ADDL CIT 23(1), MUMBAI V. SHIVKRUPA SAHAKARI PATPEDHI LTD, MUMBAI

ITA 922/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71348 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROUMUAN PAITE
• Assessee Lawyers: KISHORE B PHADKE

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 922 /MUM/2012 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2008-09) ASSTT. COMMISSIONER OF INCOME TAX 23(1), ROOM NO. 108, C-10, IST FLOOR, BKC, BANDRA (E), MUMBAI 400 051. ( ( ( ( / VS. M/S SHIVKRUPA SAHAKARI PATPEDHI LTD., LATE NAMDEORAO PATNE SMRUTI BHAVAN, GOMES WADI, STATION ROAD, VIKHROLI (W), MUMBAI 400 078. #. !./ PAN : AAAAS3870K ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ! / APPELLANT BY : SHRI ROUMUAN PAITE 01./ 2 3 ! / RESPONDENT BY : SHRI KISHORE B. PHADKE !($ 2 / // / DATE OF HEARING : 13-08-2013 45- 2 / DATE OF PRONOUNCEMENT : 30-09-2013 '6 / O R D E R PER P.M. JAGTAP, A.M. : .. , !'# THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LD. CIT(A) -33 MUMBAI DATED 30-11-2011 WHEREBY HE ALLOW ED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80-P OF THE INCOME TAX A CT, 1961 IN RESPECT OF RECOVERY CHARGES OF RS. 21,66,842/- AND SERVICE CHA RGES OF RS. 62,01,859/-. ITA 922/M/12 2 2. THE ASSESSEE IN THE PRESENT CASE IS A CO-OPERATI VE CREDIT SOCIETY ENGAGED IN THE BUSINESS OF BORROWING FROM AND LENDING TO IT S MEMBERS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED B Y IT ON 24 TH SEPTEMBER, 2008 DECLARING NIL INCOME AFTER CLAIMING DEDUCTIO N U/S 80-P OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE DEDUCTION U/S 80-P OF THE ACT WAS CLAIMED BY TH E ASSESSEE, INTER ALIA, ON SERVICE CHARGES OF RS.62,01,859/- AND RECOVERY CHAR GES OF RS. 21,66,842/- COLLECTED FROM THE MEMBERS. WHILE JUSTIFYING THE SA ID CLAIM, THE FOLLOWING SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE BEFOR E THE A.O.:- WHILE PROVIDING CREDIT FACILITY TO ITS MEMBERS SOC IETY HAS RECOVERED THE SERVICE CHARGES FROM THE BORROWER AND CREDITED TO S ERVICE CHARGES ACCOUNT WHICH IS ATTRIBUTABLE TO THE BUSINESS OF TH E ASSESSEE. WHILE SANCTIONING THE LOAN TO THE BORROWER SOCIETY HAS TO INCURRED THE EXPENSES FOR GIVING VISIT TO THE BORROWERS BUSINESS PLACE AS WELL AS TO THE RESIDENTIAL PLACE OF THE BORROWER, MAKING CONFI RMATION WITH THE EMPLOYER OF THE BORROWER AND ITS SURETIES. SOCIETY HAS RECOVERED THE RECOVERY CHARGES FROM THE BORROWERS WHO HAS MADE DEFAULT IN REPAYING REGULAR INSTALLMENT. WHILE RECOVERING THESE INSTALLMENT SOCIETY HAS REQUIRE TO PAY STAMP CHARGE S FOR MAKING APPEAL UNDER SECTION 101 OF THE MAHARASHTRA CO-OPERATIVE S OCIETIES ACT, 1960. IN THIS PROCESS SOCIETY HAS INCURRED THE EXPENSES F IRST AND DEBITED TO THE PROFIT & LOSS ACCOUNT OF THE SOCIETY AND AS AND WHEN RECOVERY IS MADE CREDITED THE RECOVERY CHARGES TO THE PROFIT AN D LOSS ACCOUNT THESE RECOVERY CHARGES WAS NOT THE INCOME OF THE SOCIETY BUT ONLY RECOVERY OF EXPENSES HENCE THESE CHARGES WERE NOT TAXABLE. IN SUPPORT OF ITS CLAIM FOR DEDUCTION U/S 80-P IN R ESPECT OF SERVICE CHARGES AND RECOVERY CHARGES, THE ASSESSEE ALSO RELIED ON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF VOLLOR ELECTRIC CORPOR ATION LTD. 227 ITR., WHEREIN IT WAS HELD THAT INCIDENTAL INCOME EARNED B Y THE CO-OPERATIVE SOCIETY CARRYING ON ITS BUSINESS OF PROVIDING CREDIT FACILI TIES TO THE MEMBERS WILL ALSO QUALIFY FOR DEDUCTION U/S 80-P(2)(A)(I) OF THE ACT. THE A.O. DID NOT FIND MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80-P(2) OF THE ACT ON S ERVICE CHARGES AND RECOVERY CHARGES FOR THE FOLLOWING REASONS GIVEN IN THE ASSESSMENT ORDER:- ITA 922/M/12 3 CONSIDERING THE STATUS OF ASSESSEE I.E. A CO-OPERA TIVE SOCIETY FORMED ON MUTUAL BENEFIT, SUCH CHARGES RECOVERED FROM THE MEM BERS CANNOT BE ATTRIB MAIN ACTIVITY OF THE ASSESSEE IN AS MUCH AS IT CAN ONLY BE ATTRIBUTED TO PROFIT DONE BY THE ASSESSEE BY RECOVE RING EXCESS CHARGES THEN WHAT IT HAS INCURRED TO CARRYING OUT THE SAID ACTIVITY. FURTHER FROM THE PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSE E IT HAS BEEN SEEN THAT DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAS EXPENSED AS SUM OF RS 4,22,951/- TOWARDS RECOVERY CHARGES AGAIN ST WHICH IT HAS RECOVERED A SUM OF RS 66,24,810 FROM ITS SO CALLED DEFAULTING MEMBERS. ACCORDINGLY THE ASSESSEE HAS SHOWN A NET INCOME ON ACCOUNT OF RECOVERY CHARGES IN ITS PROFIT AND LOSS ACCOUNT FRO M ITS MEMBERS AT RS 62,01,859/-. THEREBY THIS CLEARLY SHOWS THAT WHAT T HE ASSESSEE HAS RECOVERED FROM ITS OWN MEMBERS IS MUCH MORE THAN WH AT IT HAS ACTUALLY INCURRED. SUCH EXCESS RECOVERY CANNOT BE S AID TO BE INCOME RELATION TO THE MAN ACTIVITY OF THE ASSESSEE. AS PER SUBMISSION OF THE ASSESSEE THE SAID CHARGES ARE RECOVERY OF EXPENSES INCURRED BY THE ASSESSEE FROM DEFAULTING B ORROWERS SO AS TO COMPENSATE THE SOCIETY FOR DEFAULTS DONE BY THEM IN REPAYMENT OF DUES TOWARDS SOCIETY AND THE SOCIETY IN ORDER TO RECOVER THE DEFAULTING DUES HAS TO INCUR CERTAIN LEGAL EXPENSES. FURTHER FROM T HE PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSEE IT HAS BEEN SEEN THAT DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAS EXPENSED AS SUM OF RS 86,483/- TOWARDS RECOVERY CHARGES AGAINST WHICH IT HAS RECOVERED A SUM OF RS 22,53,325/- FROM ITS SO CALLED DEFAULTING MEMBERS. ACCORDINGLY THE ASSESSEE HAS SHOWN A NET INCOME ON ACCOUNT OF RECOVERY CHARGES IN ITS PROFIT AND LOSS ACCOUNT FRO M ITS MEMBERS AT RS 21,66,842/-. THEREBY THIS CLEARLY SHOWS THAT WHAT T HE ASSESSEE HAS RECOVERED FROM ITS OWN MEMBERS IS MORE THAN WHAT IT HAS ACTUALLY INCURRED. SUCH EXCESS RECOVERY CANNOT BE SAID TO BE INCOME RELATION TO THE MAN ACTIVITY OF THE ASSESSEE. 3. THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF ITS CLAIM FOR DEDUCTION U/S 80-P OF THE ACT ON RECOVERY CHARGES A ND SERVICE CHARGES WERE CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFOR E THE LD. CIT(A) AND THE SUBMISSIONS MADE BEFORE THE A.O. ON THIS ISSUE WERE REITERATED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A). THE LD. CIT(A) FOUND MERIT IN THE SUBMISSION OF THE ASSESSEE AND ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80-P(2) IN RESPECT OF SERVICE CHARGE S AND RECOVERY CHARGES FOR THE FOLLOWING REASONS GIVEN IN PARA 4.5 AND 4.6 OF THIS IMPUGNED ORDER:- ITA 922/M/12 4 4.5. THE APPELLANT WHICH IS A CO-OPERATIVE SOCIETY , DURING THE COURSE OF ITS CONCERNED ACTIVITY OF HAS RECEIVED SERVICE C HARGES OF RS.62,OL,859/- IS THE AMOUNT RECOVERED FROM MEMBERS OF THE SOCIETY, AND CLAIMED THAT IT IS ENTITLED FOR EXEMPTION U/S.8 0P(2)(A). I HAVE GONE THROUGH THE CASE LAWS CITED BY A.O. AND APPELLANT B OTH, AND I UNDERSTAND THAT IT IS SURPLUS AMOUNT RECEIVED OVER AND ABOVE THE COST OF EXPENDITURE INCURRED BY THE APPELLANT. HOWEVER O NLY BECAUSE IT IS SURPLUS IT DOES NOT LOSE ITS CHARACTER OF RECEIPT O F THAT NATURE AND SO BEING ON ACCOUNT OF THE CONCERNED ACTIVITY OF THE A PPELLANT SOCIETY I.E. PROVIDING CREDIT IS ENTITLED FOR EXEMPTION U/S 80P( 2)(A). 4.6 AS REGARDS RECOVERY CHARGES OF RS.21,66,842/- W HICH IS CHARGES ON ACCOUNT OF RECOVERY OF EXPENSES INCURRED BY THE APP ELLANT FROM DEFAULTING BORROWERS WHO HAVE DEFAULTED AND WHICH H AS RESULTED INTO SURPLUS DURING THE YEAR, IT IS SEEN THAT THE APPELL ANT SPENT RS.86,483/- DURING THE YEAR BUT RECOVERED A SUM OF RS.22,53,325 /- RESULTING INTO SURPLUS OF RS.21,66,842/-. AS DECIDED FOR THE SERVI CE CHARGES THIS SURPLUS AMOUNT RECEIVED OVER AND ABOVE THE COST OF EXPENDITURE INCURRED FOR RECOVERY, BY THE APPELLANT; AGAIN ONLY BECAUSE IT IS SURPLUS, IT DOES NOT LOSE ITS CHARACTER OF RECEIPT OF THAT NATURE AND SO BEING ON ACCOUNT OF THE CONCERNED ACTIVITY OF THE A PPELLANT SOCIETY I.E. PROVIDING CREDIT IS ENTITLED FOR EXEMPTION U/S 80P( 2)(A). AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL 4. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF T HE A.O. IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE WHILE THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RECOVERY AND SERVICE CHARGES VERY MUCH FOR MED INTEGRAL PART OF THE MAIN ACTIVITY CARRIED ON BY THE ASSESSEE SOCIETY. H E SUBMITTED THAT THE ASSESSEE IS A CO-OPERATIVE CREDIT SOCIETY AND SINCE THE INCOME FROM RECOVERY AND SERVICE CHARGES WAS INCIDENTAL TO ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE SAID INCOME WAS DEDUCTIBLE U/S 80-P(2)(A)(I) OF THE ACT AS RIGHTLY HELD BY THE LD. CIT(A). HE ALSO SUBMITTED T HAT SIMILAR CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80-P OF THE ACT FOR SERV ICE AND RECOVERY CHARGES WERE ALLOWED BY THE LD. CIT(A) IN A.Y. 2003-04 AND THE SAME WAS NOT CHALLENGED BY THE REVENUE BY FILING AN APPEAL BEFOR E THE TRIBUNAL. ITA 922/M/12 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IN THE PRESENT CASE IS CO-OPERATIVE CREDIT SOCIETY AND THE INCOME EARNED BY IT FROM THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS ENTITLED FOR DE DUCTION U/S 80-P(2)(A)(I) OF THE ACT. EVEN THE A.O. ALLOWED SUCH DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF ITS INCOME FROM BUSINESS OF PROVIDING CREDIT FAC ILITIES TO ITS MEMBERS EXCEPT THE INCOME FROM SERVICE CHARGES AND RECOVERY CHARGE S. ACCORDING TO HIM, THE INCOME EARNED BY THE ASSESSEE IN THE FORM OF RECOVE RY AND SERVICE CHARGES WAS NOT FROM THE BUSINESS OF PROVIDING CREDIT FACIL ITIES TO ITS MEMBERS AND THE SAME, THEREFORE, WAS NOT ENTITLED FOR DEDUCTION U/S 80-P OF THE ACT. HOWEVER, AS CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE L D. CIT(A) AS WELL AS BEFORE US, THE ACTIVITY RESULTING IN SERVICE AND RECOVERY CHARGES WAS AN INTEGRAL PART OF THE MAIN ACTIVITY OF THE ASSESSEE OF PROVIDING C REDIT FACILITIES TO ITS MEMBERS AND SINCE THE INCOME FROM SERVICE CHARGES AND RECOV ERY CHARGES WAS VERY MUCH INCIDENTAL TO THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THE SAME IN OUR O PINION WAS ENTITLED TO DEDUCTION U/S 80-P(2)(A)(I) OF THE ACT AS RIGHTLY H ELD BY THE LD. CIT(A). WE THEREFORE FIND NO INFIRMITY IN THE IMPUGNED ORDER O F THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND UPHOLDING THE SAM E, WE DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. #$ 2 7 2 89 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2013. . '6 2 45- :'(; 30-09-2013 5 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; :'( DATED 30-09-2013 ITA 922/M/12 6 $.)(.!./ RK , SR. PS '6 2 0)<= >=- '6 2 0)<= >=- '6 2 0)<= >=- '6 2 0)<= >=-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ? () / THE CIT(A)- 33, MUMBAI 4. ? / CIT 23, MUMBAI 5. =$B 0))( , , / DR, ITAT, MUMBAI E BENCH 6. %, C / GUARD FILE. '6(! '6(! '6(! '6(! / BY ORDER, !1= 0) //TRUE COPY// D D D D/ // /!8 !8 !8 !8 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI