Himali Residential Co.op. Housing Society Ltd., Pune V. Income-tax Officer,

ITA 42/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1930 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 11-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HEMANTKUMAR C LEUVA
• Assessee Lawyers: ASHOK KOTHARY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 42/PN/2016 $& ' !(' / ASSESSMENT YEAR : 2010-11 HIMALI RESIDENTIAL CO-OP. HOUSING SOCIETY LTD., PLOT NO. 8+13/1/2, ERANDWANE, PUNE 411004 PAN : AAAAH2410C ....... / APPELLANT )& / V/S. INCOME TAX OFFICER, WARD 1(4), PUNE / RESPONDENT ASSESSEE BY : SHRI ASHOK KOTHARY REVENUE BY : SHRI HEMANT KUMAR C. LEUVA / DATE OF HEARING : 12-04-2016 / DATE OF PRONOUNCEMENT : 29-04-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, PUNE DATED 26-10- 2015 FOR THE ASSESSMENT YEAR 2010-11. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS THE DISALLOWANCE OF DEDUCTION ` 50,000/- U/S. 80P(2)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO. 42/PN/2016, A.Y. 2010-11 2. THE ASSESSEE IS A HOUSING CO-OPERATIVE SOCIETY. THE ASSESSEE IN ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 CLA IMED DEDUCTION U/S. 80P(2)(C) ON INTEREST EARNED ON DEPOSITS WITH CO- OPERATIVE BANKS. THE ASSESSEE HAS ALSO CLAIMED DEDUCTION OF ` 50,000/- U/S. 80P(2)(D) ON INTEREST EARNED ON FIXED DEPOSITS WITH SCHEDULED BANKS. DURING THE COURSE OF SCRUTINY ASSESSME NT PROCEEDINGS THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DED UCTION U/S. 80P(2)(D) VIDE ORDER DATED 27-11-2010. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). TH E COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE FINDINGS OF A SSESSING OFFICER AND DISMISSED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 3. SHRI ASHOK KOTHARY APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT THE INTEREST EARNED BY THE ASSESSEE ON FIXED DEPOSITS WITH NATIONALIZED BANKS HAVE BEEN DISALLOWED BY THE AUTHO RITIES BELOW ON THE GROUND THAT INTEREST EARNING FROM SCHEDULED BANK S CANNOT BE CONSIDERED OTHER ACTIVITY ENVISAGED IN SECTION 80P AS T HE SAME IS MERE PARKING OF FUND. THE LD. AR SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CHIEF COMMISSIONER OF INCOME TAX (ADMN.) VS. KISAN SA HKARI CHINI MILLS LTD. REPORTED AS 273 ITR 42 AND THE DECISION OF HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF FILM NAGAR CO-OPERAT IVE HOUSING SOCIETY LTD. VS. INCOME TAX OFFICER REPORTED AS 91 ITD 27 (HYD)(SMC). 4. ON THE OTHER HAND SHRI HEMANT KUMAR C. LEUVA REPRESENTING T HE DEPARTMENT SUBMITTED THAT THE INTEREST EARNED BY THE ASSESSEE ON FIXED 3 ITA NO. 42/PN/2016, A.Y. 2010-11 DEPOSITS WITH THE NATIONALIZED BANKS CANNOT BE CONSIDERED AS PROFITS AND GAINS ATTRIBUTABLE TO THE ACTIVITY OF THE ASSESSEE SO CIETY. SUCH INTEREST IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHE R SOURCE. THE LD. DR VEHEMENTLY SUPPORTED THE FINDINGS OF THE COMMISSION ER OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL O F THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IN APPEAL IS DISALLOWA NCE OF ` 50,000/- U/S. 80P(2)(D) ON ACCOUNT OF INTEREST INCOME FROM DE POSITS WITH THE NATIONALIZED BANKS. THE ASSESSEE IS A HOUSING CO -OPERATIVE SOCIETY. THE ASSESSEE HAD PARKED ITS SURPLUS FUNDS WITH CO-OPERATIVE BANKS AS WELL AS NATIONALIZED BANKS. THE ASSESSING OFFICER D ISALLOWED ` 50,000/- U/S. 80P(2)(D) IN RESPECT OF INTEREST INCOME EARNED FROM FUNDS DEPOSITED WITH THE NATIONALIZED BANKS ON THE PRETEX T THAT SUCH INTEREST INCOME IS ASSESSABLE UNDER THE HEAD INCOME FR OM OTHER SOURCE AND CANNOT BE CONSIDERED AS PROFITS AND GAINS A TTRIBUTABLE TO THE ACTIVITIES OF THE ASSESSEE SOCIETY. BEFORE WE PROCEED TO DECIDE THIS ISSUE, IT WOULD BE RELEVA NT TO REFER TO THE PROVISIONS OF SECTION 80P(2)(C) & (D) OF THE ACT. THE RELEVANT EXTRACT OF THE PROVISIONS OF SECTION 80P(2)(C) & (D) ARE REPR ODUCED HERE- IN-UNDER: 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUB JECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 4 ITA NO. 42/PN/2016, A.Y. 2010-11 (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY : A. XXXXXXXXXX B. XXXXXXXXXX (C) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED I N ACTIVITIES90 OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) (EITHER INDEPENDENTLY OF, OR IN ADDITION TO, ALL OR ANY OF THE ACTIVITIES SO SPECIFIED), SO MUCH OF ITS PROFITS AND GAINS ATTRIB UTABLE91 TO SUCH ACTIVITIES AS [DOES NOT EXCEED, (I) WHERE SUCH CO-OPERATIVE SOCIETY IS A CONSUMERS CO- OPERATIVE SOCIETY, [ONE HUNDRED] THOUSAND RUPEES; A ND (II) IN ANY OTHER CASE, 94[FIFTY] THOUSAND RUPEES. EXPLANATION.IN THIS CLAUSE, CONSUMERS CO-OPERATI VE SOCIETY MEANS A SOCIETY FOR THE BENEFIT OF THE CON SUMERS;] (D) IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MENTS WITH ANY OTHER COOPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME ; A PERUSAL OF CLAUSE (D) TO SECTION 80P(2) WOULD SHOW THAT IT APPLIES TO INCOME EARNED BY WAY OF INTEREST ON INVESTMENT WITH OTHER CO-OPERATIVE SOCIETIES. THE PROVISIONS OF CLAUSE (C) TO SECTION 80P(2) DEALS WITH PROFIT S AND GAINS OF CO-OPERATIVE SOCIETY ATTRIBUTABLE TO ACTIVIT IES OTHER THAN THOSE SPECIFIED IN CLAUSE (A) OR CLAUSE (B) OF SECTION 80P(2) OF THE ACT. 6. IN THE PRESENT CASE WE OBSERVE THAT THE ASSESSEE IS CLAIMING DEDUCTION ON INTEREST INCOME EARNED ON FUNDS DEPOSITED W ITH NATIONALIZED BANKS. THE INTEREST INCOME ON DEPOSITS WITH N ATIONALIZED BANKS NEITHER FALLS IN CLAUSE (D) NOR IT PARTAKES THE CHARA CTER OF PROFITS 5 ITA NO. 42/PN/2016, A.Y. 2010-11 AND GAINS ATTRIBUTABLE TO THE ACTIVITIES OF THE ASSESSEE TO FALL WITHIN THE AMBIT OF CLAUSE (C) OF SECTION 80P(2). THE ASSESSEE IS A CO-O PERATIVE HOUSING SOCIETY, THEREFORE, INTEREST INCOME ON BANK DEPOSIT S CANNOT BE CONSIDERED AS INCOME ATTRIBUTABLE TO THE ACTIVITIES OF TH E ASSESSEE. TO BE ELIGIBLE TO CLAIM DEDUCTION U/S. 80P(2)(C) THE ASSESSEE HAS TO SHOW DIRECT OR PROXIMATE CONNECTION OF THE EARNINGS/INCOME WITH THE ACTIVITIES OF THE SOCIETY. IT IS NOT THE CASE OF ASSESSEE WHERE THE DEPOSITS WITH THE NATIONALIZED BANK WERE MADE TO COMPLY WITH STATUTORY CO NDITION. HAD IT BEEN SO, THE ASSESSEE WOULD HAVE GOT THE BENEFIT OF SE CTION 80P(2)(C) IN THE LIGHT OF DECISION IN THE CASE OF CIT VS. CO-OPERATIVE CANE DEVELOPMENT UNION LTD. REPORTED AS 118 ITR 770 (ALL). 7. RELIANCE HAS BEEN PLACED BY THE LD. AR ON THE DECISION O F HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CHIEF COMMISSIONER OF IN COME TAX (ADMN.) VS. KISAN SAHKARI CHINI MILLS LTD. (SUPRA). IN THE SAID CA SE THE ASSESSEE - CO-OPERATIVE SUGAR MILL WAS UNDER CONSTRUCTIO N. THE ASSESSEE HAD RECEIVED INTEREST ON DEPOSITS WITH THE BAN KS AND POST OFFICE. THE ASSESSEE HAD CLAIMED DEDUCTION 80P(2)(C) OF THE AC T. THE SAME WAS DISALLOWED. THE MATER TRAVELLED TO THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT HELD AS UNDER : 9. THUS, IN THE CASE IN HAND, THE INCOME EARNED BY THE ASSESSEE- RESPONDENT ON THE DEPOSITS WITH THE BANKS AND POST OFFICES DURING THE RELEVANT ASSESSMENT YEAR, WHEN THE SUGAR FACTORY IT SELF WAS UNDER CONSTRUCTION IS THE INCOME EARNED BY IT FROM INVEST MENT IN FIXED DEPOSITS IS ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY. T HE INTEREST INCOME WAS TREATED BY THE INCOME-TAX OFFICER AS THE INCOME EAR NED BY THE ASSESSEE. THE ASSESSEE, BEING A CO-OPERATIVE SOCIETY, IN OUR VIEW IS ENTITLED FOR DEDUCTION OF RS. 20,000 IN ITS GROSS TOTAL INCOME U NDER SECTION 80P(2)(C) 6 ITA NO. 42/PN/2016, A.Y. 2010-11 OF THE ACT. THE SAID PROVISION IS IN THE NATURE OF BASIC EXEMPTION GRANTED TO A CO-OPERATIVE SOCIETY. WE ARE OF THE CONSIDERED VIEW THAT THE AFOREMENTIONED J UDGMENT WOULD NOT HELP THE ASSESSEE. THE INTEREST INCOME WAS ALLO WED IN THE SAID CASE BECAUSE THE FACTORY WAS IN PRE-OPERATIVE STAG E. THE INTEREST WAS EARNED ON EXCESS FUNDS INVESTED WITH BANK/POST OFFICE DURING PRE- OPERATIVE PERIOD. IT IS ALSO NOT THE CASE OF ASSESSEE H EREIN THAT THE HOUSING PROJECT IS UNDER CONSTRUCTION THEREFORE THE IDLE FUNDS ARE PARKED IN BANK TO EARN INTEREST INCOME. THUS, THE RATIO OF SAID JUDGMENT WOULD NOT APPLY IN THE PRESENT CASE. 8. THE LD. AR HAS ALSO PLACED RELIANCE ON THE ORDER OF TR IBUNAL IN THE CASE OF FILM NAGAR CO-OPERATIVE HOUSING SOCIETY LTD. VS. INCOME TAX OFFICER (SUPRA). WE FIND THAT EVEN THE SAID DECISION OF CO -ORDINATE BENCH WOULD NOT SUPPORT THE CASE OF ASSESSEE AS THE FA CTS OF THE CASE IN HAND IS AT VARIANCE AND NO ANALOGY CAN BE DRAWN BETW EEN THE TWO CASES. 9. WE ARE WELL AWARE THAT THE COURTS HAVE HELD THAT TH E EXPRESSION ATTRIBUTABLE TO IS OF WIDE IMPORT AND HAVE TO BE CONSTR UED LIBERALLY. HOWEVER, A LINK HAS TO BE ESTABLISHED BETWEEN ACTIVITIES OF THE CO- OPERATIVE SOCIETY AND INCOME/GAINS EARNED. IN THE PRESE NT CASE WE OBSERVE THAT THERE IS NOT EVEN A REMOTE LINK BETWEEN T HE INTEREST INCOME EARNED ON DEPOSITS WITH NATIONALIZED BANKS AND THE ACTIVITIES OF THE ASSESSEE. THUS, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER AND THE SAME IS CONFIRMED. 7 ITA NO. 42/PN/2016, A.Y. 2010-11 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF APRIL, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 29 TH APRIL, 2016 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-1, PUNE 4. ' / THE CIT-1, PUNE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, %6 ,1 / PRIVATE SECRETARY, ,- , / ITAT, PUNE