Shri Shivaji Maharaj Co-operative Credit Society , Bijapur V. Income-tax officer, Ward-1, Bijapur

ITA 704/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8653 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 06-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DIVAHAR
• Assessee Lawyers: ASHOK K KULKARNI
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO S . 703 TO 706/BANG/2018 ASSESSMENT YEAR S : 2009 - 10, 2011 - 12 TO 2013 - 14 M/S. SHRI SHIVAJI MAHARAJ CO- OP CREDIT SOCIETY LTD., OPP. LAXMI TEMPLE, MAHATMA GANDHI ROAD, BIJAPUR 586 101. PAN: AAFAS5065H VS. THE INCOME TAX OFFICER, WARD I, BIJAPUR. APPELLANT RESPONDENT APPELLANT BY : SHRI ASHOK K. KULKARNI, ADVOCATE RESPONDENT BY : SHRI P. DIVAHAR, ADDL. CIT (DR) DATE OF HEARING : 13 . 1 2 .2018 DATE OF PRONOUNCEMENT : 21. 1 2 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER ALL THESE FOUR APPEALS ARE FILED BY THE ASSESSEE WH ICH ARE DIRECTED AGAINST FOUR SEPARATE ORDERS OF LD. CIT(A)-BELAGAVI ALL DAT ED 05.12.2017 FOR ASSESSMENT YEARS 2009-10 & 201112 TO 2013-14. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. ITA NO. 703/BANG/2018 (ASSESSMENT YEAR: 2009-10) 1. ORDER PASSED BY ITO-I-BIJAPUR IS AGAINST THE SPI RIT OF LAW AND HE SHOULD HAVE CONSIDERED THE FACT THAT ASSESSEE IS PR OVIDING SERVICES ONLY TO MEMBERS, ENROLLED AS PER BYE-LAW OF SOCIETY , WHICH IS INVARIABLY APPROVED BY REGISTRAR OF COOPERATIVE SOC IETIES UNDER THE KARNATAKA COOPERATIVE SOCIETIES ACT, 1979 AND THAT SOCIETY DOES NOT HOLD LICENSE FROM RESERVE BANK OF INDIA AS CARRYING ON BUSINESS OF BANKING AND ACCORDINGLY SHOULD HAVE ALLOWED DEDUCTI ON U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. 2. CIT-APPEALS, BELGAUM SHOULD HAVE CONSIDERED ONLY THE MATTERS ITA NOS. 703 TO 706/BANG/2018 PAGE 2 OF 5 APPEALED BEFORE HIM AND SHOULD NOT HAVE SEGREGATED THE INCOME FROM INVESTMENTS AS INCOME FROM OTHER SOURCES, SINCE INV ESTMENTS ARE DONE EITHER AS REQUIRED UNDER KARNATAKA STATE COOPE RATIVE SOCIETIES ACT, 1979 WITHOUT WHICH BUSINESS CANNOT BE RUN OR T O PARK EXTRA FUNDS OF SOCIETY TILL THOSE GET INVESTED IN BUSINESS, THU S SUCH INCOME BEING ATTRIBUTABLE TO BUSINESS OF CARRYING ON FINANCIAL S ERVICES TO MEMBERS OF SOCIETY. CIT-A, BELGAUM SHOULD HAVE TREATED THI S INTEREST INCOME BEING INCOME FROM BUSINESS AND SHOULD HAVE ALLOWED THE ENTIRE INCOME OF ASSESSEE AS DEDUCTION U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. 3. ASSESSEE CRAVES FOR HIS RIGHT TO ADD/ALTER ANY O F THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. ITA NO. 704/BANG/2018 (ASSESSMENT YEAR: 2011-12) 1. ORDER PASSED BY ITO-I-BIJAPUR IS AGAINST THE SPI RIT OF LAW AND HE SHOULD HAVE CONSIDERED THE FACT THAT ASSESSEE IS PR OVIDING SERVICES ONLY TO MEMBERS, ENROLLED AS PER BYE-LAW OF SOCIETY , WHICH IS INVARIABLY APPROVED BY REGISTRAR OF COOPERATIVE SOC IETIES UNDER THE KARNATAKA COOPERATIVE SOCIETIES ACT, 1979 AND THAT SOCIETY DOES NOT HOLD LICENSE FROM RESERVE BANK OF INDIA AS CARRYING ON BUSINESS OF BANKING AND ACCORDINGLY SHOULD HAVE ALLOWED DEDUCTI ON U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. 2. CIT-APPEALS, BELGAUM SHOULD HAVE CONSIDERED ONLY THE MATTERS APPEALED BEFORE HIM AND SHOULD NOT HAVE SEGREGATED THE INCOME FROM INVESTMENTS AS INCOME FROM OTHER SOURCES, SINCE INV ESTMENTS ARE DONE EITHER AS REQUIRED UNDER KARNATAKA STATE COOPE RATIVE SOCIETIES ACT, 1979 WITHOUT WHICH BUSINESS CANNOT BE RUN OR T O PARK EXTRA FUNDS OF SOCIETY TILL THOSE GET INVESTED IN BUSINESS, THU S SUCH INCOME BEING ATTRIBUTABLE TO BUSINESS OF CARRYING ON FINANCIAL S ERVICES TO MEMBERS OF SOCIETY. CIT-A, BELGAUM SHOULD HAVE TREATED THI S INTEREST INCOME BEING INCOME FROM BUSINESS AND SHOULD HAVE ALLOWED THE ENTIRE INCOME OF ASSESSEE AS DEDUCTION U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. 3. ASSESSEE CRAVES FOR HIS RIGHT TO ADD/ALTER ANY O F THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. ITA NO. 705/BANG/2018 (ASSESSMENT YEAR: 2012-13) 1. ORDER PASSED BY ITO-I-BIJAPUR IS AGAINST THE SPI RIT OF LAW AND HE SHOULD HAVE CONSIDERED THE FACT THAT ASSESSEE IS PR OVIDING SERVICES ONLY TO MEMBERS, ENROLLED AS PER BYE-LAW OF SOCIETY , WHICH IS INVARIABLY APPROVED BY REGISTRAR OF COOPERATIVE SOC IETIES UNDER THE KARNATAKA COOPERATIVE SOCIETIES ACT, 1979 AND THAT SOCIETY DOES NOT HOLD LICENSE FROM RESERVE BANK OF INDIA AS CARRYING ON BUSINESS OF BANKING AND ACCORDINGLY SHOULD HAVE ALLOWED DEDUCTI ON U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. ITA NOS. 703 TO 706/BANG/2018 PAGE 3 OF 5 2. CIT-APPEALS, BELGAUM SHOULD HAVE CONSIDERED ONLY THE MATTERS APPEALED BEFORE HIM AND SHOULD NOT HAVE SEGREGATED THE INCOME FROM INVESTMENTS AS INCOME FROM OTHER SOURCES, SINCE INV ESTMENTS ARE DONE EITHER AS REQUIRED UNDER KARNATAKA STATE COOPE RATIVE SOCIETIES ACT, 1979 WITHOUT WHICH BUSINESS CANNOT BE RUN OR T O PARK EXTRA FUNDS OF SOCIETY TILL THOSE GET INVESTED IN BUSINESS, THU S SUCH INCOME BEING ATTRIBUTABLE TO BUSINESS OF CARRYING ON FINANCIAL S ERVICES TO MEMBERS OF SOCIETY. CIT-A, BELGAUM SHOULD HAVE TREATED THI S INTEREST INCOME BEING INCOME FROM BUSINESS AND SHOULD HAVE ALLOWED THE ENTIRE INCOME OF ASSESSEE AS DEDUCTION U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. 3. ASSESSEE CRAVES FOR HIS RIGHT TO ADD/ALTER ANY O F THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. ITA NO. 706/BANG/2018 (ASSESSMENT YEAR: 2013-14) 1. ORDER PASSED BY ITO-I-BIJAPUR IS AGAINST THE SPI RIT OF LAW AND HE SHOULD HAVE CONSIDERED THE FACT THAT ASSESSEE IS PR OVIDING SERVICES ONLY TO MEMBERS. ENROLLED AS PER BYE-LAW OF SOCIETY , WHICH IS INVARIABLY APPROVED BY REGISTRAR OF COOPERATIVE SOC IETIES UNDER THE KARNATAKA COOPERATIVE SOCIETIES ACT, 1979 AND THAT SOCIETY DOES NOT HOLD LICENSE FROM RESERVE BANK OF INDIA AS CARRYING ON BUSINESS OF BANKING AND ACCORDINGLY SHOULD HAVE ALLOWED DEDUCTI ON U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. 2. FURTHER AO ERRED IN CONCLUDING THAT INTEREST EAR NED ON INVESTMENTS IS A SEPARATE ACTIVITY AND AS SUCH INTEREST ON INVE STMENTS IS INCOME FROM OTHER SOURCES AND SO DEDUCTION FOR THE SAME UN DER SECTION 80P(2)(A)(I) IS NOT ALLOWABLE. HE SHOULD HAVE APPRE CIATED THE FACT THAT INVESTMENTS ARE DONE EITHER AS REQUIRED UNDER KARNA TAKA STATE COOPERATIVE SOCIETIES ACT, 1979 WITHOUT WHICH BUSIN ESS CANNOT BE RUN OR TO PARK EXTRA FUNDS OF SOCIETY TILL THOSE GET IN VESTED IN BUSINESS, THUS SUCH INCOME BEING ATTRIBUTABLE TO BUSINESS OF CARRY ING ON FINANCIAL SERVICES TO MEMBERS OF SOCIETY. 3. CIT-APPEALS, BELGAUM SHOULD HAVE CONSIDERED ONLY THE MATTERS APPEALED BEFORE HIM AND SHOULD NOT HAVE SEGREGATED THE INCOME FROM INVESTMENTS AS INCOME FROM OTHER SOURCES, SINCE INV ESTMENTS ARE DONE EITHER AS REQUIRED UNDER KARNATAKA STATE COOPE RATIVE SOCIETIES ACT, 1979 WITHOUT WHICH BUSINESS CANNOT BE RUN OR T O PARK EXTRA FUNDS OF SOCIETY TILL THOSE GET INVESTED IN BUSINESS, THU S SUCH INCOME BEING ATTRIBUTABLE TO BUSINESS OF CARRYING ON FINANCIAL S ERVICES TO MEMBERS OF SOCIETY. CIT-A, BELGAUM SHOULD HAVE TREATED THI S INTEREST INCOME BEING INCOME FROM BUSINESS AND SHOULD HAVE ALLOWED THE ENTIRE INCOME OF ASSESSEE AS DEDUCTION U/S 80P(2)(A)(I) AS CLAIMED BY ASSESSEE. 4. ASSESSEE CRAVES FOR HIS RIGHT TO ADD / ALTER ANY OF THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING. ITA NOS. 703 TO 706/BANG/2018 PAGE 4 OF 5 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ISSUE WAS DECIDED BY CIT(A) BY SIMPLY FOLLOWING THE JUDGEMENT OF HON'BLE KARNAT AKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPE RATIVE SALE SOCIETY LTD. AS REPORTED IN 395 ITR 611 (KARN) WITHOUT EXAMINING AND COMPARING THE FACTS OF THE PRESENT CASE AND THAT CASE. HE ALSO SUBMITT ED THAT ON THE SAME ISSUE, THERE IS ANOTHER JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIV E LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309 AND AS PER THE ASSESSEE, THIS JUDGMENT IS APPLICABLE IN THE PRESENT CASE AND AS PER THIS JUDG MENT, SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. HE SUBMITTED TH AT IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA), IT WAS FOUND THAT THE AMOUNT DEPOSITED IN BANK WAS OUT OF LIABIL ITY OF THE ASSESSEE AND NOT ASSESSEES OWN FUNDS AND THEREFORE, THE ISSUE WAS D ECIDED AGAINST THE ASSESSEE. BUT IN THE CASE OF TUMKUR MERCHANTS SOUH ARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA), IT WAS FOUND THAT THE AMOUNT DEPOSITED IN BANK WAS OUT OF ASSESSEES OWN FUNDS AND NOT OUT OF LIABILITY OF THE ASSESSEE AND THEREFORE, THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE. HE SUBMITTED THAT IN THE FACTS OF PRESENT CASE, THE IS SUE SHOULD BE RESTORED BACK TO THE FILE OF CIT (A) FOR FRESH DECISION AFTER EXA MINING AND COMPARING THE FACTS OF THE PRESENT CASE WITH THE FACTS IN THOSE T WO CASES. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF CIT(A). 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND I FI ND FORCE IN THE SUBMISSIONS OF LD. AR OF ASSESSEE. I FIND THAT AS PER PARA 10.2 O F HIS ORDER, LD. CIT (A) HAS SIMPLY NOTED THAT DURING THE PRESENT YEAR, THE ASSE SSEE HAS DERIVED INCOME FROM BDCC BANK, CO-OPERATIVE BANKS AND SCHEDULED BA NKS BY WAY OF INTEREST / DIVIDEND ON FDS/INVESTMENTS AND HE HAS S IMPLY FOLLOWED THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) WITHOUT EXAMINING AND COMPARING THE FACTS OF THE PRESENT CA SE AND THE FACTS OF THAT CASE. I HAVE NOTED THAT IN THE CASE OF PCIT AND AN OTHER VS. TOTAGARS CO- OPERATIVE SALE SOCIETY LTD. (SUPRA), THE FACTS WERE THAT THE AMOUNT IN ITA NOS. 703 TO 706/BANG/2018 PAGE 5 OF 5 QUESTION DEPOSITED IN BANK WAS OUT OF LIABILITY AND NOT OUT OF ASSESSEES OWN FUNDS. IN A SIMILAR CASE I.E. IN THE CASE OF TUMKU R MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA), THE MATTER WAS DECIDED IN FAVOUR OF THE ASSESSEE BECAUSE OF DIFFERENCE IN FACTS. IN TH AT CASE, IT WAS FOUND THAT THE MONEY DEPOSITED IN BANK WAS OUT OF ASSESSEES O WN FUNDS AND NOT OUT OF LIABILITY OF THE ASSESSEE. HENCE, IN MY CONSIDERED OPINION, THE ISSUE SHOULD GO BACK TO THE FILE OF CIT(A) FOR FRESH DECISION AF TER EXAMINING AND COMPARING THE FACTS OF THE PRESENT CASE WITH THE FACTS IN THE SE TWO CASES AND IF IT IS FOUND THAT THE FACTS OF THE PRESENT CASE ARE IN LIN E WITH THE FACTS IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOC IETY LTD. (SUPRA) THEN THE ISSUE SHOULD BE DECIDED AGAINST THE ASSESSEE AN D IF IT IS FOUND THAT THE FACTS OF PRESENT CASE ARE IN LINE WITH THE FACTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO (SUPRA) THEN THE ISSUE SHOULD BE DECIDED IN FAVOUR OF THE ASSESSEE. THERE FORE, I SET ASIDE THE ORDER OF CIT (A) IN ALL THE FOUR YEARS AND RESTORE THE MA TTER BACK TO HIS FILE FOR FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PRO VIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 5. IN THE RESULT, ALL THE FOUR APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 21 ST DECEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.