M/s Lambra kangri Multipurpose, Hoshiarpur V. The Deputy Commissioner of Income Tax, Hoshiarpur

ITA 607/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0809 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 26-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SHARDA
• Keywords: Question of law
• Section: 6; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (SMC). BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NOS.607 & 419(ASR)/2015 ASSESSMENT YEARS: 2009-10 & 2010-11 PAN: AABTT3233HH THE LAMBRA KANGRI MULTIPURPOSE VS. DEPUTY COMMR. O F INCOME TAX, CO-OPERATIVE SERVICE SOCIETY, HOSHIARPUR CIR CLE, V&PO LAMBRA KANGRI, HOSHIARPUR. DISTRICT HOSHIARPUR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.SANDEEP VIJH, CA RESPONDENT BY: SH. R.K. SHARDA, DR DATE OF HEARING: 24/02/2016 DATE OF PRONOUNCEMENT: 22/04/2016 ORDER THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A), JALANDHAR, DATED 13.08.2015 & 01.06.2015 FOR THE ASSESSMENT YEARS 2009-10 & 2010- 11 RESPECTIVELY. 2. FIRST, WE WILL DEAL WITH ITA NO.607(ASR)/2015 FO R THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A), HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DENYING THE DEDUCTION CLAIMED AND ALLOWABLE U/S 80P(2)(A)(I) IN RESPECT OF THE INTERE ST OF RS.8,52,314/- EARNED FROM BANKS. THE FACTUAL AS WEL L AS THE LEGAL POSITION HAS NOT BEEN APPRECIATED. ITA NOS. 607 & 419(ASR)/2015 A.YS. 2009-10 & 2010-11 2 2. WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GR OUND NO.1, HAVING HELD THAT DEDUCTION U/S 80P(2)(A)(I) WAS NOT ALLOWABLE, THE CIT(A) HAS ERRED IN NOT ALLOWING THE ADJUSTMENT OF INTEREST PAID AND OTHER COSTS ATTRIBU TABLE TO INTEREST EARNED. ONLY THE NET AMOUNT AFTER SET OFF/ADJUSTMENT COULD HAVE BEEN TAXED AS INCOME FROM OTHER SOURCES. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE SOCI ETY IS ENGAGED IN MULTIPURPOSE CO-OPERATIVE SERVICES. FOR THE YEAR UN DER CONSIDERATION, IT CLAIMED ITS ENTIRE INCOME AS EXEMPT UNDER SECTION 8 0P OF THE I.T. ACT, ON INTEREST INCOME OF RS.8,52,314/-, WHICH AMOUNT HAD STATED TO HAVE BEEN EARNED BY THE ASSESSEE SOCIETY ON ITS FDRS AND SAVI NGS BANK ACCOUNT KEPT BY IT WITH NATIONALIZED BANK (S). THE AO WAS OF THE OPINION THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION CLAIMED IN R ESPECT OF INTEREST INCOME, UNLESS AND UNTIL SUCH INTEREST INCOME WAS EARNED FROM ANOTHER CO-OPERATIVE SOCIETY. THE DEDUCTION CLAIMED WAS, TH EREFORE, DISALLOWED. 4. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE BY OBS ERVING AS FOLLOWS: 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND THE LEGAL POSITION. IN VIEW OF THE DECISION OF HONBLE SUPREM E CURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO 3 22 ITR 283, I HAVE NO HESITATION IN HOLDING THAT THE INTEREST INCOME O F THE NATURE AS IS ADDED TO THE TOTAL INCOME IS TAXABLE IN THE HANDS O F THE ASSESSEE. 5. THUS, THE LD. CIT(A) HAS HELD THE FACTS OF THE P RESENT CASE TO BE COVERED BY THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO, 3 22 ITR 283 (SC). THE ASSESSEE HAS CHALLENGED THIS ACTION OF THE LD. CIT( A) BEFORE THIS BENCH. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT TOTGARS CO- OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) STANDS CONSIDERED IN TUMKUR ITA NOS. 607 & 419(ASR)/2015 A.YS. 2009-10 & 2010-11 3 MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD., 55 TA XMAN .COM. 447 (KARNATAKA) (COPY AT APB 27 TO 31), WHICH HAS NOT BEEN CORRECTLY APPRECIATED BY THE LD. CIT(A). 7. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 8. IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. I TO (SUPRA), THE ASSESSEE WAS A CO-OPERATIVE SOCIETY, WHERE, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, IT WAS ALSO IN THE BUSIN ESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SAL E CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED BY THE SOCIETY IN MANY CASES. SUCH RETAIN ED AMOUNT, WHICH WAS PAYABLE BY THE SOCIETY TO ITS MEMBERS FROM WHOM AGRICULTURAL PRODUCE WAS BROUGHT, WAS INVESTED BY THE SOCIETY IN A SHORT-TERM DEPOSIT/SECURITY. THIS AMOUNT WAS SHOWN BY THE SOCI ETY IN ITS BALANCE SHEET ON THE LIABILITY SIDE. ON THESE FACTS, THE HO NBLE SUPREME COURT HELD THE AO TO BE RIGHT IN TAXING THE INTEREST INCO ME, AS INDICATED, UNDER SECTION 56 OF THE ACT. ALL THESE FACTS WERE DULY TA KEN NOTE OF BY THE HONBLE KARNATAKA HIGH COURT VIDE ITS ORDER DATED 2 8.10.2014, PASSED IN TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA). IN TUMKUR MERCHANTS SOUHARDA CREDIT SO-OPERATIVE LTD . (SUPRA), IT WAS HELD AS FOLLOWS: IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT, THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATEL Y REQUIRED BY THE ITA NOS. 607 & 419(ASR)/2015 A.YS. 2009-10 & 2010-11 4 ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE, THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUT ABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. AN DHRA PRADESH STATE CO-OPERATIVE BANK LTD., [2011] 200 TAXMAN 220 /12 TAXMANN. COM 66. IN THAT VIEW OF THE MATTER, THE ORDER PASS ED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUC TION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDING LY, IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWE RED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. THE HONBLE HIGH COURT ALSO TOOK NOTE OF THE FAC T THAT THEIR LORDSHIPS OF THE HONBLE SUPREME COURT, IN TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA), HAD MADE IT CLEAR THAT THEY WERE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE AND THAT, THEREF ORE, IT WAS CLEAR THAT THE HONBLE SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. THE FACTS IN THE PRESENT CASE, IT IS SEEN, ARE ENTIRELY AKIN TO THOSE IN TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE L TD. (SUPRA). AS NOTED BY THE LD. CIT(A) IN PARA 11 OF THE IMPUGNED ORDER, THE ACTIVITIES OF THE PRESENT ASSESSEE CO-OPERATIVE SOCIETY ARE AS FO LLOWS: 1. TO ENCOURAGE THRIFT AND SAVING AMONG ITS MEMBER S BY ACCEPTING DEPOSITS AND OFFERING OTHER SUITABLE FACI LITIES. 2. TO PROVIDE ADEQUATE SHORT, MEDIUM TERM AND LONG TERM CREDIT AGRICULTURAL PRODUCTIONS, DAIRYING, POULTRY, PIGGER Y TO ITS MEMBERS ON AS CONVENIENT AND EASY TERM AS PRACTICAB LE AND RAISE FUNDS FOR THE PURPOSE. 3. TO MAKING ARRANGEMENT FOR THE SUPPLY OF AGRICULT URAL REQUIREMENTS OF ITS MEMBERS SUCH AS MANURE FERTILIZ ERS IMPROVED SEEDS IMPLEMENTS, INSECTICIDES AND OTHER P RODUCTION REQUISITES ETC. WITH A VIEW TO PROMOTING INCREASED AGRICULTURAL PRODUCTION TO PROVIDE CONSUMPTION LOANS TO NON AGRI CULTURIST MEMBERS. ITA NOS. 607 & 419(ASR)/2015 A.YS. 2009-10 & 2010-11 5 4. TO CONSTRUCT AND HIRE/GODOWNS SHOPS AND OTHER PR EMISES PRO VIDING STRONG AND MARKETING FACILITIES TO ITS MEMBE RS AND ARRANGE FOR THE SALE OF THEIR AGRICULTURAL PRODUCTS AND TO MAKE ADVANCE TO THE MEMBERS ON THE SECURITY OF THEIR PRO DUCE WITH THE SOCIETY. 5. TO PURCHASE OR HIRE VEHICLE OR DELIVERY VANS FOR TRANSPORT OF GOODS FROM ONE PLACE TO ANOTHER. 10. THEREFORE, LIKE IN TUMKUR MERCHANTS SOUHARDA C REDIT CO- OPERATIVE LTD. (SUPRA), THE AMOUNT INVESTED BY THE ASSESSEE SOCIETY IN BANKS TO EARN INTEREST, WAS NOT DUE TO ANY OF ITS M EMBERS. IT WAS NOT A LIABILITY OF THE ASSESSEE SOCIETY, NOR WAS IT SHOWN AS SUCH IN THEIR ACCOUNT. THE ASSESSEE-SOCIETY, AS NOTED BY THE AO I N THE ASSESSMENT ORDER ITSELF AND REITERATED BY THE LD. CIT(A) IN PA RA-11 OF THE IMPUGNED ORDER, IS CARRYING ON THE BUSINESS OF PROVIDING CRE DIT FACILITIES TO ITS MEMBERS. IT EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING SAID CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED, OR THE CAPITAL, IF AND WHEN NOT IMMEDIATELY REQUIRED TO BE LENT TO T HE MEMBERS, WAS DEPOSITED BY THE ASSESSEE SOCIETY IN BANKS SO AS TO EARN INTEREST. AS SUCH, IN KEEPING WITH TUMKUR MERCHANTS SOUHARDA CR EDIT CO-OPERATIVE LTD. (SUPRA), THE INTEREST FROM THE BANKS ON DEPOS IT OF THE INTEREST INCOME RECEIVED BY THE ASSESSEE SOCIETY FROM ITS ME MBERS, IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. AS IN TUMKUR MERCHANTS SOUHARDA CRED IT CO-OPERATIVE LTD. (SUPRA), IN THE PRESENT CASE ALSO, THE ASSES SEE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE ITA NOS. 607 & 419(ASR)/2015 A.YS. 2009-10 & 2010-11 6 INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAIN S OF BUSINESS ATTRIBUTABLE TO THE ACTIVITY OF CARRYING ON THE BUS INESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THE SAME IS ENTITLED TO BE DEDUCTED FROM THE GROSS TOTAL INCOME U/S 80P OF THE ACT. THE AMOUNT DEPOSITED IN BANKS, WHICH WAS IN THE NATURE OF PROF ITS AND GAINS, WAS NOT REQUIRED BY THE ASSESSEE SOCIETY, AS IN TUMKUR MER CHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA), FOR LENDING MONE Y TO THE MEMBERS, AS THERE WERE NO TAKERS AND IT WAS, THEREFORE, THAT TH E AMOUNTS HAD BEEN DEPOSITED IN THE BANKS SO AS TO EARN INTEREST. PE RTINENTLY, IN TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA ), CIT VS. ANDHRA PRADESH STATE CO-OPERATIVE BANK LTD., 200 TAXMAN 2 20 (AP), TO THE SAME EFFECT, WAS REFERRED TO BY THE HONBLE KARNATA KA HIGH COURT, WHILE SETTING ASIDE THE ACTION OF DENYING THE BENEFIT OF DEDUCTION. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. 11. ACCORDINGLY, THE LD. CIT(A) HAS CLEARLY ERRED I N RELYING ON TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA). 12. APROPOS THE ORDER OF THE ITAT, AMRITSAR BENCH, IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08, THEREIN THE FACTS WERE ENTIRELY DIFFERENT IN AS MUCH AS FOR THAT YEAR, A C ATEGORICAL FINDING OF THE ITAT WAS THAT THE ASSESSEE, DESPITE BEING QUERIED A S TO WHETHER THERE WAS ANYTHING ON RECORD TO ESTABLISH THAT THE ASSESS EE WAS CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILIT IES TO ITS MEMBERS, THE ASSESSEE COULD NOT ESTABLISH SUCH FACT WITH THE HE LP OF ANY DOCUMENTARY ITA NOS. 607 & 419(ASR)/2015 A.YS. 2009-10 & 2010-11 7 EVIDENCE, OR OTHERWISE. FOR THE YEAR UNDER CONSIDER ATION, AS NOTED HEREINABOVE, BOTH THE AO AS WELL AS THE LD. CIT(A) HAVE MADE SPECIFIC NOTE OF THE ACTIVITIES OF THE ASSESSEE SOCIETY, AS PER WHICH, THE ASSESSEE SOCIETY IS CARRYING ON THE BUSINESS OF PROVIDING CR EDIT FACILITIES TO ITS MEMBERS. THEREFORE, THE ORDER DATED 18.03.2014, PAS SED BY THE TRIBUNAL IN ASSESSEES CASE FOR THE ASSESSMENT YEAR 2007-08 IS OF NO DETRIMENT TO THE ASSESSEE FOR THE YEAR PRESENTLY UNDER CONSIDERA TION. 13. FOR THE ABOVE DISCUSSION, FINDING MERIT IN GROU ND NO. 1 RAISED BY THE ASSESSEE, THE SAME IS ACCEPTED AND IT IS HELD T HAT THE ACTION OF THE AO, AS CONFIRMED BY THE LD. CIT(A), IN DENYING THE DEDUCTION CLAIMED AND ALLOWABLE U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF INTEREST OF RS.8,52,314/- EARNED FROM THE BANKS, IS ERRONEOUS. THE SAME IS RE VERSED. THE CLAIM IS ALLOWED. 14. SINCE GROUND NO. 1 HAS BEEN ACCEPTED, GROUND NO .2, WHICH IS WITHOUT PREJUDICE TO GROUND NO.1, IS NO LONGER SU RVIVING FOR ADJUDICATION AND IT IS REJECTED, AS SUCH. 15. ITA NO.419(ASR)/2015 FOR THE A.Y. 2010-11. THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2010-11. THE GRIEVANCE OF THE ASSESSEE IS THE SAME AS THAT RAISE D IN ITA NO.607(ASR)/2015 FOR THE AY 2009-10, BUT FOR THE AM OUNT OF INTEREST CLAIMED AS ALLOWABLE UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN THIS YEAR, THIS AMOUNT IS OF RS.3,81,094/-. ITA NOS. 607 & 419(ASR)/2015 A.YS. 2009-10 & 2010-11 8 16. THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE AS SESSEE WHILE ACCEPTING GROUND NO.1 IN ITA NO. 607(ASR)/2015. THE FACTS FOR ASSESSMENT YEAR 2010-11 BEING CLEARLY IN PARI MATE RIA WITH THOSE FOR THE AY 2009-10, GROUND NO.1 FOR A.Y. 2010-11 IS ALS O ACCEPTED, WHEREAS GROUND NO.2 IS REJECTED AS NO LONGER SURVIVING FO R ADJUDICATION IN VIEW OF THE ACCEPTANCE OF GROUND NO.1. 17. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22/0 4/ 2016. SD/- (A.D. JAIN) JUDICIAL MEMBER /SKR/ DATED: 22/04/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:THE LAMBA KANGRI MULTIPURPOSE CO-OPERA TIVE SOCIETY LTD., HOSHIARPUR. 2. THE DY. CIT, HOSHIARPUR CIRCLE, HOSHIARPUR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.