Sales Tax Employees Co. Op. Credit Society Ltd., Ahmedabad V. The ITO, Ward-1(3)(5), Ahmedabad

ITA 750/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7042 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 23-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DILIPKUMAR S
• Section: 80P; 143(2)

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT ./ ITA NO. 750/AHD/2018 / ASSESSMENT YEAR: 2014-15 SALES TAX EMPLOYEES CO-OP CREDIT SOCIETY LTD. APNA BAZAR MULTI STORIED BUILDING LAL DARWAJA AHMEDABAD. VS ITO, WARD-1(3)(5) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI DILIPKUMAR S.DR / DATE OF HEARING : 04/02/2020 /DATE OF PRONOUNCEMENT : 05/02/2020 O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-10, AHMEDABAD PASSED FOR THE ASSTT.YEAR 2 014-15. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL, OUT OF W HICH GROUND NO.2 IS THE SUBSTANTIAL GROUND WHEREAS IN OTHER GROUNDS, IT HAS RAISED PERIPHERAL ARGUMENTS REVOLVING AROUND GROUND NO.2 2. IN GROUND NO.2, THE ASSESSEE HAS PLEADED THAT TH E LD.CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF EXEMPTION UNDER SECTION 80P(2)(A)(I) OF THE ACT ON INTEREST INCOME OF RS.28,911/- RECEIV ED FROM AXIS BANK ON THE SAVING BANK ACCOUNT MAINTAINED BY THE ASSESSEE AS WELL AS INTEREST INCOME OF RS.6,192/- ON LOAN GIVEN TO STAFF. ITA NO.750/AHD/2018 - 2 - 3. IN RESPONSE TO THE NOTICE OF HEARING, SHRI PRADE EP G. TULSIAN, CHARTERED ACCOUNTANT AND CONSULTANT OF THE ASSESSEE , FILED AN ADJOURNMENT APPLICATION PLEADING THEREIN THAT SENIO R PARTNER, SHRI PRADEEP G. TULSIAN IS OUT OF STATION IN CONNECTION WITH MARRIAGE OF ONE OF FAMILY MEMBERS FROM 1.2.2020 TO 15.2.2020, THERE FORE, HEARING BE ADJOURNED. 4. WITH THE ASSISTANCE OF THE LD.DR, I HAVE GONE TH ROUGH THE RECORD CAREFULLY, AND I FIND THAT A VERY SMALL ISSUE REGAR DING DISALLOWANCE OF EXEMPTION UNDER SECTION 80P(2)(A)(I) OF THE ACT OF RS.35,103/- IS INVOLVED, AND THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF STATE BANK OF INDIA EMPLOYEES CO-OP CREDIT SOCIETY LTD, 7 2 TAXMANN.COM 64. AFTER ASSESSING THE SMALLNESS OF THE ISSUE INVOLVED AND LEGAL POSITION ON THIS POINT, I DO NOT DEEM IT NECESSARY TO GRANT AN ADJOURNMENT. THEREFORE, APPLICATION OF THE ASSESSEE FOR THE ADJO URNMENT IS REJECTED. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILIT IES TO ITS MEMBERS. IT HAS FILED ITS RETURN OF INCOME ELECTRONICALLY ON 27 .9.2014 DECLARING NIL INCOME AFTER CLAIMING EXEMPTION UNDER SECTION 80P(2 ) ON THE AMOUNT OF RS.45,71,917/-. THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSU ED AND SERVED UPON THE ASSESSEE. THE LD.AO HAD ISSUED A SHOW CAUSE N OTICE TO THE ASSESSEE INVITING ITS EXPLANATION AS TO WHY INTEREST INCOME OF RS.28,911/- RECEIVED FROM AXIS BANK AND INTEREST INCOME OF RS.6,192/- EA RNED ON THE LOAN GIVEN TO THE STAFF MEMBER SHOULD NOT BE EXCLUDED FR OM THE COMPUTATION OF EXEMPTION CLAIMED UNDER SECTION 80P(2)(A)(I) OF THE ACT. IN RESPONSE ITA NO.750/AHD/2018 - 3 - TO THE QUERY OF THE AO, SHRI DINESH J. PARMAR, SECRE TARY OF THE SOCIETY ATTENDED AND SUBMITTED THE EXPLANATION. AFTER HEAR ING THE EXPLANATION OF THE ASSESSEE, THE LD.AO HAS EXCLUDED A SUM OF RS .35,103/- FROM THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF TH E ACT. DISSATISFIED WITH THE ASSESSMENT ORDER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). IT HAS MADE DETAILED SUBMISS IONS, AND MADE REFERENCE TO A LARGE NUMBER OF DECISIONS RENDERED B Y HONBLE ANDHRA PRADESH HIGH COURT, HONBLE ALLAHABAD HIGH COURT, H ONBLE SUPREME COURT AS WELL AS DECISIONS OF THE ITAT. THE LD.CIT (A) EXAMINED ALL THESE DECISIONS IN DETAIL, AND THEREAFTER CONCURRED WITH THE AO. 6. WITH THE ASSISTANCE OF THE LD.DR, I HAVE GONE TH ROUGH THE RECORD CAREFULLY. A PERUSAL OF THE RECORD WOULD SHOW THAT THE LD.CIT(A) HAS MAINLY PUT RELIANCE UPON RECENT JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO-OP CREDIT SOCIETY (SUPRA) WHEREIN THE HONBLE COURT HELD AS UNDER: IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN C ARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBE RS, WHAT IS DEDUCTIBLE UNDER SECTION 80P IS THE WHOLE OF THE AMOUNT OF PROFITS A ND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE SUCH ACTIVITIES. TH E SUPREME COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY V. ITO [2010] 322 ITR 283/ 188 TAXMAN 282 (SC) HAS, WHILE GIVING A PRECISE MEANING TO THE WOR DS 'PROFITS AND GAINS OF BUSINESS' MENTIONED IN SECTION 80P(2), OBSERVED THA T THE ASSESSEE IN THAT CASE REGULARLY INVESTED FUNDS NOT IMMEDIATELY REQUIRED F OR BUSINESS PURPOSES AND WAS OF THE VIEW THAT INTEREST ON SUCH INVESTMENTS, THEREFORE, CANNOT FALL WITHIN THE MEANING OF THE EXPRESSION 'PROFITS AND GAINS OF BUSINESS'. IT WAS HELD THAT SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTA BLE TO THE ACTIVITIES OF THE SOCIETY, NAMELY, CARRYING ON THE BUSINESS OF PROVID ING CREDIT FACILITIES TO ITS MEMBERS OR MARKETING OF THE AGRICULTURAL PRODUCE TO ITS MEMBERS. THE COURT FURTHER HELD THAT THE WORDS 'THE WHOLE OF THE AMOUN T OF PROFITS AND GAINS OF BUSINESS' EMPHASISE THAT THE INCOME IN RESPECT OF W HICH DEDUCTION IS SOUGHT MUST CONSTITUTE THE OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY. THE COURT OBSERVED THAT IN THAT PAR TICULAR CASE, THE EVIDENCE SHOWED THAT THE ASSESSEE-SOCIETY EARNED INTEREST ON FUNDS WHICH WERE NOT ITA NO.750/AHD/2018 - 4 - REQUIRED FOR BUSINESS PURPOSE AT THE GIVEN POINT OF TIME. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COURT WAS OF THE VIEW THAT SUCH INTEREST INCOME FALLS IN THE CATEGORY OF 'OTHER INCOME' WHIC H HAD RIGHTLY BEEN TAXED BY THE DEPARTMENT UNDER SECTION 56. [PARA 12] THUS, IN CASE OF A SOCIETY ENGAGED IN PROVIDING CRE DIT FACILITIES TO ITS MEMBERS, INCOME FROM INVESTMENTS MADE IN BANKS DOES NOT FALL IN ANY OF THE CATEGORIES MENTIONED UNDER SECTION 80P(2)(A). IN THE CASE OF TO TGARS CO-OPERATIVE SALE SOCIETY (SUPRA), THE COURT WAS DEALING WITH TWO KIN DS OF ACTIVITIES: INTEREST INCOME EARNED FROM THE AMOUNT RETAINED FROM THE AMO UNT PAYABLE TO THE MEMBERS FROM WHOM PRODUCE WAS BOUGHT AND WHICH WAS INVESTED IN SHORT- TERM DEPOSITS/SECURITIES; AND THE INTEREST DERIVED FROM THE SURPLUS FUNDS THAT THE ASSESSEE THEREIN INVESTED IN SHORT-TERM DEPOSIT S WITH THE GOVERNMENT SECURITIES. THIS IS FURTHER CLEAR WHEN ONE PERUSES THE DECISION OF THE KARNATAKA HIGH COURT FROM WHICH THE MATTER TRAVELLED TO THE S UPREME COURT WHEREIN IT WAS THE CASE OF THE ASSESSEE THAT IT WAS CARRYING O N THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THEREFORE, THE APPELLANT-SOCIETY BEING AN ASSESSEE ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE INTEREST RECEIVED ON DEPOSITS IN BUSINESS AND SECURITIES IS ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE AS ITS JOB IS TO PROVIDE CREDIT FACILI TIES TO ITS MEMBERS AND MARKETING THE AGRICULTURAL PRODUCTS OF ITS MEMBERS. THEREFORE, THE ABOVE DECISION IS NOT RESTRICTED ONLY TO THE INVESTMENTS MADE BY THE ASSESSEE THEREIN FROM THE RETAINED AMOUNT WHICH WAS PAYABLE TO ITS M EMBERS BUT ALSO IN RESPECT OF FUNDS NOT IMMEDIATELY REQUIRED FOR BUSINESS PURP OSES. THE SUPREME COURT HAS HELD THAT INTEREST ON SUCH INVESTMENTS, CANNOT FALL WITHIN THE MEANING OF THE EXPRESSION 'PROFITS AND GAINS OF BUSINESS' AND THAT SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY, NAMELY, CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILI TIES TO ITS MEMBERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. T HE COURT HAS HELD THAT WHEN THE ASSESSEE-SOCIETY PROVIDES CREDIT FACILITIES TO ITS MEMBERS, IT EARNS INTEREST INCOME. THE INTEREST WHICH ACCRUES ON FUNDS NOT IMM EDIATELY REQUIRED BY THE ASSESSEE FOR ITS BUSINESS PURPOSES AND WHICH HAS BE EN INVESTED IN SPECIFIED SECURITIES AS 'INVESTMENT' ARE INELIGIBLE FOR DEDUC TION UNDER SECTION 80P(2)(A)(I). [PARA 13] THUS, IN THE LIGHT OF THE PRINCIPLES ENUNCIATED BY THE SUPREME COURT IN TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA), IN CASE OF A SOC IETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS, INCOME FROM INVES TMENTS MADE IN BANKS DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN SECTION 80P(2)(A). HOWEVER, SECTION 80P(2)(D) SPECIFICALLY EXEMPTS INTEREST EARNE D FROM FUNDS INVESTED IN CO-OPERATIVE SOCIETIES. THEREFORE, TO THE EXTENT OF THE INTEREST EARNED FROM INVESTMENTS MADE BY IT WITH ANY CO-OPERATIVE SOCIET Y, A CO-OPERATIVE SOCIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INCOME U NDER SECTION 80P(2)(D). HOWEVER, INTEREST EARNED FROM INVESTMENTS MADE IN A NY BANK, NOT BEING A CO- OPERATIVE SOCIETY, IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(D). [PARA 14] ITA NO.750/AHD/2018 - 5 - 7. IN THE PRESENT CASE, THE ASSESSEE HAS EARNED INC OME FROM THE SAVING BANK ACCOUNT MAINTAINED WITH AXIS BANK. AXI S BANK IS NOT A COOPERATIVE BANK, THEREFORE, ANY INTEREST INCOME FR OM THIS BANK WILL NOT QUALIFY FOR GRANT OF DEDUCTION UNDER SECTION 80P(2) (A)(I) IN VIEW OF THE ABOVE JUDGMENT OF HONBLE GUJARAT HIGH COURT AS WE LL AS UNDER SECTION 80P(2)(D) BECAUSE IT IS NOT COOPERATIVE SOCIETY. S IMILAR IS THE POSITION WITH REGARD TO THE INTEREST INCOME ON THE LOANS GIV EN TO THE STAFF. THEREFORE, THE LD.CIT(A) HAS RIGHTLY DISALLOWED CLA IM OF THE ASSESSEE FOR GRANT OF EXEMPTION ON THIS AMOUNT OF RS.35,103/-. I DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2020. SD/- (RAJPAL YADAV) VICE-PRESIDENT AHMEDABAD; DATED, 05/02/2020