ITO, WARD- 4(5) (ERSTWHILE ITO WARD- 6(3), Nagpur V. M/S. NAGPUR MEHTAR VIVIDH UDDESHIYA CO-OP. SOCIETY, Nagpur

ITA 44/NAG/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3577 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Assessee Lawyers: SHRI MORYANI
• Keywords: Business income
• Section: 56; 28

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH: NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 4 4 /NAG/201 5 ASSESSMENT YEAR: 2010 - 11 INCOME TAX OFFICER WARD 4(5),(ERSTWHILE ITO WARD - 6(3), R.NO. 303, 3 RD FLOOR, AAYAKAR BHAWAN, NAGPUR - 440001 VS NAGPUR MEHTAR VIVIDH UDDESHIYA CO - OP. SOCIETY, BUDHWAR BAZAR COMPLEX, RAJVILAS TALKIES, MAHAL,NAGPUR - 2 PAN: - AAAAN1292Q (APPELLANT) (RESPONDENT) APPELLANT BY SHRI A.R. NINAWE , D .R. RESPONDENT BY SHRI SHRI MORYANI, A.R. I.T.A. NO. 45 /NAG/201 5 ASSESSMENT YEAR: 2010 - 11 INCOME TAX OFFICER WARD 4(5),(ERSTWHILE ITO WARD - 6(3), R.NO.303, 3 RD FLOOR, AAYAKAR BHAWAN, NAGPUR - 440001 VS SHRI SANT GAJANAN MAHARAJ NAGARI SAHAKARI PAT SANSTHA LTD., P.N.207, SAPNA T OWER, RESHIMBAGH, TULSHIBAGH ROAD , NAGPUR - 09 PAN: - AACAS5861L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI A.R. NINAWE , D .R. RESPONDENT BY NONE I.T.A. NO. 46 /NAG/201 5 ASSESSMENT YEAR: 2010 - 11 INCOME TAX OFFICER WARD 4(5),(ERSTWHILE ITO WARD - 6(3), R.NO.303, 3 RD FLOOR, AAYAKAR BHAWAN, NAGPUR - 440001 VS PRAJWAL NAGAR I SAHAKARI PAT SANSTHA LTD., P.N.219, ANNAEE, JAWAHAR NAGAR, MANEWADA RD, NAGPUR - 24 PAN: - AAAPS5905G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI A.R. NINAWE , D .R. RESPONDENT BY SHRI VIJAY K. SHINDE, A.R. - 2 - I TA NO. 4 4 TO 47 & 50/N/15 I.T.A. NO. 47 /NAG/201 5 ASSESSMENT YEAR: 2010 - 11 INCOME TAX OFFICER WARD 4(5),(ERSTWHILE ITO WARD - 6(3), R.NO.303, 3 RD FLOOR, AAYAKAR BHAWAN, NAGPUR - 440001 VS NEW SUBHEDAR LAYOUT CREDIT CO - OP. SOCIETY LTD., 750, SUBHEDAR LAYOUT, NAGP UR - 24 PAN: - AAATN4401A (APPELLANT) (RESPONDENT) I.T.A. NO. 50 /NAG/201 5 ASSESSMENT YEAR: 2010 - 11 INCOME TAX OFFICER WARD 4(4),R.NO.305, 3 RD FLOOR, AAYAKAR BHAWAN, NAGPUR - 440001 VS VISHWASHANTI PAT PURAVATHA NAGRI SAHAKARI PAT SANSTHA LTD., 215, MANEW ADA ROAD, BALAJI NAGAR, NAGPUR - 24 PAN: - AAAAV1818L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI A.R. NINAWE , D .R. RESPONDENT BY NONE DATE OF HEARING: 1 5 - 0 6 - 201 6 DATE OF PRONOUNCEMENT: - 15 / 0 6 /2016 O R D E R PER SHAMIM YAHYA , A .M. THESE ARE AP PEAL S BY THE REVENUE DIRECTED AGAINST THE RESPECTIVE ORDERS OF LD. CIT(A) , SINCE THE ISSUES ARE COMMON. THESE APPEALS CONSOLIDATED AND DISPOSED OF TOGETHER BY THIS COMMON ORDER. THE COMMON GROUNDS OF APPEAL READ AS UNDER : - 1. WHETHER, ON THE FACTS AND ON TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - II, NAGPUR HAS ERRED IN HOLDING THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE I.T. ACT IN RESPECT OF INTEREST INCOME OF RS. 28,39,042 / - , RS.17,37,554 / - , RS.44,18,443/ - ,RS.74,47,96 9 / - & RS. 34,37,430 / - RESPECTIVELY) WITHOUT APPRECIATING THAT THE SAID INCOME IS NOT THE PART OF INTEREST EARNED BY CO - OPERATIVE CREDIT SOCIETY FROM ITS INVESTMENT WITH OTHER CO - OPERATIVE SOCIETY AND HENCE NOT DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE I.T. ACT, AS CLAIMED BY THE ASSESSEE. - 3 - I TA NO. 4 4 TO 47 & 50/N/15 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) - II, NAGPUR FAILED TO APPRECIATE THAT THE INTEREST EARNED ON FDR INVESTMENT WOULD FALL IN CATEGORY OF INCOME FROM OTHER SOURCES BEING TAXAB LE UNDER SECTION 56 OF THE I.T. ACT FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF M/S. TOTGARS CO - OP SOCIETY LTD., REPORTED IN 322 ITR 283(SC), AND WOULD NOT QUALIFY FOR DEDUCTION AS BUSINESS INCOME U/S. 80P(2)(A)(I) OF THE I. T. ACT AS CLAIMED BY THE ASSESSEE. 2. UPON HEARING THE AVAILABLE COUNSEL AND PERUSING THE RECORDS, WE FIND THAT THE ABOVE ISSUES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS ITAT, REFERRED BY THE LD. CIT(A) IN HIS APPELLATE ORDER. THE DISTINCTION MENTIONED IN THE GROUNDS OF APPEAL IS NOT AT ALL SUSTAINABLE. WE FURTHER FIND THAT THIS TRIBUNAL AGAIN IN THE CASE OF CHATTISGARH URBAN SAHAKARI SANSTHA MARYADIT VS. ITO IN ITA NO.371/NAG/2012 VIDE ORDER DATED 27.05.2015 HAS ADJUDICATED SIMILAR ISSUE AS UNDER: - 11 UPON CAREFUL CONSIDERATION, WE NOTE THAT IDENTICAL ISSUE WAS THE SUBJECT MATTER OF CONSIDERATION BY ITAT, AHMEDABAD BENCH DECISION IN THE CASE OF DHANLAXMI CREDIT COOPERATIVE SOCIETY LTD. (SUPRA), IN WHICH ONE OF US, LEARNED JUDICIAL MEMBER, WAS A PARTY. THE CONCLUDING PORTION OF THE TRIBUNALS DECISION IS AS UNDER: - 4.WITH THIS BRIEF BACKGROUND, WE HAVE HEARD BOTH THE SIDES. IT WAS EXPLAINED THAT THE CO - OPERATIVE SOCIETY IS MAINTAINING OPERATIONS FUNDS AND TO MEET ANY EVENTUALITY TOWARDS RE - PAYMENT OF DEPOSIT, THE CO - OPERATIVE SOCIETY IS MAINTAINING SOME LIQUIDATED FUNDS AS A SHORT TERM DEPOSIT WITH THE BANKS. THIS ISSUE WAS THOROUGHLY DISCUSSED BY THE ITAT BBENCH AHMEDABAD IN THE CASE OF THE INCOME TAX OFFICER VS. M/S.JAFARI MOM IN VIKAS CO - OP. CREDIT SOCIETY LTD. BEARING ITA NO.1491/AHD/2012 (FOR A.Y.2009 - 10) AND CO NO.138/AHD/2012 (BY ASSESSEE) ORDER DATED 31/10/2012. THE RELEVANT PORTION IS REPRODUCED BELOW: - 19. THE ISSUE DEALT WITH BY THE HONBLE SUPREME COURT IN THE CAS E OF TOTGARS(SUPRA) IS EXTRACTED, FOR APPRECIATION OF FACTS, AS UNDER: WHAT IS SOUGHT TO BE TAXED UNDER SECTION 56 OF THE ACT IS THE INTEREST INCOME ARISING ON THE SURPLUS INVESTED IN SHORT TERM DEPOSITS AND SECURITIES WHICH SURPLUS WAS NOT REQUIRE D FOR BUSINESS PURPOSES? THE - 4 - I TA NO. 4 4 TO 47 & 50/N/15 ASSESSEE(S) MARKETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT. IN THIS CASE, WE ARE CONCERNED WITH THE TAX TREATMENT OF SUCH AMOUNT. SINCE THE FUND CREATED BY SUCH BY SUCH RETENTION WAS NOT REQ UIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SECURITIES. THE QUESTION, BEFORE US, IS WHETHER INTERE ST ON SUCH DEPOSITS/SECURITIES, WHICH STRICTLY SPEAKING ACCRUES TO THE MEMBERS ACCOUNT, COULD BE TAXED AS BUSINESS INCOME UNDER SEC TION 28 OF THE ACT? IN OUR VIEW, SUCH INTEREST INCOME WOULD COME IN THE CATEGORY OF INCOME FROM OTHER SOURCES, HENCE, SUCH INTEREST INCOME WOULD BE TAXABLE UNDER SECTION 56 OF THE ACT, AS RIGHTLY HELD BY THE ASSESSING OFFICER... 19.1. HOWEVER, IN THE PRESENT CASE, ON VERIFICATION OF THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2009, IT WAS OBSERVED THAT THE FIXED DEPOSITS MADE WERE TO MAINTAIN LIQUIDITY AND THAT THERE WAS NO SURPLUS FUNDS WITH THE ASSESSEE AS ATTRIBUTED BY THE REVENUE. HOWEVER, IN RE GARD TO THE CASE BEFORE THE HONBLE SUPREME COURT (ON PAGE 286) 7....... BEFORE THE ASSESSING OFFICER, IT WAS ARGUED BY THE ASSESSEE(S) THAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THE FUNDS WERE NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSE S AND, CONSEQUENTLY, SUCH ACT OF INVESTMENT CONSTITUTED A BUSINESS ACTIVITY BY A PRUDENT BUSINESSMAN; THEREFORE, SUCH INTEREST INCOME WAS LIABLE TO BE TAXED UNDER SECTION 28 AND NOT UNDER SECTION 56 OF THE ACT AND, CONSEQUENTLY, THE ASSESSEE(S) WAS ENTITLE D TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ARGUMENT WAS REJECTED BY THE ASSESSING OFFICER AS ALSO BY THE TRIBUNAL AND THE HIGH COURT, HENCE, THESE CIVIL APPEALS HAVE BEEN FILED BY THE ASSESSEE(S). 19.2. FROM THE ABOVE, IT EMERGES THAT (A) T HAT ASSESSEE (ISSUE BEFORE THE SUPREME COURT) HAD ADMITTED BEFORE THE AO THAT IT HAD INVESTED SURPLUS FUNDS, WHICH WERE NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF ITS BUSINESS, IN SHORT TERM DEPOSITS; (B) THAT THE SURPLUS FUNDS AROSE OUT OF THE AMOUNT R ETAINED FROM MARKETING THE AGRICULTURAL PRODUCE OF THE MEMBERS; (C) THAT ASSESSEE CARRIED ON TWO ACTIVITIES, NAMELY,(I) ACCEPTANCE OF DEPOSIT AND LENDING BY WAY OF DEPOSITS TO THE MEMBERS; AND (II) MARKETING THE AGRICULTURAL PRODUCE; AND (D)THAT THE SUR PLUS HAD ARISEN EMPHATICALLY FROM MARKETING OF AGRICULTURAL PRODUCES. - 5 - I TA NO. 4 4 TO 47 & 50/N/15 19.3. IN THE PRESENT CASE UNDER CONSIDERATION, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THERE WERE NO SURPLUS FUNDS. 19.4. WHILE COMPARING THE STATE OF AFFAIRS OF THE PRESENT ASSESSEE WITH THAT ASSESSEE (BEFORE THE SUPREME COURT), THE FOLLOWING CLINCHING DISSIMILARITIES EMERGE, NAMELY: (1) IN THE CASE OF THE ASSESSEE, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THAT THERE WERE NO SURPLUS FUN DS; - - IN THE CASE OF TOTGARS, IT HAD SURPLUS FUNDS, AS ADMITTED BEFORE THE AO, OUT OF RETAINED AMOUNTS ON MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS; (2) IN THE CASE OF PRESENT ASSESSEE, IT DID NOT CARRY OUT ANY ACTIVITY EXCEPT IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THAT THE FUNDS WERE OF OPERATIONAL FUNDS. THE ONLY FUND AVAILABLE WITH THE ASSESSEE WAS DEPOSITS FROM ITS MEMBERS AND, THUS, THERE WAS NO SURPLUS FUNDS AS SUCH; - IN THE CASE OF TOTGARS, THE HONBLE SUPREME COURT HAD NOT S PELT OUT ANYTHING WITH REGARD TO OPERATIONAL FUNDS; 19.5. CONSIDERING THE ABOVE FACTS, WE FIND THAT THERE IS FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE NOT A CO - OPERATIVE BANK, BUT ITS NATURE OF BUSINESS WAS COUPLED WITH BANKING WITH ITS MEMBERS, AS IT ACCEPTS DEPOSITS FROM AND LENDS THE SAME TO ITS MEMBERS. TO MEET ANY EVENTUALITY, THE ASSESSEE WAS REQUIRED TO MAINTAIN SOME LIQUID FUNDS. THAT WAS WHY, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD INVESTED IN SHORT TERM DEPOSITS. FURTHERMORE, THE ASSESSEE HAD MAINTAINED OVERDRAFT FACILITY WITH DENA BANK AND THE BALANCE AS AT 31.3.2009 WAS RS.13,69,955/ - [SOURCE: BALANCE SHEET OF THE ASSESSEE AVAILABLE ON RECORD]. 19.6. IN OVERALL CONSIDERATION OF ALL THE ASPECTS, WE ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COU RT IN THE CASE OF TOTGARS CO - OP. SALE SOCIETY LTD. 9SU PRA) CANNOT IN ANY WAY COME TO THE RESCUE OF EITHER THE LD.CIT(A) OR THE REVENUE. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE FIRM VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN COMING TO A CONCLUSION THAT THE SUM OF RS.9,40,639/ - WAS TO BE TAXED U/S.56 OF THE ACT. IT IS ORDERED ACCORDINGLY. 5. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO - ORDI NATE BENCH, WE HEREBY HOLD THAT THE BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) WAS RIGHTLY GRANTED BY LD.CIT(A), HOWEVER, HE HAS WRONGLY HELD THAT THE INTEREST INCOME IS TAXABLE U/S.56 OF THE ACT SO DO NOT FALL UNDER THE CATEGORY OF EXEMPTED INCOME U/S.80P OF T HE ACT. THE ADVERSE PORTION OF THE VIEW, - 6 - I TA NO. 4 4 TO 47 & 50/N/15 WHICH IS AGAINST THE ASSESSEE, OF L D.CIT(A) IS HEREBY REVERSED FOLLOWING THE DECISION OF THE TRIBUNAL CITED SUPRA, RESULTANTLY GROUND IS ALLOWED. 8. WE FIND THAT THE RATIO OF ABOVE CASE ALSO APPLIES TO THE PRES ENT CASE. AS OBSERVED IN THE ABOVE CASE LAW, IN THIS CASE ALSO THE SUBMISSIONS OF THE ASSESSEES COUNSEL IS THAT THE ASSESSEE SOCIETY IS MAINTAINING OPERATIONAL FUNDS AND TO MEET ANY EVENTUALITY TOWARDS REPAYMENT OF DEPOSIT THE COOPERATIVE SOCIETY IS MAIN TAINING SOME LIQUIDATED FUNDS AS SHORT TERM DEPOSITS WITH BANKS. HENCE ADHERING TO THE DOCTRIN STAIR DESISES, WE HOLD THAT THE ASSESSEE SHOULD BE GRANTED BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I). ACCORDINGLY, THE INTEREST ON DEPOSITS WOULD QUALIFY F OR DEDUCTION UNDER THE SAID SECTION. ACCORDINGLY, WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 3. WE FURTHER FIND THAT BATCH OF SIMILAR APPEALS DECIDED BY THE ITAT IN FAVOUR OF THE ASSESSEE HAS ALSO BEEN CO NSIDERED BY THE JURISDICTIONAL HIGH COURT. THE HONBLE JURISDICTIONAL HIGH COURT HAS DULY AFFIRMED OF THIS TRIBUNAL. ACCORDINGLY, IN THE BACKGROUND AFORESAID DISCUSSION, WE DO NOT INFIRMITY IN THE ORDER OF LD. CIT(A). 4 . IN THE RESULT, THESE APPEAL S FI LED BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JUNE , 2016 SD/ - SD/ - (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JU DICIAL MEMBER ACCOUNTANT MEMBER PLACE: - NAGPUR DATED: - 15 / 0 6 /2016 - 7 - I TA NO. 4 4 TO 47 & 50/N/15 COPY FORWARDED TO : 1. A) NAGPUR MEHTAR VIVIDH UDDESHIYA CO - OP.SOCIETY BUDHWAR BAZAR COMPLEX, RAJVILAS TALKIES, MAHAL, NAGP UR - 440002 B) SHRI SANT GAJANAN MAHARAJ NAGARI SAHAKARI PAT SANSTHA LTD. P.N.207, SAPNA TOWER, RESHIMBAGH, TULSHIBAGH ROAD, NAGPUR - 440009 C) PRAJWAL NAGARI SAHAKARI PAT SANSTHA LTD. P.N.219, ANNAEE, JAWAHAR NAGAR, MANEWADA RD, NAGPUR - 440024 D) NEW SUBHEDAR LAYOU T CREDIT CO - OP SOCIETY LTD. PLOT NO.750, SUBHEDAR LAYOUT, NAGPUR - 440024 E) VISHWASHANTI PAT PURAVATHA NAGRI SAHAKARI PAT SANSTHA LTD. PLOT NO.215, BALAJI NAGAR, MANEWADA RD, NAGPUR - 440024 2. INCOME TAX OFFICER WARD 4(5), (ERSTWHILE ITO WARD - 6(3), R.N.303, 3 RD FLOOR, AYAKAR BHAWAN, NAGPUR - 440001 3. C.I.T. - I II , NAGPUR. 4. CIT (APPEALS) - II, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR M.B.BODKHE /SR. P.S.