The ACIT, 1(2), Bhopal V. The M.P.State Co-op. Housing Federation Ltd., Bhopal

ITA 54/IND/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53999 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: S S DESH
• Keywords: Benefit of exemption

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.54/IND/2011 A.Y. 2007-08 ASSTT. COMMISSIONER OF INCOME TAX 1(2), BHOPAL ... APPELLANT VS M.P. STATE CO-OP. HOUSING FED. LTD., BHOPAL PAN AAAAM 1593 M ... RESPONDENT APPELLANT BY : SHRI ARUN DEWAN RESPONDENT BY : SHRI S.S. DESHPANDE DATE OF HEARING : 3.11.2011 DATE OF PRONOUNCEMENT : 3.11.2011 O R D E R PER JOGINDER SINGH THIS IS AN APPEAL BY THE REVENUE CHALLENGING THE O RDER DATED 12.1.2011 OF THE LEARNED COMMISSIONER OF INCO ME TAX 2 (APPEALS) ON THE GROUND THAT ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE, THE LD. FIRST APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION OF RS.14,66,113/- MADE BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE AS IT IS NOT COVERED U/S 80P(2)(A)(I) OF THE I.T. ACT, 1961. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I ARUN DEWAN, LEARNED SR. DR AND SHRI S.S. DESHPANDE, LEAR NED COUNSEL FOR THE ASSESSEE. AT THE OUTSET, THE LEARNE D COUNSEL FOR THE ASSESSEE CONTENDED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF TRIBUNAL, THAT TOO, IN THE CASE OF ASSESSEE ITSELF VIDE ORDER IN ITA NO.41/IND/2007 DATED 16.5.2008. T HIS ASSERTION OF THE ASSESSEE WAS NOT CONTROVERTED BY T HE REVENUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON FILE. IN VIEW OF THE ABOV E, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE A FORESAID ORDER DATED 16.5.2008: 3 T HIS APPEAL ARISES AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 18.10.2006 FOR THE ASSESSMENT YEAR 2003-04. 2. IN TOTAL, THERE ARE FOUR GROUNDS OF APPEAL. THE BASIC QUESTION INVOLVED IS REGARDING ALLOWABILITY OF PROVISIONS OF SECTION 80-P(2)(A)(I) OF THE INCOME-TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER. 4. THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND THE APEX BODY OF PRIMARY HOUSING CO-OPERATIVE SOCIETIES ESTABLISHED UNDER THE M.P. CO- OPERATIVE SOCIETIES ACT. THE MAIN OBJECTS OF THE SOCIETY IS TO PROVIDE HOUSING FACILITIES IN THE STATE OF M.P. THROUGH THE HOUSE CONSTRUCTION INSITUTIONS AND TO FULFIL THIS OBJECT, THE ASSESSEE WAS PROVIDING LOANS AND ADVANCES TO THE MEMBER INSTITUTES AND MAKE INDIVIDUALS AGAINST THE MORTGAGE OF IMMOVABLE PROPERTY AND OTHER SECURITIES. THE MAIN SOURCES OF THE INCOME OF THE ASSESSEE WERE FOUND TO BE INTEREST FROM VARIOUS SOCIETIES TO WHOM LOAN/ADVANCES HAS BEEN MADE. THE OTHER INCOMES ARE RENT FROM THE PROPERTY OWNED BY THE ASSESSEE, INTEREST ON UTI AND BANK DEPOSITS, INTEREST ON ADVANCES TO EMPLOYEES AND INSTITUTE MEMBERS AND MISCELLANEOUS INCOME. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE A.O.S ORDER FOR NOT CONSIDERING THE INTEREST INCOME OF RS. 20,43,750/- AND MISC. INCOME OF RS. 51,783/- FOR DEDUCTION U/S 80-P. ASSESSEE IS ENTITLED FOR SPECIAL DEDUCTION U/S 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961. THE AMOUNT OF RS. 20,43,750/- IS INTEREST ON THE FDR IN BANKS, INTEREST ON DEPOSITS WITH UTI, INTEREST ON SB A/C BALANCES INTEREST AS HAVING LOAN TO EMPLOYEES, 4 INTEREST AS VEHICLE LOAN, COMPUTER LOAN, GRAIN ADVANCES, OTHER ADVANCES TO EMPLOYEE, INTEREST AS ADVANCES TO MEMBERS OF FEDERATION AND INTEREST ON I.T. REFUNDS. THE MISC. INCOME INCLUDES RS. 40,000/- AS INCENTIVE FROM UTI AND INCOME FROM GUEST HOUSE OF RS. 11,783/-. 6. THE LD. AUTHORIZED REPRESENTATIVE RELIED ON VARIOUS DECISIONS OF SUPREME COURT AND HIGH COURTS AND ALSO THE DECISION OF I.T.A.T. , INDORE BENCH. HE PLEADED THAT I.T.A.T. INDORE BENCH IN I.T.A.NOS. 394/IND/2000 AND 3/IND/2003 IN THE CASE OF JT. CIT VS. INDORE PARASPAR SAHKARI BANK ORDER DATED 23.1.2003, THE I.T.A.T. HAS HELD AS UNDER :- 4.4 WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDER IMPUGNED AS WELL AS THE JUDGMENTS RELIED ON BY THE LD. AUTHORIZED REPRESENTATIVE. IN THE CASE OF CIT V. KARNATAKA STATE CO.OP. APEX BANK (SUPRA) THE HON'BLE SUPREME COURT WAS PLEASED TO HOLD THAT THE INTEREST ARISING FROM THE INVESTMENT MADE IN COMPLIANCE WITH STATUTORY PROVISIONS TO ENABLE IT TO CARRY ON BANKING BUSINESS OUT OF RESERVE FUND BY A COOPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS IS EXEMPT U/S 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961. THE PLACEMENT OF SUCH FUNDS BEING IMPERATIVE FOR THE PURPOSE OF CARRYING ON BANKING BUSINESS, THE INCOME THEREFROM WOULD BE INCOME FROM THE ASSESSEES BUSINESS. THERE IS NOTHING IN PHRASEOLOGY OF SECTION 80P(2)(A)(I) WHICH MAKES IT APPLICABLE ONLY TO INCOME DERIVED FROM WORKING OR CIRCULATING CAPITALS. THE HON'BLE SUPREME COURT IN THE CASES OF MAHSANA DISTT. CENTRAL CO-OP. BANK LIMITED V. CIT (SUPRA) AND IN CIT V. RAMNATH-PURAM DISTT. CO-OP. CENTRAL BANK LIMITED (SUPRA) HAS BEEN PLEASED TO FOLLOW THE 5 DECISION TAKEN IN THE CASE OF KARNATAKA STATE CO- OP. APEX COURT (SUPRA). THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RATNAGIRI DISTT. CENTRAL CO-OP BANK LIMITED AND OTHERS (SUPRA) HAS BEEN PLEASED TO HOLD THAT THE ASSESSEES WERE ENTITLED TO THE DEDUCTION U/S 80P(2)(A)(I) IN RELATION TO THE INCOME FROM INDIRA VIKAS PATRA. RESPECTFULLY FOLLOWING THE RATIO OF THE DECISION OF THE HON'BLE SUPREME COURT AND THE HONBLE BOMBAY HIGH COURT IN THE ABOVE CASES, WE DECIDE THE GROUND AND THE ADDITIONAL GROUNDS UNDER CONSIDERATION IN FAVOUR OF THE ASSESSEE. HE FURTHER PLEADED THAT HONBLE ALLAHABAD HIGH COURT IN THE CASE OF GORAKHPUR KSHETRIYA GRAMIN BANK V. CIT, (2007) 292 ITR 205 (ALL), HAS HELD AS UNDER :- HELD, THAT THE BUSINESS OF BANKING COULD NOT BE CARRIED OUT WITHOUT THE AID OF THE EMPLOYEES AND THEREFORE WHATEVER AMOUNT THE ASSESSEE HAD RECEIVED EITHER TOWARDS THE EXCESS PROVISION OF PAY RECOVERED FROM RESIGNED STAFF, TRAINING COST, RECOVERY AND FORFEITURE OF SECURITY OF EMPLOYEES WAS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING. IT WAS NOT THE CASE OF THE REVENUE THAT APART FROM CARRYING ON THE BUSINESS OF BANKING, THE ASSESSEE WAS ALSO RUNNING THE TRAINING INSTITUTE FOR TRAINING PERSONS IN THE BANKING INDUSTRY FOR PROVIDING SERVICES OF TRAINED PERSONS TO OTHER BANKS. .. XX XX RECEIPT ON ACCOUNT OF PAY RECOVERED FROM RESIGNED STAFF, RECOVERY OF TRAINING COST AND SECURITY FORFEITURE WERE ALLOWABLE AS DEDUCTION. HE ALSO RELIED ON THE ORDER OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. GRAIN 6 MERCHANTS CO-OP. BANK LIMITED, (2004) 267 ITR 742, WHEREIN THE HONBLE HIGH COURT HELD AS UNDER : (I) THAT THE INCOME RECEIVED OUT OF THE RESERVE FUND WAS EXEMPTED FROM PAYMENT OF TAX. (II) THAT THE HOUSING SOCIETY REFERRED TO IN CLAUSE (F) OF SECTION 80P(2) MUST BE UNDERSTOOD AS A SOCIETY WHICH IS NOT CARRYING ON BANKING BUSINESS OR PROVIDING CREDIT FACILITIES WHICH IS INCLUDED U/ S 80-P(2)(A)(I) OF THE ACT. IT WAS NOT IN DISPUTE THA T THE ASSESSEE WAS CARRYING ON THE BUSINESS OF BANKING. UNDER THESE CIRCUMSTANCES, THE PROVISIONS OF CLAUSE (F) OF SECTION 80P(2) COULD NOT CONTROL THE BENEFIT OF EXEMPTION EXTENDED TO THE ASSESSEE FROM PAYMENT OF TAX. THE ASSESSEE WAS ENTITLED TO EXEMPTION IN RESPECT OF THE RENTAL INCOME RECEIVED BY IT. HE ALSO RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AHMEDNAGAR DISTRICT CENTRAL CO-OP. BANK LIMITED & OTHERS, (2003) 264 ITR 38 (BOM), WHERE THE HONBLE HIGH COURT HAS HELD THAT INCOME BY WAY OF COMMISSION FROM M.S.E.B. AND M.P.C.S. WAS ATTRIBUTABLE TO THE BUSINESS OF BANKING AS THE RELIEF U/S 80-P(1) READ WITH SECTION 80-P(2)(A)(I) OF THE INCOME-TAX ACT, 1961, WAS ALLOWABLE TO THE ASSESSEE. HE PLEADED THAT THE HONBLE APEX COURT IN THE CASE OF CAMBAY ELECTRIC SUPPLY CO.LTD. VS. CIT, 113 ITR 84, HAS HELD THAT EXPRESSION ATTRIBUTED HAS TO BE GIVEN A VERY WIDE MEANING. THEREFORE, THE INTEREST EARNED ON FDR ETC. QUALIFY FOR SPECIAL DEDUCTION U/S 80P(2) OF THE INCOME-TAX ACT, 1961. THE AMOUNT OF RS. 20,43,750/- IS INTEREST ON THE FDR IN BANKS, INTEREST ON DEPOSITS WITH UTI, INTEREST ON SB A/C BALANCES,ON LOAN TO EMPLOYEES, INTEREST ON VEHICLE LOAN, COMPUTER LOAN, GRAIN ADVANCES, 7 OTHER ADVANCES TO EMPLOYEE, INTEREST AS ADVANCES TO MEMBERS OF FEDERATION AND INTEREST ON I.T. REFUNDS. THE MISC. INCOME INCLUDES RS. 40,000/- AS INCENTIVE FROM UTI AND INCOME FROM GUEST HOUSE OF RS. 11,783/-. 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 8. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING THROUGH THE FACTS OF THE CASE, WE FIND THAT THE MAIN OBJECT OF THE SOCIETY IS TO PROVIDE RESIDENTIAL FACILITIES THROUGH THE HOUSE CONSTRUCTION ACTIVITIES, THROUGH THE INSTITUTIONS. TO FULFIL THIS AIM, THE ASSESSEE WAS TO PROVIDE LOAN AND ADVANCES TO THE INSTITUTION AND INDIVIDUALS AGAINST THE IMMOVABLE PROPERTY AND OTHER SECURITIES IN ADDITION TO THE INTEREST RECEIVED FROM THE INSTITUTIONS AND THE INDIVIDUALS TO WHOM THE LOAN WAS ADVANCED, THE ASSESSEE WAS HAVING INCOME ON THE DEPOSITS WITH BANK, U.T.I. THESE DEPOSITS WERE MADE OUT OF THE SURPLUS FUND AVAILABLE WITH THE ASSESSEE IN THE INTERVENING PERIOD OF MAKING THE ADVANCES AND RECOVERY OF THE LOANS. THE I.T.A.T., INDORE BENCH HAS DECIDED IN THE CASE CITED SUPRA THAT INTEREST ON IDBI BONDS AND FDRS QUALIFY FOR DEDUCTION U/S 80-P. EVEN IN THE CASE OF CIT VS. KARNATA COOP. BANK LIMITED (SUPRA), THE INTEREST ON INDIRA VIKAS PATRAS, KISAN VIKAS PATRAS, UTI AND IDBI BONDS WAS FOUND QUALIFIED FOR DEDUCTION U/S 80-P. THE HON'BLE SUPREME COURT IN THE CASE OF MEHSANA DISTRICT CENTRAL COOP. BANK LIMITED VS. ITO, HAS HELD THAT THERE IS NOTHING IN PHRASEOLOGY OF SECTION 80-P(2)(A)(I), WHICH MAKES IT APPLICABLE ONLY TO INCOME DERIVED FROM WORKING OR CIRCULATING CAPITAL. EVEN INTEREST INCOME FROM IVPS HAS ALSO HELD ELIGIBLE FOR DEDUCTION. RESPECTFULLY FOLLOWING THE RATIO OF THE HON'BLE 8 SUPREME COURT AND HONBLE HIGH COURTS AND ALSO I.T.A.T., WE HOLD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-P(2)(A)(I) OF THE ACT, ON THE INTEREST INCOME FROM FIXED DEPOSITS WITH THE BANKS AND INTEREST FROM S. B. ACCOUNT, INTEREST ON DEPOSITS WITH U.T.I., INTEREST ON LOAN TO EMPLOYEES, INTEREST ON ADVANCES TO EMPLOYEES AND INTEREST ON ADVANCES MADE TO MEMBERS OF THE FEDERATION. HOWEVER, INTEREST RECEIVED FROM THE INCOME TAX DEPARTMENT ON THE REFUND SHALL NOT QUALIFY FOR THE SAME AS IT CANNOT BE SAID AS ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE. 9. REGARDING MISCELLANEOUS INCOME, INCOME FROM GUEST HOUSE, WE ALSO HOLD THAT THIS INCOME ALSO QUALIFY FOR DEDUCTION U/S 80-P(2)(A)(I), IN VIEW OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. GRAIN MERCHANTS CO- OP. BANK LIMITED (SUPRA), WHERE THE HONBLE HIGH COURT HAS HELD THAT FROM LETTING OUT A PART OF THE PROPERTY WAS TREATED AS INCOME FROM BANKING BUSINESS AND HELD TO BE QUALIFIED FOR DEDUCTION U/S 80-P(2)(A)(I). WE ALSO GET STRENGTH ON THIS ISSUE FROM THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. AHMEDNAGAR DISTRICT CENTRAL CO-OP. BANK LIMITED & OTHERS, ( CITED SUPRA), WHERE THE HONBLE HIGH COURT HAS HELD THAT THE COMMISSION COLLECTED FROM ELECTRICITY BILLS WAS HELD TOBE INCOME QUALIFYING FOR DEDUCTION U/S 80-P(2)(A)(I). 10. THE INCENTIVE FROM U.T.I. OF RS. 40,000/- SHALL NOT QUALIFY FOR THE DEDUCTION U/S 80-P AS IT IS NOT IN ANY WAY ATTRIBUTABLE TO THE BUSINESS OF ASSESSEE. 11. IN VIEW OF THESE FACTS, WE DIRECT THE A.O. TO ALLOW THE DEDUCTION U/S 80-P(2)(A)(I) OF THE INCOME-TAX ACT, 1961, AS DIRECTED ABOVE. 9 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED ON 16 TH MAY , 2008 . IF THE AFORESAID ORDER OF THE TRIBUNAL IS KEPT IN J UXTAPOSITION WITH THE FACTS OF THE PRESENT APPEAL, WE FIND THAT IDENT ICALLY AFTER PLACING RELIANCE UPON VARIOUS JUDICIAL PRONOUNCEMEN TS INCLUDING FROM HONBLE APEX COURT AND ANOTHER DECIS ION OF THE TRIBUNAL, IT HAS BEEN CONCLUDED THAT THE INTEREST A RISING FROM INVESTMENT MADE IN COMPLIANCE WITH STATUTORY PROVIS IONS TO ENABLE THE ASSESSEE BANK/FEDERATION TO CARRY ON BAN KING BUSINESS OUT OF RESERVED FUNDS IS EXEMPT U/S 80P(2) (A)(I) OF THE I.T. ACT, 1961. THE DECISION IN THE CASE OF MEHSANA DISTRICT CENTRAL CO-OPERATIVE BANK LTD. (SUPRA) AND KARNATAK A STATE CO-OPERATIVE APEX BANK (SUPRA) HAVE ALREADY BEEN DI SCUSSED WHEREIN IDENTICAL RATIO WAS LAID DOWN. THE DECISION IN GORAKHPUR KSHETRIYA GRAMIN BANK (292 ITR 205) (ALL) ALSO HELD IDENTICALLY. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A) ESPECIALLY WHEN THE INTEREST INCOME ON FIXED DEPOSITS AND SAVI NG BANK ACCOUNT IS VERY MUCH PART OF BANKING ACTIVITY/BUSIN ESS OF THE 10 ASSESSEE. THE RATIO LAID DOWN IN THE CASE OF CIT VS . RATNAGIRI DISTRICT CENTRAL CO-OPERATIVE BANK LTD. (254 ITR 69 7) (BOM) FURTHER SUPPORTS THE CASE OF THE ASSESSEE. EXEMPTIO N OF INTEREST INCOME WILL BE AVAILABLE ONLY IF IT HAS AR ISEN IN THE COURSE OF BUSINESS OF BANKING AND NOT OTHERWISE AS WAS HELD BY THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CAS E OF A.P. COOPERATIVE CENTRAL LAND MORTGAGE BANK LTD. VS. CIT (100 ITR 472). FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN IN THE PRESENCE O F LEARNED REPRESENTATIVES FROM BOTH THE SIDES AT THE CONCLUSION OF THE HEARING. SD SD (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 4.11.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE