DCIT, Chandigarh V. M/s The Punjab State Co-operative House Building Federation Ltd., Chandigarh

ITA 5/CHANDI/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1594 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Capital asset; Business income
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.5/CHD/2015 (ASSESSMENT YEAR : 2011-12) THE D.C.I.T., VS. M/S THE PUNJAB STATE CO-OPERATIVE CIRCLE 4(1), HOUSE BUILDING FEDERATION LTD., CHANDIGARH. SCO 150-152, SECTOR 34-A, CHANDIGARH. AND ITA NO.26/CHD/2015 (ASSESSMENT YEAR : 2011-12) M/S THE PUNJAB STATE CO-OPERATIVE VS. THE D.C.I.T., HOUSE BUILDING FEDERATION LTD., CIRCLE 4(1), SCO 150-152, SECTOR 34-A, CHANDIGARH. CHANDIGARH. PAN: AAAAT0759L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.R.SHARMA DEPARTMENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 10.09.2015 DATE OF PRONOUNCEMENT : 15.09.2015 O R D E R PER RANO JAIN, A.M . : BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORD ER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHAND IGARH DATED 21.10.2014 FOR ASSESSMENT YEAR 2011-12. 2 2. THE REVENUE HAS FILED THE APPEAL ON THE FOLLOWI NG GROUNDS OF APPEAL : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15,11,996/- MADE BY THE A.O BY DISALLOWANCE OF TH E DEDUCTION U/S SOP (2) (A) (I) ON ACCOUNT OF INTERES T RECEIVED FROM EMPLOYEES WHO ARE NOT THE MEMBER OF THE ASSESSEE SO CIETY. 3. IT IS PRAYED THAT THE ORDER OF CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 4. THE APPELLANT CARVES LEAVE TO ADD OR AMEND ANY G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 3. THE ONLY ISSUE ARISING IN THIS APPEAL IS REGARD ING DISALLOWANCE OF RS.15,11,996/- MADE BY THE ASSESSIN G OFFICER ON ACCOUNT OF DEDUCTION UNDER SECTION 80P(2 )(A)(I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) CL AIMED BY THE ASSESSEE ON INTEREST RECEIVED FROM THE EMPLOYEE S WHO ARE NOT MEMBERS OF THE ASSESSEE SOCIETY. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAD CLAIMED DEDUCTION OF RS.15,11,996/- UNDER SECTION 8 0P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST RECEIVED FROM EMP LOYEES ON ADVANCES GIVEN TO THEM FOR PURCHASE OF CONVEYANCE A ND CONSTRUCTION OF HOUSES, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER. THE LEARNED CIT (APPEALS) HAD ALLOWED THE APPEAL OF THE ASSESSEE RELYING ON THE ORDER OF THE ITAT CHANDIGARH BENCH IN THE CASE OF PUNJAB STATE COOPER ATIVE AGRICULTURAL DEVELOPMENT BANK LTD. IN ITA NO.120/CH D/2007 DATED 21.3.2009. 3 5. DURING THE COURSE OF HEARING BEFORE US, OUR ATTENTION WAS INVITED TO THE ORDER OF CHANDIGARH BE NCH OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 201 0-11 IN ITA NO.810/CHD/2013, WHEREBY THE APPEAL OF THE REVE NUE WAS ALLOWED AND THE ISSUE WAS DECIDED AGAINST THE ASSES SEE. 6. ON PERUSAL OF THE ORDER OF THE ITAT CHANDIGARH BENCH FOR ASSESSMENT YEAR 2010-11, WHEREBY THE SAME ISSUE WAS RAISED BY THE DEPARTMENT, THE ITAT CHANDIGARH B ENCH ALLOWED THE APPEAL OF THE DEPARTMENT OBSERVING AS F OLLOWS : 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE HON'BLE SUPREME COURT HAS CLEARLY HELD THAT DEDUCTION U/S 80P(2)(A) (I) OF THE ACT IS AVAILABLE ONLY IN RESPECT OF CORE ACTIVITIES OF THE SOCIETY A ND INTEREST EARNED FROM OTHER BANKS CANNOT BE SAID TO BE THE CORE ACTIVITY. IN FA CT, IN THIS REGARD IT HAS BEEN OBSERVED AS UNDER:- 'THE INTEREST INCOME ARISING TO A CO-OPERATIVE SOCI ETY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS OR MARKE TING OF AGRICULTURAL PRODUCE OF ITS MEMBERS, ON THE SURPLUS, WHICH IS NOT REQUIRED IMME DIATELY FOR BUSINESS PURPOSES, FROM INVESTMENT IN SHORT-TERM DEPOSITS AND SECURITI ES, HAS TO BE TAXED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE INCOME-T AX ACT, 1961. SUCH INTEREST CANNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY, VIZ., CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. INTEREST INCOME OF SUCH SOC IETY FROM AMOUNTS RETAINED BY IT CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACT IVITY MENTIONED IN SECTION 80P(2)(A)(I) OR SECTION 80P(2)(A)(III) OF THE ACT. SECTION 80P(2)(A)(I) CANNOT BE PLACED ON A PAR WITH EXPLANATION (BAA) TO SECTION 80HHC, SECTION 80HHD(3) AND SECTION 80HHE(5) .' 18. ON THE BASIS OF ABOVE OBSERVATION IT CAN EASILY BE SAID THAT ON SAME ANALOGY EVEN THE INTEREST EARNED FROM EMPLOYEES CANNOT BE SAID TO BE CORE ACTIVITY OF THE SOCIETY AND, THEREFORE, I N OUR OPINION, INTEREST EARNED FROM EMPLOYEES IS NOT ELIGIBLE FOR DEDUCTION U/S 80P-(2) (A)(I), THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THAT OF ASSESSI NG OFFICER. 4 7. SINCE IT WAS SUBMITTED AT THE BAR THAT THE FACT S OF THIS CASE ARE EXACTLY THE SAME, RESPECTFULLY FOLLOW ING THE ORDER OF THE ITAT CHANDIGARH BENCH IN ASSESSEES OWN CASE FOR THE EARLIER YEAR, WE ALSO DECIDE THE ISSUE AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 8. THE APPEAL OF THE REVENUE IS ALLOWED. ITA NO.26/CHD/2015 : 9. THE GROUND NO.1 RAISED BY THE ASSESSEE IS GENER AL, AND HENCE NEEDS NO ADJUDICATION. 10. THE GROUND NO.2 RAISED BY THE ASSESSEE READS A S UNDER : 2. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHEL D BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH HOLDING THAT THE IN COME OF RS. 11,60,070/- BEING THE AMOUNT OF INTEREST RECEIVED F ROM COMMERCIAL BANKS AS INCOME FROM OTHER SOURCES IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS BAD IN LAW AND NEEDS TO BE SET-ASIDE. 11. SINCE THE SAME ISSUE WAS DECIDED BY THE ITAT, CHANDIGARH BENCH IN ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2010-11 IN ITA NO.810/CHD/2013 TOGETHER WITH THE IS SUE OF INTEREST RECEIVED FROM EMPLOYEES, FOLLOWING OUR DEC ISION IN ITA NO.5/CHD/2015, WE HOLD THIS GROUND IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. 12. THE GROUND NO.3 RAISED BY THE ASSESSEE READS A S UNDER : 5 3. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHE LD BY THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING THE CLAIM OF RS.94,35,388/- OF THE APPELLANT AS LONG TERM CAPITA L GAIN AND TREATING THE SAME AS BUSINESS INCOME AMOUNTING TO RS.1,03,18,091/- IS BAD IN LAW AND NEEDS TO BE SET ASIDE. 13. DURING THE COURSE OF HEARING, IT WAS BROUGHT T O OUR NOTICE THAT THE ISSUE IS COVERED AGAINST THE ASSESS EE BY THE ORDER OF THE ITAT CHANDIGARH BENCH IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2009-10 IN ITA NO.1298/CHD/2012. ON PERUSAL OF THE SAID ORDER OF THE ITAT CHANDIGARH BE NCH, THIS GROUND OF APPEAL HAS BEEN DEALT AT PAGE 6, PARA 13 ONWARDS, WHICH READS AS UNDER : 13.GROUND NO. 5 - AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT T HE ASSESSEE HAS SHOWN INCOME FROM PROJECTS AMOUNTING TO RS.1,45 ,22,463/-. IT WAS FURTHER NOTICED THAT MAIN OBJECT OF THE ASSE SSEE WAS TO GRANT LOANS TO THE MEMBER URBAN AND RURAL COOP HOUS E BUILDING SOCIETIES OF THE STATE FOR CONSTRUCTION OF HOUSES. IN RESPONSE TO THE QUERY IT WAS STATED THAT THE ASSE SSEE WAS TREATING THE IMMOVABLE PROPERTY AS ITS CAPITAL ASSET AND THEREFO RE, ANY GAIN RECEIVED SHOULD BE TREATED AS CAPITAL GAIN. THE A SSESSING OFFICER DID NOT ACCEPT THE SUBMISSIONS AND TREATED TH E INCOME OF RS. 1,45,22,463/- AS BUSINESS INCOME. ACTION OF THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE ID. CIT(A). 14. BEFORE US, THE ID. COUNSEL OF THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFF ICER AND THE ID. CIT(A). 15. ON THE OTHER HAND, THE ID. DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER AND THE ID . CIT(A). 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE AGR EE WITH THE 6 OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASS ESSEE WAS TO GRANT LOAN TO THE URBAN & RURAL COOP SOCIETIES AND TO BUILD VARIOUS HOUSING COMPLEXES. IT IS NOT THE CASE OF O NE OR TWO ODD INVESTMENTS BUT IT IS THE BUSINESS OF CONSTRUCTION, THEREFORE, INCOME FROM SELLING OF HOUSES HAS BEEN RIGHTLY TR EATED AS TO BE INCOME FROM BUSINESS & PROFESSION. ACCORDINGLY THIS GROUND IS DISMISSED. 14. SINCE NO DISTINGUISHING FACTS WERE BROUGHT TO OUR NOTICE DURING THE COURSE OF HEARING, RESPECTFULLY F OLLOWING THE ORDER OF THE ITAT CHANDIGARH BENCH IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2009-10, WE HOLD THE GROUND AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.5/CHD/2015 IS ALLOWED AND THE APPEAL OF THE ASSE SSEE IN ITA NO.26/CHD/2015 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF SEPTEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 15 TH SEPTEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7