The BILASPUR NAGRIK SAHAKARI BANK LTD, BILASPUR(CG) V. THE DY. COMMISSIONER OF INCOME TAX,CIRCLE , 1(1)BILASPUR, BILASPUR(CG)

ITA 55/BIL/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5646 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 30-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G.S AGRAWAL
• Keywords: Earning of tax free income; TDS; Rule 8D
• Section: 14A

Judgement Text

आयकर अपीलȣय अͬधकरण Ûयायपीठ रायप ु र मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकरअपीलसं. / ITA No. 55/RPR/2017 Ǔनधा[रणवष[ / Assessment Year : 2012-13 Bilaspur Nagarik Sahakari Bank Ltd. Jail Road, Near Brihaspati Bazar, PO- Bilaspur (C.G.). PAN : AAATB7259E .......अपीलाथȸ / Appellant बनाम / V/s. The Deputy Commissioner of Income Tax, Circle-1(1), Bilaspur (C.G.) ......Ĥ×यथȸ / Respondent Assessee by : Shri G.S Agrawal, AR Revenue by : Shri Shravankumar Meena, DR 2 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 स ु नवाई कȧ तारȣख / Date of Hearing :11.03.2022 घोषणा कȧ तारȣख / Date of Pronouncement :30.03.2022 आदेश/ ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT (Appeal), Bilaspur, dated 26.07.2016, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 09.02.2015 for assessment year 2012-13. Before us the assessee has assailed the impugned order on the following grounds of appeal: “1. That the learned Commissioner of Income Tax (Appeals) erred in passing the order without allowing proper opportunity to the appellant and therefore, the order be cancelled. 2. That without prejudice, the learned Commissioner of Income Tax (Appeals) further erred in confi9rming the addition of Rs.3,99,790/- made by the learned Assessing Officer u/s.14A though the provisions of section 14A as well as Rule 8D were not applicable. The disallowance of Rs.3,99,790/- is not according to the law and be deleted. 3. The learned Commissioner of Income Tax (Appeals) further erred in not allowing TDS credit of Rs.3,375/- which is unjustified and be allowed.” 2. Succinctly stated, the assessee which is a co-operative bank, had filed its return of income for the assessment year 2012-13 on 3 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 29.09.2012, declaring an income of Rs.1,07,17,370/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act. 3. During the course of the assessment proceedings, it was, inter alia, observed by the Assessing Officer that though the assessee during the year under consideration had earned exempt income, however, it had not offered for disallowance any part of the expenditure attributable towards earning of exempt income. Observing, that the assessee had utilized its interest-bearing funds for making investment in the exempt income yielding assets, the Assessing Officer worked out a disallowance of Rs.3,99,790/- u/s. 14A of the Act by triggering the mechanism contemplated under Rule 8D(2)(ii) of the Income-Tax Rules, 1962. Accordingly, the Assessing Officer vide his order passed u/s.143(3) of the Act, dated 09.02.2015 assessed the income of the assessee at Rs.1,11,44,630/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals), but without any success in so far the disallowance of the 4 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 expenses made by the Assessing Officer u/s. 14A of the Act was concerned. 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 6. At the very outset of the hearing of appeal, it was submitted by the Ld. Authorized Representative (for short ‘AR’) that as the assessee had sufficient self-owned funds for making investment in exempt income yielding assets, therefore, no part of the interest expenditure was liable to be disallowed u/s.14A of the Act. It was submitted by the Ld. AR that while for investment in the exempt income yielding investments aggregated to Rs.1,18,17,751/- while for, the assesee had sufficient interest free own funds of Rs.6,16,95,322.05/-. In order to fortify his aforesaid claim the Ld. AR had drawn our attention to the “balance sheet” of the assessee society for the year under consideration (Page 1A - 2 of the APB). Backed by his aforesaid contentions, it was submitted by the Ld. AR that now when the assessee had sufficient interest free funds available with it, therefore, 5 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 disallowance made by the Assessing Officer of the interest expenditure u/s.14A r.w Rule 8D(2)(ii) of the Income Tax Rules, 1962 could not be sustained and was liable to be struck down. 7. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record. As is discernible from the record, the assessee had made an investment of Rs.1.18 crore (approximately) in exempt income yielding investments. Admittedly, as can be gathered from financial statements of the assessee society, it had as on 31.03.2012 sufficient interest-free funds of Rs.6.17 crore (approximately) which would suffice to source the investment made by the assessee in the aforementioned exempt income yielding assets. In the backdrop of the aforesaid facts, we are of the considered view, that as stated by the Ld. AR, and rightly so, now when the assessee society had sufficient interest-free own funds available with it which would sufficiently justify the investment made in the exempt income yielding assets, therefore, no part of the interest expenditure could have validly been disallowed u/s.14A r.w Rule 8D(2)(ii) of the Income Tax Rules, 1962. Our 6 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of South Indian Bank Ltd. Vs. CIT (2021) 438 ITR 1 (SC). In the aforesaid judgment, it was observed by the Hon’ble Supreme Court that where interest-free own funds available with the assessee exceeded their investment in tax free securities, then, it would be presumed that investments were made by the assessee out of its own funds and no disallowance would be warranted u/s.14A r.w Rule 8D(2)(ii) of the Income Tax Rules, 1962 on the ground that separate accounts were not maintained by the assessee for investments and other expenditure incurred for earning of tax free income. 8. Backed by our aforesaid observations, we are unable to persuade ourselves to sustain the disallowance of interest expenditure of Rs.3,99,790/- made by the Assessing Officer u/s.14A r.w Rule 8D(2)(ii) of the Income Tax Rules, 1962 which is accordingly vacated. Thus, the Ground of appeal No.2 raised by the assessee is allowed in terms of our aforesaid observations. 7 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 9. It is further claimed by the Ld. AR that the Assessing Officer had erred in not allowing TDS credit of Rs.3,375/-. As the said fact would require necessary verification, therefore, we direct the Assessing Officer to look into the aforesaid issue. In case, credit of the aforesaid amount of tax deducted at source had not been given while processing/assessing the return of income of the assessee then, the needful be done. Thus, the Ground of appeal No.3 raised in appeal by the assessee is allowed for statistical purposes. 10. In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open Court on 30 th day of March, 2022. Sd/- Sd/- JAMLAPPA D BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायप ु र/ RAIPUR ; Ǒदनांक / Dated : 30 th March, 2022 SB 8 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 आदेशकȧĤǓतͧलͪपअĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals), Bilaspur (C.G) 4. The Pr. CIT, Bilaspur (C.G) 5. ͪवभागीय ĤǓतǓनͬध,आयकर अपीलȣय अͬधकरण,रायप ु र बɅच, रायप ु र / DR, ITAT, Raipur Bench, Raipur. 6. गाड[फ़ाइल / Guard File. आदेशान ु सार / BY ORDER, // True Copy // Ǔनजीसͬचव / Private Secretary आयकर अपीलȣय अͬधकरण, रायप ु र / ITAT, Raipur. 9 Bilaspur Nagrik Sahakari Bank Ltd. Vs. DCIT ITA No. 55/RPR/2017 Date 1 Draft dictated on 11.03.2022 Sr.PS/PS 2 Draft placed before author 11.03.2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order