M/s Khanyan Multipurpose Co-op Agricultural Service Society Ltd., Mandi Gobindgarh V. ACIT, Mandi Gobindgarh

ITA 475/CHANDI/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7569 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 05-07-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 14-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBE AND MS. ANNAPURNA GUPTA, ACCOUNTANTMEMBER ITA NO. 475/CHD/2017 ASSESSMENT YEAR : 2013-14 M/S KHANYAN MULTIPURPOSE CO-OP VS. THE ACIT, AGRICULTURAL SERVICE SOCIETY LTD., CIRCLE, VILL.KHANYAN, TEHSIL AMLOH, MANDI GOBINDGARH MANDI GOBINDGARH PAN NO. AACAT4443M (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL, ADVOCA TE RESPONDENT BY : SH. MANOJ KUMAR, SR.DR DATE OF HEARING : 05.07.2018 DATE OF PRONOUNCEMENT : 05.07.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE AGAINST THE ORDER DATED 10.01.2017 OF THE COMMISSIONER OF INCOME TAX(A), PATIALA [HEREINAFTER REFERRED TO AS CIT(A)]. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST ON TERM DEPOSITS BY THE MEMBERS OF SOCIETY, AMOUNTI NG TO RS. 45,55,018/- CLAIMED BY THE APPELLANT U/S 80P OF THE INCOME TAX ACT, 1961 AS PER PARA 6.1 OF HIS ORDER. 2. THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONSIDERIN G THAT THE IMPUGNED INTEREST HAS BEEN RECEIVED ON FU NDS DEPOSITED BY THE MEMBERS IN ACCORDANCE WITH THE B Y-LAWS OF THE SOCIETY AND NO PART OF IT WAS FROM ITS TRADING ACTIVITY. ITA NO. 475/CHD/2017-M/S KHANYAN MULTIPURPOSE CO-OP AGRICULTURAL SERVICE SOCIETY LTD, MANDI GOBINDGARH 2 3. THAT THE WORTHY CIT(A) HAS ALSO ERRED IN NOT CONSIDERING THAT STATUTORY AUDITORS IN THE REPORT H AD ALSO NOT PIN-POINTED ANY SUCH DISALLOWANCE AS MADE BY THE AS SESSING OFFICER AND ALSO BOOKS OF ACCOUNT HAVE NOT BEEN REJ ECTED. 3. NOTWITHSTANDING ABOVE FACTS, IT IS SUBMITTED THAT E VEN OTHERWISE WHILE UPHOLDING DISALLOWANCE OF INTEREST OF RS. 45,55,018/- AND ASSESSING THE INCOME FROM OTHER SOU RCES AS ABOVE, THE ASSESSING OFFICER AS WELL THE LD. CIT(A) HAS ERRED IN NOT ALLOWING DEDUCTION OF CORRESPONDING ALLOWANCE F OR INTEREST PAID, AS BANK INTEREST HAS BEEN EARNED ON ACCOUNT O F INTEREST BEARING DEPOSITS RECEIVED FROM ITS MEMBERS. 4. THAT THE ADDITION AS ABOVE HAS BEEN UPHELD A GAINST THE FACTS AND CIRCUMSTANCES AND DETAILED SUBMIS SIONS FILED DURING THE COURSE OF HEARING HAS NOT BEEN CONSID ERED PROPERLY. 2. AT THE OUTSET, SHRI SUDHIR SEHGAL, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT HE DOES NOT PRESS THE OTHER GROU NDS EXCEPT THE GROUND RELATING TO THE SETTING OFF OF THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON DEPOSITS MADE BY THE MEMBERS WIT H THE BANK IN THE SHAPE OF FDRS. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ASSESSEE HAD COLLECTED DEPOSITS FROM ITS MEMBERS UP ON WHICH IT HAS PAID INTEREST TO THEM. THE SAID DEPOSITS WERE PLAC ED IN THE SHAPE OF FDRS WHEREUPON INTEREST INCOME HAS BEEN EARNED. THA T THE ASSESSING OFFICER HAS TREATED THE ENTIRE INTEREST INCOME FROM THE FDRS AS TAXABLE INCOME OF THE ASSESSEE WITHOUT SETTING OFF OF THE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON THE DEPOSIT S COLLECTED FROM MEMBERS UPON WHICH FDR INTEREST WAS EARNED. 4. WE FIND MERIT IN THE ABOVE SUBMISSIONS OF THE LD . COUNSEL FOR THE ASSESSEE. IF THERE IS A DIRECT NEXUS BETWEEN TH E DEPOSITS TAKEN FROM THE MEMBERS AND THE INTEREST INCOME EARNED BY THE ASSESSEE ON ITA NO. 475/CHD/2017-M/S KHANYAN MULTIPURPOSE CO-OP AGRICULTURAL SERVICE SOCIETY LTD, MANDI GOBINDGARH 3 THE FDRS ON SUCH DEPOSITS, THEN THE ASSESSEE WILL B E ENTITLED TO CLAIM INTEREST EXPENDITURE, INCURRED / PAID TO THE MEMBER S FROM WHOM THE DEPOSITS WERE COLLECTED. ACCORDINGLY, WE RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TH AT IF THE ASSESSEE WILL BE ABLE TO ESTABLISH THE DIRECT NEXUS BETWEEN THE INTEREST INCOME EARNED AND INTEREST EXPENDITURE INCURRED ON DEPOSIT S, THEN ASSESSEE WILL BE GIVEN SET OFF OF THE EXPENDITURE AGAINST IN TEREST INCOME OF THE ASSESSEE. NO OTHER GROUND OR ISSUE WAS PRESSED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 05.07.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR