M/s Moodabidri Co-operative Services Bank Ltd , Moodaidri V. The Income Tax Officer Ward-2(2), Mangalore

ITA 570/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8924 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-12-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Opportunity of being heard; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH C BEFORE SHRI N.V VASUDEVAN, VICE PRE SIDENT AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NOS.570 & 571/BANG/2018 ASSESSMENT YEARS : 2012-13 & 2013-14 M/S MOODABIDRI CO-OPERATIVE SERVICE BANK LTD., D.NO.8-192, MAIN ROAD, MOODABIDRI. PAN AABAM 7065 K. VS. THE INCOME-TAX OFFICER, WARD 2(2), MANGALURU. APPLICANT RESPONDENT APPELLANT BY : SHRI S.V RAVISHANKAR, ADVOCATE RESPONDENT BY : DR. P.V PRADEEP KUMAR, ADDL. CIT DATE OF HEARING : 10.12.2018 DATE OF PRONOUNCEMENT : 21.12.2018 O R D E R PER SHRI N.V VASUDEVAN, VICE PRESIDENT : THESE ARE APPEALS BY THE ASSESSEE AGAINST 2 ORDERS BOTH DATED 26/12/2017 OF CIT(A)-10, BANGALORE RELATING TO ASST . YEAR 2012-13 AND 2013-14. 2. IN BOTH THESE APPEALS, THE ASSESSEE WHICH IS A C O-OPERATIVE SOCIETY HAS CHALLENGED THE ACTION OF THE REVENUE AU THORITIES IN NOT ALLOWING DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P( 2)(A)(I) OF THE ACT ON ITA NOS.570 & 571/B/18 2 A SUM OF RS.19,91,271/- IN ASST. YEAR 2012-13 AND R S.9,96,509/- IN ASST. YEAR 2013-14. THE DEDUCTION CALMED BY THE ASSESSEE WAS NOT ALLOWED BY THE REVENUE AUTHORITIES FOR THE REASON THAT THE INC OME WHICH WAS CLAIMED AS DEDUCTION WAS INTEREST INCOME WHICH WAS EARNED B Y THE ASSESSEE ON DEPOSITS AND IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD., 83 TAXMANN.COM 140 INTEREST INCOME HAD TO BE REGARDED AS INCOME F ROM OTHER SOURCES. SINCE INTEREST INCOME WAS NOT INCOME DERIVED FROM T HE BUSINESS OF CO- OPERATIVE SOCIETY, THE DEDUCTION CLAIMED BY THE ASS ESEE CANNOT BE ALLOWED. 3. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL RAISING THE FOLL OWING GROUNDS OF APPEAL. ITA NO.570/BANG/2018 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR A S THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, W EIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S.80P[2][A][I] OF THE ACT AMOUNTING TO RS.19,91,271 [BEFORE ALLOWING RS. 50,0 00/- U/S. 80P[2][C]] IN RESPECT OF THE INTEREST EARNED BY THE APPELLANT FROM SYNDICATE BANK, KARNATAKA BANK, KARNATAKA VIKAS GRA MINA BANK AND CORPORATION BANK UNDER THE FACTS AND IN THE CIR CUMSTANCES OF THE APPELLANT'S CASE. 3. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WI TH THE HON'BLE CCIT/DG, THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S 234-B OF THE ACT, WHICH UNDER THE F ACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE DESERVES TO B E CANCELLED. ITA NOS.570 & 571/B/18 3 4. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE C OSTS. - ITA NO.571/BANG/2018 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, W EIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE [EARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION CLAIMED U/S.80P[2][A][I] OF THE ACT AMOUNTING TO RS.9,96,509 IN RESPECT OF THE INTEREST EARNED BY THE APPELLANT FROM SYNDICATE BANK, KARNATAKA BANK, NETR AVATHI GRAMINA BANK AND CORPORATION BANK UNDER THE FACTS A ND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 3. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WI TH THE HON'BLE CCIT/DG, THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S 234-B OF THE ACT, WHICH UNDER THE F ACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE DESERVES TO B E CANCELLED. 4. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE C OSTS. - 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNE D AR RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO 230 TAXMAN 309 (KARN) WHEREIN THE HONBLE KARNATAKA HIGH COURT CONSIDERED THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF T HE TOTGARS CO- OPERATIVE SALES SOCIETY (SUPRA) AND HELD THAT INTER EST INCOME IN RESPECT OF TEMPORARY PARKING OF OWN SURPLUS FUNDS NOT IMMEDIAT ELY REQUIRED IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE LEARNED 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.). ITA NOS.570 & 571/B/18 4 6. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT RELI ED BY THE LEARNED DR. THE FACTS OF THE CASE BEFORE THE HONBLE KARNA TAKA HIGH COURT IN THE DECISION CITED BY THE LEARNED DR WAS THAT THE HONB LE COURT WAS CONSIDERING A CASE RELATING TO ASSESSMENT YEARS 200 7-2008 TO 2011- 2012. IN CASE DECIDED BY THE HONBLE SUPREME COURT IN THE CASE OF THE VERY SAME ASSESSEE, THE ASSESSMENT YEARS INVOLVED W AS AY 1991-92 TO 1999-2000. THE NATURE OF INTEREST INCOME FOR ALL T HE AYS WAS IDENTICAL. THE BONE OF CONTENTION OF THE ASSESSEE IN AY 2007-0 8 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 CO-OPERATIVE 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 SO CIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INTEREST OR DIVIDEND INCOME. THE CLAIM OF THE ASSESSEE WAS THAT CO-OPERATIVE BANK IS ESSENTIA LLY A CO-OPERATIVE SOCIETY AND THEREFORE DEDUCTION HAS TO BE ALLOWED U NDER CLAUSE (D) OF SEC.80P(2) OF THE ACT. THE HONBLE KARNATAKA HIGH C OURT FOLLOWED THE DECISION OF THE SUPREME COURT IN THE TOTGARS CO-OPE RATIVE SALES SOCIETY LTD. (SUPRA) AND HELD THAT INTEREST EARNED FROM SCH EDULE 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 WERE MADE REMAINED THE SAME IN AY 2007-08 TO 2011- 12 AND IN AY 1991-92 TO 1999-2000 DECIDED BY THE HO NBLE SUPREME COURT. THEREFORE WHETHER THE SOURCE OF FUNDS WERE A SSESSEES OWN FUNDS ITA NOS.570 & 571/B/18 5 OR OUT OF LIABILITY WAS NOT SUBJECT MATTER OF THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE L EARNED DR. TO THIS EXTENT THE DECISION OF THE HONBLE KARNATAKA HIGH C OURT 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 LIG HT OF THESE JUDGMENT OF THE HONBLE APEX COURT RENDERED IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) AND OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMUKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA). 7. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND FILING APPROPRIATE EVIDENCE, IF DESIRED, BY THE ASS ESSEE TO SUBSTANTIATE ITS CASE, BEFORE DECIDING THE ISSUE.BEFORE DECIDING THE ISSUE. 8. IN THE RESULT, APPEAL BY THE ASSESSEE ARE TREATE D AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2018 . SD/- SD/- (JASON P BOAZ) (N.V VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED : 21/12/2018 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGI STRAR, ITAT, BANGALORE ITA NOS.570 & 571/B/18 6 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S ... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT.. 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..