Ashwathapura Pathina Souharda Sahakiari Niyamitha, Bangalore V. CIT, Bangalore

ITA 816/BANG/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1523 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: RAJESWARI S
• Keywords: Question of law
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NOS. 816 & 817/BANG/2015 ASSESSMENT YEARS : 2009-10 & 2010-11 ASHWATHPURA PATHINA SOUHARDA SAHAKARAI NIYAMITHA, NO.1206, RANGANATHA COMPLEX, 12 TH CROSS, M.C. LAYOUT, MAGADI ROAD, BANGALORE 560 040. PAN: AAAAA 5468M VS. THE INCOME TAX OFFICER, WARD 2(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : MS. RAJESWARI S., C.A. RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 28.10.2015 DATE OF PRONOUNCEMENT : 10.11.2015 O R D E R PER VIJAY PAL RAO,, JUDICIAL MEMBER THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AG AINST TWO SEPARATE ORDERS OF THE CIT(APPEALS), BENGALUR-3, BE NGALURU, BOTH DATED 25.03.2015 FOR THE ASSESSMENT YEARS 2009-10 AND 201 0-11 RESPECTIVELY. ITA NOS.816 & 817/BANG/2015 PAGE 2 OF 7 2. COMMON GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN THESE APPEALS. THE EFFECTIVE GROUNDS RAISED FOR AY 2009- 10 ARE AS UNDER:- 2. M/S ASHWATHAPURA PATHINA SOUHARDA SAHAKARA NI YAMITHA (HEREINAFTER REFERRED TO AS APPELLANT) IS A CO-OP ERATIVE REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI AC T, 1997, WHOSE MAIN OBJECT IS TO ENCOURAGE SAVINGS, SELF-SUP PORT AND CO- OPERATIVE NATURE AMONG THE SOCIETY MEMBERS AND THE DEPOSITORS OF THE SOCIETY. THE APPELLANT CLAIMS DEDUCTION U/S 80P (2)(A)(I) OF THE INCOME TAX ACT, 1961 WHICH DEALS WITH THE DEDUC TION IN RESPECT OF INCOME OF CO-OPERATIVE SOCIETIES. THE AP PELLANT, FOR THE ASSESSMENT YEAR 2009-10, HAS CLAIMED RS. 28,82, 562/- AS A DEDUCTION U/S 80P(2)(A)(I) OUT OF WHICH RS. 10,54,3 36/- PERTAINS TO INTEREST INCOME EARNED FROM DEPOSITS WITH VARIOU S CO- OPERATIVE BANKS. 3. THE APPELLANT HAS EARNED INTEREST INCOME FROM D EPOSITS WITH VARIOUS BANKS AMOUNTING TO RS. 10,54,336/- .TH E LEARNED ASSESSING OFFICER HAS ERRED IN TREATING THE SAID IN COME AS INCOME FROM OTHER SOURCES AND THEREBY NOT ALLOWIN G THE DEDUCTION OF THE SAID AMOUNT U/S 80P(2)(A)(I). 3. THE ASSESSEE IS A CO-OPERATIVE REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997. THE ASSESSEE FILED IT S RETURN OF INCOME DECLARING NIL INCOME, AFTER CLAIMING DEDUCTION U/S. 80P(2)(A)(I) OF THE INCOME-TAX ACT, 1961 [THE ACT]. 4. THE ASSESSING OFFICER WHILE COMPLETING THE ASSES SMENT U/S. 143(3) OF THE ACT DISALLOWED THE CLAIM OF DEDUCTION U/S. 8 0P(2)(A)(I) ON THE GROUND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BAN KING AND THEREFORE DEDUCTION U/S. 80P(2)(A)(I) IS NOT AVAILABLE. ITA NOS.816 & 817/BANG/2015 PAGE 3 OF 7 5. ON APPEAL, THE CIT(APPEALS) HAS ALLOWED THE CLAI M OF THE ASSESSEE TO THE EXTENT OF INTEREST EARNED FROM THE MEMBERS, BUT CONFIRMED THE DISALLOWANCE OF CLAIM U/S. 80P IN RESPECT OF INTERE ST EARNED ON SHORT TERM DEPOSITS. THUS, THE ASSESSEE IS AGGRIEVED BY THE O RDER OF THE CIT(APPEALS) ONLY ON THE DISALLOWANCE OF CLAIM U/S. 80P WITH RESPECT TO INTEREST EARNED ON SHORT TERM DEPOSITS. 6. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. 7. THE LD. AR SUBMITTED THAT THIS ISSUE IS NOW COVE RED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. V. ITO, 230 TAXMA N 309 (KAR) WHEREIN THE HONBLE HIGH COURT ALLOWED THE CLAIM AFTER CONS IDERING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY, 322 ITR 272 (SC) . 8. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE CIT(APPEALS) HAS RELIED ON THE JUDGMENT OF THE HONBLE SUPREME C OURT IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA) AND THEREFORE THERE IS NO ERROR IN THE FINDING OF THE CIT(APPEALS), WHO HAS F OLLOWED THE JUDGMENT OF THE HONBLE SUPREME COURT. HE RELIED UPON THE ORDE R OF THE CIT(APPEALS). 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD, WE NOTE THAT THE CIT(A) HAS DENIED THE CLAI M OF DEDUCTION U/S. ITA NOS.816 & 817/BANG/2015 PAGE 4 OF 7 80P(2)(A)(I) IN RESPECT OF INTEREST EARNED ON FIXED DEPOSITS BY PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA) . IT IS PERTINENT TO NOTE THAT THERE IS NO DISPUTE AS REGARDS THE FACT THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY AND THE INTEREST EARNED BY THE ASSESSEE IS FROM THE FIXED DEPOSITS WHICH IS THE DISPUTE IN THE PRESENT APPEALS. THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER AN IDENTICAL ISSUE ON T HE ALLOWABILITY OF DEDUCTION U/S. 80P IN RESPECT OF INTEREST ON DEPOSI TS. THE HONBLE HIGH COURT HAS DECIDED THE ISSUE IN PARAS 8 TO 10 AS UND ER:- 8. THEREFORE, THE WORD ATTRIBUTABLE TO IS CERTAI NLY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING, TH EY HAVE USED THE EXPRESSION DERIVED FROM. THE EXPRESSION ATTR IBUTABLE TO BEING OF WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIP TS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINE SS. A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINE SS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS P ROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS M EMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT I MMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEE P THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAID INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIE S TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE B USINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABL E TO THE ACTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTI ON 80P OF THE ACT. ITA NOS.816 & 817/BANG/2015 PAGE 5 OF 7 9. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S. TOTGARS CO-OPERATIVE SALE SOCIETY LTD., ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE-COOPERATIVE SOCIETY, APAR T FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALS O IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKE TING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS M EMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT-TE RM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE-SOCIETY WAS A LIABILITY AND IT WAS SHOWN I N THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXT ENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UND ER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS O F THE SAID CASE, THE APEX COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTEREST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. FURTHER THEY MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. THEREFORE IT IS CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVE STED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILIT Y IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFI TS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LE NDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTERES T. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED I N TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPORTED IN (2011) 200 TAXMAN 220/12. IN THAT VIEW OF THE MATTER, THE ORD ER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCOR DINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LAW I S ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HEN CE, WE PASS THE FOLLOWING ORDER: ITA NOS.816 & 817/BANG/2015 PAGE 6 OF 7 APPEAL IS ALLOWED. THE IMPUGNED ORDER IS HEREBY SET ASIDE. PARTIES TO BEAR THEIR OWN COST. 10. IT IS CLEAR THAT THE HONBLE JURISDICTIONAL HIG H COURT HAS DECIDED THIS ISSUE AFTER CONSIDERING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY (SUPRA) . RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HI GH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) , WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CONSEQUENT LY THE CLAIM OF DEDUCTION U/S. 80P IS ALLOWED IN RESPECT OF INTERES T ON FIXED DEPOSITS. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) (VIJAY PAL RAO ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 10 TH NOVEMBER, 2015. /D S/ ITA NOS.816 & 817/BANG/2015 PAGE 7 OF 7 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.