The Ladol Vividh Karyakari Sahakari Mandli Ltd., Mehsana V. The Income Tax Officer, Patan Ward- 3, Mehsana

ITA 748/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8941 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 13-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Assessee Lawyers: M K PATEL
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA.NO.748/AHD/2014 / ASSTT.YEAR : 2010-2011 THE LADOL VIVIDH KARYAKARI SAHAKARI MANDLI LTD. AT : LADOL TAL: VIJAPUR 382 840. VS THE ITO, PATAN WARD - 3 MEHSANA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL, AR REVENUE BY : SHRI VILAS V. SHINDE, SR.DR / DATE OF HEARING : 14/03/2017 / DATE OF PRONOUNCEMENT: 16/03/2017 !'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A), GANDHINAGAR DATED 6.12.2013 PASSED FOR A SSTT.YEAR 2010-11. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE L D.CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF DEDUCTION UNDER SECTION 8 0P(2) OF THE INCOME TAX ACT, 1961 ON THE AMOUNT OF RS.3,09,120/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 21.7.2010 DECLARING TOTAL INCOME AT NIL. THE AS SESSEE IS A COOPERATIVE MANDALI AND IT HAS CLAIMED DEDUCTION UNDER SECTION 80P ON ITS ENTIRE INCOME. ITA NO.748/AHD/2014 2 THE LD.AO DIRECTED THE ASSESSEE TO FURNISH ITS ACCO UNTS AND OTHER DETAILS. ON VERIFICATION OF THE DETAILS, IT REVEALED THAT THE A SSESSEE HAS INTEREST INCOME OF RS.13,09,120/- FROM STATE BANK OF INDIA AND BANK OF BARODA. THE LD.AO HAS DISALLOWED THE DEDUCTION ON THIS INTEREST INCOME. 4. ON APPEAL, THE LD.CIT(A) OBSERVED THAT NET INTER EST INCOME RECEIVABLE TO THE ASSESSEE IS OF RS.3,09,120/-, BECAUSE IT HAS TO PAY A SUM OF RS.10.00 LAKHS AS INTEREST EXPENDITURE ON OVERDRAFT. THEREF ORE, THE LD.CIT(A) PARTLY ALLOWED THE APPEAL AND UPHELD THE DISALLOWANCE UNDE R SECTION 80P(2) ON A SUM OF RS.3,09,120/-. 5. BEFORE US, THE LD.DR CONTENDED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF HON BLE GUJARAT HIGH COURT RENDERED IN THE CASE OF STATE BANK OF INDIA VS. CIT , 72 TAXMANN.COM 64 (GUJ). THE SECOND QUESTION FORMULATED BY THE HONB LE HIGH COURT IN THE ABOVE CASE IS A RELEVANT QUESTION FOR THE PURPOSE O F ISSUE INVOLVED IN THE PRESENT APPEAL BEFORE US. THE QUESTION FRAMED BY T HE HONBLE HIGH COURT READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN HOLD ING THAT INTEREST INCOME OF RS.16,14,579/- ON DEPOSITS PLACED WITH ST ATE BANK OF INDIA WAS NOT EXEMPT UNDER SECTION 80P(2)(A)(I) OF THE IN COME TAX ACT, 1961? IN TAX APPEAL NO.487/2015, IN THE SECOND QUESTION, THE FIGURE '16,14,579' SHALL STAND SUBSTITUTED BY THE FIGURE ' 32,83,410'. 6. ASSESSEE BEFORE THE HONBLE GUJARAT HIGH COURT W AS A COOPERATIVE SOCIETY REGISTERED UNDER GUJARAT COOPERATIVE SOCIET IES ACT, 1961. IT WAS REGISTERED WITH OBJECT OF ACCEPTING DEPOSITS FROM S ALARIED PERSONS OF THE STATE BANK OF INDIA, GUJARAT REGION WITH A VIEW TO ENCOUR AGE THRIFT AND PROVIDE ITA NO.748/AHD/2014 3 CREDIT FACILITY TO THEM. THE SOCIETY HAD INTEREST INCOME ON THE DEPOSITS PLACED WITH BANK OF INDIA AND CLAIMED EXEMPTION UNDER SECT ION 80P(2)(A)(I) OF THE INCOME TAX ACT. THE HONBLE GUJARAT HIGH COURT HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE. THE RELEVANT OBSERVATION OF THE HONBLE READS AS UNDER: 21. THUS, THE COURT IN THE ABOVE DECISION HAS DIST INGUISHED BETWEEN THE TWO ACTIVITIES NAMELY, THE BUSINESS OF BANKING AND PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND HAS HELD THAT CARRYING ON THE BUSINESS OF BANKING CONNOTES A LARGER ACTIVITY THAN THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT HAS FURTHER BEEN HELD THAT THE INVESTMENT OF FUNDS IS CONDUCIVE TO THE PROMOTI ON OR ADVANCEMENT OF THE BUSINESS OF BANKING. IN THE PRES ENT CASE, THIS COURT IS NOT DEALING WITH A CO-OPERATIVE SOCIETY EN GAGED IN THE BUSINESS OF BANKING, BUT WITH A CO-OPERATIVE SOCIET Y ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS, WHICH IS NOT AS WIDE AN ACTIVITY AS THE BUSINESS OF BANKING. STRONG RELIANCE HAS BEEN PLACED BY THE LEARNED COUNSEL FOR THE APPELLANT ON THE FINDINGS RECORDED IN PARAGRAPHS 52, 67 AND 69 OF THE SAID DE CISION. IN PARAGRAPH 52 THE COURT HAS REFERRED TO THE DECISION OF THE SUPREME COURT IN VELLORE ELECTRIC CORPN. LTD. V. CIT, [1997 ] 227 ITR 557/93 TAXMAN 401, WHEREIN THE PHRASE 'ATTRIBUTABLE TO' CA ME UP FOR CONSIDERATION. IN PARAGRAPH 67, THE COURT HAS REFER RED TO THE DECISION OF THE SUPREME COURT IN BIHAR STATE CO-OPERATIVE BA NK LTD. (SUPRA), WHEREIN THE COURT HAS HELD THAT IT CANNOT BE SAID T HAT THE FUNDS OF THE BANK WERE NOT LENT TO BORROWERS BUT WERE LAID O UT IN THE FORM OF DEPOSITS IN ANOTHER BANK TO ADD TO THE PROFIT INSTE AD OF LYING IDLE NECESSARILY CEASED TO BE A PART OF THE STOCK-IN-TRA DE OF THE BANK; OR THAT THE INTEREST ARISING THEREFROM DID NOT FORM PA RT OF ITS BUSINESS PROFITS. IN PARAGRAPH 69 THE COURT HELD THUS: 'THE QUESTION THEREFORE WOULD ARISE AS TO WHETHER A NY DISTINCTION CAN BE DRAWN BETWEEN SO CALLED SURPLUS FUNDS/IDLE FUNDS AND STATUTORY INVESTMENTS. IT IS NECESSARY TO BEAR IN MIND THAT A RESERVE PER SE DOES NOT YIELD ANY INCOME. IT IS THE INVESTMENT OF THE F UND BACKING A RESERVE WHICH WOULD YIELD INCOME. THEREFORE, WHATEV ER BE THE NOMENCLATURE OF A PARTICULAR RESERVE, THE FUNDS OF AN ASSESSEE IN TOTALITY ARE CONGLOMERATE OF THE TOTAL AMOUNT OF ITA NO.748/AHD/2014 4 DEPOSITS/INVESTMENTS, PROFITS AND OTHER REALISATION S. MONEY HAS NO COLOUR AND THE NOMENCLATURE USED TO SEGREGATE DIFFE RENT FUNDS IS ONLY FOR THE SAKE OF ADMINISTRATIVE CONVENIENCE. OTHERWI SE IT IS NOT POSSIBLE TO STATE THAT A PARTICULAR PORTION OF THE FUND EMANATES FROM THE DEPOSITS RECEIVED OR FROM THE PROFITS EARNED IN THE EARLIER YEARS. THUS, THESE FUNDS ARE UTILIZED, ARE INVESTED, TO EA RN FURTHER PROFITS BY WAY OF INTEREST. THE ONLY CAVEAT, AS CAN BE SEEN RU NNING THROUGH THE ENTIRE CASE LAW COMMENCING FROM THE PRIVY COUNCIL D ECISION IS THAT SUCH FUNDS MUST BE INVESTED IN EASILY REALIZABLE SE CURITIES. THE TWIN OBJECTIVE AS LAID DOWN BY THIS COURT IS NOT TO LOSE INTEREST BY KEEPING THE FUNDS IDLE AND INVESTED IN SECURITIES SO AS TO ENCASH THEM READILY IN CASE OF NEED. THIS IS IN CONSONANCE WITH THE DEF INITION OF THE TERM 'BANKING'. THE DEPOSITS ARE ACCEPTED AS PAYABLE ON DEMAND OR OTHERWISE, AND ALSO PERMITTING WITHDRAWAL BY CHEQUE S AND OTHER PRESCRIBED MODES. ON A PLAIN READING OF THE ABOVE PARAGRAPHS OF THE D ECISION OF THIS COURT IN BARODA PEOPLES CO-OPERATIVE BANK LTD. (SUP RA), IT IS CLEAR THAT THE COURT HAS HELD THAT INVESTING FUNDS TO EAR N FURTHER PROFIT IS IN CONSONANCE WITH THE TERM BANKING. THE COURT HAS FUR THER HELD THAT THE BUSINESS OF BANKING IS PRIMARILY A BUSINESS OF TRUST, A BUSINESS OF PUTTING TRUST IN A BANKER. HOW DOES A BANK ENSURE T HAT THE CUSTOMER PLACES TRUST. IT HAS TO OFFER NOT ONLY GOOD RETURNS BUT ALSO SAFETY AND LIQUIDITY. IN OTHER WORDS, THE DEPOSITOR MUST BE EN SURED THAT THE DEPOSITOR WILL GET GOOD RETURNS ON ITS DEPOSIT, THE DEPOSITS WOULD BE SAFE AND DEPOSITS WOULD BE AVAILABLE FOR WITHDRAWAL AS AND WHEN REQUIRED, SUBJECT TO THE TERMS OF THE CONTRACT BETW EEN THE PARTIES. THE COURT HELD THAT IT IS IN THIS CONTEXT THAT THE REQU IREMENT OF INVESTMENT BEING IN EASILY REALIZABLE SECURITIES OR MONEY BEIN G READILY AVAILABLE FOR MEETING THE DEMAND MADE BY THE DEPOSITOR IS TAK EN AS THE TOUCHSTONE OF THE BUSINESS OF BANKING. THUS, THE AB OVE DECISION HAVING BEEN RENDERED IN THE CONTEXT OF BANKING BUSI NESS DOES NOT HAVE ANY APPLICABILITY TO THE FACTS OF THE PRESENT CASE. UNDER THE CIRCUMSTANCES, THE SAID DECISION DOES NOT IN ANY MA NNER COME TO THE AID OF THE APPELLANT.' 22. IN THE LIGHT OF THE ABOVE DISCUSSION, THIS COUR T DOES NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER PASSED BY THE TRIBU NAL WARRANTING ITA NO.748/AHD/2014 5 INTERFERENCE. THE QUESTIONS ARE ACCORDINGLY ANSWERE D IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. IT IS ACCORDINGLY HELD THAT THE INCOME TAX APPELLAT E TRIBUNAL WAS JUSTIFIED IN UPHOLDING INVOCATION OF POWERS UNDER S ECTION 263 OF THE INCOME TAX ACT, 1961 BY THE COMMISSIONER OF INCOME TAX. THE INCOME TAX APPELLATE TRIBUNAL WAS ALSO JUSTIFIED IN HOLDING THAT INTEREST INCOME OF RS.16,14,579/- AND RS.32,83,410/ -RESPECTIVELY ON DEPOSITS PLACED WITH STATE BANK OF INDIA WAS NOT EX EMPT UNDER SECTION 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961. T HE APPEALS, THEREFORE, FAIL AND ARE ACCORDINGLY DISMISSED. 7. THE LD.COUNSEL FOR THE ASSESSEE WAS UNABLE TO CO NTROVERT THE ABOVE POSITION OF LAW HENCE, THIS APPEAL OF THE ASSESSEE IS DEVOID OF ANY MERIT. IT IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 16 TH MARCH, 2017 AT AHMEDABAD. SD/- SD/- ( AMARJIT SINGH ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER