Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 1447 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 1 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-06-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
30-05-2016
Assessment Year
2008-2009
Appeal Filed On
15-04-2015
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI MANISH BORAD , ACCOUNTANT MEMBER ./ ITA NO S . 905 TO 908 /AHD/201 5 / ASSESSMENT YEAR : 2007 - 08 , 2008 - 09, 2009 - 10 & 2011 - 12 STATE BANK OF INDIA SUPERVISING OFFICIALS CO. OPERATIVE CREDIT SOCIETY LTD., 4 TH FLOOR, SBI BUILDING, LAL DARWAJA, BHADRA, AHMEDABAD PAN : AACAS 3596 E VS THE ITO, WARD 3 (4), AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL, AR REVENUE BY : SHRI A.R. REWAR, SR DR / DATE OF HEARING : 30 / 0 5 /201 6 / DATE OF PRONOUNCEMENT: 10 / 06 /201 6 / O R D E R PER R.P. TOLANI , JUDICIAL MEMBER: - THIS IS A BATCH OF FOUR APPEALS BY THE ASSESSEE INVOLVING COMMON GROUNDS. 2. GROUND NO.1 REGARDING RE - OPENING OF ASSESSMENT U/S 147 IS NOT PRESSED; HENCE DISMISSED. 3. OUT OF REMAINING GROUNDS, LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE FOLLOWING GROUND IS THE EFFECTIVE GROUND: - THAT THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED I N LAW AND ON FACTS, IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT OF RS.21,87,277/ - FOR ASSESSMENT YEAR 2007 - 08, RS.22,26,250/ - FOR ASSESSMENT YEAR 2008 - 09, RS.36,54,690/ - FOR ASSESSMENT YEAR 2009 - 10 & RS.41,85,500/ - FOR ASSESSMENT YEAR 2011 - 12 IN RESPECT OF INTEREST INCOME RECEIVED FROM SBI. ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 2 4 . BRIEF FACTS ARE THE ASSESSEE IS A CO - OPERATIVE CREDIT SOCIETY OF S UPERVISORY OFFICERS OF STATE BANK OF INDIA. A SURVEY WAS CARRIED OUT U/S 133A OF THE ACT O N 02.08.2013 ON THE PREMISES OF THE ASSESSEE. IT WAS FOUND THAT INTEREST WAS EARNED ON SBI FDRS AND ALSO RECEIVED INTEREST INCOME FROM THE LOAN ADVANCED TO MEMBERS. ASSESSEE WAS ALLOWED DEDUCTION U/S 80P(2 )(A)(I), WHICH A CCORDING TO ASSESSI NG OFFICER THE ASS ES SEE WAS NOT ELIGIBLE TO ASSESSEE. NOTICE U/S 147 WAS ISSUED, D URING THE COURSE OF RE - ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE ACT ON RS.21,87,277/ - (AY 2007 - 08) RECEIVED AS INTEREST ON FDS WITH SBI AS THE CONDITIONS LAID DOWN IN THE SAID SECTION WERE NOT SATISFIED. FURTHER, T HE FD AMOUNTS WERE EQUAL TO THE RESERVE FUND OF THE APPELLANT AND HENCE THE ASSESSEES CONTENTION THAT OPERATIONAL FUNDS WERE DEPOSITED WITH SBI WAS NOT ACCEPTABLE. THE DEPOSITS WERE FROM SURPLUS FUNDS. THE ASSESSING OFFICER RELYING ON THE JUDGMENT OF TH E HONBLE APEX COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY LTD, 322 ITR 283 (SC) DISALLOWED THE DEDUCTION U/S 80P(2)(A)(I) OF THE ACT OF RS.21,87,277/ - (AY 2007 - 08) IN RESPECT OF INTEREST INCOME RECEIVED FROM SBI AND TREATED THE SAME AS INCOME FROM OTHER S OURCES. 4 .1 DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDED THAT FUNDS DEPOSITED WITH SB I WERE NOT SURPLUS FUNDS AND THAT THE OPERATIONAL FUNDS WERE DEPOSITED WITH THE BANK. THE ASSESSEE FURTHER SUBMITTED THAT AN OVERDRAFT IS OBTAINED ON THESE FDS AND THE AMOUNT OF OVERDRAFT FACILITY IS USED FOR MEETING THE OBLIGATIONS OF GIVING INTEREST AND LOAN TO ITS MEMBERS WITHOUT RESORTING TO PREMATURE WITHDRAWAL OF FDS. THE OVERDRAFT WAS TO MAINTAIN LIQUIDITY AND OPTIMUM UTILIZATION OF FUNDS OF S O CIETY . A CCEPTING DEPOSITS FROM MEMBERS, GRANTING LOANS TO MEMBERS AND KEEPING OPERATIONAL FUNDS WITH BANK ARE INTEGRAL PART OF ITS OBJECTIVE OF PROVIDING CREDIT FACILITIES TO MEMBERS. THE INTEREST INCOME INCLUDING INTEREST RECEIVED ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 3 FROM MEMBERS AND ALSO ON FI XED DEPOSITS MADE WITH BANK FORMS PART OF ITS BUSINESS INCOME AND IS ATTRIBUTABLE TO ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. HENCE, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I) OF THE ACT OF RS.21,87,277/ - FOR ASSESSMENT YEAR 2007 - 08 IN RESPECT OF INTEREST INCOME RECEIVED FROM SBI. THE ASSESSEE CITED VARIOUS CASE LAWS IN SUPPORT OF ITS VARIOUS CONTENTIONS. 4 .2 LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN DENYING DEDUCTION U/S 80P(2)(A)(I) BY FOLLOWING OBSERVA TIONS: - FROM THE ABOVE IT IS CLEAR THAT DEDUCTION U/S 80 P IS AVAILABLE TO A CO - OPERATIVE SOCIETY ENGAGED IN ACTIVITIES LISTED IN (A)(I) TO (VII) ABOVE ON THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ONE OR MORE ACTIVITIES OF THE CO - OPERATIVE SOCIETY. THUS IT IS CLEAR THAT THE DEDUCTION IS AVAILABLE IN RESPECT OF PROFIT AND GAINS OF BUSINESS ATTRIBUTABLE TO ONE OR MORE BUSINESS ACTIVITIES OF THE SOCIETY I.E. DEDUCTION IS IN RESPECT OF INCOME WHOLLY ATTRIBUTABLE TO BUSINESS ACTI VITY OF THE SOCIETY. IN THE PRESENT CASE THE APPELLANT IS INTO BUSINESS OF PROVIDING CREDIT TO ITS MEMBERS. SBI IS NOT A MEMBER OF THE APPELLANT SOCIETY. FURTHER, PROVIDING LOANS AND ADVANCES TO BANKS AND EARNING INTEREST ON THE SAME IS NOT PART OF BUSINES S ACTIVITY OF THE APPELLANT. FURTHER, IN RESPECT OF CONTENTION OF THE APPELLANT THAT OPERATIONAL FUNDS HAVE BEEN KEPT AS FDS WITH BANK IS NOT BORNE BY FACTS. DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD RESERVE FUNDS TO THE TUNE OF RS. 3.06 CRORE S. THE FDS WITH THE BANK WERE FOR RS.3.15 CRORES WHICH IS ROUGHLY EQUAL TO THE RESERVE FUND THIS CLEARLY SHOWS THAT THE FDS WERE NOT FROM OPERATIONAL FUNDS BUT WERE FROM THE SURPLUS FUNDS AVAILABLE WITH THE APPELLANT. THUS WHAT HAS BEEN INVESTED IS SOCIETY 'S OWN FUNDS AND THEREFORE THE INCOME BY WAY OF INTEREST ARISING ON DEPOSITS IS A SOURCE OF INCOME APART FROM BUSINESS ACTIVITY OF THE APPELLANT. AS SAID ABOVE ALSO, EARNING INTEREST FROM BANK DEPOSITS IS NOT A BUSINESS ACTIVITY OF THE APPELLANT. THE HON'B LE APEX COURT HAS DEALT WITH THIS ISSUE IN TOTGARS CO - OPERATIVE SALE SOCIETY LTD. VS. ITO 322 1TR 283 (SC) AND HELD THAT INTEREST EARNED ON SURPLUS FUNDS NOT REQUIRED FOR BUSINESS IMMEDIATELY AND INVESTED IN SHORT TERM DEPOSITS IS REQUIRED TO BE TAXED AS I NCOME FROM OTHER SOURCES U/S.56 OF THE ACT HON'BLE APEX COURT OBSERVED AS FOLLOWS: - 'THE WORDS 'THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS' EMPHASIZE THAT THE INCOME IN RESPECT OF WHICH DEDUCTION IS SOUGHT MUST CONSTITUTE THE OPERATIONAL IN COME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY. IN THIS PARTICULARS CASE, THE EVIDENCE SHOWS THAT THE ASSESSEE - SOCIETY EARNS INTEREST ON FUNDS WHICH ARE NOT ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 4 REQUIRED FOR BUSINESS PURPOSE AT THE GIVEN POINT OF TIME. THEREFORE, ON THE FACTS AND C IRCUMSTANCES OF THIS CASE, IN OUR VIEW, SUCH INTEREST INCOME FALLS IN THE CATEGORY OF 'OTHER INCOME WHICH HAS BEEN RIGHTLY TAXED BY THE DEPARTME NT UNDER SECTION 56 OF THE ACT. THE RATIO OF THE ABOVE JUDGMENT IS SQUARELY APPLICABLE TO THE CASE OF THE APP ELLANT. WITH DUE REGARD TO RATIO OF JUDGMENTS RELIED UPON BY THE APPELLANT THE SAME ARE NOT APPLICABLE TO THE PRESENT CASE. IN VIEW OF DISCUSSION ABOVE AND RELYING ON THE JUDGMENT OF THE APEX COURT IN TOTGARS CO - OPERATIVE SALE SOCIETY (SUPRA), I HOLD THA T THE AO WAS JUSTIFIE D IN DISALLOWING DEDUCTION U/S 80P(2)(A)(I) OF THE ACT OF RS. 21,87,277/ - IN RESPECT OF INTEREST INCOME RECEIVED FROM SBI. ACCORDINGLY, I UPHOLD THE ADDITION OF RS. 21,87,277/ - MADE ON THIS ACCOUNT. THIS GROUND OF APPEAL IS DISMISSED. 4 .3 AGGRIEVED, THE ASSESSEE BEFORE US. 5 . LD COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ISSUE IN QUESTION AROSE IN ASSESSEES OWN CASE IN 263 PROCEEDINGS FOR ASSESSMENT YEAR 2010 - 11 BEFORE THE ITAT, WHICH BY ORDER DATED 31.03.2016 IN ITA NO.347/AHD/2014 ALLOWED THE APPEAL OF THE ASSESSEE BY FOLLOWING OBSERVATIONS: - 2.2 BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF HONBLE KARNATAKA HIGH COURT IN THE C ASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD VS. ITO, REPORTED IN [2015] 55 TAXMANN.COM 447 (KARNATAKA), WHEREIN IN SIMILAR SET OF FACTS, THE HONBLE KARNATAKA HIGH COURT HELD AS UNDER: - A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP THE SAI D 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 FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUS INESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE 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 ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 5 DEDUCTED FROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. [PARA 8] 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO E ARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. (PARA 10] IN THAT VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORIT IES DENYING THE BENEFIT OF DEDUCTION ON THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. [PARA 10] 2.3 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF THE REVENUE. IN THE PRESENT CASE, IT IS UNDISPUTED THAT THE AMOUNT IN QUESTION, WHICH WAS INVESTED IN SBI TO EARN INTEREST, WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS ALSO NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. THIS AMOUNT, WHICH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE, THE ASSESSEE HAD DEPOSITED THE MONEY IN SBI SO AS TO EARN INTEREST. THE SAID INTEREST INCOME WAS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT WAS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. 2.4 IN VIEW OF ABOVE LEGAL DISCUSSION, WE ARE NOT INCLINE D TO CONCUR WITH THE FINDINGS OF THE CIT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA), WE SET ASIDE THE ORDER OF THE CIT AND ALLOW THIS APPEAL OF T HE ASSESSEE. 5 . 1 THEREAFTER, THE LD. COUNSEL FOR THE ASSESSEE ADVERTED TO THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD VS. ITO, REPORTED IN [2015] 230 TAXMAN 309 (KAR), WHICH CLEARLY HELD AS UNDER: - 8. THEREFORE, THE WORD ATTRIBUTABLE TO IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING, THEY HAVE USED THE EXPRESSION DERIVED FROM. THE EXPRESSION ATTRIBUTABLE TO BEING O F WIDER IMPORT, THE SAID EXPRESSION IS USED BY THE ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 6 LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A COOPERATIVE SOCIETY WHICH IS CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO I TS MEMBERS, EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THEY CANNOT KEEP 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 FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FOR EARNING SUCH INTEREST INC OME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE 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 GROS S TOTAL INCOME UNDER SECTION 80P OF THE ACT. 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 ASS ESSEE - COOPERATIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RET AINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT - TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE - SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE, TO THAT EXTENT, SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE ACT OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF 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 C LEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 10. IN THE INSTANT CASE, THE AMOUNT WHICH WAS INVESTED IN BANKS TO EARN INTEREST WAS NOT AN AMOUNT DUE TO ANY MEMBERS. IT WAS NOT THE LIABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHICH IS IN THE NATURE OF PROFITS AND GAINS , WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO THE MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HAD DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKI NG AND THEREFORE IT IS LIABLE TO BE DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE ANDHRA PRADESH HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX III, HYDERABAD VS. ANDHRA PRADESH STATE COOPERATIVE BANK LTD., REPO RTED IN (2011) 200 TAXMAN 220/12. IN THAT ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 7 VIEW OF THE MATTER, THE ORDER PASSED BY THE APPELLATE AUTHORITIES DENYING THE BENEFIT OF DEDUCTION OF THE AFORESAID AMOUNT IS UNSUSTAINABLE IN LAW. ACCORDINGLY IT IS HEREBY SET ASIDE. THE SUBSTANTIAL QUESTION OF LA W IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE, WE PASS THE FOLLOWING ORDER: APPEAL IS ALLOWED. 5 .2 LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDS THAT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA), THE HO NBLE KARNATAKA HIGH COURT HAS DULY CONSIDERED THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF TOTGARS CO - OPERATIVE SALE SOCIETY LTD AND DISTINGUISHED IT AS IT DEALT WITH ONLY ISSUE OF SURPLUS AMOUNTS DEPOSITED IN THE BANK WHICH WERE HELD ON ACCOUNT OF B EING LIABILITIES PAYABLE TO MEMBERS OF AGRICULTURAL MARKETING CREDIT SOCIETY. IN CLEAR CONTRADICTION , THE FUNDS IN THE INSTANT CASE ARE THE SURPLUS FUNDS AND NOT THE LIABILITY OF THE BANK BUT ITS OWN SURPLUS FUNDS. BASED ON THIS DISTINCTION ON FACTS AND FOLLOWING THE HONBLE ANDHRA PRADESH HIGH COURT JUDGMENT (SUPRA), IT WAS HELD THAT THE INTEREST SO EARNED IS RELATABLE TO ACTIVITIES OF CO - OPERATIVE CREDIT SOCIETY; THEREFORE, THE DEDUCTION U/S 80P(2)(A)(I) IS CLEARLY ALLOWABLE. 5 .3 LD. C OUNSEL FOR THE ASSESSEE FURTHER RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF AMALSAD VIBHAG VIVIDH KARYAKARI SAHKARI KH EDUT MANDALI LTD VS. ITO IN ITA NOS 1710 & 1711/AHD/2011 , WHEREIN IT HAS BEEN HELD AS UNDER: - 8. WE ARE OF THE VIEW THAT THE FACTS OF THE CASE ARE IDENTICAL TO THAT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT CO - OPERATIVE LTD. (SUPRA) WHICH HAS BEEN DECIDED BY HONBLE KARNATAKA HIGH COURT AND THEREFORE CONSIDERING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE AFORESAID DECISION OF HONBLE KARNATAKA HIGH COURT AND IN THE ABSENCE OF ANY CONTRARY BINDING DECISION POINTED OUT BY REVENUE, WE ARE OF THE VIEW THAT THE INTEREST EARNED BY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P. WE THEREFORE SET ASIDE THE ORDER OF THE AO. IN THE RESULT THE GROUND OF THE ASSESSEE IS ALLOWED. ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 8 5 .4 THE AFORESAID ITAT JUDGMENT HAS BEEN FOLLOWED BY THE ITAT, AHMEDABAD BENCH IN THE CASE OF MAROLI BAZAR VIBHAG VIVIDH KARYAKARI SAHKARI MANDI LIMITED VS. ITO IN ITA NOS. 3130/AHD/2014 & 1834/AHD/2013, BY ALLOWING SIMILAR CLAIM. THE LD. COUNSEL THUS CONTENDS THAT THE ASSESSEES CASE IS SUPPORTED BY TH E HONBLE KARNATAKA HIGH COURT, ANDHRA PRADESH HIGH COURT AND ITAT JUDGMENTS IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD , ANDHRA PRADESH STATE CO OPERATIVE BANK LTD. , AMALSAD VIBHAG VIVIDH KARYAKARI SAHKARI KHEDUT MANDALI LTD. AND MAROLI BAZAR VIBHAG VIVIDH KARYAKARI SAHKARI MANDI LIMITED (SUPRA) . THUS, THE ASSESSEES CLAIM MAY BE ALLOWED. 5 .5 LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, CONTENDS THAT THE ISSUE OF ASSESSEES APPEAL FOR AY 2010 - 11 WAS ONLY ON THE VALIDITY OF 263 PROCEEDINGS AND NOT THE DECISION ON MERITS. IN THIS REGARD, HE RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO - OP. CREDIT & SUPPLY SOCIETY LTD VS. CIT, REPORTED IN [2015] 57 TAXMANN.COM 367 (AHD TRIB.), WHEREIN THE 263 ACTION OF THE COMMISSIONER HAS BEEN UPHELD. 5 .6 LD. COUNSEL FOR THE ASSESSEE IN REJOINDER CONTENDS THAT THERE ARE TWO DIFFERENT VIEWS ON THE ISSUE OF 263 AND NOT ON THE MERITS. IN ASSESSEES OWN CASE, 263 HAS BEEN QUASHED BY SUBSEQUENT JUDGMENT DATED 31.03.2016; WHEREAS IN CASE OF STATE BANK OF INDIA E MPLOYEES CO - OP. CREDIT & SUPPLY SOCIETY LTD, THE JUDGMENT IS DATED 26.03.2015. THE LATEST KARNATAKA HIGH COURT JUDGMENT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD (SUPRA) HAS BEEN CONSIDERED IN ASSESSEES CASE AND NOT IN EARLIER CASE. BESIDES, ON MERITS, THERE ARE TWO HIGH COURT JUDGMENTS I.E., HONBLE KARNATAKA HIGH COURT AND ANDHRA PRADESH HIGH COURT (SUPRA), IN FAVOUR OF THE ASSESSEE AND NO HIGH COURTS JUDGMENT HAS BEEN CITED BY THE ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 9 REVENUE. IT IS A SETTLED LAW THAT HONBLE HIGH COURT JUDGMENTS ARE BINDING ON ALL LOWER AUTHORITIES. SINCE TWO HIGH COURT JUDGMENTS ARE IN FAVOUR OF THE ASSESSEE, THE DEDUCTION U/S 80P(2)(A)(I) DESERVES TO BE ALLOWED. 6 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. IN OUR CONSIDERED VIEW, THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR AY 2010 - 11 (SUPRA) AND IN THE CASE OF STATE BANK OF INDIA EMPLOYEES CO - OP. CREDIT & SUPPLY SOCIETY LTD. (SUPRA) IS ON THE VALIDITY OF 263 PROCEEDINGS AND IS NOT A DECISION ON MERITS . THE DECISION ON MERITS IN THIS REGARD HAVE BEEN DECIDED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LTD , BY ANDHRA PRADESH HIGH COURT IN THE CASE OF ANDHRA PRADESH STATE CO OPERATIVE BANK LTD. AND BY ITAT IN THE CASES OF AMALSAD VIBHAG VIVIDH KARYAKARI SAHKARI KHEDUT MANDALI LTD. AND MAROLI BAZAR VIBHAG VIVIDH KARYAKARI SAHKARI MANDI LIMITED. SINCE THESE AUTHORITIES UNEQUIVOCALLY SUPPORT THE CASE OF THE ASSESSEE, RESPECTFULLY FOLLOWING THEM, WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) , WHICH IS ALLOWED. CONSEQUENTLY, SUCH INCOME CANNOT BE HELD AS INCOME FROM OTHER SOURCES. IN VIEW OF THE FOREGOING, WE DECIDE THIS GROUND IN FAVOUR OF THE ASSESSEE FOR ALL ASSESSMENT YEARS UNDER CON SIDERATION. 7 . IN THE RESULT, ASSESSEES APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 10 TH JUNE , 201 6 AT AHMEDABAD. SD/ - SD/ - MANISH BORAD ( ACCOUNTANT MEMBER ) R.P. TOLANI ( JUDICIAL MEMBER ) AHMEDABAD; DATED 10 / 0 6 /201 6 *BIJU T. ITA NOS. 905 TO 908/AHD/ 2015 STATE BANK OF INDIA SUPERVISING OFFICIALS CO.OP CREDI T SOCIETY LTD VS. ITO AYS : 2007 - 08 TO 2009 - 10 & 2011 - 12 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD
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