THE FEROZPUR CANTT PRIMARY CO-OP AGRI DEV. BANK LIMITED, FEROZPUR V. DEPUTY COMMISSIONER OF INCOME TAX, RANGE (III), FEROZPUR

ITA 524/ASR/2018

AI Insights

The case involves The Ferozepur Cantt Primary Co-operative Agricultural Development Bank Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals), Bathinda, confirming the addition of Rs. 2,110,786 to the assessee's income under section 14A read with rule 8D of the Income Tax Rules, 1962. The addition was made due to the income earned from investments in tax-free securities, which the Assessing Officer deemed required proportionate expenses to be disallowed. The Tribunal noted that the issue of whether the investments were made from interest-free funds was factual and had not been previously adjudicated, thus remitting the matter back to the Assessing Officer for a detailed examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114838 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 30-10-2018
• Other Referred Cases: Punjab State Co-operative Milk Producer Federation Ltd. vs. CIT, CIT-2, Mumbai vs HDFC Bank Ltd, CIT vs. Reliance Utilities
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 143(3); 14A; 80P; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 The Ferozepur Cantt Primary Co-operative Agricultural Development Bank Ltd. Near Malwa Khalsa School Shaheed Udham Singh Chowk Ferozepur City. [PAN:-AAAJT2366E] (Appellant) Vs. DCIT, Circle-3, Ferozepur. (Respondent) Appellant by Sh. P.N. Arora, Adv. Respondent by Sh. S. M. Surendranath, Sr.DR. Date of Hearing 18.07.2023 Date of Pronouncement 26.07.2023 ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income-tax (Appeals), Bathinda, (in brevity ‘the CIT (A)’) order passed u/s 250 (6) of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2015-16. The impugned order was emanated from the order of the ld. Dy. Commissioner of Income Tax Circle-3 Ferozepur, (in brevity the ld. AO) order passed u/s 143(3) of the Act. I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 2 2. The assessee has taken the following grounds: “Grounds of appeal No.l That the learned CIT (A), Bhatinda was not right in confirming the action of DCIT, Range-Ill, Ferozepur in which the AO has confirmed action of addition of Rs.2110786/- in the income of the assessee viz., The Ferozepur Cantt., Primary Agricultural Coop., Development Bank Ltd (PLMB) in the limited scrutiny case as per notice received from CASS, by relying upon the Judgment of Punjab State Co-operative Milk Producer Federation Ltd.,V., CIT (2011)336 ITR 495 by whereas the assessee has already distinguished this judgment on last date of hearing before the AO and the same has also been incorporated in the decision of the AO of dated 20.12.2017. Grounds of appeal No.2 That the assessing officer cum DCIT, Bhatinda wanted to convert the case FULL scrutiny during the assessment proceedings then the Permission from Commissioner/ principal Commissioner has to be obtained as per the CBDT instructions. Since the assessing officer has not mentioned in his order the permission to convert the limited Scrutiny case into full scrutiny case hence orders of assessment passed by the Assessing Officer. Range III, Ferozepur was ab initio void and illegal. Hence it is prayed that the same may please be quashed. Grounds of appeal No.3 That the Assessing Officer has applied the provisions of section 14A of ITACT, 1961 whereas the assessee has not claimed the I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 3 deduction under 80P(2)(d) of the IT. Act, 1961 whereas the Assessee has claimed deduction under80P(2)(a)(i) of the Income Tax Act, 1961 as who per NAMBARD, Hence, it is prayed that whole the addition may kindly be deleted. Ground of appeal No. 4 That the assessee craves to add or amend any grounds of appeal before the appeal is finally disposed off.” 3. The brief fact of the case is that the assessee is a Cooperative Bank Society and registered under the cooperative society. During the year the assessee invested the amount and earned interest amount of Rs.9,53,46,487/- which is debited in the profit and loss account. On one hand, the assessee is paying interest year after year and amount taken on the other hand also investing in shares within Apex Society SADB and is earning exempted income. The ld. AO initiated proceeding with contravening section 14A r.w.s. 8D of the Income Tax Rule 1962 and calculated the amount of Rs.21,10,786/- which was added with the total income of the assessee. The aggrieved assessee filed an appeal before the ld. CIT(A). After considering the submission of the assessee the ld. CIT(A) had taken a view that M/s Punjab State Co-operative Milk Producer’s Federation Ltd., vs. CIT-II, (2016) 67 taxmann.com 27, the Jurisdictional High Court is against the assessee. So, the entire addition made by the ld. AO was duly confirmed. Being aggrieved assessee filed an appeal before us. I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 4 4. The ld. AR, Mr. P.N. Arora, Advocate has first withdrawn the ground nos. 1 and 2.He only placed the ground no. 3. So, only ground no. 3 is for adjudication. The prayer of the ld. AR is that the assessee has more capital than investment amount so, assessee is liable for earning interest which is not at all attracted the section 14A of the Act. 4.1 The ld. AR further placed that the same issue was adjudicated by the ld. CIT(A) for A.Y. 2017-18 and accepted the assessee’s plea and allowed the appeal. The ld. AR further relied on the order of Hon’ble High Court of Bombay in the case ofCIT-2, MumbaivsHDFC Bank Ltd. 366 ITR 505 (Bom).The relevant paragraph is reproduce as below:- “5. We find that the facts of the present case are squarely covered by the judgment in the case of Reliance Utilities & Power Ltd. (supra). The finding of fact given by the ITAT in the present case is that the Assessee's own funds and other non-interest-bearing funds were more than the investment in the tax-free securities. This factual position is not one that is disputed. In the present case, undisputedly the Assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in the tax-free securities. In view of this factual position, as per the judgment of this Court in the case of Reliance Utilities & Power Ltd. (supra), it would have to be presumed that the investment made by the Assessee would be out of the interest-free funds available with the Assessee. We therefore, are unable to agree with the submission of Mr Suresh Kumar that the Tribunal had erred in dismissing the Appeal of the Revenue on this ground. We do not find that question (A) gives rise to any substantial question of law and is therefore rejected.” I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 5 He further relied on the order of the CIT vs. Reliance Utilities 313 ITR 340 (Bom). 5. The ld. DR vehemently argued and relied on the order of the ld. AO the relevant paragraph is reproduced as below: I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 6 I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 7 5.1 He further relied on the order of the ld. CIT(A) the relevant paragraph is reproduced as below: I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 8 I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 9 6. We heard the rival submissions and considered the documents available in the record. The asseesee claimed the interest expenses amount of Rs I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 10 9,53,46,487/-in impugned assessment year. The assessee earned dividend from share investment in SADB. The ld. AO calculated proportionate expenses related exempted income and calculated amount to Rs.21,10,790/- U/R 8D of Income tax Rule, 1962 for contravening section 14A and added back the amount with total income. The revenue respectfully relied on the order of High Court of Punjab and Haryana in the case of Punjab State Cooperative Milk Producers Federation Ltd.v.Commissioner of Income-tax-II, Chandigarh, [2016] 67 taxmann.com 27 (Punjab & Haryana). Held that. “Section 14A, read with section 80P of the Income-tax Act, 1961 - Expenditure incurred in relation to income not includible in total income (In case of deduction under section 80P) - Assessment year 2011-12 - Whether provisions of section 14A are applicable even to income claimed as deduction under section 80P(2)(d) - Held, yes”. With due regards on the order of the Hon’ble High Court of Punjab and Haryana that 14A is applicable in case of claim of deduction u/s 80P. But the ld. AR has taken view that the investment for earing dividend is allowed from excess fund of assessee which is not interest bearable. He respectfully relied on the order of CIT-2, MumbaivsHDFC Bank Ltd(supra). The ld. AR had not made any comment against the observation of jurisdictional high court. But the investment of excess fund was duly agitated firsttime before the bench. As the issue is fully factual basis the revenue should get opportunity to adjudicate the issue. We I.T.A. No. 524/Asr/2018 Assessment Year: 2015-16 11 remit back the appeal to the file of the ld. AO to determine that the investment made by assessee in tax free income generating fund whether is covered as assessee’s own fund which is not interest-bearing fund. Needless to say, the assessee should get the reasonable opportunity in set aside proceeding. The matter is disposed off with terms indicated above. 7. In the result, appeal of the assessee ITA No. 524/ASR/2018 is allowed for statistical purpose. Order pronounced in the open court on 26.07.2023 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order