The ITO, Ward-2, Navsari V. M/s. Kaveri Vibhag Sahkari Khand Udhyog Mandli, Navsari

ITA 4060/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1751 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U S RAINA
• Keywords: Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.N.PHAUJA, HONBLE ACCOUNTANT MEMBER ITA NO.4060/AHD/2008 ASSESSMENT YEAR:2005-06 DATE OF HEARING:16.3.11 DRAFTED:16.3.11 INCOME TAX OFFICER, WARD-2, NAVSARI V/S. KAVERI VIBHAG SAHKARI KHAND UDHYOG MANDLI, 103, NISHA COMPLEX, WATER TANK, KHERGAM ROAD, CHIKHLI, DIST. NAVSARI PAN NO.AAAAK0902G (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI U.S. RAINA, DR RESPONDENT BY:- NONE O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS REVENUES APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME- TAX(APPEALS)-, VALSAD IN APPEAL NO. CIT(A)/VLS/194A /07-08 DATED 29-08- 2008 FOR THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F DELETING DISALLOWANCE MADE U/S. 80(P)(2)(D) OF THE ACT OF RS .15,16,826/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O AND DISMISSED THE PLEA OF THE ASSESSEE. ITA NO. 4060/AHD/2008 A.Y. 2005-0 6 ITO WD-2 NVS V. K.V.S.K.U MANDLI PAGE 2 3. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE THE FACT THAT NOTICE WAS SERVED UPON (AD ON RECORD). HOWEVER, WE PROCEED TO DECIDE THE APPEAL AFTER HEARING LD. DR. THE ISSUE IN THIS APPEAL OF REVENUE RELATES TO CLAIM OF ASSESSEE U/S 80P(2)(D) OF THE I.T. ACT OF RS.15,16, 826/-. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A CO-OPERATIVE SOCIETY AND FIL ED RETURN OF INCOME AT NIL ON 30-11-2005. THE ASSESSING OFFICER HAS DENIED THIS C LAIM OF THE ASSESSEE BY OBSERVING AS UNDER:- I HAVE CAREFULLY GONE THROUGH THE WRITTEN SUBMISSI ON OF THE ASSESSEE. HOWEVER, I DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE. THOUGH, THE ASSESSEE, IN ITS WRITTEN SUBMISSION, HAS SHOWN TOTAL INCOME OF RS.15,16,885/- INSTEAD OF RS.15,16,826/-. THERE IS NO DISPUTE ON THE OVERALL AMOUNT OF INTEREST. THE ASSESSEE HAS ADMITT ED THAT THE AMOUNT INTEREST OF RS.15,16,826/- WAS EARNED BY INVESTING THE AMOUNT COLLECTED IN FORM OF SHARE CAPITAL FROM FARMERS, GOVT. OF GUJ ARAT AND FROM THE OTHERS. IT FURTHER ADDS THAT IF THE AMOUNT OF INTER EST OF RS.15,16,826/- IS TREATED AS INCOME FROM OTHER SOURCE AND NOT FOR THE DEDUCTION U/S.80P(2)(D) OF THE ACT EVEN THOUGH, THE RESULT WO ULD THE SAME. IT HAS WORKED OUT BUSINESS LOSS OF RS.6,40,378/-. IF THE I NTEREST INCOME OF RS.15,16,885/- IS CONSIDERED AS INCOME FROM OTHER S OURCE, AGAIN THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 80P(2) (D) OF THE ACT OF RS.8,75,507/- AFTER TAKEN INTO CONSIDERATION, THE B USINESS LOSS OF RS.6,40,378/-. THE CONTENTION OF THE REPRESENTATIVE OF THE ASSESSEE IS ALSO NOT ACCEPTABLE BECAUSE HE HAS FORGOTTEN THAT W HEN THERE IS NO BUSINESS NO EXPENDITURE OF ANY SORT IS ALLOWABLE. P ARTICULARLY, IN THIS CASE, THE CLAIM OF EXPENDITURE HAS TO BE CONSIDERED AS PRE-OPERATIVE EXPENSES AND CAN NOT BE DEBITED FROM ANY OTHER INCO ME. IT IS PERTINENT TO MENTION HERE THAT THOUGH THE SOCIETY WAS ESTABLI SHED IN THE YEAR 1989, IT COULD NOT START THE PRODUCTION OF SUGAR TI LL DATE. IT MAY BE NOTED THAT NO DIVIDEND OR INTEREST HAS BEEN DISTRIBUTED T O THE MEMBERS IN ANY OF THE YEAR. THOUGH 18 YEARS HAVE ELAPSED, THE ASSE SSEE SAYS THAT THE SOCIETY IS IN PRIMARY STAGE IS VERY RIDICULOUS. SIN CE THERE WERE NO BUSINESS ACTIVITIES OF ANY SORT, THE WHOLE INTEREST INCOME CAN BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES OF INCOME WHICH DOES NOT QUALIFY FOR DEDUCTION U/S.80P(2)(D) OF THE I.T. ACT . THE ASSESSEE HAS RELIED UPON SEVERAL DECISIONS. THE Y ARE DISCUSSED IN BRIEF HEREUNDER:- THE ASSESSEE HAS STATED THAT FACTS OF ITS CASE ARE SIMILAR TO THE CASE REPORTED IN CIT V/S. DOABA CO.OP SUGAR MILLS (1998) TAXMAN 509/230 ITR 774 (PUJ. & HAR.). HOWEVER, I DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE. THE FACTS OF T HAT CASE ARE DIFFERENT FROM THIS CASE. IN THAT CASE, THE ASSESSE E WAS RUNNING ITA NO. 4060/AHD/2008 A.Y. 2005-0 6 ITO WD-2 NVS V. K.V.S.K.U MANDLI PAGE 3 THE SUGAR MILLS WHEREAS HERE IN ASSESSEES CASE NO BUSINESS ACTIVITIES OF ANY SORT WERE CARRIED OUT NOT ONLY DU RING THE PREVIOUS YEAR BUT ALSO IN YEARS TOGETHER. THE DEDUCTION IN T HAT CASE WAS DENIED BY THE ASSESSING OFFICER ON THE WHOLE AMOUNT OF INTEREST. THEREFORE, THE FACTS OF THAT CASE ARE DIFFERENT ALT OGETHER AND CANNOT BE COMPARED WITH. THE ASSESSEE HAS ALSO RELIED UPON TWO CASE, NAMELY REPORTED IN CIT V/S. HARYANA CO.OP. HOUSING BUILDING SOCIETY LT D. (1998) 234 ITR 14. ON GOING THROUGH THE DECISIONS, IT IS SEEN THAT IN THOSE CASES TOO, THE BUSINESS WAS CARRIED ON BY THE ASSESSEE. THEREFORE, THE ASSESSEES CONTENTION THAT THE FACTS OF THOSE CASES ARE SIMILAR TO ITS CASE, IS ALSO SNOT ACCEPTABLE AN D DEDUCTION U/S.80P(2)(D) OF THE I.T. ACT OF RS.8,75,507/- CLAI MED BY IT IS DISALLOWED AND WHOLE AMOUNT OF RS.15,58,834/- (INCL UDING THE INCOME FROM SALE OF GRASS AND INTEREST INCOME RECEI VED FROM VALSAD DANGS GRAMIN BANK) IS ADDED TO THE TOTAL INC OME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCE . IT IS PERTINENT TO MENTION HERE THAT THE PURPOSE FOR WHICH THE SOCIETY WAS FORMED HAS NEVER BEEN PURSUED BY TH E MANAGEMENT OF THE SOCIETY. ISSUE SHOW CAUSE NOTICE U/S.271(1) FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE SOCIETY HAS ALSO SHOWN INCOME FROM SALE OF GRAS S OF RS.42,000/- AND INTEREST INCOME OF RS.54,211/- FROM VALSAD DANGS GRAMIN BANK AND CLAIMED THE DEDUCTION U/S.80P (2)(D) OF THE I.T. ACT ON IT. HOWEVER, BOTH THE INCOMES ARE D O NOT QUALIFY FOR THE ABOVE DEDUCTION. SINCE, THE DISALLOWANCE WHOLE AMOUNT IS MADE TO THE TOTAL INCOME, NO SEPARATE DISALLOWANCE IS MADE TO THE TOTAL INCOME. IN APPEAL, LD. CIT(A) HAS GIVEN RELIEF TO THE ASSES SEE BY OBSERVING AS UNDER:- 4. I HAVE CONSIDERED THE CONTENTIONS OF THE APPELL ANT AS WELL AS THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. THE FACTS REMAIN THAT THE APPELLANT SOCIETY HAS NOT STARTED ANY BUSINESS DURING THE YEAR UNDER CONSIDERATION BUT IT HAS INVESTED ITS SHARE CAPITAL FUND IN THE VALSAD DIST. CENTRAL CO.OP BANK, CHIKHLI BRANCH AND FROM V ALSAD DANGS GRAMIN BANK FROM WHERE IT HAS EARNED INTEREST INCOM E OF RS.15,16,834/-. OVER AND ABOVE, THE APPELLANT HAS E ARNED INCOME OF RS.42,000/- FROM SALE OF GRASS. THERE IS NO FORCE I N THE CONTENTION OF THE AO THAT SINCE NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT BY THE APPELLANT SOCIETY, THE BENEFIT OF DEDUCTION U/S.80P(2)(D) OF THE ACT HIS NOT AVAILABLE TO THE APPELLANT., THE PROVISIONS OF SECT ION 80P(2)(D) OF THE ACT IS NOT AVAILABLE TO THE APPELLANT. THE PROVISIO NS OF SECTION 80P(2)(D) ITA NO. 4060/AHD/2008 A.Y. 2005-0 6 ITO WD-2 NVS V. K.V.S.K.U MANDLI PAGE 4 HAS SPECIFICALLY GRANTED EXEMPTION ON THE INCOME FR OM HAS NOT DISPUTED THE FACT THAT THE APPELLANT HAS INVESTED IN THE DEP OSITS OF VALSAD OF VALSAD DIST. CENTRAL CO.OP BANK, CHIKHLI BRANCH AND FROM VALSAD DANGS GRAMIN BANK FROM WHERE IT HAS EARNED INTEREST INCOME OF RS.15,16,834/-. ON THESE COUNTS, THE CONTENTION OF THE APPELLANT IS CORRECT THAT IRRESPECTIVE OF THE FACT THAT NO BUSIN ESS ACTIVITY IS CARRIED ON BY IT, YET THIS APPELLANT IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(D) OF THE ENTIRE INTEREST INCOME OF RS.15,16,834/-. HOWEVER, NO BENEFIT OF DEDUCTION U/S.80P(2)(D) CAN BE EXTENDED TOWARDS THE INCOME FROM SALE OF GRASS AS THE APPELLANTS INCOME FROM SALE OF GRA SS IS NOT COVERED UNDER ANY OF THE CLAUSE (A) TO OF SUB-SECTION (2) O F SECTION 80P OF THE I.T. ACT. THEREFORE, THE APPELLANTS GROUND NO.1 IS PARLY ALLOWED. AGGRIEVED BY THIS ORDER OF LD. CIT(A), NOW REVENUE IS IN APPEAL BEFORE TRIBUNAL. 4. AFTER HEARING LD. DR AND PERUSING THE RECORDS AN D THE PROVISION OF SECTION OF 80P(2)(D) OF THE I.T. ACT, WE FIND NO IN FIRMITY IN THE ORDER PASSED BY LD. CIT(A) AS IT IS IN CONFORMITY WITH THE PROVISIO N OF SECTION 80P(2)(D) OF THE I.T. ACT AND THEREFORE THE SAME IS HEREBY UPHELD. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18/03/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 18/03/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- VALSAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ ITA NO. 4060/AHD/2008 A.Y. 2005-0 6 ITO WD-2 NVS V. K.V.S.K.U MANDLI PAGE 5 DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD