M/s Primary Co-operative Agriculture and Rural Development Bank , Bellary Dist V. Income Tax Officer ward-2, Bellary

ITA 821/BANG/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8221 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G S PRASHANT
• Keywords: Opportunity of being heard; Principle of natural justice; Source of fund
• Section: 234B; 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 821/BANG/2017 ASSESSMENT YEAR : 2012 - 13 M/S. PRIMARY CO-OPERATIVE AGRICULTURE & RURAL DEVELOPMENT BANK, SADASIVANAGAR, SIRUGUPPA POST. BELLARY DIST. 583121. PAN: AAALP 0180A VS. THE INCOME TAX OFFICER, WARD 2, BELLARY. APP EL L ANT RESPONDENT APP ELL ANT BY : SHRI G.S. PRASHANT, CA RE SPONDENT BY : SHRI VIKAS K. SURYAWANSHI, ADDL.CIT(D R)(ITAT), BENGALURU. DATE OF HEARING : 18 . 12. 201 8 DATE OF PRONOUNCEMENT : 04 . 01 . 201 9 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 3/2/2017 OF CIT(APPEALS), GULBARGA, RELATING TO ASSESSMENT Y EAR 2012-13. 2. THE ASSESSEE WHICH IS A CO-OPERATIVE SOCIETY HA S CHALLENGED THE ACTION OF THE REVENUE AUTHORITIES IN NOT ALLOWING D EDUCTION CLAIMED BY THE ASSESSEE U/S 80P(2)(A)(I) OF THE ACT ON A SUM OF R S.12,17,900/- WHICH WAS ITA NO. 821/BANG/2017 PAGE 2 OF 6 INTEREST INCOME DERIVED FROM DEPOSIT OF SURPLUS FUN DS IN FIXED DEPOSITS IN STATE BANK OF INDIA BELLARY. THE DEDUCTION CALMED BY THE ASSESSEE WAS NOT ALLOWED BY THE REVENUE AUTHORITIES FOR THE REAS ON THAT THE INCOME WHICH WAS CLAIMED AS DEDUCTION WAS INTEREST INCOME WHICH WAS EARNED BY THE ASSESSEE ON DEPOSITS AND IN VIEW OF THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD., 83 TAXMANN.COM 140 INTEREST INCOME HAD TO BE REGARDED AS INCOME FROM OTHER SOURCES. SINCE INTEREST INCOME WAS NOT INCOME DERIVED FROM THE BUSINESS OF CO-OPERATIVE SOCIETY, THE DEDUCTION CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED. 3. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL RAISING THE FOLL OWING GROUNDS OF APPEAL:- 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR A S THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTA NCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D ON TOTAL INCOME OF RS.12,17,900/- AS AGAINST THE RETURNED IN COME OF RS. NIL UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN LAW I N DENYING THE DEDUCTION CLAIMED BY THE APPELLANT FOR A SUM OF RS.12,17,900/- UNDER SECTION 80P(2)(A)(I) OF THE AC T UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE AUTHORITIES BELOW ERRED IN NOT APPRECIATING THE FACT THAT INTEREST EARNED FROM FIXED DEPOSITS MADE IN OT HER BANKS, IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE THE APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80P(2)(A)(I) OF THE ACT UNDER THE FACTS OF THE CASE. ITA NO. 821/BANG/2017 PAGE 3 OF 6 RELIANCE IS PLACED ON THE DECISION OF THE JURISDICT IONAL HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CRED IT COOPERATIVE LTD. VS. ITO, REPORTED IN 230 TAXMAN 30 9. 5. THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THE FACT THAT THE DEDUCTION UNDER SECTION 80P(2)(A)(I) IS AP PLICABLE TO THE APPELLANT BANK, WHETHER SUCH FUNDS CONSTITUTED THE OPERATIONAL INCOME OF THE APPELLANT OR NOT UNDER THE FACTS OF T HE CASE. RELIANCE IS PLACED ON THE DECISION OF THE SUPREME C OURT IN THE CASE OF CIT VS. KARNATAKA STATE COOPERATIVE APEX BA NK, REPORTED IN 251 ITR 194. 6. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT IF THE SURPLUS FUNDS NOT REQUIRED IMMEDIATELY FOR BUSINESS ACTIVITY BY THE APPELLANT BANK ARE INVESTED IN FIXED DEPOSITS, THEN THE INTEREST ON SUCH DEPOSITS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. RELIANCE IS PLACED ON THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE APPELLANT'S OWN CASE FOR THE ASSESSMENT YEAR 2013-14 IN ITA NO. 2307/BANG/2016, DATED 27.02.2017. 7. THE AUTHORITIES BELOW OUGHT TO HAVE APPRECIATED THAT THE APPELLANT IS A PRIMARY CO-OPERATIVE AGRICULTURAL AN D RURAL DEVELOPMENT BANK AS PER SECTION 80P(4) OF THE ACT A ND THEREFORE THE RATIO OF THE DECISION OF THE SUPREME COURT IN T HE CASE OF TOTGARS CO-OPERATIVE SALES SOCIETY LIMITED DO NOT A PPLY TO THE APPELLANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE APPELLANT DENIES ITSELF LIABLE TO BE LEVIED TO INTEREST UNDER SECTION 234B OF THE ACT AND FURTHER THE COMPU TATION OF INTEREST WAS NOT PROVIDED TO THE APPELLANT AS REGAR D TO THE RATE, PERIOD AND METHOD OF CALCULATION OF INTEREST UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. WITHOUT PREJUDICE, THE INTEREST UNDER SECTION 23 4B IS NOT LEVIABLE AND OUGHT TO HAVE BEEN WAIVED ON THE FACTS OF THE CASE. 10. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELET E OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. ITA NO. 821/BANG/2017 PAGE 4 OF 6 11. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPEL LANT PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTIC E AND EQUITY. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNE D AR RELIED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO 230 TAXMAN 309 (KARN) WHEREIN THE HONBLE KARNATAKA HIGH COURT CONSIDERE D THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF THE TOTGARS CO- OPERATIVE SALES SOCIETY (SUPRA) AND HELD THAT INTEREST INCOME IN RESPECT OF TEMPORARY PARKING OF OWN SURPLUS FUNDS NOT IMMEDIAT ELY REQUIRED IS ELIGIBLE FOR DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. THE LEAR NED DR RELIED ON A SUBSEQUENT DECISION OF THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF PCIT VS. TOTGARS CO-OPERATIVE SALE SOCIETY LTD. 395 ITR 611 (KARN) . 6. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT RELI ED BY THE LEARNED DR. THE FACTS OF THE CASE BEFORE THE HONBLE KARNA TAKA HIGH COURT IN THE DECISION CITED BY THE LEARNED DR WAS THAT THE HONB LE COURT WAS CONSIDERING A CASE RELATING TO ASSESSMENT YEARS 200 7-08 TO 2011-12. IN CASE DECIDED BY THE HONBLE SUPREME COURT IN THE CA SE OF THE VERY SAME ASSESSEE, THE ASSESSMENT YEARS INVOLVED WAS AY 1991 -92 TO 1999-2000. THE NATURE OF INTEREST INCOME FOR ALL THE AYS WAS I DENTICAL. THE BONE OF CONTENTION OF THE ASSESSEE IN AY 2007-08 TO 2011-12 WAS THAT THE DEDUCTION UNDER SECTION 80P(2) OF THE ACT IS CLAIME D BY THE RESPONDENT ASSESSEE UNDER SECTION 80P(2)(D) OF THE ACT AND NOT UNDER SECTION 80P(2)(A) OF THE ACT WHICH WAS THE CLAIM IN AY 1991 -92 TO 1999-2000. THE REASON GIVEN BY THE ASSESSEE WAS THAT IN AY 2007-08 TO 2011-12 INVESTMENTS AND DEPOSITS AFTER THE SUPREME COURT'S DECISION AGAINST THE ASSESSEE TOTGAR'S CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) , WERE SHIFTED FROM SCHEDULE BANKS TO CO-OPERATIVE BANK. U/S.80P( 2)(D) OF THE ACT, ITA NO. 821/BANG/2017 PAGE 5 OF 6 INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY OTHER CO-OPERATIVE SO CIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INTEREST OR DIVIDEND INCOME. THE CLAIM OF THE ASSESSEE WAS THAT CO-OPERATIVE BANK IS ESSENTIA LLY A CO-OPERATIVE SOCIETY AND THEREFORE DEDUCTION HAS TO BE ALLOWED U NDER CLAUSE (D) OF SEC.80P(2) OF THE ACT. THE HONBLE KARNATAKA HIGH C OURT FOLLOWED THE DECISION OF THE SUPREME COURT IN THE TOTGARS CO-OPERATIVE SALES SOCIETY LTD. (SUPRA) AND HELD THAT INTEREST EARNED FROM SCHEDULE BANK O R CO- OPERATIVE BANK IS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE THE PROVISIONS OF SEC.80P(2)(D) OF TH E ACT WAS NOT APPLICABLE TO SUCH INTEREST INCOME. IT IS THUS CLEAR THAT THE SOURCE OF FUNDS OUT OF WHICH INVESTMENTS WERE MADE REMAINED THE SAME IN AY 2007-08 TO 2011- 12 AND IN AY 1991-92 TO 1999-2000 DECIDED BY THE HO NBLE SUPREME COURT. THEREFORE, WHETHER THE SOURCE OF FUNDS WERE ASSESSEES OWN FUNDS OR OUT OF LIABILITY, WAS NOT SUBJECT MATTER OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE DECISION CITED BY THE L EARNED DR. TO THIS EXTENT THE DECISION OF THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA) STILL HOLDS GOOD. HENCE, ON THIS ASPECT, THE ISSUE SHOULD BE RESTORED BACK TO THE AO FOR A FRESH DECISION AFTER EXAMINING THE FACTS IN THE LIG HT OF THESE JUDGMENTS OF THE HONBLE APEX COURT RENDERED IN THE CASE OF THE TOTGARS CO-OPERATIVE SALE SOCIETY LTD. (SUPRA) AND OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CO-OPERATIVE LTD. (SUPRA) . 7. THE AO WILL AFFORD OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND FILING APPROPRIATE EVIDENCE, IF DESIRED, BY THE ASS ESSEE TO SUBSTANTIATE ITS CASE, BEFORE DECIDING THE ISSUE. ITA NO. 821/BANG/2017 PAGE 6 OF 6 8. IN THE RESULT, APPEAL BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 04 TH DAY OF JANUARY, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 04 TH JANUARY, 2019. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.