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

ITA 40/DEL/2012

• Counselvise Citation: 4020114 RSA 2012
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 08-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHUMANA SEN
• Keywords: Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SHRI I.C.SUDHIR, JUDICIAL MEMBER I.T.A .NO.-40/DEL/2012 ASSESSMENT YEAR - 2008-09 ACIT, VS. M/S SANGWARI PRIMARY AGR. CO-OP. SOCIET Y LTD. CIRCLE REWARI, VPO-SANGWARI, MODEL TOWN, DISTT.-REWARI, HARYANA. REWARI-123401. PAN-AABAT7821K (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. SHUMANA SEN, SR. DR RESPONDENT BY: SH. SANJEEV JAIN, GPA. APPEAL HEARD ON-08.11.2012 ORDER PRONOUNC ED ON-14.12.2012 ORDER PER S.V.MEHROTRA, AM THIS APPEAL FILED ON 23-01-2012 BY THE REVENUE IS A GAINST THE ORDER DATED 25-10-2011 OF THE LD. CIT(A), ROHTAK FOR AY 2008-09 . 2. THE ASSESSEE IS A PRIMARY AGRICULTURE COOPERATIV E SOCIETY, REGISTERED UNDER THE COOPERATIVE SOCIETY ACT, HARYANA. THIS SOCIETY IS ALSO KNOWN BY THE NAME OF PACS. IN THE RELEVANT AY, THE SOCIETY WAS ENGAGED IN CARRYING OUT THE BANKING ACTIVITIES LIKE BORROWING, RAISING OR TAKING UP OF MONEY AND LENDING OR ADVANCING OF MONEY FOR THE PURPOSE OF AGRICULTURAL WORK AND S ALE & PURCHASE OF SEEDS & UREA. THE AO HAS OBSERVED THAT THESE SOCIETIES ARE FINANCED BY THE DISTRICT CENTRAL I.T.A .NO.-40/DEL/2012 2 COOPERATIVE BANK TO PROVIDE FURTHER CREDIT FACILITI ES IN ITS AREA ON BEHALF OF THE STATE GOVERNMENT. PACS ARE THE NODAL AGENCIES WHIC H RUN AS PER THE GUIDELINES OF STATE GOVERNMENT TO FACILITATE THE FARMERS OF THE V ILLAGES FOR THEIR CREDIT REQUIREMENT AS WELL AS TO FULFILL SEED, UREA ETC. R EQUIREMENT. THE SOCIETY ACCEPTED THE LOANS FROM THE COOPERATIVE BANK AND ADVANCE THE SAME TO FARMERS/VILLAGER SITUATED IN RURAL AREA FOR AGRICULTURAL PURPOSES. THE AO NOTICED THAT ASSESSEE HAD FILED RETURN DECLARING NIL INCOME. HE OBSERVED THA T DURING THE YEAR UNDER CONSIDERATION, THE SOCIETY HAD DECLARED NET PROFIT OF RS.20,60,678/- AND THE WHOLE OF THE PROFIT HAD BEEN CLAIMED AS DEDUCTION UNDER C HAPTER VI-A U/S 80P (2)(A)(I) & 80P(2)(A)(IV) OF THE INCOME TAX ACT, 1961. THE AO OBSERVED THAT THESE TWO SECTIONS APPLIED ONLY TO THOSE SOCIETIES WHO WERE E NGAGED IN SUCH ACTIVITIES FOR ITS MEMBERS ONLY AND NOT FOR THE PUBLIC AT LARGE I.E NO N MEMBERS. HE OBSERVED THAT ASSESSEE WAS PROVIDING SUCH SERVICES AS MENTIONED I N THESE TWO SECTIONS TO ITS MEMBERS AS WELL AS TO THE NON-MEMBERS AND, THEREFOR E, THE ENTIRE INCOME CANNOT BE TERMED AS INCOME DERIVED FROM ITS MEMBERS ONLY. HE NOTED THAT THERE WAS A LIABILITY IN THE BALANCE SHEET MENTIONED AS SAVING BANK A/C NON MEMBERS DEPOSIT OF RS.25,21,770/-. FROM THE EXAMINATION OF BALANCE SHEET AND RECEIPT AND PAYMENT ACCOUNT, HE CONCLUDED THAT THE CO-OPERATIVE SOCIETY WAS NOT ENGAGED EXCLUSIVELY IN PROVIDING BANKING AND/OR CREDIT FACI LITIES TO ITS MEMBERS BUT ALSO TO NON-MEMBERS. HE OBSERVED THAT THE AUDITOR HAD CLEA RLY MENTIONED IN HIS REPORT THAT SOCIETY HAD RECEIVED RS.36,27,826/- AND RETURN ED BACK RS.11,06,056/- IN THE I.T.A .NO.-40/DEL/2012 3 YEAR TO NON MEMBERS, RESULTANTLY BALANCE OF RS.25,2 1,770/- REMAINED AS DEPOSIT UNDER THE NON-MEMBERS ACCOUNT. HE, THEREFORE, REQU IRED THE ASSESSEE TO BIFURCATE THE INCOME AND EXPENDITURE RELATED TO MEMBERS AND N ON-MEMBERS SO THAT DEDUCTION CLAIMED U/S 80P COULD BE RESTRICTED TO TH AT EXTENT OTHERWISE DEDUCTION OF RS.50,000/- ONLY TO BE ALLOWED. THE ASSESSEE IN IT S REPLY SUBMITTED THAT IT WAS ENGAGED IN CARRYING OUT THE BANKING ACTIVITIES LIKE BORROWING, RAISING OR TAKING UP OF MONEY FROM MEMBER AND NON-MEMBERS AND LENDING AN D ADVANCING OF MONEY TO ITS MEMBERS ONLY FOR THE PURPOSES OF AGRICULTURAL W ORK SINCE THE DATES OF ITS INCORPORATION. IT WAS FURTHER POINTED OUT THAT ASS ESSEE WAS FINANCED BY THE DISTRICT CENTRAL COOPERATIVE BANK TO PROVIDE FURTHER CREDIT FACILITIES TO ITS MEMBERS ONLY IN ITS AREA ON BEHALF OF THE STATE GOVERNMENT. IT WA S FURTHER CLARIFIED THAT PACS ACCEPTED THE LOANS FROM THE COOPERATIVE BANK AND AD VANCE THE SAME TO FARMERS/VILLAGER SITUATED IN RURAL AREA FOR AGRICUL TURAL PURPOSES ONLY AFTER ACCEPTING THEIR MEMBERSHIP. THUS, PACS PROVIDED THE CREDIT F ACILITIES TO ITS MEMBERS ONLY FOR AGRICULTURAL AND ALLIED ACTIVITIES. THE ASSESS EE FURTHER SUBMITTED THAT DURING AY 2008-09, THE ASSESSEE HAD CARRIED ON BANKING ACTIVI TIES AS MENTIONED ABOVE AND PROVIDED ALL AGRICULTURAL FERTILIZERS, SEED ETC SUP PLIED BY THE HARYANA GOVERNMENT TO ITS MEMBERS AS PER INSTRUCTION OF HARYANA GOVERN MENT. THE ASSESSEE ALSO CLARIFIED THAT IT ACCEPTED SOME OF THE DEPOSIT ON S HORT-TERM BASIS FROM ITS NON- MEMBERS ALSO. THIS WAS ONLY IN THE NATURE OF BANKI NG ACTIVITY. HOWEVER, NO CREDIT FACILITIES OR SALE OF AGRICULTURAL SEED, UREA ETC. WAS PROVIDED TO ANY NON-MEMBERS. I.T.A .NO.-40/DEL/2012 4 THE ASSESSEE ALSO SUBMITTED THAT AS PER THE SECTION 80P(2)(A)(I), THE WORD CARRYING ON THE BUSINESS OF BANKING OR PROVIDING C REDIT FACILITIES, THE WORD BUSINESS OF BANKING COVERS EVERYTHING EXCEPT TO C OVER CREDIT FACILITIES PROVIDED TO MEMBERS OR NON-MEMBERS AND, ACCORDINGLY, ACCEPTA NCE OF DEPOSITS FROM NON- MEMBERS WAS THE PART OF THE BANKING ACTIVITIES. SI NCE CREDIT FACILITIES WAS PROVIDED TO MEMBERS ONLY, THEREFORE, THE ASSESSEE W AS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80P(2)(A)(I). THE ASSESSEE FURTHER S UBMITTED THAT IT WAS ALMOST IMPOSSIBLE FOR IT TO BIFURCATE THE EXPENDITURE INCU RRED TOWARDS DEPOSITS RECEIVED FROM MEMBERS AND NON-MEMBERS. HOWEVER, THE ASSESSE E CONFIRMED THAT IT HAD NOT EARNED ANY INCOME FROM ITS NON-MEMBERS SINCE THE AS SESSEE HAD NOT INCURRED ANY INCOME FROM SALE OF AGRICULTURAL SEEDS AND UREA FRO M NON-MEMBERS AS WELL AS DID NOT PROVIDE ANY CREDIT FACILITIES TO NON-MEMBERS FR OM INTEREST INCOME EARNED BY IT. THE AO CONCLUDED THAT SINCE ASSESSEE WAS ACCEPTING DEPOSIT FROM NON-MEMBERS, IT TANTAMOUNT TO THE FACT THAT IT HAD PROVIDED BANKING FACILITIES TO PERSONS OTHER THAN MEMBERS. HE OBSERVED THAT IF A SOCIETY WAS ACCEPTI NG DEPOSITS FROM NON- MEMBERS, THAT MONEY GOT CIRCULATED THROUGH ADVANCES TO ITS MEMBERS WHO IN RETURN PAID INTEREST ON THE ADVANCES AND INCOME HAD BEEN G ENERATED BY THE SOCIETY. THEREFORE, SOCIETY WAS NOT ELIGIBLE TO CLAIM 100% D EDUCTION U/S 80P. HE FURTHER OBSERVED THAT THE TAX CONCESSIONS ARE ALLOWED ONLY TO THOSE SOCIETIES WHO ARE ENGAGED IN ACTIVITIES AS PER THE CONDITIONS LAID DO WN IN THE ACT AND NOT ON THE BASIS OF THEIR NAMES. HE FURTHER OBSERVED THAT THE PROVI SIONS RELATING TO TAX CONCESSIONS I.T.A .NO.-40/DEL/2012 5 HAVE TO BE INTERPRETED RIGIDLY AND THAT THE BURDEN OF PROOF LIES ON THE ASSESSEE. IN THIS REGARD, HE RELIED ON FOLLOWING DECISIONS:- (A) CIT VS ANAKAPALLI CO-OP MARKETING SOCIETY LTD, 2445 ITR 616 (A.P) (B) UOI VS. WOOD PAPER LTD. AIR 1991 HONBLE SUPREME CO URT 2049. 3. HE FURTHER POINTED OUT THAT IF PERSONS OTHER THA N THE MEMBERS OF THE SOCIETY HAD BEEN PROVIDED BANKING FACILITIES BY THE SOCIETY , IT WOULD HAVE THE EFFECT OF MAKING INCOME SO EARNED NOT PURELY FROM ITS MEMBERS . IN THIS REGARD, HE RELIED ON FOLLOWING DECISIONS :- (A) AO VS GANESH CO-OP L/CIT(A) SOCIETY, 67 ITD 436 (AS SAM TRIBUNAL) (B) NILGIRI ENGINEERING CO-OP SOCIETY LTD. VS. CIT, 208 ITR 326 (ORISSA). 4. HE, ACCORDINGLY, WITHDREW THE EXEMPTION CLAIMED U/S 80P(2)(A)(I) & (IV) OF RS.20,60,678/- AND ALLOWED DEDUCTION TO THE EXTENT OF RS.50,000/- AS PER SECTION 80P(2)(C)(II). 5. LD. CIT(A) BY HIS COMMON ORDER IN ASSESSEES CAS E AND IN THE CASE OF THE MUNDI PRIMARY AGRI. CO-OPERATIVE SOCIETY LTD., ALL OWED THE ASSESSEES APPEAL FOR THE FOLLOWING REASONS :- (I) IT IS NOT IN DISPUTE THAT THE CREDIT FACILITIES AND SUPPLY OF SEEDS, UREA ETC ONLY TO THE MEMBERS OF THE ASSESSEES SOCIETY. (II) ONLY DEPOSITS WERE ACCEPTED FROM NON-MEMBERS. THE ACCEPTANCE OF DEPOSITS FROM NON-MEMBERS DID NOT IN ANY WAY EFFECT THE REVENUE BY THE ASSESSEE IN PROVIDING CREDIT FACILITIES AND SUP PLY OF SEEDS UREA ETC. TO THE MEMBERS. I.T.A .NO.-40/DEL/2012 6 (III) MERELY BECAUSE THE ASSESSEE WAS UNABLE TO BIFURCAT E THE EXPENDITURE FOR THE DEPOSITS FROM THE MEMBERS AND NON-MEMBERS, DEDUCTION U/S 80P(2)(A)(I) AND 80P(2)(A)(IV) COULD NOT BE DISALLO WED. 6. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), TH E DEPARTMENT HAS RAISED FOLLOWING GROUNDS :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN LAW AND FACTS BY ALLOWING THE DEDUCTION UN DER SECTION 80P OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.20,50,680/ -. 7. LD. DR RELIED ON THE ORDER OF AO. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS AND HAS RELIED ON THE DECISION OF TRIBU NAL IN THE CASE OF :- (A) ACIT VS THE PALHAWAS PRIMARY AGRICULTURE CO-OP. IN ITA NO- 2368/DEL/2011 & OTHERS. IN THE WRITTEN SUBMISSIONS, THE ASSESSEE HAS REITER ATED THE SUBMISSIONS MADE BEFORE AO AND FURTHER POINTED OUT THAT DURING THE S CRUTINY PROCEEDINGS, THE AO DULY VERIFIED THAT NO CREDIT FACILITIES AS WELL AS NO SALE OF AGRICULTURAL SEED, UREA HAD BEEN MADE TO NON-MEMBERS. AS REGARDS, ACCEPTAN CE OF DEPOSITS FROM NON- MEMBERS, THE ASSESSEE SUBMITTED THAT AS PER SECTION 80P(2)(A)(I), THE WORDS CARRYING ON THE BUSINESS OF BANKING OR PROVIDING C REDIT FACILITIES, THE WORD BUSINESS OF BANKING COVERS EVERYTHING EXCEPT TO CO VER CREDIT FACILITIES PROVIDED TO MEMBERS OR NON-MEMBERS AND, ACCORDINGLY, ACCEPTANCE OF DEPOSITS FROM NON- MEMBERS WAS PART OF THE BANKING ACTIVITIES. I.T.A .NO.-40/DEL/2012 7 8. WE HAVE CONSIDERED THE SUBMISSION OF THE BOTH TH E PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT CREDIT FACILITIES AND SEEDS & UREA ETC. WERE GIVEN ONLY TO THE MEMBER S AND ONLY DEPOSITS WERE ACCEPTED FROM NON-MEMBERS. TRIBUNAL IN THE CASE OF PALHAWAS PRIMARY AGRICULTURE CO-OP. VS ACIT FOR AYS 2008-09 & 2009-1 0, HAS OBSERVED THAT DEPOSITS FROM NON-MEMBERS DID NOT GENERATE ANY INCO ME TO THE ASSESSEE. THE AOS ONLY CONTENTION IS THAT THE DEPOSITS RECEIVED FROM NON-MEMBERS GOT CIRCULATED THROUGH MEMBERS WHO IN RETURN PAID INTER EST ON THE ADVANCES AND INCOME HAD BEEN GENERATED TO THE SOCIETY. THUS, TH E AO ACCEPTED THAT THERE WAS NO DIRECT INCOME GENERATED FROM THE DEPOSITS BUT ON LY BY UTILIZING THAT MONEY FOR MAKING ADVANCES TO ITS MEMBERS. THE INCOME CONTEMP LATED U/S 80P(2)(A)(I) & (IV) IS THE INCOME FROM CARRYING ON THE BUSINESS OF BANK ING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR INCOME EARNED BY THE P URCHASE OF AGRICULTURAL IMPLEMENTS, SEEDS, LIVESTOCK OR OTHER ARTICLES INTE NDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS. THE SOU RCE OF FUNDS UTILIZED FOR EARNING THESE INCOMES CAN NOT BE A BASIS FOR MAKING DISALLOWANCE UNDER THESE PROVISIONS. THE BUSINESS OF BANKING CAN NOT BE RES TRICTED TO CARRYING ON ACTIVITIES WITH MEMBERS ONLY BECAUSE THERE IS NO SUCH IMPEDIME NT IMPOSED U/S 80P(2)(A)(I). THE DIRECT SOURCE OF INCOME IS ULTIMATELY FROM THE CREDIT FACILITIES PROVIDED TO ITS MEMBERS OR FROM SALE OF SEEDS, AGRICULTURAL IMPLEME NTS TO MEMBERS ONLY ETC CONTEMPLATED UNDER SECTION 80(2)(A)(IV). WE, THERE FORE, RESPECTIVELY FOLLOWING THE I.T.A .NO.-40/DEL/2012 8 DECISIONS OF TRIBUNAL IN THE CASE OF PALHAWAS PRIMA RY AGRICULTURE CO-OP. VS ACIT (SUPRA), CONFIRM THE ORDER OF LD. CIT(A). 9. IN THE RESULT, WE DISMISS THE DEPARTMENTS APPEA L. ORDER PRONOUNCED IN THE OPEN COURT ON 14.12.2012. SD/- SD/- (I.C.SUDHIR) (S.V.MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14/12/2012 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRA R ITAT NEW DELHI