Arihant Nagari Sah. Pat Sanstha Ltd., Sangli V. ITO, Ward- 1(2), Sangli

ITA 473/PUN/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56408 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 29-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA SR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTAN T MEMBER ITA NO. 473/PN/2010 (ASST.YEAR: 2005-06) ARIHANAT NAGARI SAHAKARI PAT SANSTHA LTD., 241, MARKET YARD SANGLI - 416416 .. AP PELLANT PAN AAAAS1309R VS. INCOME TAX OFFICER, WARD 1(2) SANGLI .. RESPONDE NT APPELLANT BY: WRITTEN SUBMISSIONS RESPONDENT BY: ANN KAPTHUAMA, SR AR ORDER PER D.KARUNAKARA RAO, A.M .: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KOLHAPUR DATED 29-1- 2010 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS IN ITS APPEAL. 1. THE LD.CIT(A) ERRED IN OBSERVING THAT THE RENT RECE IVED FROM THE EXCESS PORTION OF BUILDING IN WHICH THE SOCIETY IS CARRYING ON ITS BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBER IS NOT INCOME INCIDENTAL TO THE BUSINESS OF PROVIDING CRED IT FACILITIES TO ITS MEMBER AND HENCE IS NOT ELIGIBLE FOR DEDUCTI ON U/S 80P(2)(A)(I) . 2. THE ASSESSING OFFICER MAY BE DIRECTED TO GIVE DEDUC TION U/S 80P(2)(A)(I) IN RESPECT OF RENT RECEIVED. 3. WITHOUT PREJUDICE, THE LEARNED ASSESSING OFFICER ER RED IN NOT APPRECIATING THAT THE ACTIVITY OF THE LETTING IS IN CIDENTAL TO THE MAIN ACTIVITY SINCE THE EXCESS SPACE HAS BEEN LET O UT AND, THEREFORE, THE ASSESSEE IS ENTITLED TO DEDUCTION U/ S 80P(2)(II) IN RESPECT OF THIS INCOME. 4. THE LEARNED ASSESSING OFFICER MAY BE DIRECTED TO AL LOW DEDUCTION U/S 80P(2)(II) OF RS.56,000/-. 3. BEFORE US, THERE WAS NONE FOR THE ASSESSEE. HOWE VER, THE ASSESSEE FILED THE WRITTEN SUBMISSIONS WHEREIN IT W AS SUBMITTED THAT THE RENTING OUT OF THE PROPERTY IS INCIDENTAL TO TH E CORE ELIGIBLE ACTIVITY AND THEREFORE, THE ASSESSEE IS ENTITLED TO THE BENEFIT OF THE DEDUCTION U/S 80P IN RESPECT OF THE RENTAL RECEIPTS . ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE PROVISION S OF THE ACT AND ITA NO. 473/PN/2010 (ASST.YEAR: 2005-06) ARIHANAT NAGARI SAHAKARI PAT SANSTHA LTD., THE JUDGMENT OF THE HONBLE HIGH COURT OF KERALA IN THE CASE OF KOTTAYAM CO-OPERATIVE LAND MORTGAGE BANK LTD. V. CI T, REPORTED IN 172 ITR 443. CONSIDERING THE COVERED NATURE OF THE ISSUE, WE PROCEED TO HEAR THE CASE AND DISPOSE. 4. WE FIND THAT THE FACTS ARE NOT DISPUTED. AS PER THE PROVISIONS OF SEC.80P OF THE ACT, THE AMOUNT OF PROFITS AND GA INS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES SPECIFIED ARE ELIGIBLE FOR DEDUCTION. IN THIS CASE, PROVIDING CRE DIT FACILITIES TO ITS MEMBERS IS CORE ACTIVITY. SINCE IMPUGNED RENTAL INCOME IS STATUTORILY ASSESSABLE UNDER THE HEAD INCOME FROM THE HOUSE PROPERTY, THE ASSESSEE IS NOT ENTITLED TO DEDUCTIO N U/S 80(2)(A)(I) OF THE ACT. AS FAR AS THE RESIDUARY SECTION 80P(2)(C) (II), IT IS CLEARLY EXCLUDED FROM ITS PURVIEW THOSE CO-OP SOCIETIES COV ERED UNDER CLAUSE A OR CLAUSE B. WE HAVE PERUSED THE SAID JUD GMENT OF THE HONBLE HIGH COURT OF KERALA REPORTED IN 172 ITR 44 3 AND THAT THE PORTIONS FROM THE HEAD-NOTE OF THE DECISION READ AS UNDER. SECTION 80P(2) OF THE INCOME TAX ACT, 1961, EXEM PTS INCOME OF CO-OPERATIVE SOCIETIES TO THE EXTENT MENT IONED THEREIN IF THE PROFITS OR GAINS ARE ATTRIBUTABLE TO THE ACTIVITY IN WHICH THE CO-OPERATIVE SOCIETY IS ENGAGED . THE EXPRESSION ATTRIBUTABLE TO IS MUCH WIDER THAN THE EXPRESSION DERIVED FROM AND IT COVERS RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF THE ASSESSEE. WHERE, HOWEVER, THE SOCIETY AS OWNER OF CERTAIN PROPERTY L ETS OUT THAT PROPERTY AND RECEIVES THE RENTAL INCOME, THE INCOME THUS RECEIVED CANNOT PARTAKE THE CHARACTER OF PROFITS AN D GAIN ATTRIBUTABLE TO AN ACTIVITY CARRIED ON BY THE SOCI ETY. THE BUILDING LET OUT IS NOT A COMMERCIAL ASSET NOR IS T HE RENT RECEIVED PROFIT OR GAIN ARISING FROM THE EXPLOITATI ON OF BUSINESS ASSET. THE WORD ACTIVITY IS WIDER THAN THE WORD BUSINESS . IT CONNOTES A SPECIFIED FORM OF SUPERVISED ACTION O R FIELD OF ACTION. READ IN THE CONTEXT OF THE PROFIT- EARNIN G ACTIVITY OF A CO-OPERATIVE SOCIETY, IT MEANS THE CORPORATE ACTIVI TY OF THE SOCIETY, THAT IS TO SAY, THE COMBINATION OF OPERATI ONS UNDERTAKEN BY THE CO-OPERATIVE SOCIETY WHETHER OR N OT THEY AMOUNT TO A BUSINESS, TRADE OR PROFESSION IN THE OR DINARY SENSE. CLAUSE(C) OF SECTION 80P(2) IS INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS BUT ATTRIBUTABLE TO AN ACTIVITY WHICH RESU LTS IN PROFITS OR GAINS. LETTING OUT OF SURPLUS SPACE IN THE BUIL DING OWNED AND USED BY THE ASSESSEE IS NOT SUCH AN ACTIVITY FA LLING UNDER CLAUSE (C). THE RENT THUS RECEIVED BY THE SOCIETY IS NOT ELIGIBLE FOR THE EXEMPTION PROVIDED UNDER SECTION 8 0P(2)(C). 5. CONSIDERING THE COVERED NATURE OF THE ISSUE, WE FIND THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S 80P IN R ESPECT OF THE RENTAL ITA NO. 473/PN/2010 (ASST.YEAR: 2005-06) ARIHANAT NAGARI SAHAKARI PAT SANSTHA LTD., RECEIPTS RECEIVED BY THE ASSESSEE. ACCORDINGLY, THE GROUNDS RAISED ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 26 -8-2011. SD/- SD/- (I.C.SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 26 -8-2011 COPY TO:- 1) ASSESSEE 2) RESPONDENT 3) THE CIT (A) II, KOLHAPUR 4) THE CIT CONCERNED 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T.A.T., PUNE.