Shri Vasantrao Chougule Nagari Sah. Pat Sanstha Ltd., Kolhapur V. Income-tax Officer,

ITA 516/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1747 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 516 /PN/201 4 / ASSESSMENT YEAR : 20 09 - 1 0 SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LTD., 532, E WARD, SHAHUPURI, KOLHAPUR . / APPELLANT PAN: AAAAS1563M VS. THE INCOME TAX OFFICER , WARD 2 ( 2 ), KOLHAPUR . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI ANIL CHAWARE / DATE OF HEARING : 3 0 . 0 5 .201 6 / DATE OF PRONOUNCEMENT: 31 . 0 5 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) , KOLHAPUR , DATED 2 0 . 1 2 .20 1 3 RELATING TO ASSESSMENT YEAR 20 09 - 1 0 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1) ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON MERIT IN UPHOLDING THE ASSESSEES DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF RS.26,74,651/ - . ITA NO. 516 /PN/20 1 4 SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LTD. 2 3. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS PARTLY COVERED BY THE ORDER OF TRIBUNAL IN ITO VS. M/S. KUNDALIKA N AGARI SAHAKARI PATSANSTHA MARYADIT & ANOTHER IN ITA NO S .900/PN/2014 , 898/PN/2014, CO NOS.34/PN/2015 & 32/PN/2015 , RELATING TO ASSESSMENT YEAR 2010 - 11 , ORDER 29.01.2016 . 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDE RS OF AUTHORITIES BELOW . 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A CO - OPERATIVE SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE ASSESSEE WAS REGISTERED UNDER SECTION 10 OF THE BOMBAY CO - OPERATIVE SOCIETIES ACT. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS ON VERIFICATION OF FINANCIAL STATEMENTS AND ON EXAMINATION OF BOOKS OF ACCOUNT, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE SOCIETY HAD MAINLY EARNED INTEREST INCOME FROM LOANS AND ADVANCES GIVEN TO THE MEMBERS AND FRO M OTHER CO - OPERATIVE SOCIETIES. HOWEVER, CERTAIN SURPLUS FUNDS WERE DEPOSITED WITH BANKS OTHER THAN CO - OPERATIVE SOCIETIES / CO - OPERATIVE BANKS. THE INTEREST TOTALING RS. 18,36,256/ - AS DETAILED UNDER PARA AT PAGE 2 OF THE ASSESSMENT ORDER WAS RECEIVED FR OM THE SAID BANKS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT ON THE AFORESAID INTEREST INCOME OF RS. 18,36,256/ - RECEIVED FROM THE BANKS. FURTHER, THE ASSESSEE HAD ALSO EARNED INCOME FROM THE ACTIVITIES OTHER THAN PROVIDING CREDIT FACILITIES TO ITS MEMBERS TOTALING RS. 8,38,395/ - . THE DETAILS OF THE AFORESAID INCOME ARE AS UNDER: - ITA NO. 516 /PN/20 1 4 SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LTD. 3 I) BANK CHARGES : RS.4,48,806/ - II) MSEB COMMISSION : RS.3,34,561/ - III) WA TER BILL COMMISSION : RS. 7,718/ - IV) FEES FROM MEMBERS DIRECTLY TRANSFER TO RESERVE FUNDS : RS. 47,370/ - ___________ TOTAL : RS. 8,38,395/ - 6. THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE CLAIM OF DEDUCTION UND ER SECTION 80P(2)(A)(I) OF THE ACT , AGAINST SUCH INCOME ALSO TO WHICH IT WAS NOT ENTITLED. THE INCOME OF RS. 8,38,395/ - WAS ASSESSED TO TAX AS INCOME FROM OTHER SOURCES. HOWEVER, THE ASSESSING OFFICER ALLOWED DEDUCTION UNDER SECTION 80P(2)(C) OF THE ACT AT RS.50,000/ - AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.26,24,651/ - . 7. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER ON BOTH COUNTS. 8. THE ASSESSEE IS IN APPEAL BEFORE US ON BOTH THE ADDITIONS MADE TOTALING RS. 26,74,651/ - . THE ASSESSE E HAS RAISED GROUND OF APPEAL AGAINST ADDITION OF RS. 26,74,651/ - . IT MAY BE POINTED OUT THAT THE ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 80P(2)(C) OF THE ACT TO THE TUNE OF RS.50,000/ - AND BALANCE INCOME OF RS. 26,24,651/ - WAS ADDED IN THE HANDS OF AS SESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY CONCEDED THAT THE INTEREST INCOME RECEIVED FROM BANKS OTHER THAN CO - OPERATIVE SOCIETIES OR CO - OPERATIVE BANKS IS ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE AC T . HOWEVER, THE SAID DEDUCTION IS NOT AVAILABLE ON INTEREST RECEIVED FROM MSEB DEPOSITS TOTALING RS. 15,691/ - , WHICH IS PART AND PARCEL OF RS. 18,36,256/ - . IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT SIMILARLY ON OTHER INCOME ASSESSED IN THE HANDS OF ASSESSEE TO THE EXTENT OF RS. 8,38,395/ - , THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT , IN VIEW OF THE RATIO LAID DOWN BY PUNE BENCH OF ITA NO. 516 /PN/20 1 4 SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LTD. 4 TRIBUNAL IN ITO VS. M/S. KUNDALI KA NAGARI SAHAKARI PATSANSTHA MARYADIT & ANOTHER (SUPRA) . 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED INTEREST INCOME ON THE DEPOSITS WITH THE BANKS OTHER THAN CO - OPERATIVE SO CIETIES OR CO - OPERATIVE BANKS, WHICH ADMITTEDLY WAS RECEIVED ON THE SURPLUS AVAILABLE WITH THE ASSESSEE, WHICH WAS DEPOSITED IN THE SAID BANKS. THE DETAILS OF INTEREST INCOME TOTALING RS. 18,36,256/ - ARE AS UNDER: - SR. NO. NAME OF THE BANK AMOUNT OF DEPO SIT INTEREST RECEIVED 1 STATE BANK OF INDIA RS.1,00,00,000/ - RS.6,94,548/ - 2 THE RATNAKAR BANK RS.1,13,00,000/ - RS.8,60,337/ - 3 SUBHADRA LOCAL AREA RS.26,00,000/ - RS.2,65,549/ - 4 UNION BANK OF INDIA RS.2,00,000/ - RS.131/ - 5 MSEB DEPOSITS RS.12,00,000/ - RS.15,691/ - RS.18,36,256/ - 10. WE FIND THAT SIMILAR ISSUE OF ALLOWABILITY OF CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT ON BANK DEPOSITS OTHER THAN DEPOSITS WITH CO - OPERATIVE SOCIETIES / CO - OPERATIVE BANKS, AROSE BEFORE THE TRIBUNAL I N ITO VS. M/S. KUNDALIKA NAGARI SAHAKARI PATSANSTHA MARYADIT & ANOTHER (SUPRA) AND VIDE PARA 21, IT WAS OBSERVED AS UNDER: - 21. THE ISSUE ARISING BEFORE US IS WHETHER THE INTEREST EARNED BY THE ASSESSEE ON ITS INVESTMENTS IS ELIGIBLE FOR DEDUCTION UNDER S ECTION 80P(2) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS MADE SEVERAL PROPOSITIONS BEFORE US. THE FIRST AND FOREMOST PROPOSITION RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THAT THE INTEREST INCOME IS E LIGIBLE FOR THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. HOWEVER, WITHOUT PREJUDICE TO THE SAME, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE MADE AN ALTERNATE PROPOSITION THAT IN CASE THE INTEREST EARNED BY THE ASSESSEE IS HELD TO BE AS SESSABLE AS INCOME FROM OTHER SOURCES, THEN THE PROPORTIONATE EXPENDITURE RELATABLE TO SUCH INVESTMENTS IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE AND THEN ONLY BALANCE INTEREST INCOME IS TO BE TAXED AS INCOME FROM OTHER SOURCES. ANOTHER PROPOSITION RA ISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT WHERE THE INVESTMENTS WERE MADE WITH OTHER CO - OPERATIVE SOCIETIES, THEN THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT AND NO AMOUNT WAS ASSES SED IN THE HANDS OF THE ASSESSEE EXCEPT THE DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND SUNDARAM FINANCE OF RS.87,087/ - AND RS.88,519/ - . THE ITA NO. 516 /PN/20 1 4 SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LTD. 5 ASSESSEE HAS PLACED ON RECORD ITS BALANCE SHEET ALONG WITH PROFIT & LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION AT PAGES 22 TO 31 OF THE PAPER BOOK WITH ITS ENGLISH TRANSACTION. THE PERUSAL OF THE BALANCE SHEET AS ON 31.03.2010 REFLECTS THE ASSETS IN THE FORM OF BANK BALANCE, CASH, INVESTMENTS AND OTHER DEPOSITS ALONG WITH THE LOAN ADVANCED TO MEMBERS, PROPERTY HEL D BY THE ASSESSEE AND INTEREST RECEIVABLE ON INVESTMENTS AND OUTSTANDING LOAN. ON THE LIABILITIES SIDE, THE ASSESSEE HAS DECLARED SHARE CAPITAL, SHARE CAPITAL FUND OF THE ASSESSEE SOCIETY, THE DEPOSITS RECEIVED FROM ITS MEMBERS AND OTHER DEPOSITS AND THER EAFTER, PROVISION OF RS.41,62,699/ - . THE BREAK - UP OF THE INVESTMENT OF RS.5.55 CRORES IS PROVIDED BY THE ASSESSEE AT PAGE 56 OF THE PAPER BOOK. THE BREAK - UP OF THE INVESTMENT IS IN DIFFERENT FDS WITH CO - OPERATIVE SOCIETIES TOTALLING TO RS.5.47 CRORES AND THE OTHER INVESTMENT IN UTI MUTUAL FUNDS, SUNDARAM FINANCE, GRATUITY FUND AND SHARES TOTALLING RS.7,48,216/ - , TOTALLING RS.5.55 CRORES. THE ASSESSEE HAS FURTHER FURNISHED THE BREAK - UP OF FDS WITH DIFFERENT CO - OPERATIVE BANKS AT PAGES 57 TO 68 OF THE PAPE R BOOK WITH SAMPLE COPIES OF FDS AT PAGES 69 TO 75 OF THE PAPER BOOK. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT IT WAS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OUT OF LOAN RECEIVED FROM ITS MEMBERS ITSELF. THE SURPLUS AMOU NT WHICH WAS ON ACCOUNT OF AMOUNT RECEIVED FROM ITS MEMBERS ONLY, WHICH HAD NOT BEEN ADVANCED TO ANY OF THE MEMBERS WAS INVESTED IN THE BANKS, AGAINST WHICH THE SAID INVESTMENT WAS MADE OUT OF SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE, WHICH IN TURN, WERE AMOUNTS ADVANCED BY THE MEMBERS ITSELF. THE SAID PARKING OF FUNDS WITH THE CO - OPERATIVE BANKS WAS CLAIMED BY THE ASSESSEE TO BE IN THE NATURE OF ITS BUSINESS ACTIVITY AS IT WAS THE REQUIREMENT OF MAHARASHTRA CO - OPERATIVE SOCIETIES ACT, 1960, THAT 20 TO 30 % OF TOTAL DEPOSITS ARE TO BE PARKED IN THE INVESTMENTS WITH CO - OPERATIVE BANKS. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE AMOUNT INVESTED BY THE ASSESSEE WAS OUT OF ANY LIABILITIES DUE BY THE ASSESSEE. IN THE ABSENCE OF THE SAME AND FOLLOWING THE SA ME PARITY OF REASONING LAID DOWN BY THE HONBLE HIGH COURT OF KARNATAKA IN TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA) AND THE FACTS OF MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. VS. ITO (SUPRA) AND THE FACTS OF THE PRESENT CASE BEING AT VARIANCE TO THE FACTS BEFORE THE HONBLE SUPREME COURT IN TOTGARS CO - O PERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA), WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN THE ALTERNATE, WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT AT BEST THE INCOME WHICH CAN BE ASSESSED IN THE HANDS OF ASSESSEE IS THE NET INCOME AND NOT THE GROSS INCOME AS PROPORTIONATE EXPENDITURE INCURRED IS TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. HOWEVER, WE ARE NOT ADJUDICATING THIS ISSUE SINCE WE HAVE ALREADY HELD THE ASSESSEE TO BE ELIGIBLE FOR C LAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN VIEW THEREOF, WE ALSO DO NOT ADJUDICATE THE SECOND ALTERNATE PLEA RAISED BY THE ASSESSEE THAT IT IS ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. HOWEVER, THE ASSESSEE I S NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT RELATING TO DIVIDEND RECEIVED FROM UTI MUTUAL FUNDS AND SUNDARAM FINANCE OF RS.87,087/ - AND RS.88,519/ - , WHICH ARE TO BE INCLUDED AS INCOME FROM OTHER SOURCES, ON WHICH THE ASSESSEE IS E NTITLED TO PROPORTIONATE EXPENDITURE. SIMILARLY, THE PROFIT OF RS.25,786/ - FROM OTHER ACTIVITIES AND SERVICES IS NOT ENTITLED TO THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ACCORDINGLY, WE PARTLY UPHOLD THE ORDER OF CIT(A). IN VIEW THE REOF, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED. 11. THE ISSUE ARISING IN THE PRESENT APPEAL TO THE EXTENT OF INTEREST EARNED ON BANK DEPOSITS IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL , DATED 29.01.2016 (SUPRA). FOLLOWING THE SAM E PARITY OF REASONING, WE HOLD THAT THE ITA NO. 516 /PN/20 1 4 SHRI VASANTRAO CHOUGULE NAGARI SAH. PAT SANSTHA LTD. 6 ASSESSEE IS ENTITLED TO CLAIM THE AFORESAID DEDUCTION. HOWEVER, NO SUCH DEDUCTION IS AVAILABLE ON THE INTEREST ARISING ON MSEB DEPOSITS TOTALING RS.15,691/ - . ACCORDINGLY, THE ASSESSEE SHALL GET RELIEF OF RS. 18,36,2 56/ - ( - ) RS.15,691/ - = RS. 18,20,565/ - . IN RESPECT OF AFORESAID INTEREST ON MSEB DEPOSITS AND OTHER INCOME TOTALING RS.8,38,395/ - , THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FAIRLY CONCEDED THAT NO SUCH DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IS ALLOWABLE AND HENCE, THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 1 2 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MAY , 201 6 . SD , / - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 31 ST MAY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLA NT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A), KOLHAPUR ; 4. / THE CIT - I / II, KOLHAPUR / CIT(CENTRAL), PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE