Sri. Durdundeeshwar Urben Crdit Souhard Sahakari Ltd., Belgaum V. Income Tax Officer Ward-1(3), Belgaum

ITA 390/PAN/2013

• Counselvise Citation: 39024114 RSA 2013
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K LD
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 390/PNJ/2013 : (ASST. YEAR : 2008 - 09) SRI DURDUNDEESHWAR URBAN CREDIT SOUHARD SAHAKARI LIMITED, SANKESHWAR, TAL. HUKKERI, DIST. BELGAUM PAN : AAAAS5612D (APPELLANT) VS. INCOME TAX OFFICER, WARD - 1(3), BELGAUM (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : NISHANT K., LD. DR DATE OF HEARING : 25/02/2014 DATE OF PRONOUNCEMENT : 21 / 03 /2014 O R D E R PER P.K. BANSAL 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), BELGAUM DT. 7.10.2013 FOR A.Y. 2008 - 09 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DENYING THE DEDUCTION CLAIMED U/S 57. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE DURING THE YEAR HAS EARNED INTEREST ON LOANS AND DEPOSITS OF RS.5,22,61,695/ - . OUT OF THE TOTAL INTEREST EARNED ON INVESTMENT WITH D NYANAYOGI SHIVAKUMAR SWAMINI SUGARS LTD., INDI OF RS.2,02,500/ - AND FROM VENKAT E SHWARA POWER PROJECT LTD., BEDAKIHAL TO THE EXTENT OF RS.56,50,946/ - . THE ASSESSEE CLAIMED DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF THE SAID SUM OF RS.58,53,446/ - . THE AO DID NOT ALLOW THE DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF THE SAID AMOUNT AS WELL AS DISALLOWED THE PROPORTIONATE EXPENSES AGAINST THE 2 ITA NO. 390/PNJ/2013 (ASST. YEAR : 2008 - 09) INTEREST INCOME. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) CONFIRMED THE ORDER OF THE AO IN THE FOLLOWING MAN NER : 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND ALSO PERUSED THE ASSESSMENT ORDER AND THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSING OFFICER AS WELL AS BY THE APPELLANT. THE ASSESSING AUTHORITY HAS WORKED THE INCOME ON INVE STMENTS WITH DNYNAYOGI SHIVAKUMAR SWAMINI SUGBARS LTD., OF RS.2,02,500/ - AND TREATED THE SAME AS INCOME FROM OTHER SOURCES NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) AS IT IS NOT ATTRIBUTABLE TO THE BUSINESS OF THE APPELLANT OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE BASIC CONTENTION OF THE APPELLANT IS THAT IT HAS DEPOSITED THE AMOUNTS WITH THESE COMPANIES IN ORDER TO MAINTAIN LIQUIDITY RATIO AND SAFETY MARGIN. THE APPELLANT HAS ALSO CONTENDED THAT INTEREST RECEIVED ON THESE INVESTMENTS UNDOUBTE DLY CONSTITUTES BUSINESS INCOME AND HENCE IT SHOULD BE ELIGIBLE FOR EXEMPTION U/S 80P. THE APPELLANT HAS FURTHER CONTENDED THAT DEDUCTION U/S 57 SHOULD HAVE BEEN ALLOWED WITH REGARD TO THE INTEREST PAID ON DEPOSITS WHICH HAD BEEN INVESTED WITH THE COMPANI ES TO EARN THE INTEREST INCOME WHICH THE A.O HAS CONSIDERED AS INCOME FROM OTHER SOURCES AND DENIED THE APPELLANT DEDUCTION U/S 80P(2)(A)(I). IT HAS BEEN RIGHTLY HELD BY THE A.O THAT INCOME ON INVESTMENTS FROM DEPOSITS WITH THESE COMPANIES CANNOT BE HELD TO BE INCOME ATTRIBUTABLE TO THE ACTIVITY OF BANKING OR PROVIDING CREDIT FACILITY TO THE MEMBERS OF THE SOCIETY. THE APPELLANT HAS ALSO NOT BEEN ABLE TO PROVE THAT SUCH AN ACTIVITY IS COVERED BY THE BYE LAWS OF THE SOCIETY AND IT IS PERMITTED TO DO SO UND ER THE KARNATAKA CO - OPERATIVE SOCIETIES ACT. THEREFORE, THE ACTION OF THE A.O IN THIS REGARD DENYING DEDUCTION U/S 80P(2)(A)(I) ON INCOME ON INVESTMENTS FROM DEPOSITS WITH THE AFORESAID TWO COMPANIES ARE CONFIRMED. 6.1 AS FAR AS APPELLANTS CLAIM OF DEDU CTION U/S 57 IS CONCERNED, IT MAY BE MENTIONED HERE THAT THE ONUS OF PROVING ANY NEXUS OR CONNECTION WITH THE INTEREST INCOME WAS ON THE APPELLANT WHICH IT HAS NOT BEEN ABLE TO DISCHARGE IN ITS AFORESAID SUBMISSION. 6.1.1 WITHOUT PREJUDICE TO THE FOREGOING, IT IS WORTH NOTING THAT ALL THE EXPENSES DEBITED IN THE P&L ACCOUNT TO EARN BUSINESS INCOME HAVE ALREADY BEEN ALLOWED. THE EXPENSES ALREADY DEBITED IN THE P&L ACCOUNT CANNOT BE ALLOWED TO BE DEBITED ALL OVER AGAIN FOR THE SECOND TIME. THEREFOR E, THE CONTENTION OF THE APPELLANT ON THIS GROUND ALSO FAILS. 7. IN VIEW OF THE ABOVE DISCUSSION AND DETAILED REASONS GIVEN BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER, THE APPEAL FILED BY THE APPELLANT IS DISMISSED. 2.1 WE HAVE HEARD THE RIVAL SUB MISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF BANKING OR PROVIDING 3 ITA NO. 390/PNJ/2013 (ASST. YEAR : 2008 - 09) CREDIT FACILITIES TO ITS MEMBERS. WHILE CARRYING ON THE SAID BUSINESS, THE ASSESSEE HAD INVESTED SURPLUS FUNDS WITH DNYANAYOGI SHIV AKUMAR SWAMINI SUGARS LTD., INDI AND VENKAT E SHWARA POWER PROJECT LTD., BEDAKIHAL ON WHICH THE ASSESSEE HAS EARNED INTEREST AMOUNTING TO RS.2,02,500/ - AND RS.56,50,946/ - TOTALLING TO RS.58,53,446/ - . THIS INCOME, SINCE DOES NOT ARISE OUT OF THE BUSINESS CAR RIED ON BY THE ASSESSEE, CANNOT BE REGARDED TO BE INCOME BEING EARNED FROM THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THIS INCOME, IN OUR OPINION, HAS TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES AND CONSEQUENTLY T HE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) OF THE INCOME TAX ACT. IN OUR OPINION, THE ISSUE INVOLVED IN THIS APPEAL IS DULY COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT DT. 8.2.2010 IN THE CASE OF THE TOTG A RS CO - OPERATIVE SALE SOC IETY LTD. VS. ITO, KARNATAKA IN CIVIL APPEAL NO. 1622 OF 2010. SO FAR AS THE ISSUE RELATING TO THE CLAIM OF DEDUCTION OF THE EXPENDITURE WHICH HAS BEEN DISALLOWED TO THE ASSESSEE PROPORTIONATELY AS CLAIMED BY THE ASSESSEE , WE NOTED THAT A SIMILAR ISSUE HAS BEEN SET BACK IN THE SAID JUDGEMENT BY THE HON'BLE SUPREME COURT TO THE HON'BLE HIGH COURT TO TAKE A FRESH DECISION. WE, ACCORDINGLY, RESTORE THIS ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO TAKE THE VIEW WHATEVER THE HON'BLE KARNATAKA HIGH COURT MAY TAKE IN THE CASE OF THE TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO IN THE ORDER PASSED IN CONSEQUENCE OF THE HON'BLE SUPREME COURT DECISION. 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTIC AL PURPOSE . 4. ORDER PRONOUNCED IN THE OPEN COURT ON 21 / 03 /2014. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 21 / 03 / 201 4 *SSL* 4 ITA NO. 390/PNJ/2013 (ASST. YEAR : 2008 - 09) COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT(A) CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER