Assistant Commissioner of Income-tax, V. Ahmednagar Zilla Prathamik Shikshak Sahakari Bank Ltd., Ahmednagar

ITA 71/PUN/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8550 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 13-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Audit objection
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.71/PN/2014 (ASSESSMENT YEAR : 2004-05) INCOME TAX OFFICER, WARD 1, AHMEDNAGAR. . APPELLANT VS. AHMEDNAGAR ZILLA PRATHAMIK SHIKSHAK SAHAKARI BANK LTD., AIKYA MANDIR, ANANDI BAZAR, AHMEDNAGAR. PAN : AAAJA0961E . RESPONDENT DEPARTMENT BY : SHRI RAJESH DAMOR ASSESSEE BY : NONE DATE OF HEARING : 17-12-2014 DATE OF PRONOUNCEMENT : 29-12-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGA INST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUN E DATED 07.10.2013 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 16.1 1.2009 PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 147 OF THE INCO ME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2004-0 5. 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.3,12,577/- ON ACCOUNT OF DISALLOWANCE THE DEDUCTION U/S 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 IN RESPECT OF INTEREST ON VOLUNTARY RESERVE INSTEAD OF CONFIRMING THE SAID ADDITION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN NOT CONSIDERING THE FACT THAT DISTRIBUTION OF DIVIDEND OF RS.23,57,290/ - OUT OF THE VOLUNTARY RESERVES IS ATTRIBUTABLE TO BANKING BUSINESS AND QU ALIFIED FOR DEDUCTION U/S 80P(2)(A)(I). ITA NO.71/PN/2014 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) GROSSL Y ERRED IN IGNORING THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF MEHASANA DISTRICT CENTRAL CO-OPERATIVE BANK LTD. VS. ITO (25 1 ITR 522) WHO HAVE REMANDED THE MATTER BACK TO THE CIT(A) TO ASCERTAIN , AS A FACT, WHETHER THE INCOME DERIVED BY AN ASSESSEE FROM THE INVESTMENTS FROM ITS VOLUNTARY RESERVES HAS BEEN UTILIZED BY IT IN THE COURSE OF I TS ORDINARY BANKING BUSINESS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO CONSIDER THAT ONLY INCOME ARISING FROM CARRYING ON THE BUSINESS O F BANKING QUALIFIES FOR DEDUCTION U/S 80P OF THE INCOME-TAX A CT, 1961 AND NOT SUCH INCOME WHICH ARISES FROM ENGAGEMENT IN OTHER FORMS OF BUSINESS BY A CO- OPERATIVE BANK. 3. AT THE TIME OF HEARING, NONE APPEARED AND NOR AN Y ADJOURNMENT WAS SOUGHT ON BEHALF OF THE RESPONDENT-ASSESSEE INSPITE OF THE NOTICE HAVING BEEN SERVED THROUGH RPAD ON MORE THAN ONE OCCASION AND T HE LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF THE APPELLANT- REVENUE. THEREFORE, HAVING REGARD TO THE RULE 25 OF THE APPELLATE TRIBU NAL RULES, 1963, THE APPEAL IS BEING DISPOSED-OFF AFTER HEARING THE APPELLANT O N MERITS AND EX-PARTE QUA THE ASSESSEE-RESPONDENT. 4. IN BRIEF, THE RELEVANT FACTS ARE AS FOLLOWS. TH E ASSESSEE IS A CO- OPERATIVE SOCIETY REGISTERED UNDER THE MAHARASHTRA CO-OPERATIVE SOCIETIES ACT, 1960 AND IS CARRYING ON THE BUSINESS OF BANKIN G IN TERMS OF A LICENSE ISSUED BY THE RESERVE BANK OF INDIA (RBI). FOR THE ASSESSMENT YEAR 2004-05, IT FILED A RETURN OF INCOME DECLARING NIL INCOME. AN ASSESSMENT U/S 143(3) OF THE ACT WAS COMPETED ON 27.11.2006 WHEREBY THE TOTA L INCOME WAS DETERMINED AT NIL, AS WAS THE RETURNED INCOME. T HEREAFTER, IT WAS NOTED THAT ASSESSEE HAD EARNED INTEREST @ 8.5% ON INVESTMENTS OF ITS VOLUNTARY RESERVES WHICH AMOUNTED TO RS.23,57,290/-. THE ASS ESSEE HAD DISTRIBUTED DIVIDEND OF RS.1,20,15,000/-. THE DIVIDEND TO THE EXTENT OF RS.23,57,290/- WAS MADE OUT OF THE INCOME EARNED FROM VOLUNTARY RE SERVES. SINCE THERE WAS AN AUDIT OBJECTION RAISED BASED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MEHSANA DISTRICT CENTRAL CO-OPERATIV E BANK LTD. VS. ITO, 251 ITA NO.71/PN/2014 ITR 522, THE CASE OF THE ASSESSEE WAS REOPENED U/S 148 OF THE ACT REQUIRING THE ASSESSEE TO PROVE AS TO HOW DOES IT SATISFY THE TESTS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF MEHSANA DISTRI CT CENTRAL CO-OPERATIVE BANK LTD. (SUPRA) AS DIVIDEND DISTRIBUTION WAS NOT A BANKING ACTIVITY. AS A CONSEQUENCE, THE IMPUGNED ASSESSMENT WAS FINALIZED U/S 143(3) R.W.S. 147 OF THE ACT DATED 16.11.2009 HOLDING THAT INCOME BY WAY OF INTEREST TO THE EXTENT OF RS.23,57,290/- ON INVESTMENTS FROM VOLUNTARY RES ERVES WAS EXCLUDED FROM THE PROFITS OF THE ASSESSEE QUALIFYING FOR DEDUCTIO N U/S 80P(2)(A)(I) OF THE ACT. BY HOLDING SO, THE ASSESSING OFFICER ALLOWED DEDUCT ION FOR THE PROPORTIONATE EXPENDITURE FOR EARNING SUCH INCOME AND ACCORDINGLY HE ASSESSED TO TAX AN INCOME OF RS.2,59,577/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE US. 5. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2003-04, 2004-05 AND 2006-07. THE CIT(A) ALSO NOTE D THAT FOR ASSESSMENT YEAR 2006-07 THE PUNE BENCH OF THE TRIBUNAL HAS FOL LOWED THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . SOLAPUR NAGARI AUDYOGIK SAHAKARI BANK LTD., (2010) 328 ITR 292 (BO M) WHILE HOLDING THAT INTEREST INCOME FOR INVESTMENT MADE OUT FOR VOLUNTA RY RESERVES IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. AS A CONSEQ UENCE, THE CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE A PPEARING FOR THE REVENUE HAS NOT DISPUTED THE FACTUAL MATRIX BROUGHT OUT BY THE CIT(A). THE LD. DEPARTMENTAL REPRESENTATIVE ALSO POINTED OUT TH AT FOR ASSESSMENT YEAR 2005-06, SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AGAINST WHICH APPEAL OF THE REVENUE IS PENDING BEFO RE THE HONBLE HIGH COURT. THERE IS NO MATERIAL AND NOR IS THERE ANY S UBMISSION MADE ON BEHALF OF ITA NO.71/PN/2014 THE REVENUE THAT THE PAST ORDERS OF THE TRIBUNAL ON THIS ASPECT IN THE ASSESSEES OWN CASE HAVE BEEN ALTERED BY ANY HIGHER AUTHORITY. AS A CONSEQUENCE, WE HEREBY AFFIRM THE ORDER OF THE CIT( A), WHICH HAS BEEN PASSED AFTER FOLLOWING THE ORDERS OF THE TRIBUNAL I N THE ASSESSEES OWN CASE IN THE EARLIER YEARS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 29 TH DECEMBER, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-IT/TP, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE