ITO, Sirsi V. M/s Suvarna Co-Operative Society Ltd., Sirsi

ITA 679/BANG/2015

• Counselvise Citation: 67921114 RSA 2015
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Question of law
• Section: 56

Judgement Text

ITA.666/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.679/BANG/2015 (ASSESSMENT YEAR : 2010-11) INCOME-TAX OFFICER, WARD -1, SIRSI ..APPELLANT V. M/S. SUVARNA COOPERATIVE SOCIETY LTD, TSS ROAD, SIRSI ..RESPONDENT PAN : AAALS0006N ASSESSEE BY : SHRI. S. RAMASUBRAMANIAN, CA REVENUE BY : SHRI. T. N. PRAKASH, JCIT HEARD ON : 01.10.2015 PRONOUNCED ON : 01 .10.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE, IT IS AGGRIEVED TH AT ASSESSEE WAS ALLOWED DEDUCTION U/S.80P(2)(D) OF THE INCOME-TAX ACT, 1961 (THE ACT IN SHORT), BY THE CIT (A) RELYING ON THE JUDGMENT OF HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT V. TUMKUR MERCHANTS SOUHARDA CREDIT CO OPERATIVE LTD (ITA.307 OF 2014, DT.28.10.2014) ITA.666/BANG/2015 PAGE - 2 02. LD. DR SUBMITTED THAT ASSESSEE HAD INVESTED ITS MONEY WITH OTHER BANKS AND ASSESSEE COULD NOT SHOW WHETHER IT WAS SURPLUS OR AMOUNT LENT FROM ITS MEMBERS WHICH WERE SO INVESTED. AS PER THE LD. DR WITHOUT GETTING CLARIFICATION IN THIS REGARD, CIT (A) HAD WRONGLY R ELIED ON THE HONBLE JURISDICTIONAL HIGH COURT JUDGMENT IN TUMKUR MERCHA NTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA). 03. PER CONTRA, LD. AR SUPPORTED THE ORDER OF CIT ( A). 04. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA), HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER : '4. THE LEARNED COUNSEL FOR THE ASSESSEE ASSA ILING THE IMPUGNED ORDER CONTENDED, THE INTEREST ACCRUED IN A SUM OF R S.1,77,305/- IS FROM THE DEPOSITS MADE BY THE ASSESSEE IN A NATIONA LIZED BANK OUT OF THE AMOUNTS WHICH WAS USED BY THE ASSESSEE FOR P ROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THEREFORE THE SAID IN TEREST AMOUNT IS ATTRIBUTABLE TO THE CREDIT FACILITIES PROVIDED BY T HE ASSESSEEAND FORMS PART OF PROFITS AND GAINS OF BUSINESS AND THE REFORE HE SUBMITS THE APPELLATE AUTHORITIES WERE NOT JUSTIFIED IN DEN YING THE SAID BENEFIT IN TERMS OF SUB-SEC.(2) OF SECTION 80P OF T HE ACT. IN SUPPORT OF HIS CONTENTIONS, HE RELIED ON SEVERAL JUDGMENTS AND POINTED OUT THAT THE APEX COURT IN THE AFORESAID JUDGMENT HAS N OT LAID DOWN ANY LAW. 5. PER CONTRA, LEARNED COUNSEL FOR THE REVENUE STRO NGLY RELIED ON THE SAID JUDGMENT OF THE SUPREME COURT AND SUBMITTE D, THE CASE IS COVERED BY THAT JUDGMENT OF THE APEX COURT AND NO C ASE FOR INTERFERENCE IS MADE OUT. 6. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, THE UNDISPUTED FACTS WHICH EMERGES IS, THE SUM OF RS. 1,77,305/- R EPRESENTS THE INTEREST EARNED FROM SHORT-TERM DEPOSITS AND FROM S AVINGS BANK ACCOUNT. THE ASSESSEE IS A COOPERATIVE SOCIETY PROV IDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT CARRYING ON AN Y OTHER BUSINESS. ITA.666/BANG/2015 PAGE - 3 THE INTEREST INCOME EARNED BY THE ASSESSEE BY PROVI DING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHORT DURATION WHICH HAS EARNED INTEREST. THEREFORE, WHET HER THIS INTEREST IS ATTRIBUTABLE TO THE BUSINESS OF PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELEVANT PROVISION OF LAW IE., SECTION 8 0P(2)(A)(I): DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOC IETIES: 80P (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A C O-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORD ANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB- SECTION (2) , IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY: (A) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN (I) )CARRYING ON THE BUSINESS OF BANKING OR PROVIDI NG CREDIT FACILITIES TO ITS MEMBERS, OR (II) XXX (III) XXX (IV) XXX (V) XXX (VI) XXX (VII) XXX THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. 7. THE WORD ATTRIBUTABLE USED IN THE SAID SECTION IS OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSI DER THE MEANING OF THE WORD ATTRIBUTABLE AS SUPPOSED TO D ERIVE FROM ITS USE IN VARIOUS OTHER PROVISIONS OF THE STATUTE IN T HE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME-TAX, GUJARAT-LL REPORTED IN ITR VOL. 113 (1978) PAGE 842 AT PAGE 93 AS UNDER : AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION ATTRIBUTABLE TO OCCURRING IN THE PHRASE PROFITS AND GAINS ATTRIBUTABLE TO THE BUSINESS OF THE SPECIFIED INDUS TRY HERE GENERATION AND DISTRIBUTION OF ELECTRICITY ON WHICH THE LEARNED SOLICITOR-GENERAL RELIED, IT WILL BE PERTIN ENT TO OBSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE ITA.666/BANG/2015 PAGE - 4 EXPRESSION ATTRIBUTABLE TO AND NOT THE EXPRESSION DERIVED FROM. I T CANNOT BE DISPUTED THAT THE EXPRESSION ATTRIBUTABLE TO IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. HAD THE EXPRESSION DERI VED FROM BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISING FROM THE SALE OF OLD MACHINERY AND BUILDINGS CANNOT BE REGARDED AS P ROFITS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF GENERATION AND DISTRIBUTION OF ELECTRICITY. I N THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED B Y THE LEARNED SOLICITOR GENERAL, IT HAS USED THE EXPRESSION DERI VED FROM, AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINCE TH E EXPRESSION OF WIDER IMPORT, NAMELY, ATTRIBUTABLE TO, HAS BEEN U SED, THE LEGISLATURE INTENDED TO COVER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GENERATION AND DI STRIBUTION OF ELECTRICITY. 8. THEREFORE, THE WORD ATTRIBUTABLE TO IS CERTAIN LY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING, TH EY HAVE USED THE EXPRESSION DERIVED FROM. THE EXPRESSION ATTR IBUTABLE TO BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIP TS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINE SS. A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS P ROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT I MMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEE P THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIE S TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE B USINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABL E TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTI ON 80P OF THE ACT. 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S. TOTGARS CO-OPERATIVE SALE SOCIE TY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEA LING WITH A ITA.666/BANG/2015 PAGE - 5 CASE WHERE THE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATIO N RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS P AYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT-TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH W AS RETAINED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY M ENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80 P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF THE SAID CASE, T HE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHE R THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVES TED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THE IR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND G AINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MO NEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HA D DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAI D INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF S ECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHR A PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX III , HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12 IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLA TE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID A MOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOW ING ORDER. APPEAL IS ALLOWED.' 05. THE QUESTION BEFORE US IS WHETHER ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A) OR 80P(2)(D) OF THE ACT, ON THE INTE REST RECEIVED BY IT. WHAT WE FIND IS THAT IN CASE THE INTEREST WAS RECEIVED FROM SURPLUS INVESTED BY THE ITA.666/BANG/2015 PAGE - 6 ASSESSEE IN SHORT-TERM FDS OR SAVINGS BANK ACCOUNT OF OTHER BANKS, THEN THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE O F TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD WOULD COME TO ITS A ID. HOWEVER, IF THE MONEY DEPOSITED WAS AMOUNTS LENT TO THE ASSESSEE BY ITS M EMBERS, OR DUE BY THE ASSESSEE TO ITS MEMBERS THEN SUCH DEDUCTION MAY NOT BE AUTOMATIC. WE ARE THEREFORE OF THE OPINION THAT THE ISSUE REQUIRES A FRESH LOOK BY THE AO. WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE AO FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 06. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE.. ORDER PRONOUNCED IN THE OPEN COURT ON 1ST DAY OF OC TOBER, 2015. SD/- SD/- (N. V. VASUDEVAN) (ABRAHAM P GEO RGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR