PRATHAMIK SHIKSHAK KARMACHARI SAHAKARI PATSANSTHA MARYADIT, V. I.T.O. WARD -2, Chandrapur

ITA 524/NAG/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7690 (ITAT-NAGPUR)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 27-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Principle of natural justice; Benefit of exemption
• Section: 56; 28

Judgement Text

1 ITA NO. 524/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 524/NAG/2016 ASSESSMENT YEAR: 2009 - 10. PRATHMIK SHIKSHK KARMACHARI SAH. THE INCOME - TAX OFFICER, PAT SANSTHA LTD., CHAMORSHI. VS. WARD - 2, CHANDRAPUR. PAN AAAAP7980P. APPELLANT. RE SPONDENT. APPELLANT BY : NONE. RESPONDENT BY : SHRI A.R. NINAWE. DATE OF HEARING : 05 - 01 - 201 7 DATE OF PRONOUNCEMENT : 6 TH JANUARY, 2017. O R D E R. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - 4, NAGPUR DATED 21 - 03 - 2016 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1. THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS INCORRECT AND BAD IN LAW AND AGAINST THE NATURAL JUSTICE. 2. THAT THE LEARNED ASSESSING OFFICER ERRED IN TREATING THE ASSESSEE AS A CO - OPERATIVE BANK U/S 80 - P(4) INSTEAD OF TREATING THE ASSESSEE AS A SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 3. THE ASSESSING OFFICER ERRED IN DISALLOWING THE CLAIM U/S 80 - P OF RS.1784272 - 00 AND DISALLOWANCE OF PROVISION. 2. IN THIS CASE THE ASSESSEE IS A CO - OPERATIVE CREDIT SOCIETY. IN THE ASSESSMENT ORDER THE AO DENIED THE BENEFIT OF EXEMPTION U/S 80P(2)(A)(I) HOLDING THAT THE ASSESS EE SOCIETY WAS ENGAGED IN THE BUSINESS OF COOPERATIVE 2 ITA NO. 524/NAG/2016. BANKING. WHILE HOLDING SO THE AO OBSERVED AS UNDER : 4.5 IT IS AN UNDENIABLE FACT THAT THE ASSESSEE IS ENGAGED IN THE RECEIVING/ GIVING DEPOSITS/LOANS TO ITS MEMBERS. THUS THE ATTEMPT OF THE ASSESSEE TO CLAIM DEDUCTION UNDER THE GUISE OF PROVIDING SUCH LOANS OR RECEIVING DEPOSITS FROM ITS MEMBERS ONLY IS NOT CORRECT IN AS MUCH AS THAT IT HAS BEEN HELD BY VARIOUS HIGH COURTS THAT THE EXPRESSION 'PROVIDING CREDIT FACILITIES' TAKES ITS COLOUR FROM THE PR ECEDING EXPRESSION 'BUSINESS OF BANKING'. IT IS ALSO HELD THAT THE WORDS WHICH ARE USED IN ONE PARTICULAR CLAUSE HAVE TO BE GIVEN THE SAME COLOUR AND UNDERSTOOD AS FORMING PART OF ONE GENUS OF WHICH THEY MAY BE DIFFERENT SPECIES. THE SAID FINDING IS GIVEN ON THE USE OF TERMS 'BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS' APPEARING SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT 1961. 5. PERUSAL OF THE FINANCIAL STATEMENTS OF THE ASSESSEE FOR THE FINANCIAL YEAR 2008 - 09 SHOWS THAT THE ASSESSEE IS ACCEPTING DEPOSITS FROM ITS MEMBERS, LENDING MONEY TO ITS MEMBERS, MAKING DEPOSITS . WITH BANKING INSTITUTION, ETC 6. PLAIN READING OF SUB - SEC TION 4 OF SECTION 80P OF THE INCOME TAX ACT, 1961, IT CLEARLY APPEARS THAT THE DEDUCTION UNDER SECTION SOP OF THE INCOME TAX ACT, 1961 IS SPECIFICALLY ALLOWED ONLY TO PRIMARY AGRICULTURAL AND RURAL D EVELOPMENT BANKS IN EXCLUSION OF ALL OTHER FINANCIAL INST ITUTIONS. EVEN THE APEX COURT HAS HELD THAT AS LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PROCESS TO UNFOLD THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTION OF THE LEGISLATURE CANNOT THEN BE AP PEALED TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS, IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE STATUTE ARE, IN THEIR OWN TERMS, AMBIVALENT AND DO NOT MA NIFEST THE INTENTION OF THE LEGISLATURE. 7. FRONT THE ABOVE DISCUSSION, IT NOW BECOMES CRYSTAL CLEAR WITHOUT ANY SCOPE FOR AMBIGUITY THAT THE DEDUCTION UNDER SECTION 80 P OF THE INCOME TAX ACT, 1961 IS NOT AVAILABLE TO A CO - OPERATIVE CREDIT SOCIETY. 8. IN VIEW OF THE ABOVE FINDINGS THE DEDUCTION OF RS. 1784272/ - CLAIMED BY THE ASSESSEE UNDER SECTION 80 P OF THE INCOME TAX ACT, 1961 IS ACCORDINGLY DISALLOWED. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT,1961 ARE INITIATED FOR CONCEALMENT OF INCOME BY FURNISHING OF INACCURATE PARTICULARS OF INCOM E. 3. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LEARNED CIT(APPEALS). THE LEARNED CIT(APPEALS) ELABORATELY REPRODUCED THE SUBMISSION OF THE ASSESSEE. HOWEVER, LEARNED CIT(APPEALS ) DECLINED TO ADJUDICATE THE ISSUE AND DISMISSED THE APPEAL FOR NON PROSECUTION. 4. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 3 ITA NO. 524/NAG/2016. 5. I HAVE HEARD THE LEARNED D.R. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, IN MY CONSIDERED OPINION THE APPEAL CAN BE DISPOSED OF BY HEARING THE LEARNED D.R. AND PERUSING THE RECORDS AS THE ISSUE INVOLVED IS COVERED IN FAVOUR OF THE ASSESSEE BY A CATE NA OF DECISIONS FROM THIS TRIBUNAL AS W ELL AS THE HONBLE HIGH COURT. 6. I FIND THAT THE LEARNED CIT(APPEALS) HAS ERRED IN DISMISSING THE APPEAL FOR NON PROSECUTION INSTEAD OF ADJUDICATING THE ISSUE ON MERITS WHEN ALL THE FACTS WERE AVAILABLE ON RECORD. I FIND THAT THE IMPUGNED ISSUE HAS BEEN DECIDED IN IDENTICAL CASE IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL IN ITA NO. 371/NAG/2012 FOR ASSTT. YEAR 2009 - 10 VIDE ORDER DATED 27 - 05 - 2015 IN THE CASE OF CHHATTISGARH URBAN CREDIT SAHAKARI SANSTHA MARYADIT WHER EIN THE TRIBUNAL HELD AS UNDER : 11 UPON CAREFUL CONSIDERATION, WE NOTE THAT IDENTICAL ISSUE WAS THE SUBJECT MATTER OF CONSIDERATION BY ITAT, AHMEDABAD BENCH DECISION IN THE CASE OF DHANLAXMI CREDIT COOPERATIVE SOCIETY LTD. (SUPRA), IN WHICH ONE OF US, L EARNED JUDICIAL MEMBER, WAS A PARTY. THE CONCLUDING PORTION OF THE TRIBUNALS DECISION IS AS UNDER : 4. WITH THIS BRIEF BACKGROUND, WE HAVE HEARD BOTH THE SIDES. IT WAS EXPLAINED THAT THE CO - OPERATIVE SOCIETY IS MAINTAINING OPERATIONS FUNDS AND TO MEET ANY EVENTUALITY TOWARDS RE - PAYMENT OF DEPOSIT, THE CO - OPERATIVE SOCIETY IS MAINTAINING SOME LIQUIDATED FUNDS AS A SHORT TERM DEPOSIT WITH THE BANKS.THIS ISSUE WAS THOROUGHLY DISCUSSED BY THE ITAT B BENCH AHMEDABAD IN THE CASE OF THE INCOME TAX OFFICER VS. M/S.JAFARI MOMIN VIKAS CO - OP.CREDIT SOCIETY LTD. BEARING ITA NO.1491/AHD/2012 (FOR A.Y. 2009 - 10) AND CO NO.138/AHD/2012 (BY ASSESSEE) ORDER DATED 31/10/2012. THE RELEVANT PORTION IS REPRODUCED BELOW: - 19. THE ISSUE DEALT WITH BY THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS (SUPRA) IS EXTRACTED, FOR APPRECIATION OF FACTS, AS UNDER: WHAT IS SOUGHT TO BE TAXED UNDER SECTION 56 OF THE ACT IS THE INTEREST INCOME ARISING ON THE SURPLUS INVESTED IN SHORT TERM DEPOSITS AND SECURITIES WHICH SURPLUS WAS NOT REQUIRED FOR 4 ITA NO. 524/NAG/2016. BUSINESS PURPOSES? THE ASSESSEE(S) MARKETS THE PRODUCE OF ITS MEMBERS WHOSE SALE PROCEEDS AT TIMES WERE RETAINED BY IT. IN THIS CASE, WE ARE CONCERNED WITH THE TAX TREATMENT OF SUCH AMOUNT. SINCE THE FUND CREATED BY SUCH BY SUCH RE TENTION WAS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES, IT WAS INVESTED IN SPECIFIED SECURITIES. THE QUESTION, BEFORE US, IS WHETHER INTEREST ON SUCH DEPOSITS/SECURITIES, WHICH STRICTLY SPEAKING ACCRUES TO THE MEMBERS ACCOUNT, COULD BE TAXED AS BUSI NESS INCOME UNDER SECTION 28 OF THE ACT? IN OUR VIEW, SUCH INTEREST INCOME WOULD COME IN THE CATEGORY OF INCOME FROM OTHER SOURCES, HENCE, SUCH INTEREST INCOME WOULD BE TAXABLE UNDER SECTION 56 OF THE ACT, AS RIGHTLY HELD BY THE ASSESSING OFFICER... 1 9.1. HOWEVER, IN THE PRESENT CASE, ON VERIFICATION OF THE BALANCE SHEET OF THE ASSESSEE AS ON 31.3.2009, IT WAS OBSERVED THAT THE FIXED DEPOSITS MADE WERE TO MAINTAIN LIQUIDITY AND THAT THERE WAS NO SURPLUS FUNDS WITH THE ASSESSEE AS ATTRIBUTED BY THE RE VENUE. HOWEVER, IN REGARD TO THE CASE BEFORE THE HONBLE SUPREME COURT (ON PAGE 286) 7....... BEFORE THE ASSESSING OFFICER, IT WAS ARGUED BY THE ASSESSEE(S) THAT IT HAD INVESTED THE FUNDS ON SHORT TERM BASIS AS THE FUNDS WERE NOT REQUIRED IMMEDIATEL Y FOR BUSINESS PURPOSES AND, CONSEQUENTLY, SUCH ACT OF IN VESTMENT CONSTITUTED A BUSINESS ACTIVITY BY A PRUDENT BUSINESSMAN; THEREFORE, SUCH INTEREST INCOME WAS LIABLE TO BE TAXED UNDER SECTION 28 AND NOT UNDER SECTION 56 OF THE ACT AND, CONSEQUENTLY, THE ASSESSEE(S) WAS ENTITLED TO DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. THE ARGUMENT WAS REJECTED BY THE ASSESSING OFFICER AS ALSO BY THE TRIBUNAL AND THE HIGH COURT, HENCE, THESE CIVIL APPEALS HAVE BEEN FILED BY THE ASSESSEE(S). 19.2. FROM THE AB OVE, IT EMERGES THAT (A) THAT ASSESSEE (ISSUE BEFORE THE SUPREME COURT) HAD ADMITTED BEFORE THE AO THAT IT HAD INVESTED SURPLUS FUNDS, WHICH WERE NOT IMMEDIATELY REQUIRED FOR THE PURPOSE OF ITS BUSINESS, IN SHORT TERM DEPOSITS; (B) THAT THE SURPLUS FUNDS AROSE OUT OF THE AMOUNT RETAINED FROM MARKETING THE AGRICULTURAL PRODUCE OF THE MEMBERS; 5 ITA NO. 524/NAG/2016. (C) THAT ASSESSEE CARRIED ON TWO ACTIVITIES, NAMELY , (I) ACCEPTANCE OF DEPOSIT AND LENDING BY WAY OF DEPOSITS TO THE MEMBERS; AND (II) MARKETING THE AGRICULTU RAL PRODUCE; AND (D) THAT THE SURPLUS HAD ARISEN EMPHATICALLY FROM MARKETING OF AGRICULTURAL PRODUCES. 19.3. IN THE PRESENT CASE UNDER CONSIDERATION, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THERE WERE NO SURPLUS FUNDS. 19.4. W HILE COMPARING THE STATE OF AFFAIRS OF THE PRESENT ASSESSEE WITH THAT ASSESSEE (BEFORE THE SUPREME COURT), THE FOLLOWING CLINCHING DISSIMILARITIES EMERGE, NAMELY: (1) IN THE CASE OF THE ASSESSEE, THE ENTIRE FUNDS WERE UTILIZED FOR THE PURPOSES OF BUSINESS AND THAT THERE WERE NO SURPLUS FUNDS; - - IN THE CASE OF TOTGARS, IT HAD SURPLUS FUNDS, AS ADMITTED BEFORE THE AO, OUT OF RETAINED AMOUNTS ON MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS; (2) IN THE CASE OF PRESENT ASSESSEE, IT DID NOT CARRY O UT ANY ACTIVITY EXCEPT IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THAT THE FUNDS WERE OF OPERATIONAL FUNDS. THE ONLY FUND AVAILABLE WITH THE ASSESSEE WAS DEPOSITS FROM ITS MEMBERS AND, THUS, THERE WAS NO SURPLUS FUNDS AS SUCH; - IN THE CASE OF TO TGARS, THE HONBLE SUPREME COURT HAD NOT SPELT OUT ANYTHING WITH REGARD TO OPERATIONAL FUNDS; 19.5. CONSIDERING THE ABOVE FACTS, WE FIND THAT THERE IS FORCE IN THE ARGUMENT OF THE ASSESSEE THAT THE ASSESSEE NOT A CO - OPERATIVE BANK, BUT ITS NATURE OF BU SINESS WAS COUPLED WITH BANKING WITH ITS MEMBERS, AS IT ACCEPTS DEPOSITS FROM AND LENDS THE SAME TO ITS MEMBERS. TO MEET ANY EVENTUALITY, THE ASSESSEE WAS REQUIRED TO MAINTAIN SOME LIQUID FUNDS. THAT WAS WHY, IT WAS SUBMITTED BY THE ASSESSEE THAT IT HAD I NVESTED IN SHORT - TERM DEPOSITS. FURTHERMORE, THE ASSESSEE HAD MAINTAINED OVERDRAFT FACILITY WITH DENA BANK AND THE BALANCE AS AT 31.3.2009 WAS RS.13,69,955/ - [SOURCE: BALANCE SHEET OF THE ASSESSEE AVAILABLE ON RECORD]. 6 ITA NO. 524/NAG/2016. 19.6. IN OVERALL CONSIDERATION OF ALL THE ASPECTS, WE ARE OF THE CONSIDERED VIEW THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO - OP. SALE SOCIETY LTD. 9SUPRA) CANNOT IN ANY WAY COME TO THE RESCUE OF EITHER THE LD.CIT(A) OR THE REVENUE. IN VIEW OF THE ABOVE FACTS, WE ARE OF THE FIRM VIEW THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN COMING TO A CONCLUSION THAT THE SUM OF RS.9,40,639/ - WAS TO BE TAXED U/S.56 OF THE ACT. IT IS ORDERED ACCORDINGLY. 5. RESPECTFULLY FOLLOWI NG THE ABOVE DECISION OF THE CO - ORDINATE BENCH, WE HEREBY HOLD THAT THE BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) WAS RIGHTLY GRANTED BY LD.CIT(A), HOWEVER, HE HAS WRONGLY HELD THAT THE INTEREST INCOME IS TAXABLE U/S.56 OF THE ACT SO DO NOT FALL UNDER THE CA TEGORY OF EXEMPTED INCOME U/S.80P OF THE ACT. THE ADVERSE PORTION OF THE VIEW, WHICH IS AGAINST THE ASSESSEE, OF LD.CIT(A) IS HEREBY REVERSED FOLLOWING THE DECISION OF THE TRIBUNAL CITED SUPRA, RESULTANTLY GROUND IS ALLOWED. WE FIND THAT THE RATIO OF A BOVE CASE ALSO APPLIES TO THE PRESENT CASE. AS OBSERVED IN THE ABOVE CASE LAW, IN THIS CASE ALSO THE SUBMISSIONS OF THE ASSESSEES COUNSEL IS THAT THE ASSESSEE SOCIETY IS MAINTAINING OPERATIONAL FUNDS AND TO MEET ANY EVENTUALITY TOWARDS REPAYMENT OF DEPOSI T THE COOPERATIVE SOCIETY IS MAINTAINING SOME LIQUIDATED FUNDS AS SHORT TERM DEPOSITS WITH BANKS. HENCE ADHERING TO THE DOCTRIN STAIR DESISES, WE HOLD THAT THE ASSESSEE SHOULD BE GRANTED BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I). ACCORDINGLY, THE INT EREST ON DEPOSITS WOULD QUALIFY FOR DEDUCTION UNDER THE SAID SECTION. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 7. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, I SET ASIDE THE ORDERS OF T HE AUTHORITIES BELOW AND HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE INCOME - TAX ACT, 1961. 7 ITA NO. 524/NAG/2016. 8. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF JANUARY., 2017. SD/ - ( SH AMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR, DATED: 6 TH JANUARY, 2017. COPY FORWARDED TO : 1. PRATHMIK SHIKSHAK SAHAKARI PAT SANSTHA MARYADIT, GADCHIROLI ROAD CHAMORSHI GADCHIROLI - 442 603 2. I.T.O., WARD - 2, CHANDRAPUR. 3. PR. C.I.T. - 3, NAGPUR. 4. CIT(APPEALS), - 4, NAGPUR. 5. D.R., ITAT, NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKOD E.