO OF CASE LAWS RELIED UPON BY THE ASSESSING OFFICER ARE DISTINGUISHABLE ON FACTS. ON THE OTHER HAND, THE RA TIO OF HONBLE APEX COURT IS RELIED UPON BY THE LD. AUTHORISED REPRESENTATIVE, THOUGH ON DIFFERENT SET OF FATS, IS APPLICABLE TO THE APPELLANT. IN VIEW OF T HE ABOVE, THE ACTION OF THE ASSESSING OFFICER IN NOT I.T.A. NO. 39/DEL/2012 5 ALLOWING DEDUCTION U/S. 80P(2)(I) AND U/S. 80P(2)(A)( IV) IS HELD AS NOT TENABLE AND THEREFORE THE GROUND OF APPEAL IS ALLOWED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPE AL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. THE ASSESSEE IN ITS WRITTEN SUBMISSION HAS POINTED OUT THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN I.T.A. NO. 236 8/DEL/2012 TO 2371/DEL/2012 VIDE ORDER DATED 18.5.2012. IT HAS FURTHER BEEN SUBMITTED THAT THE SAME DECISION WAS FOLLOWED BY TH E ITAT, DELHI IN THE CASE OF SIMILAR TYPE OF ASSESSEE IN I.T.A. NO. 2 362/DEL/2012 & 2363/DEL/2012 VIDE ORDER DATED 31.7.2012. 7. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED UPON THE DECISION OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. NONE APPEARED ON BEHALF OF THE ASSES SEE ONLY THE WRITTEN SUBMISSIONS WERE SUBMITTED AND THE SAME WERE CONSIDERED. WE FIND THAT IN THIS CASE THE ASSESSING OFFICER HAS ASKED THE ASSESSEE AS TO WHETHER THE BANKING FACILITIES ARE EXCLUSIVEL Y PROVIDED TO THE MEMBERS ONLY OR TO NON MEMBERS ALSO AND, IF SO, BIFU RCATE THE INCOME AND EXPENDITURE RELATED TO MEMBERS AND NON-MEMBE RS SO THAT DEDUCTION CLAIMED U/S. 80P CAN BE RESTRICTED TO THAT EXTENT. ASSESSING OFFICER HAS FURTHER HELD THAT ACCEPTANCE OF DEPOS ITS FROM NON MEMBERS TANTAMOUNT TO PROVIDING BANKING FACILITIES TO PERSONS OTHER THAN MEMBERS. WE FIND THAT THE ABOVE IS NOT ACCEPT ABLE PROPOSITION. IT IS UNDISPUTED THAT THE CREDIT FACILITIES AND SUP PLY OF SEEDS, UREA IS ONLY GIVEN TO THE MEMBERS OF SOCIETY. ONLY WITH RE GARD TO THE I.T.A. NO. 39/DEL/2012 6 DEPOSITS, THE ASSESSEE ACCEPTED FROM NON MEMBERS AL SO. ACCEPTANCE OF DEPOSITS FROM NON-MEMBERS DOES NOT IN A NY WAY AFFECT THE REVENUE GENERATED BY THE ASSESSEE IN PROVIDING CREDIT FACILITIES AND SUPPLY OF SEEDS, AREA ETC. TO THE MEMBERS. W E AGREE WITH THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (A) TH AT MERELY BECAUSE THE ASSESSEE WAS UNABLE TO BIFURCATE THE EXPENDITU RE FOR THE DEPOSITS FROM THE MEMBERS AND NON MEMBERS, DEDUCTION U/S. 80P(2)(A )(I) AND U/S. 80P(2)(A)(IV) CANNOT BE DISALLOWED. IN THIS REGARD, THE CASE LAWS REFERRED IN THE ASSESSEES SUBMISSIONS ARE GERMANE. THE TRIBUNAL IN I.T.A. NOS. 2362/DEL/2012 & 2363/DEL/2012 VIDE ORDE R DATED 31.7.2012 HAS HELD AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE RECORD CAREFULLY. SECTION 80P(2)(II) HAS A DIREC T BEARING ON THE CONTROVERSY. IT IS, THEREFORE, IMPERATIVE UPO N US TO TAKE NOTE OF THE RELEVANT PROVISIONS: (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-O PERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AN D SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIE D IN SUB- SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE A SSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY, :- (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED I N (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS, OR I.T.A. NO. 39/DEL/2012 7 (II) A COTTAGE INDUSTRY, OR (III)THE MARKETING OF THE AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS, OR (IV) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTUR E FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS, OR (V) THE PROCESSING, WITHOUT THE AID OF POWER.. 6. A PERUSAL OF THE ABOVE PROVISIONS INDICATES THAT IN THE GROSS TOTAL INCOME OF A CO-OPERATIVE SOCIETY, IF AN Y, INCOME REFERRED TO IN SUB-SECTION (2) IS INCLUDED THEN THE RE SHALL BE A DEDUCTION OF SUCH INCOME IF OTHER CONDITIONS ARE FULFILLED BY THE ASSESSEE SOCIETY. THE CASE OF THE ASSESSEE F ALLS WITHIN THE CATEGORY (I) AND (IV) I.E. ASSESSEE SOCI ETY IS CARRYING ON THE BUSINESS OF BANKING AND PROVIDING C REDIT FACILITIES TO ITS MEMBERS, TO PURCHASE AGRICULTURAL IMPLEMENTS SEEDS ETC. TO THIS EXTENT, THERE IS NO DIS PUTE ON FACTS. THE CASE OF THE ASSESSING OFFICER IS THAT IN ORDER TO FULFILL THESE OBJECTS, ASSESSEE GETS THE MONEY IN TH E SHAPE OF DEPOSITS FROM OTHER CO-OPERATIVE BANKS WHO ARE N OT ITS MEMBERS, THEREFORE, IT IS NOT ENTITLED FOR EXEMPTION. IN ASSESSMENT YEAR 2008-09, THE ITAT HAS CONSIDERED TH IS ASPECT AND OBSERVED THAT DEPOSITS FROM NON-MEMBERS D O I.T.A. NO. 39/DEL/2012 8 NOT GENERATE ANY INCOME TO THE ASSESSEE. ASSESSING OFFICER IN THE PRESENT ASSESSMENT YEAR ALSO NOT POINTED OUT HOW INCOME WOULD GENERATE TO THE ASSESSEE BY TAKING DEP OSITS FROM NON-MEMBERS. THE DIRECT SOURCE OF INCOME IS ULTIMATELY FROM THE CREDIT FACILITY PROVIDED TO ITS MEMBERS OR FROM SALE OF SEEDS AGRICULTURAL IMPLEMENTS ETC. CONTEMPLATED IN SECTION 80P(2)(A)(IV). THE CALCULATIO N MADE BY THE ASSESSING OFFICER IS ON HYPOTHESIS ONLY. HE ASSUMES THAT FOR EXAMPLE HUNDRED RUPEES ARE TAKEN AS A DEPOS IT FROM NON-MEMBER, THEN HUNDRED WOULD BE GIVEN TO ITS MEMBERS AS A CREDIT FACILITY WHICH WOULD GENERATE INT EREST INCOME FORM THE MEMBERS, NAMELY, TEN RUPEES. IN THIS TE N RUPEES, THE ELEMENT OF INCOME ON THE CONTRIBUTION MAD E BY THE DEPOSITOR IS INVOLVED. TO OUR MIND, THE NET INCO ME GENERATED TO THE ASSESSEE IS ONLY FROM ITS MEMBERS. O N THE DEPOSITS, IT WILL PAY INTEREST WHICH WOULD BE ITS E XPENSES AND WOULD BE SET OFF AGAINST THE TOTAL INCOME GENER ATED FROM THE CREDIT FACILITY. IT HAS NOT INCOME ON THE DEPOSITS FROM THE NON-MEMBERS RATHER IT MUST HAVE PAID INTEREST ON SUCH DEPOSITS. THIS ISSUE HAS ELABORATELY BEEN DISC USSED BY THE ITAT IN ASSESSMENT YEAR 2008-09 IN THE CASE OF I.T.A. NO. 39/DEL/2012 9 PALHAWAS PRIMARY AGRICULTURE CO-OP SOCIETY. RESPECTF ULLY FOLLOWING THE ORDER OF THE ITAT, WE DO NOT FIND ANY ERROR IN THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS). 9. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AN D PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CO MMISSIONER OF INCOME TAX (A). ACCORDINGLY, WE UPHOLD THE SAME. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/11/2012. SD/- SD/- [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 09/11/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES