The Karnataka Judicial Officers Credit Co-operative Society Limited, Bangalore V. The Income Tax Officer, Ward- 5(2)(3), Bangalore

ITA 58/BANG/2021

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2573 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 11-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI. B.R BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.58/BANG/2021 ASSESSMENT YEAR : 2016-17 THE KARNATAKA JUDICIAL OFFICERS CREDIT CO-OPERATIVE SOCIETY LTD., 1 ST FLOOR, CITY CIVIL COURT COMPLEX, K.G ROAD, BENGALURU-560 009. PAN AAAAT 1226 C VS. THE INCOME - TAX OFFICER , WARD-5(2)(3), BENGALURU. APPELLANT RESPONDENT A SSESSEE BY : SHRI RAVISHANKAR S.V, ADVOCATE RE VENUE BY : S HRI SAJIT KUMAR , J CIT(DR) DATE OF HEARING : 2 6 - 0 4 - 202 1 DATE OF PRONOUNCEMENT : 23 - 06 - 202 1 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29/11/2019, PASSED BY LD CIT(A)-5, 4 ASSESSMENT YEA R 2016- 17 ON FOLLOWING TWO ISSUES:- PAGE 2 OF 7 ITA NO.58/BANG/2021 (A) REJECTION OF DEDUCTION CLAIMED U/S 80P(2)(A)(I) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. (B) REJECTION OF DEDUCTION U/S 80P(2)(D) OF THE ACT IN RESPECT OF INTEREST INCOME EARNED ON FIXED DEPOSITS WITH OTHER CO- OPERATIVE SOCIETIES. 2. THE LD A.R SUBMITTED THAT THE ASSESSEE IS A CRED IT CO- OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF ACCEPT ING DEPOSITS FROM AND LENDING LOANS TO ITS MEMBERS. THE ASSESSEE FILED ITS RETURN OF INCOME CLAIMING DEDUCTION U/S 80P OF THE ACT. THE LD. AO REJECTED THE CLAIM ON THE REASONING THAT THE ASSESSEE IS A BANK, AND HENCE PROVISIONS OF 80 P ARE NOT APPLIC ABLE. THE ASSESSEE HAD EARNED INTEREST FROM DEPOSITS/INVESTM ENT KEPT WITH OTHER CO-OPERATIVE SOCIETIES. THE AO HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80P (2)(D) OF THE ACT IN RESPECT OF ABOVE SAID INCOME. IN THIS REGAR D, THE AO PLACED HIS RELIANCE ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY VS. PCIT LTD REPORTED IN (2010) 188 TAXMANN.COM 282 . 3. THE LD.AR SUBMITTED THAT THE APPEAL FILED BY THE ASSESSEE BEFORE LD.CIT(A) CHALLENGING THE ADDITIONS MADE BY THE LD.AO WAS DISMISSED. AGGRIEVED BY THE ORDER PASSED BY LEARNT CIT (A) ASS ESSEE IS IN APPEAL BEFORE US 4.IT IS SUBMITTED THAT, BOTH THE ABOVE SAID ISSUES ARE COVERED BY THE DECISION RENDERED BY THE CO-ORDINATE BENCH IN THE CASE OF KARKALA CO-OP S. BANK LTD (ITA NOS.1288 & 1289/BANG/2019 RELATING TO ASSESSMENT YEAR: 2015-1 6 & PAGE 3 OF 7 ITA NO.58/BANG/2021 2016-17 BY ORDER DATED 18-02-2021 . IT IS FURTHER SUBMITTED THAT, THE CO-ORDINATE BENCH OF THIS TRIBUNAL RESTOR ED THE FIRST ISSUE TO THE FILE OF LD.AO WITH THE DIRECTION TO A PPLY THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MAVILAYI SERVICE CO-OPERATIVE BANK LTD. VS.CIT REPORTED IN (2021) 123 TAXMANN.COM 161 (SC) . 4.1. WITH REGARD TO THE SECOND ISSUE, THE CO-ORDIN ATE BENCH HAS DIRECTED THE LD.AO TO FOLLOW THE DECISION REND ERED BY THE JURISDICTIONAL HONBLE KARNATAKA HIGH COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (20 15) 58 TAXMANN.COM 35 (KARN) . 4.2. ACCORDINGLY, THE LD A.R SUBMITTED THAT, THE DE CISION RENDERED BY THE CO-ORDINATE BENCH MAY KINDLY BE FOL LOWED IN THIS CASE ALSO IN RESPECT OF BOTH THE ISSUES. 4.3. ON THE CONTRARY, LD. DR PLACED RELIANCE ON ORD ERS PASSED BY AUTHORITIES BELOW. WE HAVE PERUSED THE RECORD BASED ON THE SUBMISSIONS ADVANCED BY BOTH SIDES. 4.5. THE FIRST ISSUE RELATES TO THE CLAIM OF DEDUCT ION U/S 80P(2)(A)(I) OF THE ACT. WE NOTICE THAT, AN IDENTIC AL ISSUE HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH IN THE CAS E OF KARKALA CO-OP BANK LTD (SUPRA) , WHEREIN AN IDENTICAL ISSUE HAS BEEN RESTORED TO THE FILE OF LD.AO FOR EXAMININ G IT AFRESH. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE R ELEVANT OBSERVATIONS MADE BY THE CO-ORDINATE BENCH:- 4. THE LD. A.R. SUBMITTED THAT THE LAW ON DEDUCTIO N OF 80P(2)(A)(I) OF THE ACT AVAILABLE TO CREDIT CO-OPE RATIVE SOCIETIES HAS SINCE BEEN SETTLED BY HONBLE SUPREME COURT IN THE CASE PAGE 4 OF 7 ITA NO.58/BANG/2021 OF MAVILAYI SERVICE CO-OPERATIVE BANK LTD. VS.CIT (2021) 123 TAXMANN.COM 161 (SC). HE SUBMITTED THAT THE HONBL E SUPREME COURT HAS HELD THAT THE EXPRESSION MEMBERS IS NOT DEFINED IN THE INCOME-TAX ACT. HENCE, IT IS NECESSA RY TO CONSTRUE THE EXPRESSION MEMBERS IN SECTION 80P(2) (A)(I) OF THE ACT IN THE LIGHT OF DEFINITION OF THAT EXPRESSION AS CONTAINED IN THE CONCERNED CO-OPERATIVE SOCIETIES ACT. THE LD. A.R. SUBMITTED THAT THE HONBLE SUPREME COURT HAS CONSID ERED THE DECISION RENDERED BY IT IN THE CASE OF CITIZEN CO-O PERATIVE SOCIETY LTD. (SUPRA) AND OBSERVED THAT THE RATIO DE CIDENDI OF CITIZEN CO OPERATIVE SOCIETY LTD. MUST BE GIVEN EFF ECT TO. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. 5. THE LD. D.R., ON THE CONTRARY, SUBMITTED THAT TH E ISSUE OF DEDUCTION NEEDS TO BE EXAMINED AFRESH IN THE LIGHT OF DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF M AVILAYI SERVICE CO-OPERATIVE BANK LTD. (SUPRA). ACCORDINGL Y, HE SUBMITTED THAT THIS ISSUE MAY BE RESTORED TO THE FI LE OF THE A.O. 6. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. WE FIND MERIT IN THE SUBMISSION MADE BY LD. D.R. S INCE THE HONBLE SUPREME COURT HAS SETTLED MANY ISSUES IN T HE DECISION RENDERED BY IT IN THE CASE OF MAVILAYI SE RVICE CO- OPERATIVE BANK LTD. (SUPRA) AND SINCE THE FACTS PRE VAILING IN THE INSTANT CASE NEEDS TO BE EXAMINED AFRESH IN TH E LIGHT OF THE PRINCIPLES ENUNCIATED BY HONBLE SUPREME COURT IN THE ABOVE SAID CASE, WE ARE OF THE VIEW THAT THE ISSUE OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT REQUIRES FRES H EXAMINATION AT THE END OF THE A.O. ACCORDINGLY, WE SET ASIDE TH E ORDER PASSED BY LD. CIT(A) ON THIS ISSUE IN BOTH THE YEAR S UNDER CONSIDERATION AND RESTORE THEM TO THE FILE OF THE A.O. IN BOTH THE YEARS FOR EXAMINING IT AFRESH AS DISCUSSED ABO VE. 4.6. SINCE THE FACTS ARE IDENTICAL, FOLLOWING THE D ECISION RENDERED BY THE CO-ORDINATE BENCH, WE RESTORE THIS ISSUE TO THE FILE OF THE LD.AO WITH SIMILAR DIRECTIONS. 5. THE NEXT ISSUE RELATES TO THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80P(2)(D) OF THE ACT IN RESPECT OF INT EREST INCOME. IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE CO-ORDIN ATE BENCH IN THE CASE OF KARKALA CO-OP BANK LTD (SUPRA) . FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVAT IONS MADE BY THE CO-ORDINATE BENCH:- PAGE 5 OF 7 ITA NO.58/BANG/2021 7. THE NEXT COMMON ISSUE RELATES TO REJECTION OF D EDUCTION CLAIMED U/S.80P(2)(D) OF THE ACT IN RESPECT OF INTEREST INC OME EARNED FROM FIXED DEPOSITS KEPT WITH BANK. WE NOTICED EARLIER THAT THE A.O. HAS OBSERVED IN ASSESSMENT YEAR 2015-16 THAT THE INTER EST INCOME RECEIVED BY THE ASSESSEE FROM DEPOSITS KEPT WITH B ANKS IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(C) & 80P(2)(D) OF THE ACT SINCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A )(I) OF THE ACT. IN AY 2016-17, THE AO ASSESSED THE INTEREST INCOME REC EIVED ON BANK DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOURCES AND DENIED DEDUCTION CLAIMED U/S.80P(2)(D) OF THE ACT. THE LD CIT(A) CONFIRMED THE ACTION OF THE AO ON THIS ISSUE. 8. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ENTI TLED TO CLAIM DEDUCTION ALLOWABLE U/S 57 OF THE ACT IN RESPECT OF COST OF FUNDS AND PROPORTIONATE ADMINISTRATIVE AND OTHER EXPENSES. IN SUPPORT OF THIS SUBMISSION, THE LD. A.R. PLACED RELIANCE ON THE DE CISION RENDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOT GARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (2015) 58 TAXMANN.COM 35 (KARN). THE LD. A.R. SUBMITTED THAT THE ASSESSEE IN THE ABOVE SAID CASE HAD PUT FORTH IDENTICAL CLAIM CLAIM BEFORE HONBLE SUPREME COURT IN THE CASE REPORTED AS TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (2010) 188 TAXMANN.COM 282 AND THE HONBLE SUPREME COURT, VIDE 14 OF ITS ORDER, HAD RESTORED THE QUESTION RAISED BY THE ASSE SSEE TO THE FILE OF HONBLE HIGH COURT OF KARNATAKA. CONSEQUENT THERETO , THE HONBLE HIGH COURT OF KARNATAKA HAS PASSED THE ORDER IN THE CASE REPORTED IN 58 TAXMANN.COM 35 AND HELD THAT THE TRIBUNAL WA S NOT RIGHT IN COMING TO THE CONCLUSION THAT THE INTEREST EARNED BY THE APPELLANT IS AN INCOME FROM OTHER SOURCES WITHOUT ALLOWING DEDU CTION IN RESPECT OF PROPORTIONATE COST, ADMINISTRATIVE EXPENSES INC URRED IN RESPECT OF SUCH DEPOSITS. ACCORDINGLY, THE LD. A.R. PRAYED THA T THE A.O. MAY BE DIRECTED TO ALLOW DEDUCTION OF PROPORTIONATE COST, ADMINISTRATIVE AND OTHER EXPENSES, IF THE A.O. PROPOSES TO ASSESS THE INTEREST INCOME EARNED FROM BANK DEPOSITS AS INCOME UNDER THE HEAD OTHER SOURCES. 9. WE HEARD LD. D.R. ON THIS ISSUE. WE FIND MERIT I N THE PRAYER OF THE ASSESSEE, SINCE IT IS SUPPORTED BY THE DECISIO N RENDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOT GARS CO-OPERATIVE SALE SOCIETY LTD. VS.ITO (2015) 58 TAXMANN.COM 35 ( KARN). ACCORDINGLY, WE DIRECT THE A.O. TO ALLOW DEDUCTION OF PROPORTIONATE COST, ADMINISTRATIVE AND OTHER EXPENSES, IF THE A. O. PROPOSES TO ASSESS THE INTEREST INCOME EARNED FROM BANK DEPOSIT S AS INCOME UNDER THE HEAD OTHER SOURCES. 5.1. IN THE INSTANT CASE, THE ASSESSEE HAS EARNED I NTEREST INCOME FROM FIXED DEPOSITS WITH OTHER BANKS. IN VIE W OF THE DECISION RENDERED BY THE JURISDICTIONAL HONBLE HIGH COURT OF KARNATAKA , THE ASSESSEE IS ENTITLED FOR DEDUCTION OF PAGE 6 OF 7 ITA NO.58/BANG/2021 PROPORTIONATE COST, ADMINISTRATIVE AND OTHER EXPENS ES. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD.CI T(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH SIMILAR DIRECTIONS. ACCORDINGLY THE GROUNDS RAISED BY ASSESSEE STANDS A LLOWED FOR STATISTICAL PURPOSES IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2021. SD/- SD/- (B.R BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 23 RD JUNE, 2021. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 7 OF 7 ITA NO.58/BANG/2021 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -6-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -6-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -6-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -6-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -6-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -6-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -6-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS