Varadavinayaka Credit Sahakara Sangha Niyamitha, Ballari V. Income-Tax Officer, Waed-2, Ballari

ITA 795/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5903 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 15-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S PALANI
• Keywords: Opportunity of being heard; Set aside
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 795 / BANG/201 8 ASSESSMENT YEAR : 20 1 4 - 15 M/S. VARADAVINAYAKA CREDIT SAHAKARA SANGHA NIYAMITHA, NO. 63, 2 ND LINK, 2 ND CROSS, PARVATHI NAGAR, BALLARI 583 102. PAN:AABAV1731F VS. THE INCOME TAX OFFICER, WARD 2, BALLARI. APPELLANT RESPONDENT APPELLANT BY : SHRI MADHUKAR G. HEGDE, CA RESPONDENT BY : DR. S. PALANI, ADDL. CIT (DR) DATE OF HEARING : 1 2 . 0 4 .2018 DATE OF PRONOUNCEMENT : 20 . 0 4 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A), GULBARGA DATED 30.11.2017 FOR ASSESSMEN T YEAR 2014-15. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-7 IS PREJUDICIAL TO THE INTEREST OF THE APPELLANT, IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT (APPEALS)-7 ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE INTEREST INCOME EARNED FROM THE TERM D EPOSITS IN THE BANKS AS DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON THE GROUND THAT THE SAME CANNOT BE ATTRIBUTABLE TO BUSINESS OF PROVIDIN G CREDIT FACILITIES TO THE MEMBERS. 3. THE LEARNED CIT (APPEALS)-7 ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE INTEREST INCOME EARNED FROM CO- OPERAT IVE BANKS AS DEDUCTION U/S. 80P(2)(D) OF THE ACT EVEN THOUGH THE CO-OPERATIVE BANK IS REGISTERED AS A CO-OPERATIVE SOCIETY UNDER KARNA TAKA STATE CO- OPERATIVE SOCIETIES ACT, 1959. ITA NO.795/BANG/2018 PAGE 2 OF 3 4. THE LEARNED CIT (APPEALS)-7 FAILED TO CONSIDER T HAT THE PETITIONER IN APPEAL IS A CO-OPERATIVE SOCIETY ENGAGED EXCLUSIVEL Y IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND AS SUCH INVEST S ITS SURPLUS FUNDS AS ARE NOT IMMEDIATELY REQUIRED FOR USE IN ITS BUSINES S IN CO-OPERATIVE SOCIETIES AS WELL AS NATIONALIZED /COMMERCIAL BANKS . THEREFORE, THE ENTIRE INTEREST INCOME OF RS.1,53,879/- DERIVED BY THE APPELLANT FORMS PART OF ITS PROFITS AND GAINS ATTRIBUTABLE TO ITS B USINESS AND CHARGEABLE U/S. 28 OF THE ACT AND QUALIFIES FOR FULL DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. THE CITATION OF TOTGARS CO-OPERATIVE SALE SOCIETY LTD. RELIED UPON BY THE RESPONDENT IS NOT APPLICABLE TO THE APP ELLANT'S CASE SINCE TOTGARS CO-OP. SALE SOCIETY WAS ENGAGED IN NUMEROUS ACTIVITIES UNLIKE THE APPELLANT. 5. THE IMPUGNED ORDERS PASSED BY THE AUTHORITIES AR E ILLEGAL AND ARE LIABLE TO BE SET ASIDE IN VIEW OF THE JUDGEMENT OF THE HONBLE HIGH COURT OF KARNATAKA IN ITA 29/2015 IN THE CASE OF M/ S. GUTTIGEDARARA CREDIT CO-OP. SOCIETY LTD. MYSORE VS. ITO, WARD 2(2 ), MYSORE AND ITA 307/2014 - M/S. TUMKUR MERCHANTS SOUHARDA CREDI T CO-OP. LTD. VS. ITO,WARD-1, TUMKUR. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO AS REPORTED IN 230 TAXMAN 309 WHICH IS APPLICABLE IN THE PRESENT CASE AND THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY AS REPORTED IN 395 ITR 611 (KARN) IS N OT APPLICABLE IN THE FACTS OF THE PRESENT CASE. AT THIS JUNCTURE, THE BENCH WANT ED TO KNOW ABOUT THE FINDING OF THE AUTHORITIES BELOW IN RESPECT OF RELEVANT FAC TS OF ASSESSEE AS TO WHETHER THE INVESTMENT IN BANK FOR EARNING INTEREST INCOME WAS MADE BY THE ASSESSEE OUT OF THE ASSESSEES OWN FUNDS OR OUT OF ITS LIABI LITY. IN REPLY IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THERE IS NO COMMENT OF T HE AUTHORITIES BELOW REGARDING THESE FACTS AND HENCE, THE MATTER MAY BE RESTORED BACK TO THE FILE OF AO/CIT(A) FOR FRESH DECISION AFTER EXAMINING THE RE LEVANT FACTS IN THE LIGHT OF ITA NO.795/BANG/2018 PAGE 3 OF 3 THESE TWO JUDGEMENTS. THE LD. DR OF REVENUE SUPPOR TED THE ORDERS OF AUTHORITIES BELOW. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND I FE EL IT PROPER THAT THE MATTER SHOULD GO BACK TO THE FILE OF CIT(A) FOR FRESH DECI SION AFTER EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THESE TWO JUDGM ENTS RENDERED IN THE CASE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOC IETY(SUPRA) AND TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO( SUPRA) AND IF IT IS FOUND THAT THE FACTS OF THE PRESENT CASE ARE IN LINE WITH THE FACTS OF THE PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY(SUPR A) THEN THE ISSUE MAY BE DECIDED AGAINST THE ASSESSEE AND IF THE FACTS OF TH E PRESENT CASE ARE IN LINE WITH THE FACTS OF THE CASE OF TUMKUR MERCHANTS SOUH ARDA CREDIT COOPERATIVE LTD. VS. ITO(SUPRA) THEN THE ISSUE MAY BE DECIDED I N FAVOUR OF THE ASSESSEE. THE CIT(A) SHOULD PASS NECESSARY ORDER AS PER LAW I N THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 20 TH APRIL, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.