State Bank of India Officers Co-operative Credit Society Limited, Hyderabad, Hyderabad V. ITO, Ward-5(3), Hyderabad, Hyderabad

ITA 673/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2268 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 13-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: B SHANTHI KUMAR
• Section: 80C; 263

Judgement Text

ITA NO 673 OF 2017 SBI OFFICERS COOP.CREDIT SOCIETY LTD HYDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.673/HYD/2017 (ASSESSMENT YEAR: 2012-13) SBI OFFICERS COOP. CREDIT SOCIETY LTD HYDERABAD PAN: AAAJS 1602 G VS ITO WARD 5 (3) BASHEERBAGH HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI B. SHANTHI KUMAR FOR REVENUE : SMT. U. MINI CHANDRAN, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2012-13. IN T HIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE LEARNED CIT (A)-10, HYDERABAD, DATED 2.11.2016 CONFIRMING THE D ISALLOWANCE OF RS.77,44,295 CLAIMED BY THE ASSESSEE AS A DEDUCT ION U/S 80P OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO- OPERATIVE CREDIT SOCIETY PROVIDING CREDIT FACILITY TO ITS MEMBERS. IT FILED ITS RETURN OF INCOME FOR THE A.Y 2012-13 ON 2 8.09.2012 ADMITTING INCOME FROM BUSINESS OR PROFESSION AT R S.1,91,88,053 AND CLAIMING THE SAME AS A DEDUCTION U/S 80P OF THE ACT. DATE OF HEARING: 12.12.2017 DATE OF PRONOUNCEMENT: 15 . 1 2 .2017 ITA NO 673 OF 2017 SBI OFFICERS COOP.CREDIT SOCIETY LTD HYDERABAD. PAGE 2 OF 6 3. DURING THE ASSESSMENT PROCEEDINGS U/S 143 (3) OF THE I.T. ACT, THE AO OBSERVED THAT THE ASSESSEE WAS EST ABLISHED FOR THE BENEFIT OF SBI OFFICERS ONLY, BY COLLECTING SHARE C APITAL AND THRIFT CONTRIBUTIONS EVERY MONTH, FROM MEMBERS AND WAS SAN CTIONING LOANS TO THE MEMBERS WHO ARE IN NEED OF MONEY FOR P ERFORMING OF MARRIAGES AND HIGHER EDUCATION OF CHILDREN ETC. FRO M THE INCOME AND EXPENSES STATEMENT FOR THE YEAR, THE AO OBSERVE D THAT THE ASSESSEES RECEIPTS INCLUDE INTEREST ON DEPOSITS AMOUNTING TO RS.77,44,295. AS THE ASSESSEES TOTAL INCOME FROM THE BUSINESS OF PROVIDING CREDIT FACILITIES, INCLUDES RECEIPTS ATTR IBUTABLE TO INTEREST ON DEPOSITS MADE WITH A SCHEDULED BANK W HICH IS NOT A MEMBER OF THE SOCIETY, THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INTEREST EARNED ON BANK DEPOSIT SHOULD NOT BE TREATED AS INCOME FROM OTHER SOURCES AND EXEMPTION U/S 80C SHO ULD NOT BE DISALLOWED. IN RESPONSE, THE ASSESSEE FILED EXPLANA TIONS DATED 22.1.2015 AND 29.01.2015, STATING THAT THE FUNDS CO NSTITUTE RESERVES WHICH HAVE BEEN DEPOSITED WITH STATE BANK OF INDIA AS PER NORMS OF A.P. COOPERATIVE SOCIETY ACT, 1964 AND THAT THE SOCIETY IS ELIGIBLE FOR DEDUCTION UNDER THE PROFITS ATTRIBUTABLE TO THEIR ACTIVITY U/S 80P(1)(2(A)(I) OF THE I.T. ACT A ND THAT THE PROVISIONS OF SECTION 80P(2)(D) ARE NOT APPLICABLE TO THE SOCIETY AS THEY ARE KEEPING THE RESERVES AND TEMPORARY SURPLUS ES WITH THE NATIONALIZED BANK AS MANDATED BY LAW. IT WAS SUBMI TTED THAT THE INTEREST EARNED ON STATUTORY FUND DEPOSITS MADE IN BANK ARE ELIGIBLE FOR DEDUCTION AS PER THE DECISIONS OF THE HON'BLE COURTS AND TRIBUNALS. THE ASSESSEE ALSO EXPLAINED THAT TH E DECISION OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CA SE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS. ITO IS NOT RELEVA NT TO THE FACTS OF THE CASE AND RELIED UPON THE DECISION OF THE HON'BL E JURISDICTIONAL ITA NO 673 OF 2017 SBI OFFICERS COOP.CREDIT SOCIETY LTD HYDERABAD. PAGE 3 OF 6 HIGH COURT IN THE CASE OF A.P. STATE COOPERATIVE BA NK LTD AND APEX COURTS DECISION IN THE CASE OF KARNATAKA STATE COOPERATIVE APEX BANK. THE AO WAS, HOWEVER, NOT CONVINCED WITH THE ASSESSEES EXPLANATION. HE WAS OF THE OPINION THAT THE INTEREST EARNED ON FIXED DEPOSITS MADE WITH NATIONALIZED BAN K IS NOT ATTRIBUTABLE TO THE ACTIVITIES OF PROVIDING CREDIT FACILITIES FOR ITS MEMBERS. HE THEREFORE, HELD THAT THE INTEREST INCOM E ON FDS RECEIVED FROM SBI OF RS.77,44,295 IS THE INCOME FR OM OTHER SOURCES AND DISALLOWED THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT TO THAT EXTENT. AGGRIEVED, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE A O AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE, BEING A COOPERATIVE SOCIETY, CARRYING ON THE BUSINESS OF BANKING, IS REQUIRED TO DEPOSIT THE RESERVES AND TE MPORARY SURPLUSES WITH NATIONALIZED BANKS AS MANDATED BY LAW AND THAT THE INTEREST EARNED ON SUCH STATUTORY FUND DEPOSITS IS ELIGIBLE FOR DEDUCTION U/S 80P OF THE ACT AS PER THE DECISIONS OF THE TRIBUNAL AND THE JURISDICTIONAL HIGH COURT. HE PLACED RELIANCE UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF VAVVERU CO-OPERATIVE RURA L BANK LTD, IN WRIT PETITION NOS. 12727 OF 2016 AND BATCH, DATED 15.03. 2017, WHEREIN THE HON'BLE COURT WAS CONSIDERING THE QUESTION AS TO WH ETHER THE INCOME DERIVED BY THE PETITIONERS BY WAY OF INTEREST ON FI XED DEPOSIT MADE IN THE BANK IS TO BE TREATED AS PROFIT AND GAINS OF BU SINESS ATTRIBUTABLE TO ANY OF THE ACTIVITIES INDICATED IN SUB-CLAUSES (I) TO (VII) OF CLAUSE (A) OF SUB-SECTION (2) OF SECTION 80P OR NOT. AFTER CONSID ERING THE VARIOUS DECISIONS/PRECEDENTS ON THE ISSUE, INCLUDING THE DE CISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD VS. ITA NO 673 OF 2017 SBI OFFICERS COOP.CREDIT SOCIETY LTD HYDERABAD. PAGE 4 OF 6 ITO IN REPORTED IN (2010) 322 ITR 283, DATED 8 TH FEBRUARY, 2010, THE HON'BLE HIGH COURT HAS HELD THAT WHERE THE INVESTME NTS ARE MADE BY THE PETITIONERS IN FDS OF NATIONALISED BANKS OF TH EIR OWN MONEY AND IF THE PETITIONERS HAD MADE INVESTMENT OF THOSE AMOUNT S IN OTHER COOPERATIVE SOCIETIES, THEN THE PETITIONERS THEREIN ARE ELIGIBLE FOR BENEFIT OF DEDUCTION U/S 80P OF THE ACT. THE LEARNED COUNS EL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN THE ASSESSEES OWN CASE, THE B BENCH OF THIS TRIBUNAL IN ITA NO.1429/HYD/2013 DATED 26.2.2014 HA D HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P OF THE A CT AND THAT THE REVENUE HAD GONE IN APPEAL TO THE HON'BLE HIGH COUR T BY WAY OF ITTA NO.669/2016 AND THE HON'BLE HIGH COURT, FOLLOWING I TS DECISION IN W.P.NOS. 12727 OF 2016 AND BATCH DATED 15.3.2017, H AS UPHELD THE ORDER OF THE TRIBUNAL. HE FILED THE COPIES OF THE S AID ORDERS BEFORE US. 5. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T SIMILAR ISSUE IN THE CASE OF SBI, GUJARAT REGION HAD COME UP FOR CONSIDERATION BEFORE THE HON'BLE GUJARAT HIGH COURT, AS REPORTED IN (201 6) 72 TAXMANN.COM 64 (GUJ.), WHEREIN FOLLOWING THE DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY L TD VS. ITO (CITED SUPRA), THE HON'BLE HIGH COURT HAD HELD THE ISSUE A GAINST THE ASSESSEE. SHE, THEREFORE, PLACED RELIANCE UPON THE SAID DECIS ION. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE JURISDICTIONAL HIGH COURT S DECISION IS IN FAVOUR OF THE ASSESSEE, WHILE THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IS AGAINST THE ASSESSEE. HOWEVER, WE FIND THAT IN THE CASE OF SBI VS. CIT, BEFORE THE HON'BLE GUJARAT HIGH COURT, THE W.P. WAS FILED AGAINST THE ORDER OF THE CIT U/S 263 ON THE QUESTION WHETHER TH E INTEREST INCOME FROM SBI WAS EXEMPT U/S 80P(2) OF THE I.T. ACT. THE HON'BLE GUJARAT ITA NO 673 OF 2017 SBI OFFICERS COOP.CREDIT SOCIETY LTD HYDERABAD. PAGE 5 OF 6 HIGH COURT HAS FOLLOWED THE DECISION OF THE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOC IETY LTD VS. ITO TO HOLD IN FAVOUR OF THE REVENUE. THE HON'BLE JURISDIC TIONAL HIGH COURT, IN THE CASE OF VAVVERU COOP.RURAL BANK LTD (CITED SUPR A) HAS DISTINGUISHED THE DECISION OF THE HON'BLE SUPREME C OURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY, TO HOLD THE ISS UE IN FAVOUR OF THE ASSESSEE. AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GODAVARIDEVI SARAF REPORTED IN (1978) 113 ITR 589 (BOM.), WE ARE BOUND BY THE DECISION OF THE JURISDICTIONAL HIGH CO URT ON SIMILAR SET OF FACTS. FURTHER, IN THE CASE OF SBH EMPLOYEES CO-OPE RATIVE CREDIT SOCIETY ALSO, THE HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THE ASSESSEES APPEAL AND DIRECT THE AO TO ALLOW THE DE DUCTION U/S 80P OF THE ACT OF THE INTEREST INCOME EARNED BY THE ASSE SSEE ON THE DEPOSITS PLACED WITH THE SBI, A NATIONALISED BANK. THE LEARN ED DR HAD TRIED TO DISTINGUISH THE FACTS OF THE CASE BEFORE US WITH TH E ABOVE DECISION STATING THAT IN THE CASE OF THE ASSESSEE, THE INTER EST IS EARNED ON FDRS, WHILE, IN THE CASE BEFORE THE HON'BLE HIGH COURT, T HE DEPOSITS WERE NOT FIXED DEPOSITS. HOWEVER, FROM THE ASSESSMENT ORDER , IT IS SEEN THAT THE RESERVES AND SURPLUSES HAVE BEEN KEPT AS DEPOSITS A ND THERE IS NO REFERENCE TO FDRS BY THE AO. THEREFORE, THIS DIST INCTION IS NOT ESTABLISHED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DECEMBER, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 15 TH DECEMBER, 2017. VINODAN/SPS ITA NO 673 OF 2017 SBI OFFICERS COOP.CREDIT SOCIETY LTD HYDERABAD. PAGE 6 OF 6 COPY TO: 1 SHRI B SHANTHI KUMAR, ADVOCATE, 111, TARAMANDAL C OMPLEX, 5-9- 13, SAIFABAD, HYDERABAD 500004 2 I.T.O. WARD 5(3) BASHEERBAGH, HYDERABAD 500004 3 CIT (A) - 10 HYDERABAD 4 PR. CIT IV HYHDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER 1 DRAFT DICTATED ON 12 TH DECEMBER, 2017 2 DRAFT PLACED BEFORE THE AUTHOR 13 TH DEC. 2017 3 DRAFT PLACED BEFORE THE SECOND MEMBER 14.12.17 4 DRAFT APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.PS 6 KEPT FOR PRONOUNCEMENT 15.12.17 7 FILE SENT TO BENCH CLERK