Appeal details
Counselvise Citation
[2014] 140 COUNSELVISE.COM (IT) 75095 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 9 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-03-2014
Appeal Filed By
Department
Bench Allotted
B
Assessment Year
2005-2006
Appeal Filed On
30-05-2011
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA ( ) BEFORE , /AND . , ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] ! ! ! ! /ITA NO.854/KOL/2009 '# $% / ASSESSMENT YEAR : 2005-06 ( &' / APPELLANT ) - ' - ( ()&' /RESPONDENT) SAGAR GRAMIN BANK C.I.T., XIV, KOLKATA (PRESENTLY MERGED WITH BANGIYA GRAMIN VIKASH BANK),KOLKATA (PAN:AAALB 0462 D) ! ! ! ! /ITA NO.814/KOL/2011 '# $% / ASSESSMENT YEAR : 2005-06 ( &' / APPELLANT ) - ' - ( ()&' /RESPONDENT) SAGAR GRAMIN BANK D.C.I.T., CIRCLE, (PRESENTLY MERGED WITH MURSHIDABAD BANGIYA GRAMIN VIKASH BANK),MURSHIDABAD (PAN:AAALB0462D) ! ! ! ! /ITA NO.819/KOL/2011 '# $% / ASSESSMENT YEAR : 2005-06 ( &' / APPELLANT ) - ' - ( ()&' /RESPONDENT) D.C.I.T., CIRCLE, MURSHIDABAD SAGAR GRAMIN BANK (PRESENTLY MERGED WITH BANGIYA GRAMINVIKASH BANK, MURSHIDABAD (PAN:AACAS 4912 N) ! ! ! ! /ITA NO.1771/KOL/2008 '# $% / ASSESSMENT YEAR : 2005-06 ( &' / APPELLANT ) - ' - ( ()&' /RESPONDENT) SAGAR GRAMIN BANK A.C.I.T., CIRCLE-4, (SINCE AMALGAMATED INTO KOLKATA BANGIYA GRAMIN VIKASH BANK),KOLKATA (PAN:AACAS4912N) &' * + / FOR THE ASSESSEE SOUMITRACHOWDHURY,ADVOCATE ()&' * + / FOR THE DEPARTMENT: SHRI VARINDER MEHTA, CIT(DR) ,' - * . /DATE OF HEARING : 06.03.2014 /$ * . /DATE OF PRONOUNCEMENT : 13.03.2014 0 / ORDER 2 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 ( ) , PER SHRI MAHAVIR SINGH, JM ITA NO.854/KOL/2009 (BY THE ASSESSEE): THIS APPEAL OF THE ASSESSEE IS ARISING O UT OF REVISION ORDER PASSED U/S. 263 OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) BY CIT- KOLKATA, XIV IN M.NO.CIT/KOL/XIV/263/SGB/2008-09/5356-58 DATED 24.0 3.2009. ASSESSMENT WAS FRAMED BY ACIT-CIRCLE-41/KOLKATA U/S 143(3) OF THE ACT FOR A. YR. 2005-06 VIDE ITS ORDER DATED 13.12.2007. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSE E IS AGAINST THE REVISION ORDER PASSED BY CIT, KOLKATA-XIV U/S 263 OF THE ACT FOR THE REASON THAT THE AO FAILED TO EXAMINE CAREFULLY THE ALLOWANCES OF BROUGHT FORWARD LOSSES TO BE SET OFF. FOR THIS, ASSESSEE HAS RAISED FOLLOWING THREE GROUNDS:- 1. FOR THAT ON THE FACTS OF THE CASE THE LEARN ED CIT-XIV WAS WRONG IN PASSING THE ORDER UNDER SECTION 263 OF THE I.T.ACT WITHOUT CONSIDERIN G THE WRITTEN SUBMISSION FILED BY THE ASSESSEE BANK AT THE TIME OF HEARING, THEREFORE, TH E ORDER PASSED BY THE CIT-XIV IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 2.FOR THAT PM THE FACTS OF THE CASE THE :LEARNED CI T-XIV WHILE PASSING ORDER UNDER SECTION 263 HAS NOT CONSIDERED THE FACT THAT THE SET OFF OF BROUGHT FORWARD LOSSES OF RS.33.36 CRORES WERE DULY CONSIDERED BY THE A.O. AT THE TIME OF MAK ING ASSESSMENT UNDER SECTION 143(3), THEREFORE THE ORDER PASSED UNDER SECTION 263 IS COM PLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE THE LEARNED CI T-XIV WAS WRONG IN NOT CONSIDERING THE FACT THAT THE A.O. HAS DULY CONSIDERED AND VERIFIED ALL THE EVIDENCES AND THEREAFTER HE HAS SET OFF CARRY FORWARD LOSSES, THEREFORE, THE CIT WAS WR ONG IN PASSING THE ORDER UNDER SECTION 263 OF THE I.T.ACT WHICH IS COMPLETELY ARBITRARY, U NJUSTIFIED AND ILLEGAL. 3. BRIEFLY STATED FACTS ARE THAT FOR THE R ELEVANT ASSESSMENT YEAR 2005-06 ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT NIL ON 30.08.2005. ASSESSEE IS A COOPERATIVE SOCIETY DOING BANKING BUSINESS AND HAD FILED COMPUT ATION OF INCOME ALONG WITH RETURN OF INCOME IN WHICH CLAIMED EARLIER YEARS CARRY FORWAR D BUSINESS LOSS AT RS.23,31,68,483/- AND ALSO CLAIMED CURRENT YEARS LOSS AT RS.2,71,43,005/ -. AO I.E. ACIT, CIRCLE-41, KOLKATA FRAMED ASSESSMENT U/S 143(3) OF THE ACT AFTER GIVING DETAI L HEARINGS AND AFTER VERIFYING EVIDENCES, EXPLANATIONS AND REPORTS AND CROSS-REFERENCES. THIS FACT IS MENTIONED IN ASSESSMENT ORDER DATED 13.12.2007 AND THE RELEVANT PARA READS AS UNDER:- 2. SHRI P.KAPOOR, A/R HAS REPRESENTED THE CASE O N BEHALF OF THE ASSESSEE. NECESSARY DETAILS HAVE BEEN CALLED FOR AND VERIFIED. EVIDENCE S, EXPLANATIONS, REPORTS AND CROSS- REFERENCES HAVE BEEN CONSIDERED AND ASSESSMENT IS B EING MADE ACCORDINGLY. 3 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 FINALLY, AO ASSESSED TOTAL ASSESSABLE INCOME AT RS. 21,14,74,259/- BY MAKING ADDITION ON NON- SLR INCOME AT RS.27,46,27,553/-. AO ALSO ALLOWED AD JUSTMENT OF LOSSES, AS NOTED ABOVE, AT RS.26,03,11,535/- AND THEREBY FINALLY ASSESSED THE LOSSES TO BE CARRIED FORWARD AT RS.4,88,37,276/-. SUBSEQUENTLY, CIT-XIV, KOLKATA IS SUED SHOW CAUSE NOTICE DATED 23.12.2008 AND THE RELEVANT PART OF THE SHOW CAUSE NOTICE READ S AS UNDER:- IN THE IMPUGNED ASSESSMENT COMPLETED U/S 143(3) ON 13-12-2007 AFTER COMPUTING THE TOTAL INCOME AT RS.21,14,74,259/-, THE AO HAS ALLOW ED ADJUSTMENT AS PER COMPUTATION OF RS.260311535/-, COMPUTING THE ASSESSED LOSS TO BE C ARRIED FORWARD AT RS.48837276/-. THE LOSS OF THE SAID EARLIER ADJUSTMENT, CONSISTS OF TW O PART, VIZ. RS.233168483/- FOR EARLIER YEAR AND RS.27143052/- FOR THE CURRENT YEAR. THE ADJUSTM ENT OF THE CURRENT YEARS LOSS ON THE FACT OF THE COMPUTATION MADE BY THE AO IS PATENTLY WRONG AND ERRONEOUS WHICH IS DETRIMENTAL TO THE INTERESTS OF REVENUE. RS.3336160 00/- FOR THE AY 1998-99 WAS THE CLAIM OF LOSS FOR EARLIER YEARS WHICH CANNOT, IN ANY CASE, B E SET OFF AGAINST CURRENT YEARS INCOME. HENCE, THERE IS NO EARLIER YEARS LOSS ELIGIBLE FOR SET OFF AGAINST CURRENT YEARS INCOME OF RS.211474259/- AS MADE IN THE ORDER. UNDER THE CIRC UMSTANCES, THE SET OFF OF RS.260311535/-IN TOTALITY AS MADE IN THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THIS SHOW CAUSE NOTICE IS REPRODUCED IN THE REVISI ON ORDER PASSED BY CIT, KOLKATA U/S 263 OF THE ACT. CIT, KOLKATA-XIV VIDE ITS ORDER DATED 24.0 3.2009 FOR THE REASON THAT AO HAS FAILED TO EXAMINE THE ISSUE WITH REFERENCE TO ASSESSMENT RECO RDS OF ASSESSEE AND THE RELEVANT LEGAL PROVISIONS OF THE ACT. FOR THIS, HE OBSERVED IN PA RAS 9 AND 10 AS UNDER:- 9. UPON CAREFUL CONSIDERATION OF THE MATTER WITH REFERENCE TO SUBMISSIONS OF THE AR AND FACTS OF THE CASE AS DISCUSSED ABOVE, IT IS EVIDENT THAT THE IMPUGNED ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE IN SO FAR AS THE SET OFF OF LOSSES OF RS.260311535/- IS CONCERNED. THE AO HAS FAILED TO C AREFULLY EXAMINE THIS ISSUE WITH REFERENCE TO ASSESSMENT RECORDS OF THE ASSESSEE AND THE RELEVANT LEGAL PROVISIONS OF THE ACT. FAILURE ON THE PART OF THE AO TO MAKE PROPER SCRUTI NY OF THE MATTER HAS RESULTED IN UNDER ASSESSMENT OF INCOME AND CONSEQUENT LOSS TO THE REV ENUE. HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES VS ADDL.CIT (99 ITR 37 5) HAS HELD THAT OMISSION TO MAKE FURTHER ENQUIRY IS AN ERROR, IF IN THE FACTS AND CI RCUMSTANCES OF THE CASE, FURTHER ENQUIRIES WERE REQUIRED TO BE MADE BY THE ASSESSING OFFICER B EFORE ACCEPTING THE STATEMENT MADE BY THE ASSESSEE IN THE RETURN. FURTHER, IT HAS BEEN HE LD IN THE CASE OF SMT.RENU GUPTA VS CIT (2008) 301, ITR, 45 (RAJ) THAT THE CIT MAY CONSIDER AN ORDER OF THE AO TO BE ERRONEOUS NOT ONLY IF THERE IS SOME APPARENT ERROR OF REASONING O R OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO TYPED ORDER WHICH SIMPLY, ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILED TO MAKE ENQUIRIES WHICH ARE C ALLED FOR IN THE CIRCUMSTANCES OF THE CASE. HONBLE HIGH COURT HAS FURTHER HELD THAT IT I S NOT NECESSARY FOR THE COMMISSIONER OF INCOME TAX TO MAKE FURTHER ENQUIRIES BEFORE CANCELI NG THE ASSESSMENT ORDER OF THE AO. THE RATIO OF BOTH THE ABOVE DECISIONS SQUARELY APPLIES TO THE FACTS OF THIS CASE ALSO. 10. IN VIEW OF THE DISCUSSION MADE HEREIN ABOVE, I AM SATISFIED THAT ON THE ISSUES RAISED IN THE SHOW CAUSE NOTICE U/S 263 DATED 23.12.008, THE IMPUGNED ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. FOR THE REA SONS IN THE FOREGOING PARAS, I, THEREFORE, SET ASIDE THE IMPUGNED ASSESSMENT WITH THE DIRECTIO N TO THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT ORDER AFTER MAKING PROPER SCRUTINY OF TH E CASE ON THE ISSUES AS IN THE AFORESAID SHOW CAUSE NOTICE. NEEDLESS TO SAY THAT THE ASSESSI NG OFFICER SHALL GRANT THE ASSESSEE SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEAR D. 4 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 AGGRIEVED AGAINST THE REVISION ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE GONE THROUGH THE REVISION ORDER AS W ELL AS THE CONTENTS OF SHOW CAUSE NOTICE AND GATHERED THAT THERE IS NO BASIS FOR THE ALLEGATION THAT THE LOSS COMPUTED BY AO FOR ALLOWANCE AND TO BE CARRIED FORWARD IS NOT ALLOWABLE. THERE I S NO BASIS IN THE ORDER OF CIT HOW ASSESSEE IS NOT ENTITLED TO THE LOSS OF RS.26,03,11,535/-. HE HAS ONLY MENTIONED THAT LOSS OF THE EARLIER YEARS CONSISTING OF TWO PARTS I.E. RS.23,31,68,483/ - IT PERTAINS TO EARLIER YEARS AND RS.2,71,43,052/- PERTAINS TO CURRENT YEAR. CIT HAS MENTIONED AGAINST THE ASSESSMENT ORDER AS WELL AS IN SHOW CAUSE NOTICE THAT ADJUSTMENT OF CUR RENT YEARS LOSS ON THE BASIS OF COMPUTATION MADE BY AO IS PATENTLY WRONG AND ERRONEOUS BUT HOW. THERE IS NOTHING ON RECORD. CIT HAS ONLY REFERRED THE MATTER FOR THE REASON THAT WHILE FRAMING ASSESSMENT AO HAS NOT CAREFULLY EXAMINED THIS ISSUE WITH REFERENCE TO THE ASSESSMEN T RECORDS OF THE ASSESSEE. IT MEANS THAT CIT HAS FAILED TO POINT OUT HOW THE ORDER OF AO. I.E. A SSESSMENT ORDER PASSED U/S 143(3) OF THE ACT IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. NOW DURING THE COURSE OF HEARING WHEN THE QUERY WAS PUT TO CIT(DR) THAT WHAT IS THE BASIS OF STATEMENT MADE BY CIT IN THE REVISION ORDER THAT CARRY FORWARDED THE LOSS PE RTAINS BEYOND 8 YEARS, HE COULD NOT ADDRESS THE BASIS. THE QUESTION IS WHETHER REVISION U/S 263 (1) CAN BE MADE. FOR MAKING A VALID ORDER U/S 263(1) OF THE ACT, IT IS ESSENTIAL THAT CIT HAS TO RECORD AND EXPRESS FINDINGS TO THE EFFECT THAT THE ORDER SOUGHT TO BE REVISED IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE FACTUAL MATRIX IN THE PRESENT CASE STAIRS IN THE FA CE OF THE RECORD IN THE LIGHT OF LEGAL REQUIREMENT OF SATISFACTION THAT FOR INVOKING POWER U/S 263 OF THE ACT IS LACKING. THE REQUIREMENT OF SATISFACTION FOR INVOKING POWER U/S 263 OF THE ACT NECESSARILY PRE-SUPPOSES THE STATUTORY SATISFACTION THOUGH THERE IS SOME ERROR WITH REGARD TO THE COMPLETED ASSESSMENT ORDER PASSED BY AO I.E. ASSESSMENT ORDER HAS TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. A PLAIN LANGUAGE OF SECTION 263 OF THE ACT IS MORE THAN ABUNDANTLY CLEAR THAT IT DOES NOT HAVE ERROR FOR A MISTAKE THAT SHOULD INDUCE CIT TO RESTORE TO EXERCISE THE POWER U/S 263 OF THE ACT. WHETHER THE FACTUAL MATRIX SHOWS THAT IT I S A MARGINAL SITUATION, THEN IT IS NOT PROPER ON THE PART OF CIT TO RESTORE TO REVISIONAL PROCEEDING S U/S 263 OF THE ACT. IN ANY EVENTUALITY, THE CIT HAS TO REACH A PRIMA FACIE CONCLUSION THAT ASSE SSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. AS IN THE P RESENT CASE, WE CANNOT COME TO A CONCLUSION ANY BASIS FOR NOT ALLOWING CARRY FORWARD BUSINESS L OSS OF EARLIER YEAR AS WELL AS CURRENT YEAR, THEN HOW CIT REACHED TO A CONCLUSION THAT ASSESSMEN T ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. IN THE ABSENCE OF THE A BOVE, WE QUASH THE REVISION ORDER PASSED BY CIT U/S 263 OF THE ACT. THE APPEAL OF ASSESSEE IS A LLOWED ON THIS ISSUE. 5 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 5. THE CONNECTING APPEALS I.E. ITA NO.814/ KOL/2011 BY THE ASSESSEE AND ITA NO.819/KOL/2011 BY THE REVENUE ARE ARISING OUT OF T HE ABOVE REVISION ORDER, BEING CONSEQUENTIAL TO REVISION ORDER. WE DISMISS BOTH TH E APPEALS AS INFACTUOUS AS WE HAVE ALREADY QUASHED THE REVISION ORDER. ITA NO.1771/KOL/2008 (BY THE ASSESSEE): 6. THIS APPEAL OF THE ASSESSEE IS ARISING OU T OF ORDER OF CIT- (A)-XII, KOLKATA IN APPEAL NO.624/CIT(A)-XII/ACIT.CIR-41/07-08 DATED 30.06.200 8. ASSESSMENT WAS FRAMED BY ACIT- CIRCLE-41/KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR A.YR. 2005-06 VIDE ITS ORDER DATED 13.12.2007. 7. THE ONLY ISSUE IN THIS APPEAL OF ASSESSE E IS IN REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN DISALLOWING THE CLAIM OF EXEMPT ION U/S 80P OF THE ACT IN RESPECT TO RECEIPTS OF NON-SLR AMOUNTING TO RS.27,46,27,553/-. 8. BRIEFLY STATED FACTS ARE THAT ASSESSEE WAS ESTABLISHED AND INCORPORATED ON 24.09.1980 BY THE CENTRAL GOVT. WITH NOTIFICATION IN THE OFFICIAL GAZETTE TO FUNCTION AS A REGIONAL RURAL BANK IN BENGAL. THE BANK HAS BEEN FUNCTIONING AS SUCH DU RING THE LAST 25 YEARS. ASSESSEE IS A COOPERATIVE SOCIETY RUNNING A GRAMIN BANK. ASSESSEE CLAIMED RECEIPT ON ACCOUNT OF NON-SLR FUNDS AS EXEMPTION U/S 80P OF THE ACT FOR AN AMOUNT OF RS.27,46,27,553/-. AO DISALLOWED THIS DEDUCTION AND TREATED THE RECEIPTS AS INCOME FROM N ON-ELIGIBLE BUSINESS. 9. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFOR E CIT(A), WHO CONFIRMED THE ACTION OF AO AND THE RELEVANT OBSERVATIONS IN PARA-VIII READS AS UNDER :- VIII. IN THE LIGHT OF THE ABOVE ANALYSIS, THE RE AL ISSUES IN THIS APPEAL CAN BE ANALYSED. DEDCUTION U/S 80P(2)(A)(I) CLAIMED BY THE RRB IS IN THE NATURE OF INCOME OF A SPECIFIED NATURE (NET INCOME, AND NOT GROSS RECEIPTS) LIKE DE DUCTION U/S 80-1IA/80-IB FROM SPECIFIED UNITS OR SPECIFIED BUSINESS. IT IS NOT IN THE NATUR E OF DEDUCTION U/S 80HHC AVAILABLE TO AN ASSESSEE AS A PERSON. NEVERTHELESS, WHAT IS IMPORTA NT IS THAT FIRST THE INCOME OF THE NATURE ELIGIBLE FOR DEDUCTION U/S 80P IS TO BE IDENTIFIED AND QUANTIFIED. IT IS NOT EVERY INCOME OF AN RRB HOWSOEVER AND WHERE SO EVER EARNED THAT WILL BE ELIGIBLE FOR DEDUCTION U/S 80P. ALTHOUGH SECTION 14A IS NOT DIRECTLY APPLICABLE TO THE AFFAIRS OF THE RRB SINCE IT DOES NOT CLAIM THAT ITS ENTIRE INCOME IS NOT CHARGEABLE TO T AX, YET, RUDIMENTARY PRINCIPLES OF ACCOUNTANCY DICTATE MATCHING OF REVENUES AND EXPENS ES. THIS IS TO SAY, REVENUES AND EXPENSES HAVE TO BE SEGREGATED FOR ACTIVITIES THAT ARE PURELY COMMERCIAL OR MERCENARY ACTIVITIES OF BANKING FROM THOSE ACTIVITIES THAT FU RTHER THE OBJECTIVES OF THE RRB ACT. THE SURPLUS FROM ACTIVITIES IN FURTHERANCE OF THE OBJEC TIVES OF THE RRB ACT ARE ELIGIBLE FOR DEDUCTION U/S 80P. THE SURPLUS EARNED FROM MEETING THE CRR AND SLR REQUIREMENTS IS NORMAL BUSINESS INCOME AND CAN BE CONSIDERED FOR DE DUCTION U/S 80P. HOWEVER, REVENUES EARNED FROM DIVERTING THE FUNDS OF THE NOTIFIED AR EA AFTER MEETING THE CRR AND SLR REQUIREMENTS TO OUTSIDE STAND ON DIFFERENT FOOTING. IN VIEW OF THE DISCUSSION SO FAR, IT IS CLEAR THAT THIS ACTIVITY IS NOT MANDATED BY THE PAR LIAMENT. THE PARLIAMENT DID NOT ENACT THE 6 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 REGIONAL RURAL BANKS ACT, 1976 TO CREATE THE RRBS T O IMPOVERISH THE RURAL ECONOMY AND TO SUCK OUT THEIR MEAGER FUNDS. SECTION 18(1) OF TH E RRB ACT IS AN ENABLING PROVISION TO IMPLEMENT THE PROVISIONS OF SECTION 18(2), READ WIT H THE PREAMBLE OF THE RRB ACT. FOR THIS, CIT(A) HAS ALSO RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF BEHARI LAL JAISWAL AND ORS. VS CIT & ORS. 217 ITR 746. AGG RIEVED ASSESSEE CAME IN APPEAL BEFORE US. 10. AT THE OUTSET, THE LD. COUNSEL FOR THE AS SESSEE STATED THAT THE ISSUE IS SQUARELY COVERED IN ASSESSEES FAVOUR IN RESPECT OF INTEREST EARNED ON DEPOSITS OF NON-SLR FUNDS U/S 80P(2)(A)(I) OF THE ACT. FOR THIS, HE RELIED ON THE DECISION OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS GULSHAN MERCANTILE URBAN CO-OPERATIVE BANK LTD, 214 TAXMAN 510 (ALL) AND CIT VS MUZAFFARNAGAR DISTRICT CO-OPERATIVE BANK LTD. 214 T AXMAN 498 (ALL) AND ON THE DECISION OF HONBLE HIMACHAL HIGH COURT IN THE CASE OF CIT VS H IMACHAL GRAMIN BANK 35 TAXMANN.COM 461(HP). ON THE OTHER HAND, LD. CIT(DR) COULD NOT C ONTROVERT THESE JUDGEMENTS AND HE HAS NOT BROUGHT TO OUR KNOWLEDGE ANY ADVERSE JUDGEMENTS ON THE ISSUE. 11. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE BANK HAS DEPLOYED TOTAL D EPOSITS INTO THREE TYPES OF INCOME EARNING INSTRUMENTS I.E. CRR, SLF FUNDS AND NON-SLR FUNDS. THE INVESTMENTS OF THE ABOVE FUNDS ARE MADE AS PER RRB ACT, 1976 AND VIOLATIONS OF THE ACT HAVE BEEN DETERMINED AS SLR FUND AND NON-SLR FUND. INCOME HAS BEEN DETERMINED ACCORDING TO THE FUNDS DEPLOYED AS PER RRB ACT. WE HAVE GONE THROUGH THE ABOVE CASE LAWS AND FIND T HAT WHETHER INCOME IS ATTRIBUTABLE TO SLR OR NON-SLR FUNDS WOULD NOT MAKE ANY DIFFERENCE FOR THE PURPOSE OF QUANTIFYING DEDUCTION ON INTEREST BY COOPERATIVE BANK U/S. 80P(2)(A)(I) OF T HE ACT AS DEPOSITS OF SURPLUS IDLE MONEY AVAILABLE FROM WORKING CAPITAL I.E. RESERVES, EXCES S COLLECTION OF INTEREST AND OTHER INCOMES ALL ATTRIBUTABLE TO BANKING BUSINESS. THEREFORE, THE IN TEREST EARNED ON NON-SLR FUNDS WILL ALSO QUALIFY FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. MUZAFFARNAGAR DISTRICT CO-OPERATIVE BANK LT D. (2013) 214 TAXMAN 498 (ALL) RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF BIHAR STATE COOPERATIVE BANK LTD. VS. CIT (1960) 39 ITR 114 (SC) AND OF HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. GOA URBAN COOPERATIVE BANK LTD., (TAX APPEAL NOS. 6 & 8 OF 2005, AND IN TAX APPEAL NO. 54 OF 2008, DECIDED ON 15.07.2009) HAVE HELD THAT INTERE ST EARNED OUT OF DEPOSITS OF SURPLUS FUND AND INTEREST UEARNED ON SLR OR NON-SLR FUNDS WILL QUALI FY FOR DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. THE RELEVANT PARAS 8, 9 AND 10 READS AS UNDER : 8. THE SUPREME COURT IN BIHAR STATE CO-OPERATIVE B ANK LTD. (SUPRA) EXPLAINED IN PARA 12 AND 13 THAT THE INTEREST EARNED OUT OF DEPOSITS OF SURPLUS FUND HAS TO BE TREATED AS 7 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 8 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 9 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80P(2)( A)(I) OF THE ACT ON INTEREST EARNED ON NON-SLR FUNDS. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 12. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.854/ K/200 AND ITA NO.1771/K/2008 ARE ALLOWED, ITA NO. 814/K/2011 BY ASSESSEE AND ITA NO. 819/K/2011 BY REVENUE ARE DISMISSED BEING INFRUCTUOUS. ORDER PRONOUNCED IN THE COURT ON 13.03.2014 SD/- SD/- [ ABRAHAM P.GEORGE ] [ MAHAVIR SINGH ] ACCOUNTANT MEMBER JUDICIAL MEMBER ( . . . . ) DATE: 13.03.2014 R.G.(.P.S.) 10 ITA NO.854/K/2009, 814/K/2011, 819/K/2011 & 1771/K/2008 SAGAR GRAMIN BANK , AY:2005-06 0 * ( 1$2 - COPY OF THE ORDER FORWARDED TO: 1. SAGAR GRAMIN BANK (SINCE AMALGAMATED INTO BANGIYA G RAMIN VIKASH BANK), 190, ULTADANGA MAIN ROAD, KOLKATA-700067. 2 SAGAR GRAMIN BANK (PRESENTLY MERGED WITH BANGIYA GR AMIN VIKASH BHAWAN), BMC HOUSE, NH-34, CHAUNPUR, BERHAMPORE, MURSHIDABAD 742 101. 3. THE A.C.I.T., CIRCLE-41, KOLKATA. 4 . THE CIT-XIV, KOLKATA, 5 . THE CIT(A)-XII, KOLKATA 6. CIT(DR), KOLKATA BENCHES, KOLKATA. ) ( / TRUE COPY, 0 ', / BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES
