Kothapally Farmers Service Co-Operative Society Limited, Medak V. Income Tax Officer, Ward-1, Sangareddy

ITA 766/Hyd/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0884 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: S AMBIKA
• Keywords: Co-operative Credit Society; Set aside
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES SMC, HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 766/HYD/20 2011-12 KOTHAPALLY FARMERS SERVICE CO-OPERATIVE SOCIETY LIMITED, PAPANNAPET MANDAL, SANGAREDDY DIST., [PAN: AAAAF1299H] THE INCOME TAX OFFICER, WARD-1, SANGAREDDY 767/HYD/20 2012-13 768/HYD/20 2013-14 769/HYD/20 2014-15 FOR ASSESSEE : SMT. S.AMBIKA, AR FOR REVENUE : SMT. N.SWAPNA, DR DATE OF HEARING : 22-02-2021 DATE OF PRONOUNCEMENT : 24-02-2021 O R D E R THESE FOUR ASSESSEES APPEALS FOR AYS.2011-12, 2012 -13, 2013-14 & 2014-15 ARISE FROM THE CIT(A)-2, HYDERABAD S ORDER(S) DATED 04-07-2019 PASSED IN APPEAL NOS.10169 , 10174, 10175 & 10176/2018-19/CIT(A)-2, IN PROCEEDIN GS U/S.143(3) R.W.S.147OF THE INCOME TAX ACT, 1961 [IN S HORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILES PERUSED. 2. IT TRANSPIRES AT THE OUTSET THAT ALL THESE ASSESSEES INSTANT FOUR APPEALS SUFFER FROM IDENTICAL 411 DAYS D ELAY STATED TO BE ATTRIBUTABLE TO THE FOLLOWING REASON(S) BEYON D ITS CONTROL AS PER CONDONATION PETITION/AFFIDAVIT DT.11-12-2 020: 1. THE TERM OF THE MANAGING COMMITTEE OF THE SOCIE TY EXPIRED ON 31/01/2018 AND THE ELECTIONS WAS SUPPOSED TO BE HEL D DURING JANUARY 2018. BUT THE ELECTIONS WERE NOT HELD INSTE AD THE EXISTING ITA NOS. 766, 767, 768 & 769/HYD/2020 :- 2 -: MC WERE DIRECTED TO ACT AS PERSON -IN CHARGE TILL T HE REGULAR MC TAKES CHARGE AFTER ELECTIONS. HENCE THE MC HEADED BY THE PRESIDENT HAS NOT TAKEN ANY STEPS TO APPROACH THE PROFESSIONALS FOR T AKING NECESSARY ACTION FOR FILING FURTHER APPEALS AFTER RECEIVING T HE CIT(A) ORDERS. 2. THE ELECTION TO THE SOCIETY WERE HELD DURING FEB RUARY, 2020 AND THE NEW MC HAS TAKEN CHARGE OF THE AFFAIRS OF THE S OCIETY.' BY THE TIME THE NEW MC HEADED BY THE UNDERSIGNED PRESIDENT ACQUAINTED WITH THE AFFAIRS AND PENDING WORKS OF THE SOCIETY, THE ONGOING PANDEMIC VIZ. COVID HAS STALLED ALL THE ACTIVITIES. 3. NOW THE UNDERSIGNED HAS APPROACHED THE AUDITORS FOR FILING NECESSARY APPEALS BEFORE THE HON'BLE ITAT AND THE A PPEAL IN FORM 36 WAS GOT PREPARED AND IS NOW BEING FILED FOR GRAN TING NECESSARY RELIEF U/S 80P OF THE ACT AFTER A DELAY OF 411 DAYS . 2.1. NO REBUTTAL TO ALL THESE SOLEMN AVERMENTS HAS COME FROM THE DEPARTMENTAL SIDE. I THUS QUOTE HON'BLE APEX COURTS LANDMARK DECISION COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS [167 ITR 471] (SC) TO HOLD THAT THIS TECHNICAL REA SON OF DELAY MUST MAKE WAY FOR THE CAUSE OF SUBSTANTIAL JUSTICE . THE SAME ACCORDINGLY STANDS CONDONED. ALL THESE CASES ARE NOT TAKEN UP FOR ADJUDICATION ON MERITS. 3. THE ASSESSEES IDENTICAL SOLE SUBSTANTIVE GRIEVANCE IN ALL THESE FOUR CASES CHALLENGES CORRECTNESS OF BOTH THE LOW ER AUTHORITIES ACTION DISALLOWING ITS INTEREST INCOME(S) OF RS.28,27,602/-, RS.42,20,319/-, RS.54,38,060/- AND RS.44,35,325/-; RESPECTIVELY AS NOT ENTITLED FOR 80P DEDUCTION SINCE DERIVED FROM DEPOSITS MADE IN SCHEDULED BANKS . 4. IT IS VEHEMENTLY CONTENDED AT THE REVENUES BEHEST T HAT THE LEARNED LOWER AUTHORITIES HAVE RIGHTLY MADE IMPUG NED DISALLOWANCE SINCE THE ASSESSEES INTEREST INCOME HAS BEEN DERIVED FROM FIXED DEPOSITS IN NATIONALISED BANKS T HAN CO- OPERATIVE BANKS. ITA NOS. 766, 767, 768 & 769/HYD/2020 :- 3 -: 5. I HAVE GIVEN MY THOUGHTFUL CONSIDERATION TO THE ABOVE SOLE ISSUE OF 80P DEDUCTION. SUFFICE TO SAY, HON'BLE JURISDICTIONAL HIGH COURTS DECISION IN VAVVERU CO-OP ERATIVE RURAL BANK LTD., VS. CIT (2017) [396 ITR 371] (AP) HOLDS THE VERY NATURE OF INCOME AS ELIGIBLE FOR SECTION 80P D EDUCTION AS UNDER: 32. IN SIMPLE TERMS, THE POSITION CAN BE SUMMARIZE D LIKE THIS. IF THERE IS A CO-OPERATIVE SOCIETY, WHICH IS CARRYING ON SEVERAL ACTIVITIES INCLUDING THOSE ACTIVITIES LISTED IN SUB CLAUSES (I ) TO (VII) OF CLAUSE (A), THE BENEFIT UNDER CLAUSE (A) WILL BE LIMITED ONLY T O THE PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANYONE OR MORE OF SUCH ACTIVITIES. BUT, IN CASE THE SAME CO-OPERATIVE SOCIETY HAS AN I NCOME NOT ATTRIBUTABLE TO ANYONE OR MORE OF THE ACTIVITIES LI STED IN SUB-CLAUSES (I) TO (VII) OF CLAUSE (A), THE SAME MAY GO OUT OF THE PURVIEW OF CLAUSE (A), BUT STILL, THE CO-OPERATIVE SOCIETY MAY CLAIM THE BENEFIT OF CLAUSE (D) OR (E) EITHER BY INVESTING THE INCOME IN ANOTHE R CO-OPERATIVE SOCIETY OR INVESTING THE INCOME IN THE CONSTRUCTION OF A GODOWN OR WAREHOUSE AND LETTING OUT THE SAME. 33. IN OTHER WORDS, THE BENEFIT CONFERRED BY CLAUSE (D) UPON ALL TYPES OF CO-OPERATIVE SOCIETIES IS RESTRICTED ONLY TO THE INVESTMENTS MADE IN OTHER CO-OPERATIVE SOCIETIES. SUCH A RESTRICTION CA NNOT BE READ INTO CLAUSE (A), AS THE TEMPORARY PARKING OF THE PROFITS AND GAINS OF BUSINESS IN NATIONALISED BANKS AND THE EARNING OF I NTEREST INCOME THEREFROM IS ONLY ONE OF THE METHODS OF MULTIPLYING THE SAME INCOME. TO ACCEPT THE STAND OF THE DEPARTMENT WOULD MEAN TH AT CO-OPERATIVE SOCIETIES CARRYING ON THE ACTIVITIES LISTED IN CLAU SES (I) TO (VII), WHICH INVEST THEIR PROFITS AND GAINS OF BUSINESS EITHER I N OTHER CO-OPERATIVE SOCIETIES OR IN THE CONSTRUCTION OF GODOWNS AND WAR EHOUSES, MAY BENEFIT IN TERMS OF CLAUSE (D) OR (E), BUT THE VERY SAME SOCIETIES WILL NOT BE ENTITLED TO ANY BENEFIT, IF THEY INVEST THE VERY SAME FUNDS IN BANKS. SUCH AN UNDERSTANDING OF SECTION 80P(2) IS I MPERMISSIBLE FOR ONE SIMPLE REASON. THE BENEFITS UNDER CLAUSES (D) A ND (E) ARE AVAILABLE IN GENERAL TO ALL CO-OPERATIVE SOCIETIES, INCLUDING SOCIETIES ENGAGED IN THE ACTIVITIES LISTED IN CLAUSE (A). SEC TION 80P(2) IS NOT INTENDED TO PLACE ALL TYPES OF CO-OPERATIVE SOCIETI ES ON THE SAME PEDESTAL. THE SECTION CONFERS DIFFERENT TYPES OF BE NEFITS TO DIFFERENT TYPES OF SOCIETIES. SPECIAL TYPES OF SOCIETIES ARE CONFERRED A SPECIAL BENEFIT. ITA NOS. 766, 767, 768 & 769/HYD/2020 :- 4 -: 34. THE CASE BEFORE THE SUPREME COURT IN TOTGARS WA S IN RESPECT OF A CO-OPERATIVE CREDIT SOCIETY, WHICH WAS ALSO MARKETI NG THE AGRICULTURAL PRODUCE OF ITS MEMBERS. AS SEEN FROM T HE FACTS DISCLOSED IN THE DECISION OF THE KARNATAKA HIGH COURT IN TOTG ARS, FROM OUT OF WHICH THE DECISION OF THE SUPREME COURT AROSE, THE ASSESSEE WAS CARRYING ON THE BUSINESS OF MARKETING AGRICULTURAL PRODUCE OF THE MEMBERS OF THE SOCIETY. IT IS ALSO FOUND FROM PARAG RAPH-3 OF THE DECISION OF THE KARNATAKA HIGH COURT IN TOTGARS THA T THE BUSINESS ACTIVITY OTHER THAN MARKETING OF THE AGRICULTURAL P RODUCE ACTUALLY RESULTED IN NET LOSS TO THE SOCIETY. THEREFORE, IT APPEARS THAT THE ASSESSEE IN TOTGA.RS WAS CARRYING ON SOME OF THE AC TIVITIES LISTED IN CLAUSE (A) ALONG WITH OTHER ACTIVITIES. THIS IS PER HAPS THE REASON THAT THE ASSESSEE DID NOT PAY TO ITS MEMBERS THE PROCEED S OF THE SALE OF THEIR PRODUCE, BUT INVESTED THE SAME IN BANKS. AS A CONSEQUENCE, THE INVESTMENTS WERE SHOWN AS LIABILITIES, AS THEY REPR ESENTED THE MONEY BELONGING TO THE MEMBERS. THE INCOME DERIVED FROM THE INVESTMENTS MADE BY RETAINING THE MONIES BELONGING TO THE MEMBERS CANNOT CERTAINLY BE TERMED AS PROFITS AND GAINS OF BUSINESS. THIS IS WHY TOTGARS STRUCK A DIFFERENT NOTE. 35. BUT, AS RIGHTLY CONTENDED BY THE LEARNED SENIOR COUNSEL FOR THE PETITIONERS, THE INVESTMENT MADE BY THE PETITIONERS IN FIXED DEPOSITS IN NATIONALISED BANKS, WERE OF THEIR OWN MONIES. IF THE PETITIONERS HAD INVESTED THOSE AMOUNTS IN FIXED DEPOSITS IN OTH ER CO-OPERATIVE SOCIETIES OR IN THE CONSTRUCTION OF GODOWNS AND WAR EHOUSES, THE RESPONDENTS WOULD HAVE GRANTED THE BENEFIT OF DEDUC TION UNDER CLAUSE (D) OR (E), AS THE CASE MAY BE. 36. THE ORIGINAL SOURCE OF THE INVESTMENTS MADE BY THE PETITIONERS IN NATIONALISED BANKS IS ADMITTEDLY THE INCOME THAT TH E PETITIONERS DERIVED FROM THE ACTIVITIES LISTED IN SUB CLAUSES ( I) TO (VII) OF CLAUSE (A). THE CHARACTER OF SUCH INCOME MAY NOT BE LOST, ESPECIALLY WHEN THE STATUTE USES THE EXPRESSION ATTRIBUTABLE TO A ND NOT ANYONE OF THE TWO EXPRESSIONS, NAMELY, DERIVED FROM OR DIR ECTLY ATTRIBUTABLE TO. 37. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT T HE PETITIONERS ARE ENTITLED TO SUCCEED. HENCE, THE WRIT PETITIONS ARE ALLOWED, AND THE ORDER OF THE ASSESSING OFFICER, INSOFAR AS IT RELAT ES TO TREATING THE INTEREST INCOME AS SOMETHING NOT ALLOWABLE AS A DED UCTION UNDER SECTION 80P(2) (A), IS SET ASIDE. ITA NOS. 766, 767, 768 & 769/HYD/2020 :- 5 -: 5.1. I ADOPT THE FOREGOING DETAILED DISCUSSION MUTATIS- MUTANDIS AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE THEREBY TREATING THAT THE ASSESSEE AS ELIGIBLE FOR SECTION 80P DEDUCTION. 6. THESE ASSESSEES APPEALS ARE ALLOWED. A COPY OF THIS COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY, 2021 SD/- ( S.S.GODARA ) JUDICIAL MEMBER HYDERABAD, DATED: 24-02-2021 TNMM ITA NOS. 766, 767, 768 & 769/HYD/2020 :- 6 -: COPY TO : 1.KOTHAPALLY FARMERS SERVICE CO-OPERATIVE SOCIETY L IMITED, H.NO.4-51, KOTHAPALLY, PAPANNAPET MANDAL, SANGAREDD Y DIST., 2.THE INCOME TAX OFFICER, WARD-1, SANGAREDDY. 3.CIT(APPEALS)-2, HYDERABAD. 4.PR.CIT-2, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.