The Umreth Urban Co. Op.Bank Ltd., Anand V. The DCIT., Anand Circle, Anand

ITA 803/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2146 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 31-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Business income; Question of law
• Section: 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 803/AHD/2017 (ASSESSMENT YEAR: 2012-13) M THE UMRESH URBAN CO.OP BANK LTD. PANCHVATI UMRETH, TAL. & DIST. ANAND V/S THE DCIT, ANAND CIRCLE, ANAND (APPELLANT) (RESPONDENT) PAN: AAAAU 0116E APPELLANT BY : SHRI S. N. DIVETIA, AR RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. ( )/ ORDER DATE OF HEARING : 25 -07-201 9 DATE OF PRONOUNCEMENT : 29 -07-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-4, VADODARA DATED 06.12.2016 PERTAINING TO A .Y. 2012-13 AND SOLELY GROUND HAVE BEEN TAKEN BY THE ASSESSEE THAT LD.CIT( A) HAS GRIEVOUSLY ERRED IN ITA NO. 803/ AHD/2017 . A.Y. 2012- 13 2 LAW AND ON FACTS OF CONFIRMING THE DISALLOWANCE OF LOSS ON SALE OF SECURITIES OF RS. 7,54,500/- AS BUSINESS LOSS. 2. FACTS OF THE CASE ARE THAT THE APPELLANT IS A COOPE RATIVE SOCIETY ENGAGED IN THE BUSINESS OF BANKING. IT IS DULY REGISTERED UNDER TH E GUJARAT CO-OP. SOCIETY ACT AND CARRY ON THE BANKING BUSINESS UNDER THE SUPERVI SION OF RBI. IT HAD FILED HIS RETURN OF INCOME FOR A.Y.2012-13 ON 31.07.2012 DECL ARING TOTAL INCOME OF RS.92,87,229. 3. 2.1 DURING THE COURSE OF ASSTT. PROCEEDINGS, THE AO NOTICED THAT THE APPELLANT HAD DEBITED IN P&L ACCOUNT RS.7,54,500/- ON ACCOUNT OF LOSS ON SALE OF SECURITIES. THE AO DISALLOWED THE SAME ON THE GROUN D THAT THE LOSS WAS IN CAPITAL NATURE. THE AO MADE FURTHER ADDITIONS ALSO AND COMPLETED THE ASSESSMENT U/S.143(3) ON THE TOTAL INCOME OF RS.1,2 2,72,640/-. 4. THEREAFTER ASSESSEE PREFERRED FIRST STATUTORY APPEA L BEFORE THE LD. CIT(A) WHEREIN IT WAS POINTED OUT THAT THE APPELLANT BANK WAS REQUIRED TO MAKE INVESTMENT IN SPECIFIED GOVT. SECURITIES AS PER RBI NORMS. ACCORDINGLY, THE BANK HAD PURCHASED 6.3% GOVT. SECURITIES ON 07.05.2 003 AND ITS INTEREST INCOME WAS SHOWN AS BUSINESS INCOME. THEREFORE, THE LOSS ON SALE OF SUCH SECURITIES WAS CLAIMED AS BUSINESS LOSS. THE APPELL ANT RELIED UPON THE DECISION IN ITS OWN CASE GIVEN BY HON. GUJARAT HIGH COURT FO R A.Y.2002-03 VIDE TAX APPEAL NO.2447 OF 2009 DATED 21.06.2016. HOWEVER, C IT(A) HAS CONFIRMED THE DISALLOWANCE BY A NON-SPEAKING ORDER AND ON ERRONEO US FACT THAT THE APPELLANT WAS NOT ABLE TO PROVE AS TO HOW PURCHASE AND SALE O F SECURITIES WAS A PART OF ITS BUSINESS. ITA NO. 803/ AHD/2017 . A.Y. 2012- 13 3 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. ASSESSEE HAS PURCHASED 6.3 GOVT. SECURITIES ON 07.05.2003 AND IT S INTEREST WAS SHOWN AS BUSINESS INCOME AND CLAIMED LOSS ON SALE OF SUCH SE CURITIES WAS AS BUSINESS LOSS. 6. IN SUPPORT OF ITS CONTENTION, ASSESSEE FILED DETAIL S PERTAINING TO DETAILS OF THE GOVT. SECURITIES AT PAGE NO. 11 OF THE PAPER BOOK: ANNEXURE - M (AS ON 31 - 03 - 2012) CENT. GOVT. LOAN 235,439,09 9.00 STATE GOVT. LOAN 40,454,112.00 GOVT. BILLS 9,797,985.00 TOTAL 285,691,196.00 7. AS WE CAN SEE AS PER RBI GUIDELINES, IT WAS MANDATO RY ON THE PART OF THE ASSESSEE TO PURCHASE 6.3% OF ITS TOTAL CAPITAL INCO ME SECURITIES AND ASSESSEE DID NOT HAVE ANY OPTION IF ANY LOSS INCURRED ON ACCOUNT OF PURCHASE OF SUCH GOVT. BONDS THAT KIND OF LOSS TO BE ALLOWABLE LOSS. 8. IN SUPPORT OF ITS CONTENTION, ASSESSEE ALSO CITED A JUDGMENT OF ASSESSEES OWN CASE WHICH WERE DELIVERED ON 21.06.2016 IN FAVOUR O F ASSESSEE AND RELEVANT PARA OF THE JUDGMENT IS REPRODUCED: WHEN THE MATTER WAS CARRIED BEFORE THE CIT (APPEAL S), HE TOOK SOMEWHAT A DIFFERENT STAND. CIT (APPEALS) WAS OF THE OPINION T HAT CERTAIN PROCEEDS ON SALE OF SECURITIES WERE INVESTED BY THE ASSESSEE WITH MADHA VPURA MERCANTILE COOP. BANK. LTD. WHICH WAS DOUBTFUL INVESTMENTS. IN ANY C ASE, THE SAME WAS NOT ITA NO. 803/ AHD/2017 . A.Y. 2012- 13 4 APPROVED UNDER SECTION 71 OF THE GUJARAT COOPERATIV E SOCIETIES ACT. HE, THEREFORE FOUND THAT NON-UTILIZATION OF SALE PROCEEDS WOULD N OT FALL WITHIN THE NORMAL BANKING BUSINESS AND THE CAPITAL GAIN WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ONCE AGAIN, THE IS SUE REACHED THE TRIBUNAL. THE TRIBUNAL BY THE IMPUGNED COMMON JUDGMENT ALLOWED TH E ASSESSEE'S APPEAL RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF RAJKOT NAGRIK SAHAKARI BANK LIMITED. REVENUE, THEREUPON, PRESENTED THIS TAX APP EAL RAISING FOLLOWING QUESTION: 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE TRIBUNAL WAS RIGHT IN LAW IN ALLOWING THE DEDUCTION U/S.80P(2)(A )(I) IN CONTRADICTION TO THE ASSESSES HAVING INCOME FROM CAPITAL GAINS NOT ATTRIBUTABLE TO REGULAR BANKING BUSINESS OF THE ASSESSEE ? THOUGH AT DIFFERENT STAGES DIFFERENT AUTHORITIES HA VE VIEWED THE SITUATION SOMEWHAT DIFFERENTLY THE REVENUE HAS FRAMED THE QUE STIONS WHICH ARE IDENTICALLY WORDED THE QUESTIONS THAT ARISE ARE (I) WHAT WOULD BE THE EFFECT OF INCOME OF THE ASSESSEE FROM WHAT THE ASSESSING OFFICER REFERRED T O AS NON-BANKING PROFITS AND (II) WHETHER ON ACCOUNT OF ASSESSEE INVESTING SALE PROCEEDS OF SECURITIES WITH BANKS AND FINANCIAL INSTITUTIONS NOT APPROVED UNDER SECTION 71 OF THE GUJARAT COOPERATIVE SOCIETIES ACT, CAN DEDUCTION UNDER SECT ION SOP OF THE ACT BE DENIED? IN SO FAR AS FIRST QUESTION IS CONCERNED, IT DOES N OT POSE ANY SERIOUS DIFFICULTY. AS ALREADY NOTED, THE ASSESSEE WAS RELYING ON .THE DEC ISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SURAT DISTRICT COOPERAT IVE BANK (SUPRA). AT THE STAGE WHEN THE ASSESSING OFFICER DECIDED THE ISSUE, THE R EVENUE HAD CARRIED THE DECISION IN FURTHER APPEAL. HOWEVER, SUBSEQUENTLY, BY VIRTUE OF THE DECISION OF THE APEX COURT IN THE CASE OF C.I.T. V. KARNATAKA STATE COOP. APEX BANK, 251 ITR 194, THE ENTIRE ISSUE HAS BEEN SETTLED AND DECIDED IN FA VOUR OF THE ASSESSEE. THE APEX ITA NO. 803/ AHD/2017 . A.Y. 2012- 13 5 COURT HELD AND OBSERVED THAT THERE IS NOTHING IN TH E PHRASEOLOGY OF SECTION 80P(2)(A)(I) WHICH MAKES IT APPLICABLE ONLY TO INCO ME DERIVED FROM WORKING OR CIRCULATING CAPITAL. IT WAS FURTHER OBSERVED THAT F ROM INVESTMENT MADE, IN COMPLIANCE WITH STATUTORY PROVISIONS TO ENABLE IT T O CARRY ON BANKING BUSINESS OUT OF RESERVE FUND BY A COOPERATIVE SOCIETY IS EXE MPT UNDER SECTION 80P(2)(A)(I) OF THE ACT AND PLACEMENT OF SUCH FUNDS BEING IMPERA TIVE FOR THE PURPOSE OF CARRYING ON BANKING BUSINESS, INCOME THEREFROM WOUL D BE INCOME FROM THE ASSESSES 'S BUSINESS. IN THAT VIEW OF THE MATTER, T HE REVENUE'S OBJECTION TO THE DEDUCTION CLAIMED BY THE ASSESSEE TO ITS SO CALLED NON-BANKING PROFITS MUST REST HERE. WITH RESPECT TO THE SECOND ASPECT, COUNSEL FOR THE REVENUE VEHEMENTLY CONTENDED THAT THE ASSESSEE HAD PARKED ITS FUNDS OU T OF SALE PROCEEDS OF SECURITIES WITH BANKS AND INSTITUTIONS WHICH ARE NO T APPROVED UNDER SECTION 71 OF THE GUJARAT COOPERATIVE SOCIETIES ACT. HE, THEREFOR E, SUBMITTED THAT SUCH IRREGULAR INVESTMENTS CANNOT QUALIFY FOR DEDUCTION UNDER SECTION 80P(2) OF THE ACT. HAD THE QUESTION BEEN WITH RESPECT TO DEDUCTIO N ON THE INCOME DERIVED FROM SUCH INVESTMENTS, WE WOULD HAVE BEEN INCLINED TO EX AMINE TH ISSUE FURTHER. HOWEVER, IN THE PRESENT CASE, FACTS ARE CONTRARY. A S HELD AND OBSERVED BY THE CIT (APPEALS) IN BOTH THE CASES, THE ASSESSEE HAD DERIV ED INCOME FROM SALE OF GOVERNMENT SECURITIES AND OTHER APPROVED INVESTMENT S. SUCH PROCEEDS WERE THEREAFTER INVESTED IN SECURITIES AND DEPOSITS WHIC H MAY NOT HAVE BEEN APPROVED UNDER SECTION 71 OF THE GUJARAT COOPERATIVE SOCIETI ES ACT. WHAT WE ARE CONCERNED WITH IS THE TREATMENT THAT SUCH INCOME OU T OF SALE PROCEEDS AND SECURITIES SHOULD RECEIVE AND NOT WHAT INCOME FROM FURTHER INVESTMENTS SHOULD RECEIVE. IN SHORT, CLAIM FOR DEDUCTION UNDER SECTIO N 80P(2) OF THE ACT RAISED BY THE ASSESSEE RELATED TO INCOME DERIVED FROM SALE OF APP ROVED SECURITIES. ITA NO. 803/ AHD/2017 . A.Y. 2012- 13 6 THAT BEING THE POSITION, THE ASSESSEE WAS JUSTIFIED IN CLAIMING DEDUCTION AS AVAILABLE UNDER LAW. IN OUR VIEW, THEREFORE, THE TR IBUNAL COMMITTED NO ERROR. NO QUESTION OF LAW ARISES. TAX APPEALS ARE, THEREFORE, DISMISSED.' 5. IN LIGHT OF THE ABOVE SETTLED LEGAL POSITION, WE ARE NOT GIVING ELABORATE REASONS AND ANSWER THE QUESTION RAISED IN THIS APPEAL IN FA VOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THE APPEAL IS DIS MISSED. 9. RESPECTFULLY FOLLOWING THE HONBLE JURISDICTIONAL H IGH COURT JUDGMENT, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 29 - 07- 2019 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 29/07/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD