The Rurkee Cooperative Agri.Multipurpose Soc. Ltd., V. JCIT (OSD), Phagwara

ITA 459/ASR/2012

• Counselvise Citation: 45920914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 17-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: PIYUSH BANSAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.459(ASR)/2012 ASSESSMENT YEAR:2009-10 PAN :AABTD3993N M/S. THE RURKEE CO-OPERATIVE AGRI VS. JT. COMMR. OF INCOME TAX (OSD) MULTIPURPOSE SOCIETY LTD; PHAGWARA CIRCLE, VPO RURKEE, THE. PHILLAUR. PHAGWARA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. PIYUSH BANSAL, CA RESPONDENT BY:SH.AMRIK CHAND, DR DATE OF HEARING: 07/01/2014 DATE OF PRONOUNCEMENT:24/02/2014 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISE FROM THE ORDER OF THE CIT(A), JALANDHAR, DATED 10.10.2012 FOR THE ASSESSMENT YEAR 2009-10.THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ORDER OF THE LD. CIT(A), JALANDHAR, TREATI NG THE ADMISSION FEES OF RS.2,520/- RECEIVED FROM NOMINAL MEMBERS AS ADMISSION FEES FROM NON MEMBERS AND TREATING THE SA ME AS NOT DIRECTLY RELATED WITH THE OBJECTS OF THE SOCIETY, I S AGAINST LAW AND FACTS OF THE CASE. ITA NO.459(ASR)/2012 2 2. THAT ORDER OF THE LD. CIT(A), JALANDHAR, CONFIRM ING THE DISALLOWANCE OF RS.14,27,433/- ON ACCOUNT OF NON DE DUCTION OF TDS FROM NOMINAL MEMBERS IS AGAINST LAW AND FACTS O F THE CASE. 3. THAT THE LD. CIT(A), JALANDHAR, HAS ERRED IN NO T APPRECIATING THAT THE TERM MEMBER IS NOT DEFINED UNDER THE INC OME TAX ACT, 1961 AND THAT THE DEFINITION OF MEMBER AS GIVE N IN THE PUNJAB COOPERATIVE SOCIETIES ACT INCLUDES BOTH NOMI NAL AND ASSOCIATE MEMBERS WITH IN ITS AMBIT. 4. THAT ORDER OF THE LD. CIT(A), JALANDHAR, HAS ERR ED IN HOLDING THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN J ALGAON DISTRICT CENTRAL CO-OPERATIVE BANK LTD. V. UNION O F INDIA (2004) 134 TAXMAN 0001 IS NOT BINDING ON IT WITHOUT APPRECIATING THE FACT THAT THERE IS NO CONTRARY DEC ISION ON THE ISSUE BY ANY OTHER HIGH COURT AND THAT THE SLP FILE D BY REVENUE HAS BEEN DISMISSED BY THE APEX COURT. 5. THAT THE LD. CIT(A), JALANDHAR, HAS ERRED IN HO LDING THAT THE TDS PROVISIONS ARE APPLICABLE TO NOMINAL MEMBERS AN D NOT APPRECIATING THE IMPORT OF LAW THAT THERE IS NO LIA BILITY ON THE ASSESSEE U/S 194A(3)(V) OF THE ACT TO DEDUCT TAX AT SOURCE IN RELATION TO INTEREST PAID TO NOMINAL MEMBERS. 6. THAT AS CLAIMED IN ABOVE GROUNDS OF APPEAL ORDER OF CIT(A), JALANDHAR, CONFIRMING THE DISALLOWANCE OF RS.14,27, 433/- ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE FROM INTE REST PAID TO NOMINAL MEMBERS AND TREATING THE ADMISSION FEES OF RS.2,520/- AS NOT CONNECTED WITH THE OBJECTS OF THE SOCIETY BE SET ASIDE AND THE APPLICANT BE ALLOWED THE ENTIRE AMOUNT AS DEDUC TIBLE U/S 80P(2). 7. THAT THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER AMEND, MODIFY, SUBSTITUTE, DELETED AND/OR RESCINDS ALL OR ANY OF T HE GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING, IF NECESSITY SO ARISES. 2. THE BRIEF FACTS OF THE CASE AS PER AOS ORDER IN PA RA 4.1 AT PAGES 6 TO 9, WHICH FOR THE SAKE OF CONVENIENCE ARE REPROD UCED AS UNDER: ITA NO.459(ASR)/2012 3 4.1. I HAVE CAREFULLY CONSIDERED THE REPLY FURNISHED BY THE ASSESSEE WITH REFERENCE TO ALL FACTS, MATERIAL AND EVIDENCE AVAILABLE ON RECORD. ALL WHAT THE ASSESSEE IS TRYIN G TO MAKE OUT IS THAT INTEREST HAS BEEN PAID TO MEMBERS OF THE CO -OPERATIVE SOCIETY AND THEREFORE IT IS NOT REQUIRED TO DEDUCT TAX AT SOURCE AS PER PROVISIONS OF SECTION 194A(3)(I) AND 194A(3) (I)(B) OF THE ACT. THE CONTENTION SO RAISED IS FACTUALLY NOT ONL Y INCORRECT BUT ALSO IS NOT BORNE OUT FROM THE FACTS AND EVIDENCE AVAILABLE ON RECORD. THE ASSESSEE CO-OPERATIVE SOCIETY HAS ITSEL F PROVIDED BIFURCATION OF THE DETAILS OF INTEREST PAID TO MEMB ERS AND NOMINAL MEMBERS I.E. NON-MEMBERS AND NON-MEMBERS AS UNDER: 1. NOMINAL MEMBERS FDRS ACCOUNTS RS.15,83,113/- 2. NOMINAL MEMBERS SB ACCOUNTS RS.2,42,129/- 3. NON MEMBERS FDRS ACCOUNTS RS.5,47,849/- 4. NON MEMBERS SB ACCOUNTS RS.8,69,297/- TOTAL: RS.32,42,388/- 5. INTEREST TO MEMBERS FDRS ACCOUNTS RS.19,07,862/- 6. INTEREST TO MEMBERS SB ACCOUNTS RS.8,43,732/- TOTAL RS.27,51,594/- IT IS THUS CLEAR THAT INTEREST PAID TO MEMBER OF TH E SOCIETY IS RS.27,51,594/- WHEREAS INTEREST PAID TO NOMINAL MEM BERS AND NON-MEMBERS IS RS.32,42,388/-. AS PER PROVISIONS O F SECTION 194A(3)(V) OF THE ACT, INTEREST IS NOT REQUIRED TO BE DEDUCTED AT SOURCE ONLY ON THE PAYMENT OF INTEREST MADE TO MEMB ERS OF THE SOCIETY. AS REGARDS INTEREST PAID TO NOMINAL MEMBER S AND NON- MEMBERS TAX AT SOURCE WAS REQUIRED TO BE DEDUCTED A S PER PROVISIONS OF SECTION 194A OF THE ACT.THIS HAS ADMI TTEDLY NOT BEEN DEDUCED AND DEPOSITED BY THE ASSESSEE SOCIETY IN TO THE ACCOUNT OF THE CENTRAL GOVT. THE CONTENTION OF THE ASSESSEE THAT IT HAS OBTAINE D FORM NO.15G FROM NON-MEMBERS FOR NON DEDUCTION OF TAX AT SOURCE AND FORWARDED TO THE CIT, JALANDHAR IS FACTUALLY IN CORRECT AS FIRSTLY, IT HAS NOT FURNISHED ANY DOCUMENTARY EVIDE NCE IN THE FORM OF FURNISHING COPIES OF SUCH FORM NO. 15G, SEC ONDLY FORM NO. 15G WERE STATUTORILY REQUIRED TO BE SUBMIT TED TO THE ITA NO.459(ASR)/2012 4 CIT (TDS) CHANDIGARH AND NOT CIT, JALANDHAR AND THI RDLY THE ASSESSEE HAS FURNISHED ANY DOCUMENTARY EVIDENCE FOR FURNISHING FORMS NO.15G TO THE CIT, JALANDHAR. THER E IS THEREFORE, NO MERIT IN THIS CONTENTION OF THE ASSES SEE AND IS ACCORDINGLY REJECTED. THE CA SH. VIKRAM ARORA, WHO HAS AUDITED THE BOOKS OF ACCOUNTS AND FURNISHED AUDIT REPORT HAS COMMENTED A GAINST COLUMN 27(A) OF THE AUDIT REPORT THAT COMPLIANCE H AS BEEN MADE WITH THE PROVISIONS OF CHAPTER XVIIB REGARDING DEDUCTION OF TAX AT SOURCE. THIS IS FACTUALLY INCO RRECT AS THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON THE PAYM ENTS OF INTEREST MADE TO NOMINAL AND NON MEMBERS. THIS FAC T HAS ALSO BEEN ADMITTED BY THE COUNSEL SH. V.K.PRASHAR ADVOCA TE IN HIS WRITTEN REPLY REPRODUCED HEREINABOVE. WHAT IS EXEMP T FROM DEDUCTION OF TAX AT SOURCE U/S 194A IS THE PAYMENT OF INTEREST MADE TO MEMBERS OF THE SOCIETY AND NON ELSE. IT WAS , THEREFORE, INCUMBENT ON THE PART OF THE ASSESSEE SOCIETY TO DE DUCT TAX AT SOURCE ON THE PAYMENTS OF INTEREST MADE TO NOMINAL AND NON- MEMBERS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES OF THE CA SE AND THE LEGAL POSITION OBTAINING ON THE POINT AT ISSUE IT I S HELD THAT THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE PAYMENTS OF INTEREST MADE TOP NOMINAL AND NON-MEMBERS AS MENTIO NED ABOVE UNDER THE PROVISIONS OF SECTION 194A AND THER EFORE EXPENDITURE CLAIMED ON THIS COUNT AT RS.32,42,388/- IS DISALLOWED U/S 40(A)(IA) OF THE ACT. AS THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN THIS REGARD, PENALTY PROCEEDINGS U/S 271(1)(C) HAVE BEEN INITIAT ED SEPARATELY. TOTAL INCOME IS COMPUTED AS FOLLOWS: TOTAL INCOME AS DECLARED IN THE RETURN OF INCOME R S. NIL ADD I) MISC. INCOME RS.7,360/- II) DIVIDEND INCOME RS.40,000/- III) ADMISSION FOR NON MEMBERS. RS.2520/- RS.49,880/- III) DISALLOWANCE OF INTEREST PAID ITA NO.459(ASR)/2012 5 TO NON-MEMBERS WITHOUT DEDUCTION OF TAX AT SOURCE U/S 194A, AS PER PROVISIONS OF SEC. 40(A)(IA) OF THE ACT, AS DISCUSSED ABOVE. RS.32,43,388/- TOTAL INCOME RS.32,92,268/- EXEMPTION CLAIMED U/S 80P(2) ON RS.49,880/- AND RS.32,42,388/- IS DISALLOWED AS THESE ITEMS OF INCO ME ARE ASSESSABLE UNDER THE HEAD OTHER SOURCES. PENALTY NOTICE U/S 271(1)(C) HAS BEEN ISSUED FOR FU RNISHING INACCURATE PARTICULARS OF INCOME RELATING TO MISC. INCOME, DIVIDEND INCOME AND ADMISSION FEE FOR NON MEMBERS A T RS.49,880/- AND INTEREST DISALLOWANCE AT RS.32,42,2 68/- U/S 40(A)(IA) OF THE ACT, AS DISCUSSED ABOVE. S 3 THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. W ITH REGARD TO DISALLOWANCE OF RS. 14,27,433/- FOR NON DEDUCTION O F TAX AT SOURCE FROM INTEREST PAID TO NOMINAL MEMBERS AND ADMISSION F EES OF RS.2,520/- RECEIVED FROM NOMINAL MEMBERS. 4. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IN THE PRESENT CASE, THE DISALLOWANCE HAS BEEN MADE U/S 40(A)(IA) OF THE ACT, WITH REGARD TO THE INTEREST PAYMENTS TO THE NOMINAL MEMBERS, SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE OF SUCH PAYMENTS MADE TO THE NOMINAL MEMBERS. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ITA NO.459(ASR)/2012 6 CIT VS PUNJAB STATE CO-OPERATIVE BANK LTD. REPORTED IN [2008] 300 ITR 24 (P&H) HAS HELD THAT NOMINAL MEMBER WHO HAD A BECOME MEMBER OF THE SOCIETY AFTER ITS REGISTRATION ON PAYMENT OF THE PR ESCRIBED FEES AS PER THE BYE- LAWS OF THE SOCIETY, WOULD ALSO BE CONSIDERED AS A MEMBER OF THE SOCIETY AS PER THE DEFINITION GIVEN UNDER THE CO-OPERATIVE SOC IETIES ACT AND THE HEAD NOTE OF THE SAID DECISION OF HONBLE PUNJAB & HARYA NA HIGH COURT IS REPRODUCED AS UNDER: THE PROVISION OF SECTION 80P OF THE INCOME-TAX ACT , 1961 WERE INTRODUCED WITH A VIEW TO ENCOURAGING THE GROWTH OF THE CO-OPERATIVE SECTOR IN THE ECONOMIC LIFE OF THE COUNTRY AND IN P URSUANCE OF THE DECLARED POLICY OF THE GOVERNMENT. THE DIFFERENT HE ADS OF EXEMPTION ENUMERATED IN THE SECTION ARE SEPARATE AND DISTINCT HEADS AND ARE TO BE TREATED AS SUCH. CLAUSE (A)(I) OF SUB-SECTION (2 ) OF SECTION 80P TALKS OF A CO-OPERATIVE SOCIETY ENGAGED IN CARRYING ON TH E BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBE RS. THE CARRYING OF ON THE BUSINESS OF BANKING BY A CO-OPERATIVE SOCI ETY OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS ARE TWO DIFFERENT TYPES OF ACTIVITIES WHICH ARE COVERED UNDER THIS SUB-CLAUSE. THE WORD OR USED IN THIS SUB-CLAUSE CANNOT BE READ AS AND . IF THE LITERAL READING OF THE WHOLE OF A SECTION OR SUB-SECTION OR A CLAUSE IS QU IET CLEAR AND THERE IS NO AMBIGUITY, THEN THE PLAIN MEANING TO THE SE CTION SHOULD BE GIVEN EFFECT AND THE WORD OR SHOULD NOT BE READ AS AND. ANY INTEREST INCOME RECEIVED BY THE CO-OPERATIVE SOCIET Y ENGAGED IN CARRYING ON THE BUSINESS OF BANKING ACTIVITIES FRO M THE MEMBERS OR NON-MEMBERS, IS LIABLE FOR EXEMPTION UNDER THIS SUB -CLAUSE. THE ASSESSEE WAS A CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING AND EXTENDING CREDIT FACILITIES TO ITS MEMB ERS AND NOMINAL MEMBERS. THE ASSESSEE CLAIMED EXEMPTION U/S 80P(2)( A)(I). THE ASSESSING OFFICER ADDED INTEREST DERIVED FROM THE L OANS ADVANCED TO THE NOMINAL MEMBERS AS INCOME FROM OTHER SOURCES AN D DISALLOWED THE CLAIM OF THE ASSESSEE THAT THIS SHOULD BE TREAT ED AS INCOME DERIVED FROM BANKING BUSINESS WHICH WAS ELIGIBLE FOR EXEMPT ION U/S 80P(2)(A)(I) . THE CIT(A) AND THE TRIBUNAL HELD THA T INTEREST DERIVED ITA NO.459(ASR)/2012 7 FROM LOANS TO NOMINAL MEMBERS WAS ENTITLED TO SPECI AL DEDUCTION U/S 80P. ON APPEAL TO THE HIGH COURT: HELD, DISMISSING THE APPEAL, THAT A NOMINAL MEMBER WHO HAD BECOME A MEMBER OF THE SOCIETY AFTER ITS REGISTRATION ON P AYMENT OF THE PRESCRIBED FEES AS PER THE BYE-LAWS OF THE SOCIETY, WOULD ALSO BE CONSIDERED AS A MEMBER OF THE SOCIETY AS PER THE DE FINITION GIVEN UNDER THE CO-OPERATIVE SOCIETIES ACT. IN ANY CASE, IT MADE NO DIFFERENCE WHETHER THE INCOME WAS DERIVED FROM THE LOAN ADVANCED TO THE NOMINAL MEMBERS OR MEMBERS OR OTHERWISE TO A TH IRD PARTY BECAUSE EVERY INCOME OF INTEREST DERIVED BY A CO-OP ERATIVE BANKING SOCIETY FROM THE BANKING ACTIVITY WAS ENTITLED TO S PECIAL DEDUCTION U/S 80P. 6.1. THEREFORE, THE WHOLE ISSUE HAS BEEN RESOLVED BY THE HONBLE PUNJAB & HARYANA HIGH COURT AND BEING THE JURISDICTIONAL H IGH COURT, WE ARE BOUND TO FOLLOW THE SAID DECISION OF HONBLE JURISD ICTIONAL HIGH COURT. WE ARE OF THE VIEW THAT NOMINAL MEMBERS ARE TO BE CONS IDERED AS MEMBERS IN VIEW OF THE DECISION OF HONBLE PUNJAB & HARYANA HI GH COURT IN THE CASE OF CIT VS. PUNJAB STATE CO-OPERATIVE BANK LTD. (SUPRA) . ACCORDINGLY, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE O N INTEREST PAYMENTS TO THE NOMINAL MEMBERS, WHO ARE MEMBERS AS PER THE DECISI ON OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PUNJAB STATE CO-OPERATIVE BANK LTD. (SUPRA) AND THEREFORE, NO DISALLOWANCE U NDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE. ALSO, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JALGAON DISTRICT CENTRAL CO-OPERATIVE BANK LTD. V. UNION OF INDIA [2004] 134 TAXMAN 1, HELD THAT WHERE THE LEGAL VALIDITY OF CIRCULAR NO.9 OF 2002 ITA NO.459(ASR)/2012 8 DATED 11.9.2002 WAS QUESTIONED AND THE SAID CIRCUL AR WAS QUASHED AND SET ASIDE BY THE HONBLE BOMBAY HIGH COURT. ACCORDINGLY , THERE IS NO DISTINCTION BETWEEN MEMBER AND NOMINAL MEMBER AS FA R AS PROVISIONS OF SECTION 80P AND 194(3)(V) ARE CONCERNED. IN THE FAC TS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) IS REVERSED A ND THE A.O. IS DIRECTED TO DELETE THE DISALLOWANCE SO MADE. 6.2. ALSO DISALLOWANCE OF RS.2,520/- ON ACCOUNT O F ADMISSION FEES CANNOT BE DISALLOWED. IN THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. THUS, ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7. THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24TH FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL,