Bapooji Pattin Souharda Sahakari Niyamit , Bagalkot V. Income Tax officer Ward-1 , Bagalkot

ITA 544/BANG/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2365 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 18-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS SURYAVAMSHI
• Assessee Lawyers: JEEVAN KISHOR D
• Keywords: Business income; Opportunity of being heard; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 544 /BANG/201 9 ASSESSMENT YEAR : 20 1 3 - 1 4 M/S. BAPOOJI PATTIN SOUHARDA SAHAKARI NIYAMIT, NO.7/8, SECTOR NO.25, NAVANAGAR, BAGALKOT. PAN : AAAAB 6930 F VS. INCOME TAX OFFICER, WARD 1, BAGALKOT. APPELLANT RESPONDENT ASSESSEE BY : SHRI. JEEVAN KISHOR D, ADVOCATE REVENUE BY : SHRI. VIKAS SURYAVAMSHI, ADDL. CIT DATE OF HEARING : 1 1 . 0 7 .201 9 DATE OF PRONOUNCEMENT : 04 . 0 9 .201 9 O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28.01.2019 OF CIT(A), BELGAUM, FOR ASSESSMENT YEAR 2013-14. 2. THE GROUNDS RAISED IN THIS APPEAL ARE AS UNDER:- ITA NO. 544/BANG/2019 PAGE 2 OF 8 ITA NO. 544/BANG/2019 PAGE 3 OF 8 ITA NO. 544/BANG/2019 PAGE 4 OF 8 ITA NO. 544/BANG/2019 PAGE 5 OF 8 3. THE ISSUES THAT ARISE FOR CONSIDERATION IN THIS APPEAL BY THE ASSESSEE ARE AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON INTEREST INCOME EARNED FROM PROVIDING CREDIT FACILITIES TO ITS REGULAR MEMBERS AND OTHERS. THE ASSESSING OFFICER (AO) DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT INTEREST INCOME EARNED IS ALSO FROM NOMINAL MEMBERS, CO-MEMBERS AND NON-MEMBERS. IN UPHOLDING THE ABOVE CONCLUSIONS, THE CIT(A), INTER ALIA, RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS CO-OPERATIVE SALES SOCIETY LTD., VS. ITO 322 ITR 283 (SC) WHEREIN THE HONBLE SUPREME COURT HELD THAT THE BENEFIT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT IS ONLY ON INCOME WHICH IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. INTEREST EARNED ON INVESTMENT OF SURPLUS FUNDS NOT IMMEDIATELY REQUIRED IN SHORT TERM DEPOSITS AND SECURITIES BY A CO-OPERATIVE SOCIETY PROVIDING CREDIT FACILITIES TO MEMBERS OR MARKETING AGRICULTURAL PRODUCE TO MEMBERS IS NOT BUSINESS INCOME BUT INCOME FROM OTHER SOURCES AND THE SOCIETY IS NOT ENTITLED TO SPECIAL DEDUCTION. ITA NO. 544/BANG/2019 PAGE 6 OF 8 4. WHILE LEARNED AR RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMUKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD., 230 TAXMAN 309 (KARN), THE DR RELIED ON A SUBSEQUENT DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD., 395 ITR 611 (KARN.). WE HAVE CAREFULLY GONE THROUGH THE SAID JUDGMENT. THE FACTS OF THE CASE BEFORE THE HONBLE KARNATAKA HIGH COURT WAS THAT THE HONBLE COURT WAS CONSIDERING A CASE RELATING TO ASSESSMENT YEARS 2007-08 TO 2011-12. IN CASE DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF THE VERY SAME ASSESSEE, THE ASSESSMENT YEARS INVOLVED WAS ASSESSMENT YEARS 1991-92 TO 1999-2000. THE NATURE OF INTEREST INCOME FOR ALL THE ASSESSMENT YEARS WAS IDENTICAL. THE BONE OF CONTENTION OF THE ASSESSEE IN AY 2007-08 TO 2011-12 WAS THAT THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT IS CLAIMED BY THE RESPONDENT ASSESSEE UNDER SECTION 80P(2)(D) OF THE ACT AND NOT UNDER SECTION 80P(2)(A) OF THE ACT WHICH WAS THE CLAIM IN AY 1991-92 TO 1999- 2000. THE REASON GIVEN BY THE ASSESSEE WAS THAT IN AY 2007-08 TO 2011-12 INVESTMENTS AND DEPOSITS AFTER THE SUPREME COURT'S DECISION AGAINST THE ASSESSEE TOTGAR'S CO-OPERATIVE SALE SOCIETY LTD. (SUPRA), WERE SHIFTED FROM SCHEDULE BANKS TO COOPERATIVE BANK. U/S.80P(2)(D) OF THE ACT, INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SOCIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INTEREST OR DIVIDEND INCOME. THE CLAIM OF THE ASSESSEE WAS THAT CO-OPERATIVE BANK IS ESSENTIALLY A CO-OPERATIVE SOCIETY AND THEREFORE DEDUCTION HAS TO BE ALLOWED UNDER CLAUSE (D) OF SEC.80P(2) OF THE ACT. THE HON'BLE KARNATAKA HIGH COURT FOLLOWED THE DECISION OF THE SUPREME COURT IN THE TOTGARS CO-OPERATIVE SALES SOCIETY LTD. (SUPRA) AND HELD THAT INTEREST EARNED FROM SCHEDULE BANK OR CO- OPERATIVE BANK IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE THE PROVISIONS OF SEC.80P(2)(D)OF THE ACT WAS NOT APPLICABLE TO SUCH INTEREST INCOME. IT IS THUS CLEAR THAT THE SOURCE OF FUNDS OUT OF WHICH INVESTMENTS ITA NO. 544/BANG/2019 PAGE 7 OF 8 WERE MADE REMAINED THE SAME IN AY 2007-08 TO 2011-12 AND IN AY 1991-92 TO 1999-2000 DECIDED BY THE HON'BLE SUPREME COURT. THEREFORE WHETHER THE SOURCE OF FUNDS WERE ASSESSEE'S OWN FUNDS OR OUT OF LIABILITY WAS NOT SUBJECT MATTER OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE LEARNED DR. TO THIS EXTENT THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF TUMUKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA) STILL HOLDS GOOD. HENCE, ON THIS ASPECT, THE ISSUE SHOULD BE RESTORED BACK TO THE AO FOR A FRESH DECISION AFTER EXAMINING THE FACTS IN THE LIGHT OF THESE JUDGMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) AND OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMUKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA). 5. THE AO WILL AFFORD ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND FOR FILING DETAILS / EVIDENCE FOR THE ASSESSEE TO SUBSTANTIATE ITS CASE, BEFORE DECIDING THE ISSUE. 6. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2013-14 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF SEPTEMBER, 2019. SD/- SD / - SD/ - (N. V. VASUDEVAN) VICE PRESIDENT (JASON P BOAZ) ACCOUNTANT MEMBER BANGALORE. DATED: 4 TH SEPTEMBER, 2019. /NS/* ITA NO. 544/BANG/2019 PAGE 8 OF 8 COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.