M/s North Canara District Co-op Fish Marketing Federation Ltd , Karwar V. Income Tax Officer Ward-1 , Karwar

ITA 415/BANG/2018

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5497 (ITAT-BANGALORE)
• Duration Of Justice: 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALAKRISHNAN N
• Assessee Lawyers: BHARATH H P
• Keywords: Business income; Opportunity of being heard; Question of law
• Section: 80HHC; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO S . 415 & 416 / BANG/201 8 ASSESSMENT YEAR S : 2012 - 13 & 2013 - 14 M/S. NORTH CANARA DISTRICT CO-OP FISH MARKETING FEDERATION LTD., NEAR SAGAR DARSHAN, NH-17, KODIBAG, KARWAR 581 303. PAN: AAAAN0767C THE INCOME TAX OFFICER, WARD 1, KARWAR. APPELLANT RESPONDENT APPELLANT BY : SHRI BHARATH H.P., CA RESPONDENT BY : SHRI BALAKRISHNAN .N, ADDL. CIT (DR) DATE OF HEARING : 01 .0 3 .2018 DATE OF PRONOUNCEMENT : 01 . 0 3 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AND TH ESE ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A)-10, BANGALORE BOT H DATED 21.11.2017 FOR ASSESSMENT YEARS 2012-13 AND 2013-14. BOTH THESE A PPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2012-13 ARE AS UNDER. 1. THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSES SING OFFICER ('AO')AND THE ORDER OF THE COMMISSIONER OF INCOME T AX (APPEALS) [CIT(A)] UNDER INCOME TAX ACT, 1961 ('THE ACT') A RE NOT IN ACCORDANCE WITH THE LAW AND IS CONTRARY TO THE FACT S AND CIRCUMSTANCES OF THE PRESENT CASE. 2. THE LD CIT(A) AND AO HAS ERRED, IN LAW AND IN FA CTS, BY HOLDING INTEREST INCOME AMOUNTING TO INR 617,749 AND DIVIDE ND INCOME AMOUNTING TO INR 20,274 SHALL NOT BE ELIGIBLE TO CL AIM DEDUCTION UNDER SECTION 80P OF THE ACT. ITA NOS. 415 & 416/BANG/2018 PAGE 2 OF 5 3. THE LD CIT(A) AND AO HAS ERRED IN LAW BY HOLDING THAT INTEREST / DIVIDEND INCOME RECEIVED ON IDLE FUNDS INVESTED WIT H OTHER MEMBERS OR FINANCIAL INSTITUTIONS SHALL NOT BE CONSIDERED A S INCOME FROM BUSINESS OR PROFESSION. 4. THE LD CIT(A) AND AO HAS FAILED TO ACKNOWLEDGE T HE FACTS THAT, THE INTEREST INCOME CONSIDERED AS BUSINESS INCOME AND E LIGIBLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT, SINCE THE INTEREST INCOME IS CONSIDERED TO BE INCIDENTAL TO CARRYING THE MAIN ACTIVITIES OF THE BUSINESS. APPLYING THE SAME PRINCIPLES TO THE PRESE NT CASE, THE APPELLANT INTEREST AND DIVIDEND INCOME EARNED BY TH E APPELLANT IS ALSO INCIDENTAL TO CARRYING ON THE MAIN OBJECTS OF THE SOCIETY AND INTEREST AND DIVIDEND SHOULD BE CONSIDERED AS INCOM E FROM BUSINESS OR PROFESSION ONLY. ACCORDINGLY BENEFITS OF SECTION 80P SHOULD BE EXTENDED TO INTEREST AND DIVIDEND ALSO. EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOU T PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFO RE OR AT, THE TIME OF HEARING, OF THE APPEAL, SO AS TO ENABLE THE HONO RABLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSMENT YEAR 2013-14 ARE AS UNDER. 1. THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSIN G OFFICER ('AO')AND THE ORDER OF THE COMMISSIONER OF INCOME T AX (APPEALS) ['CIT(A)']UNDER INCOME TAX ACT, 1961 ('THE ACT') AR E NOT IN ACCORDANCE WITH THE LAW AND IS CONTRARY TO THE FACT S AND CIRCUMSTANCES OF THE PRESENT CASE. 2. THE LD CIT(A) AND AO HAS ERRED, IN LAW AND IN FA CTS, BY HOLDING INTEREST INCOME AMOUNTING TO INR 16,98,106 AND DIVI DEND INCOME AMOUNTING TO INR 23,833 SHALL NOT BE ELIGIBLE TO CL AIM DEDUCTION UNDER SECTION 80P OF THE ACT. 3. THE LD CIT(A) AND AO HAS ERRED IN LAW BY HOLDING THAT INTEREST / DIVIDEND INCOME RECEIVED ON IDLE FUNDS INVESTED WIT H OTHER MEMBERS OR FINANCIAL INSTITUTIONS SHALL NOT BE CONSIDERED A S INCOME FROM BUSINESS OR PROFESSION. 4. THE LD CIT(A) AND AO HAS FAILED TO ACKNOWLEDGE T HE FACTS THAT, THE INTEREST INCOME CONSIDERED AS BUSINESS INCOME AND E LIGIBLE FOR DEDUCTION UNDER SECTION 80HHC OF THE ACT, SINCE THE INTEREST INCOME IS CONSIDERED TO BE INCIDENTAL TO CARRYING THE MAIN ACTIVITIES OF THE BUSINESS. APPLYING THE SAME PRINCIPLES TO THE PRESE NT CASE, THE APPELLANT INTEREST AND DIVIDEND INCOME EARNED BY TH E APPELLANT IS ITA NOS. 415 & 416/BANG/2018 PAGE 3 OF 5 ALSO INCIDENTAL TO CARRYING ON THE MAIN OBJECTS OF THE SOCIETY AND INTEREST AND DIVIDEND SHOULD BE CONSIDERED AS INCOM E FROM BUSINESS OR PROFESSION ONLY. ACCORDINGLY BENEFITS OF SECTION 80P SHOULD BE EXTENDED TO INTEREST AND DIVIDEND ALSO. EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOU T PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFO RE OR AT, THE TIME OF HEARING, OF THE APPEAL, SO AS TO ENABLE THE HONO RABLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. 4. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ISSUE IN DISPUTE IN PRESENT CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMEN T OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309. AT THIS JUNCTURE, IT WAS POINTED OUT BY THE BENCH THAT THERE IS LATER JU DGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO- OPERATIVE SALE SOCIETY AS REPORTED IN 395 ITR 611 ( KARN). IN BOTH THESE JUDGMENTS, THE CONCLUSION IS DIFFERENT BECAUSE THE FACTS WERE DIFFERENT. THE BENCH WANTED TO KNOW WHETHER THERE IS ANY FINDING O F THE AUTHORITIES BELOW REGARDING THE FACTS OF THE PRESENT CASE OF ASSESSEE AS TO WHETHER THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE CA SE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) OR PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA). THE BEN CH ALSO WANTED TO KNOW AS TO WHETHER THE FACTS ARE AVAILABLE IN THE PAPER BOO K. IN REPLY IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THOSE FACTS ARE NOT READ ILY AVAILABLE AND THERE IS NO FINDING OF LOWER AUTHORITIES REGARDING THE RELEVANT FACTS OF THE PRESENT CASE AND THEREFORE, THE MATTER MAY BE RESTORED BACK TO THE F ILE OF AO FOR FRESH DECISION AFTER EXAMINING THE FACTS OF THE PRESENT CASE IN TH E LIGHT OF THESE TWO JUDGMENTS. THE LD. DR OF REVENUE SUPPORTED THE ORD ER OF CIT(A). 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST O F ALL, I REPRODUCE THE RELEVANT PARA FROM THE JUDGMENT OF HON'BLE KARNATAKA HIGH CO URT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA) BEING SECOND PARA ON PAGE 616 OF 395 ITR. THE SAME IS AS UNDER. ITA NOS. 415 & 416/BANG/2018 PAGE 4 OF 5 FURTHER, AS STATE ABOVE, THE ASSESSEE(S) MARKETS TH E AGRICULTURAL PRODUCE OF ITS MEMBERS. IT RETAINS THE SALE PROCEED S IN MANY CASES. IT IS THIS 'RETAINED AMOUNT' WHICH WAS PAYABLE TO ITS MEMBERS, FROM WHOM PRODUCE WAS BOUGHT, WHICH WAS INVESTED IN SHOR T-TERM DEPOS- ITS/SECURITIES. SUCH AN AMOUNT, WHICH WAS RETAINED BY THE ASSESSEE- SOCIETY, WAS A LIABILITY AND IT WAS SHOWN IN THE BA LANCE-SHEET ON THE LIABILITY-SIDE. THEREFORE, TO THAT EXTENT, SUCH INT EREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENT IONED IN SECTION 80P(2)(A)(I) OF THE ACT OR IN SECTION 80P(2)(A)(III ) OF THE ACT. THEREFORE, LOOKING TO THE FACTS AND CIRCUMSTANCES O F THIS CASE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME, INDICATED ABOVE, UNDER SECTION 56 OF THE AC T. 6. I ALSO REPRODUCE PARA NO. 10 FROM THE JUDGMENT O F HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUH ARDA CREDIT COOPERATIVE LTD. VS. ITO(SUPRA). THE SAME READS AS UNDER. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVES TED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR A CCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MO NEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HA D DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID IN TEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P (1) O F THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH CO URT IN THE CASE OF COMMISSIONER OF INCOME-TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYI NG THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER: APPEAL IS ALLOWED. THE IMPUGNED ORDER IS HEREBY SET ASIDE. PARTIES TO BEAR THEIR OWN COST . 7. WHEN I GO THROUGH BOTH THESE JUDGMENTS OF HON'BL E KARNATAKA HIGH COURT, I FIND THAT THERE IS NO CONTRADICTION IN BOTH THESE J UDGMENTS. BOTH THESE JUDGMENTS ARE ON THE SAME LINE THAT IF THE DEPOSITS IN BANK ARE OUT OF OWN FUNDS OF SOCIETY THEN THE INTEREST ON SAME IS ELIGIBLE FO R DEDUCTION U/S. 80P (1) AND IF THE DEPOSIT IN BANK IS OUT OF THE FUND AVAILABLE WI TH THE SOCIETY IN THE FORM OF LIABILITY THEN THE SAME IS NOT ELIGIBLE FOR DEDUCTI ON U/S. 80P (2) OF IT ACT. THE CONCLUSION IS DIFFERENT IN BOTH THE JUDGMENTS BECAU SE THE FACTS ARE DIFFERENT IN BOTH THESE CASES. IF AS PER THE FACTS OF THE PRESE NT CASE, IT IS FOUND THAT THE ITA NOS. 415 & 416/BANG/2018 PAGE 5 OF 5 DEPOSIT IN BANK ARE OUT OF OWN FUNDS OF SOCIETY THE N THE INTEREST ON SAME IS ELIGIBLE FOR DEDUCTION U/S. 80P (1) AS PER THE JUDG MENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO(SUPRA) BUT IF IT IS FOUND THAT THE DEPOSIT IN BANK IS OUT OF THE FUND AVAILABLE WITH THE SOCIETY IN THE FORM OF LIABILITY THEN THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S. 80P (2) OF IT ACT AS PE R THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT A ND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA). HENCE, THE FACT S OF THE PRESENT CASE HAS TO BE LOOKED INTO AND SINCE THE FACTS OF THE PRESENT C ASE ARE NOT READILY AVAILABLE AND THERE IS NO FINDING OF ANY OF THE AUTHORITIES B ELOW IN RESPECT OF THESE FACTS, I SET ASIDE THE ORDERS OF CIT (A) IN BOTH YEARS AND R ESTORE THE MATTER BACK TO HIS FILE FOR A FRESH DECISION WITH THE DIRECTION THAT H E SHOULD DECIDE THE ISSUE AFRESH IN BOTH YEARS AS PER ABOVE DISCUSSION AFTER PROVIDI NG ADEQUATE OPPORTUNITY OF BEING HEARD IN BOTH YEARS TO BOTH SIDES. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 1 ST MARCH, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.