Sri Visakha Gowri Mutually Aided Co-operative Society Limited, Visakhapatnam V. Income Tax Officer, Ward-1(4), , Visakhapatnam

ITA 442/VIZ/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8269 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 24-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Keywords: Charitable institution; Set aside
• Section: 143(3); 80P; 56; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 442 /VIZ/201 8 ( / ASSESSMENT YEAR : 20 13 - 14 ) SRI VISAKHA GOWRI MUTUALLY AIDED CO - OPERATIVE SOCIETY LIMITED D.NO.10 - 27 - 3/1, 2 ND FLOOR FACOR LAYOUT, WALTAIR UPLANDS VISAKHAPATNAM [PAN : A A GAS2947B ] VS. INCOME TAX OFFICER WARD - 1 (4) VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI , AR / RESPONDENT BY : S HRI D. K.SONOWAL , CIT DR / DATE OF HEARING : 2 1 . 0 6 . 201 9 / DATE OF PRONOUNCEMENT : 17 .0 7 . 201 9 / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PR.COMMISSIONER OF INCOME TAX (PR.CIT) - 1, VISAKHAPATNAM VIDE F.NO.PR.CIT - 1/VSP/263/12/2017 - 18 DATED 27.03.2018 FOR THE ASSESSMENT YEAR (A.Y.) 2013 - 14. 2 I.T.A. NO . 442 /VIZ/201 8 , A.Y.2013 - 14 SRI VISAKHA GOWRI MUTUALLY AIDED CO - OPOERATIVE SOCIETY LTD , VISAKHAPATNAM 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE VALIDITY OF ORDER PASSED BY PR.CIT U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). IN THE INSTANT CASE, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING NIL INCOME ON 19.02.2014 AND CLAIMED THE DEDUCTION U/S 80P FOR A SUM OF RS.10,58,078/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.NIL VIDE ORDER DATED 25.01.2016. SUBSEQUENTLY, THE PR.CIT FOUND FROM THE 26AS STATEMENT THAT THE ASSESSEE HAD RECEIVED A SUM OF RS.14 LAKHS AS INTEREST O N DEPOSITS MADE IN VARAHALAKSHMI NARASIMHA SWAMI EDUCATIONAL TRUST (IN SHORT TRUST) WHICH IS NOT A COOPERATIVE SOCIETY. AS PER THE PROVISIONS OF SECTION 80P(2)(A)(I) OF THE ACT, IN CASE THE COOPERATIVE SOCIETY IS ENGAGED IN CARRYING ON THE BUSINESS OF BA NKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF THE BUSINESS IN RESPECT OF WHICH DEDUCTION IS SOUGHT MUST CONSTITUTE THE OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY. HENCE, HELD THAT THE INTEREST RECEIVED BY THE ASSESSEE TO THE TUNE OF RS.14 LAKHS IS NOT ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT AND THE SAME IS NOT ATTRIBUTABLE TO PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND NEEDS TO BE BROUGHT TO TAX U/S 56 OF TH E ACT SEPARATELY. SINCE THE AO HAS ALLOWED THE 3 I.T.A. NO . 442 /VIZ/201 8 , A.Y.2013 - 14 SRI VISAKHA GOWRI MUTUALLY AIDED CO - OPOERATIVE SOCIETY LTD , VISAKHAPATNAM SAID CLAIM OF THE ASSESSEE IN THE SCRUTINY ASSESSMENT WITHOUT PROPER VERIFICATION OF THE CLAIM, THE LD.PR.CIT HELD THAT THE ORDER PASSED U/S 143(3) IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY DIRECTED THE AO TO REDO THE ASSESSMENT AFRESH AS PER LAW. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, THE LD.AR ARGUED THAT THE ASSESSEE IS A CO - OPERATIVE SOCIETY AND TH E TRUST IS A MEMBER OF THE SOCIETY. THE LD.PR.CIT HA S ISSUED THE NOTICE U/S 263 WITH A MISUNDERSTANDING THAT THE ASSESSEE HAS PLACED THE SURPLUS FUNDS IN THE TRUST, WHICH IS INCORRECT. THE ASSESSEE HAS GIVEN LOAN TO THE TRUST AND BEFORE GIVING LOAN TO TH E TRUST, THE TRUST BECAME THE MEMBER OF THE SOCIETY. ALL THE DOCUMENTS SUCH AS ADMISSION FORM, APPLICATION FOR LOAN, ADMISSION AMOUNT, LETTER OF UNDERTAKING FOR REPAYMENT OF LOAN, GUARANTEE AGREEMENT, TERM LOAN AGREEMENT AND LOAN LEDGER ETC. WERE FURNISHE D BEFORE THE LD.PR.CIT. HOWEVER, THE LD.PR.CIT VIEWED , EVEN AFTER ESTABLISHING ALL THE EVIDENCES THAT THE ISSUE REQUIRE TO BE EXAMINED SINCE HE WAS UNDER THE IMPRESSION THAT THE AO HAS ALLOWED EXEMPTION WITHOUT CALLING FOR ANY DOCUMENTARY EVIDENCE IN SUPP ORT OF THE ASSESSEES CLAIM THAT THE TRUST IS A MEMBER OF THE SOCIETY. LD.AR ARGUED THAT SINCE , THE TRUST IS A MEMBER OF THE SOCIETY 4 I.T.A. NO . 442 /VIZ/201 8 , A.Y.2013 - 14 SRI VISAKHA GOWRI MUTUALLY AIDED CO - OPOERATIVE SOCIETY LTD , VISAKHAPATNAM AND THE AMOUNT GIVEN TO THE TRUST IS A LOAN AND THE BYE LAWS OF THE SOCIETY PERMITS THE TRUST TO BECOME A MEMBER, THERE IS NO UNDER ASSESSMENT WHICH CAUSED PREJUDICE TO THE REVENUE. THE LD.AR FURTHER SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS W HICH W ERE EXAMINED BY THE AO AND SATISFIED WITH REGARD TO THE ASSESSEES ELIGIB ILITY FOR DEDUCTION U/S 80P , HENCE, SUBMITTED THAT THERE IS NO ERROR IN THE ASSESSMENT ORDER WHICH REQUIRES REVISION U/S 263 , ACCORDINGLY REQUESTED TO QUASH THE ORDER PASSED U/S 263. 4. ON THE OTHER HAND, THE LD.DR ARGUED THAT THE ASSESSMENT ORDER IS SILE NT ON THE ISSUE OF COLLECTING THE INTEREST FROM THE TRUST AND THERE WAS NO INDICATION , WHETHER THE AO HAS VERIFIED THE ISSUE OR NOT. NON APPLICATION OF MIND AND NON VERIFICATION OF ISSUE WHICH REQUIRED TO BE VERIFIED IS AN ERROR WHICH CALLS FOR REVISION U/S 263 AS PER THE DECIDED CASE LAWS. HENCE, ARGUED THAT THE LD.PR.CIT HAS RIGHTLY INVOKED THE PROVISION OF SECTION 263 AND REQUESTED TO UPHOLD THE ORDER OF THE LD.PR.CIT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE LD.PR.CIT WAS UNDER THE IMPRESSION THAT THE AMOUNT ADVANCED TO THE TRUST WAS DEPOSIT AND THE ASSESSEE WAS PLACING THE SURPLUS FUNDS 5 I.T.A. NO . 442 /VIZ/201 8 , A.Y.2013 - 14 SRI VISAKHA GOWRI MUTUALLY AIDED CO - OPOERATIVE SOCIETY LTD , VISAKHAPATNAM WITH THE CHARITABLE TRUST FOR EARNING THE INCOME . DURING THE REVISION PROCEEDINGS, THE ASSESSEE PLACED ALL THE EVIDENCES ESTABLISHING THAT THE TRUST IS A MEMBER OF THE SOCIETY AND THE SUM GIVEN WAS LOAN BUT NOT DEPOSIT. BYE LAWS OF THE SOCIETY PERMITS THE TRUST TO BECOME A MEMBE R AS SEEN FROM THE BYE LAWS WHICH ARE FURNISHED IN THE PAPER BOOK. THE ASSESSEE ALSO FURNISHED COPY OF THE ADMISSION REGISTER, WHEREIN, IT IS SEEN THAT THE TRUST IS A MEMBER OF THE SOCIETY. THERE IS SUFFICIENT MATERIAL AVAILABLE IN PAPER BOOK TO SHOW THA T THE TRUST BECAME MEMBER OF THE SOCIETY AND THE SOCIETY IS PERMITTED TO GIVE LOAN TO ITS MEMBERS. THE SOCIETY HAD ADVANCED THE AMOUNTS TO THE TRUST AND COLLECTED THE INTEREST. SINCE THE INTEREST RECEIVED WAS FROM THE MEMBER OF THE SOCIETY, THE INTEREST COLLECTED BY THE SOCIETY IS ENTITLED FOR DEDUCTION U/S 80P OF THE ACT. AS SEEN FROM THE ASSESSMENT ORDER, THE ASSESSMENT WAS COMPLETED U/S 143(3) AND DURING THE ASSESSMENT PROCEEDINGS, THE AO CALLED FOR THE BOOKS OF ACCOUNTS, AND THE OTHER DETAILS, IN RE SPONSE TO WHICH THE LD.AR FURNISHED THE DETAILS. AFTER EXAMINING THE BOOKS OF ACCOUNTS AND THE OTHER DETAILS, VOUCHERS FOR EXPENSES , THE ASSESSMENT WAS COMPLETED BY THE AO ALLOWING DEDUCTION U/S 80P. THEREFORE, IT IS INCORRECT TO SAY THAT THE AO ALLOWED EXEMPTION U/S 80P WITHOUT EXAMINING THE DETAILS. TH E SOLE ISSUE INVOLVED IN THE 6 I.T.A. NO . 442 /VIZ/201 8 , A.Y.2013 - 14 SRI VISAKHA GOWRI MUTUALLY AIDED CO - OPOERATIVE SOCIETY LTD , VISAKHAPATNAM ASSESSMENT IS DEDUCTION U/S 80P AND H ENCE WE ARE NOT INCLINED TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE AO HA S ALLOWED DEDUCTION U/S 80P WITHOUT EXAMINING THE DETAILS. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THERE IS NO REVENUE LOSS WHICH CAUSED PREJUDICE TO THE REVENUE AND WE DO NOT SEE ANY ERROR IN THE ASSESSMENT. THEREFORE , WE HOLD THAT THERE IS NO REASON TO TAKE UP THE CASE FOR REVISION AND WE SET ASIDE THE ORDER OF THE LD.PR.CIT PASSED U/S 263 AND RESTORE THE ASSESSMENT ORDER. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUL 2019. SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 17 .0 7 .2019 L.RAMA, SPS 7 I.T.A. NO . 442 /VIZ/201 8 , A.Y.2013 - 14 SRI VISAKHA GOWRI MUTUALLY AIDED CO - OPOERATIVE SOCIETY LTD , VISAKHAPATNAM / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE - S RI VISAKHA GOWRI MUTUALLY AIDED, CO - OPERATIVE SOCIETY LIMITED , D.NO.10 - 27 - 3/1, 2 ND FLOOR , FACOR LAYOUT, WALTAIR UPLANDS VISAKHAPATNAM 2. / THE REVENUE INCOME TAX OFFICER, WARD - 1 (4), VISAKHAPATNAM 3. THE PR. COMMISSIONER OF INCOME TAX - 1 , VI SAKHAPATNAM 4 . , , / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM