SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR V. DEPUTY COMMISSIONER OF INCOME TAX, ALWAR

ITA 425/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6392 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DHK
• Section: 56

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH HKKXPUN ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 425/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15. SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, MALAKHERA GATE BAHAR, NER POST OFFICE, ALWAR. CUKE VS. THE DCIT, CIRCLE-1, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAGAS 4023 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM RAI (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12.07.2018. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 16/07/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 22 ND JANUARY, 2018 OF LD. CIT (A) FOR THE ASSESSMENT YEAR 2014-15 . THE ASSESSEE HAS RAISED THE SOLITARY GROUND AS UNDER :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF IN NOT ALLOWING THE DEDUCTION IN RESPECT OF INTEREST RECEIPT OF RS. 12,43,470/- FROM BANKS U/S 80P(2)(A) (I) OF THE IT ACT, 1961. 2. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 3. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 2 ITA NO. 425/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. 2. THE ASSESSEE IS A COOPERATIVE SOCIETY AND REGIST ERED WITH THE REGISTRAR OF COOPERATIVE SOCIETIES. THE ASSESSEE ACCEPTED THE D EPOSITS FROM THE MEMBERS AND ALSO PROVIDED CREDITS TO THE MEMBERS AS PER THEIR N EED AT THE REASONABLE INTEREST RATE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS RECEIVED INTEREST FROM BANK AND ACCORDINGLY THE AO PROPOSED TO DISALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF TH E ACT IN RESPECT OF INTEREST FROM THE BANK. THE ASSESSEE CONTENDED THAT THE INTERES T WAS EARNED IN NORMAL COURSE OF ACTIVITY OF GRANTING CREDITS TO THE MEMBERS AND THE AMOUNT WAS KEPT IN THE SAVINGS BANK ACCOUNT ON WHICH THE INTEREST WAS EARNED. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) IN RESPECT OF INTEREST RECEIVED FROM B ANK THOUGH THE DEDUCTION UNDER SECTION 80P(2)(A)(I) WAS ALLOWED IN RESPECT OF THE INTEREST INCOME FROM MEMBERS. ON APPEAL, THE LD. CIT (A) HAS CONFIRMED THE ACTION OF THE AO. 3. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE WAS CONSIDERED AND DECIDED BY THIS BENCH OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEARS 2013-14 AND 2014-15 VIDE ORDER DATED 21 ST MAY, 2018 IN ITA NOS. 957 & 958/JP/2017. THE RELEVANT FINDING OF THE TRIBUNAL IN PARA 4 ARE AS UNDER :- 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSESSEE HAS E ARNED THE INTEREST FROM SAVINGS BANK ACCOUNT WHICH IS MAINTAINED BY TH E ASSESSEE WITH THE SCHEDULED BANKS FOR THE PURPOSE OF ITS DAY TO D AY ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND KEEP ING ITS FUNDS WITH THE BANK. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF GUTTIGEDARARA 3 ITA NO. 425/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO (SUPRA) WH ILE CONSIDERING AN IDENTICAL ISSUE HAS OBSERVED AND HELD IN PARA 7 TO 12 AS UNDER :- 7. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, TH E UNDISPUTED FACTS WHICH EMERGE ARE, CERTAIN SUMS OF INTEREST WERE EAR NED FROM SHORT- TERM DEPOSITS AND FROM SAVINGS BANK ACCOUNT. THE AS SESSEE IS A CO- OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO IT S MEMBERS. IT IS NOT CARRYING ON ANY OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMB ERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTERES T. THEREFORE, WHETHER THIS INTEREST IS ATTRIBUTABLE TO THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. 8. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELE VANT PROVISION OF LAW I.E., SECTION 80P(2)(A)(I): '80P DEDUCTION IN RESPECT OF INCOME OF CO- OPERATIVE SOC IETIES : (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERAT IVE 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 S UB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY: ( A ) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN ( I ) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR ( II ) TO ( VII ) ** ** ** THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 9. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION I S OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSI DER THE MEANING OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FR OM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (AT PAGE 93) AS UNDER: 'AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION 'ATTRIBUTABLE TO' OCCURRING IN THE PHRASE 'PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF' THE SPECIFIED INDU STRY (HERE GENERATION AND DISTRIBUTION OF ELECTRICITY) ON WHIC H THE LEARNED SOLICITOR-GENERAL RELIED, IT WILL BE PERTINENT TO O BSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION 'A TTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED THAT THE EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. HAD THE EXPRESS ION 4 ITA NO. 425/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME F ORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE OF OLD MACHINERY AND BUILDINGS CANNOT BE REGARDED AS PROFI TS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF G ENERATION AND DISTRIBUTION OF ELECTRICITY. IN THIS CONNECTION , IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE L EARNED SOLICITOR- GENERAL, IT HAS USED THE EXPRESSION 'DER IVED FROM', AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINC E THE EXPRESSION OF WIDER IMPORT, NAMELY, 'ATTRIBUTABLE T O', HAS BEEN USED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FR OM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GE NERATION AND DISTRIBUTION OF ELECTRICITY.' 10. THEREFORE, THE WORD 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. WHENEVER THE LE GISLATURE WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EX PRESSION 'DERIVED FROM'. THE EXPRESSION 'ATTRIBUTABLE TO' BEING OF WI DER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A CO-OPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSIN ESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INT EREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THE SOCIETY CANNOT KEEP THE SAID AMOUNT ID LE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAI D INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSIN ESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. 11. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF TH E APEX COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY'S CASE ( SUPRA ), ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CAS E WHERE THE ASSESSEE/CO-OPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATIO N RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS R ETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE T O ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHO RT-TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE-S OCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME CAN NOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SE CTION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE 5 ITA NO. 425/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. FACTS OF THE SAID CASE, THE APEX COURT HELD THE ASS ESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MADE IT CLEAR THAT THEY ARE C ONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 12. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT W AS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMME DIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO ITS MEMBERS, AS T HERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO B E DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. ANDHRA PRADESH STATE CO- OPERATIVE BANK LTD. [2011] 336 ITR 516/200 TAXMAN 220/12 TAXMANN.COM 66 . THUS IT IS CLEAR THAT THE HONBLE HIGH COURT HAS AN ALYZED THE PROVISIONS OF SECTION 80P(2) AND PARTICULARLY THE TERM ATTRIB UTABLE USED IN THE SECTION AND HELD THAT THE WORD ATTRIBUTABLE TO IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. THUS ON THE IDENTICAL FACT, THE HONBLE HIGH COURT HAS HELD THAT THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF M/S. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE PRESE NT CASE AS IN THE SAID CASE BEFORE THE HONBLE SUPREME COURT THE AMOUNT DE POSITED WITH BANK DID NOT BELONG TO THE SOCIETY BUT IT WAS A LIA BILITY OF THE SOCIETY TO BE PAID TO THE MEMBERS AGAINST THE SALE OF AGRICULT URAL PRODUCE. THUS THE SALE CONSIDERATION RECEIVED BY THE SOCIETY TO B E PAID TO THE MEMBERS WAS KEPT WITH THE BANK AND EARNED INTEREST AND ACCORDING THE HONBLE SUPREME COURT HELD THAT SUCH AN AMOUNT WAS RETAINED BY THE SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, ON THE SPECIFIC FACTS O F THE SAID CASE THE INTEREST INCOME WAS HELD TO BE NON ATTRIBUTABLE EIT HER TO THE ACTIVITIES MENTIONED IN SECTION 80P(2)(A)(I) OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. IN THE CASE IN HAND, THE INTEREST INCOME RECE IVED BY THE ASSESSEE 6 ITA NO. 425/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. IS ON ITS OWN FUNDS AND NOT ON THE FUNDS WHICH IS A LIABILITY TOWARDS THE MEMBERS. FURTHER, THIS INTEREST INCOME IS EARNED FR OM THE SAVINGS BANK WHICH IS MAINTAINED FOR DAY TO DAY ACTIVITY OF THE ASSESSEE SOCIETY FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. TH EREFORE, FOLLOWING THE ORDER OF THE HONBLE KARNATAKA HIGH COURT IN THE CA SE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO (SUPRA), W E HOLD THAT THE SAID INTEREST INCOME EARNED BY THE ASSESSEE FROM SAVINGS BANK ACCOUNT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) O F THE ACT. ACCORDINGLY, FOLLOWING THE EARLIER ORDER OF THIS TR IBUNAL, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW, QUA THIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 16/07/2018. SD/- SD/- HKKXPUN FOT; IKY JKWO (BHAGCHAND) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16/07/2018. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-SHIKSHA COOPERATIVE THRIFT & CREDIT S OCIETY, ALWAR. 2. IZR;FKHZ@ THE RESPONDENT-THE DCIT, CIRCLE-1, ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 425/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 7 ITA NO. 425/JP/2018 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR.