Aryad Block Small scalecoir fibre Mats Manufactureres Co-opsociety Ltdty, Alappuzha V. ITO, Alappuzha

ITA 787/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81325 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 06-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-12-2013
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: A KRISHNAN
• Keywords: Business income
• Section: 6; 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO.787/COCH/2013 ASSESSMENT YEAR : 2009-10 ARYAD BLOCK SMALL SCALE COIR FIBRE MATS MANUFACTURERS CO- OPERATIVE SOCIETY LTD., A-741, SOUTH ARYAD, ALAPPUZHA-688 006. [PAN: AFIPK 0924Q] VS. THE INCOME TAX OFFICER, WARD-1, ALAPPUZHA. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI A. KRISHNAN, ADV. REVENUE BY SMT. LATHA V. KUMAR, JR. DR DATE OF HEARING 06/08/2014 DATE OF PRONOUNCEMENT 14/08/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 09-10-2013 PASSED BY THE LD. CIT(A)-V, KOCHI FOR THE ASSESSMENT YEAR 2009-10. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO TRE ATMENT OF RECEIPT OF REVENUE GRANT OF RS. 18,05,344/- FROM THE COIR D EVELOPMENT DIRECTORATE AS MARKET DEVELOPMENT ALLOWANCE. FOR A DVERTISEMENT, STARTING NEW SHOWROOMS, DEVELOPMENT OF EXISTING SHO WROOMS, MARKET STUDY, COMPUTERIZATION, CONSTRUCTION OF GODOWNS AND FOR GIVING I.T.A. NO.787/COCH/2013 2 ATTRACTIVE DISCOUNTS TO DEVELOP NEW MARKET TECHNIQU ES ETC. THIS GRANT WAS CREDITED TO P&L A/C BY THE ASSESSEE AS INCOME A ND SHOWN UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. THE LD. AR SUBMITTED THAT THIS AMOUNT IS DIRECTL Y LINKED TO THE BUSINESS CARRIED ON BY THE ASSESSEE AND THIS HAS TO BE CONSIDERED AS INCOME FROM BUSINESS SO AS TO GRANT DEDUCTION U/S. 80P OF THE ACT . ACCORDING TO THE LD. AR THE GRANT RECEIVED FROM THE COIR DEVELOPMENT DIRECTORATE AS MARKET DEVELOPMENT ALLOWANCE IS BUSI NESS INCOME AND THIS WAS THE SUBJECT MATTER OF DISPUTE BEFORE THE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. U.P. CO-OPERATIVE FEDERATION LTD. (176 ITR 435). THE LD. AR ALSO RELIED ON THE JUDGMENT OF THE HONB LE SUPREME COURT IN THE CASE OF CIT VS. RAMANATHAPURAM DISTT. CO-OP CEN TRAL BANK LTD. (255 ITR 423) WHEREIN IT WAS HELD THAT INTEREST ON SECURITIES, SUBSIDIES FROM THE GOVERNMENT AND DIVIDEND RECEIVED BY THE AS SESSEE, A CO- OPERATIVE SOCIETY CARRYING ON BANKING BUSINESS, WER E BUSINESS INCOME OF THE ASSESSEE, AND THE ASSESSEE WAS ENTITLED TO DEDU CTION U/S. 80P(2)(A)(I) OF THE I.T. ACT. FURTHER, HE RELIED O N THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STRAWB OARD MANUFACTURING CO. LTD. (177 ITR 431) WHEREIN IT WAS HELD THAT THE LAW PROVIDING FOR CONCESSIONS FOR TAX PURPOSES TO ENCOURAGE INDUSTRIA L ACTIVITY, SUCH LAW IS TO BE LIBERALLY INTERPRETED. I.T.A. NO.787/COCH/2013 3 4. THE LD. DR SUBMITTED THAT THE GRANT OF INCENTIV E BY THE COIR DEVELOPMENT DIRECTORATE HAS NOT BEEN COVERED UNDER THE PROVISIONS OF SEC. 28 OF THE I.T. ACT, AT THE SAME TIME, IT CANNO T BE CONSIDERED AS INCOME FROM BUSINESS SO AS TO GRANT DEDUCTION U/S. 80P OF THE I.T. ACT. ACCORDINGLY, THE SUBSIDY RECEIVED BY THE ASSESSEE C ANNOT BE TREATED AS BUSINESS INCOME OF THE ASSESSEE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. IN THE CASE OF CIT VS. RAMANATHAPURAM DISTT. CO-OP CENTRAL BANK LTD., (SUPRA), THE QUESTION OF WHETHER THE SUBSIDIES RECE IVED FROM THE GOVERNMENT IS TO BE CONSIDERED FOR DEDUCTION U/S. 8 0P(2)(A)(I) WAS THE SUBJECT MATTER BEFORE THE HONBLE SUPREME COURT AND THE HONBLE SUPREME COURT AFTER CONSIDERING THE ENTIRE ISSUE, H ELD THAT THE SUBSIDIES RECEIVED FROM THE GOVERNMENT ARE TO BE TREATED AS B USINESS INCOME OF THE ASSESSEE AND IS ENTITLED FOR DEDUCTION UNDER SE CTION 80P(2)(A)(I) OF THE I.T. ACT. IN VIEW OF THE ABOVE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAMANATHAPURAM DISTT. CO-OP CENTRAL BANK LTD. (SUPRA), WE ARE INCLINED TO DECIDE THE ISSUE I N FAVOUR OF THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS ALLOWED. I.T.A. NO.787/COCH/2013 4 6. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE OF CLAIM FOR DEDUCTION U/S. 80P(2)(D) OF THE I.T. ACT ON THE REASON THAT THE ASSESSEE HAS RECEIVED INTEREST FROM THE CO-OPERATIV E BANK AND NOT THE CO-OPERATIVE SOCIETY. 7. THE LD. DR RELIED ON THE DECISION OF THE CIT(A) AND SUBMITTED THAT THE BENEFIT OF SECTION 80P(2)(D) OF THE ACT IS ALLOWABLE ONLY IN RESPECT OF ANY INCOME BY WAY OF INTEREST DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPER ATIVE SOCIETIES. IN THE INSTANT CASE, THE DEPOSIT HAS BEEN MADE WITH A CO-OPERATIVE BANK AND THE ACT HAS WELL DIFFERENTIATED BY DEFINING THE CO-OPERATIVE SOCIETY U/S. 2(19) OF THE ACT. UNDER EXPLANATION SEC. 80P, CO-OPERATIVE BANK AND PRIMARY AGRICULTURAL CREDIT SOCIETY SHALL HAVE THE MEANINGS ASSIGNED TO THEM IN PART V OF THE BANKING REGULATION ACT, 19 49 (10 OF 1949) AND ACCORDINGLY, CO-OPERATIVE BANK MEANS A STATE CO-OP ERATIVE BANK, A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO-OPERATIV E BANK. AS A MATTER OF FACT, THE CO-OPERATIVE SOCIETY AND THE CO-OPERATIVE BANK HAVE BEEN WELL DIFFERENTIATED IN THE SCHEME OF THIN GS. THE SEC. 80P(4) MAKE IT EXPLICIT THAT THE PROVISIONS OF SEC. 80P SH ALL NOT APPLY IN RELATION TO ANY CO-OPERATIVE BANK, FURTHER STRENGTHENS THIS VIEW THAT THE CO- OPERATIVE SOCIETY HAS DEMARKETDLY BEEN PUT ON A DI FFERENT FOOTING THAN THAT OF A CO-OPERATIVE BANK. IN VIEW OF THIS, TH E INFERENCE DRAWN BY I.T.A. NO.787/COCH/2013 5 THE ASSESSING OFFICER IS UPHELD AND THE DISALLOWANC E OF THE CLAIM FOR DEDUCTION U/S. 80P MADE BY THE ASSESSING OFFICER IS FOUND TO BE CORRECT. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE FIND NO MERIT IN THE ARGUMENTS OF THE ASSESSEES COUNSEL AND THE INTEREST EARNED ON FIXED DEPOSITS WITH THE CO-OPERATIVE BANK , CANNOT BE CONSIDERED AS BUSINESS INCOME. IT IS TO BE CONSIDE RED AS INCOME FROM OTHER SOURCES AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (20 10) (322 ITR 283) WHEREIN IT WAS HELD THAT THE ASSESSEE BEING CO-OPER ATIVE SOCIETY IS ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBE RS OR MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS, INTEREST EARNE D BY IT BY INVESTING SURPLUS FUNDS IN SHORT TERM DEPOSITS WOULD FALL UND ER THE HEAD INCOME FROM OTHER SOURCES TAXABLE U/S. 56 OF THE I.T. ACT AND IT CANNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY AND THEREFORE, THE INTEREST DID NOT QUALIFY FOR DEDUCTION U/S. 80P(2)( A)(I) OF THE I.T. ACT. 9. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE H AS EARNED INTEREST INCOME ON FIXED DEPOSITS MADE BY THE ASSESSEE IN A CO-OPERATIVE BANK AND THE INTEREST INCOME EARNED ON THE SURPLUS FUNDS OF THE ASSESSEE CANNOT BE CONSIDERED AS BUSINESS INCOME SO AS TO BE ENTITLED FOR I.T.A. NO.787/COCH/2013 6 DEDUCTION U/S. 80P(2)(A)(I) OF THE I.T. ACT. THUS, THIS GROUND OF THE ASSESSEE IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 14-08- 2014. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 14TH AUGUST, 2014 GJ COPY TO: 1. ARYAD BLOCK SMALL SCALE COIR FIBRE MATS MANUFACT URERS CO-OPERATIVE SOCIETY LTD., A-741, SOUTH ARYAD, ALAPPUZHA-688 006. 2. THE INCOME TAX OFFICER, WARD-1, ALAPPUZHA. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T. COCHIN