ITO, Salem V. S. 681 Chinnathirupathi PACB Ltd., Salem

ITA 946/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90655 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 27-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTA IRS
• Section: 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , ! ' , # $% & [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.946/MDS/2015 / ASSESSMENT YEAR : 2010-2011 THE INCOME TAX OFFICER, WARD 1(4), SALEM VS. M/S. S.681 CHINNATHIRUPATHI PACB LTD, CHINNATHIRUPATHI, SALEM 636 008. [PAN AAATT 5833A] ( '( / APPELLANT) ( )*'( /RESPONDENT) / APPELLANT BY : SHRI. S. DAS GUPTA, IRS, JCIT. /RESPONDENT BY : NONE / DATE OF HEARING : 13-07-2015 / DATE OF PRONOUNCEMENT : 17-07-2015 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), SALEM, D ATED 29.01.2015 FOR THE ASSESSMENT YEAR 2010-2011. ITA NO.946/MDS/2015 :- 2 -: 2. THE CRUX OF THE GROUND RAISED BY THE REVENUE IS WIT H REGARD TO COMMISSIONER OF INCOME TAX (APPEALS) OUGH T TO HAVE CONSIDERED THE FACT THAT DEDUCTION U/S.80P(2)(D) OF THE INCOME TAX ACT, 1961 IS ALLOWABLE ONLY ON NET RECEIPTS AFTER D EDUCTING THE EXPENSES FROM THE GROSS RECEIPTS OF INTEREST AND TH AT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE DEDUCTION U/S.80 P(2)(D) ON PRO- RATA BASIS. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENG AGED IN BANKING BUSINESS AND TRADING IN CIVIL SUPPLY GOO DS AND ACCORDING A REPORT UNDER SECTION 44AB HAS BEEN FILED. THE ASS ESSEE IN COMPUTATION STATEMENT FILED DURING THE ASSESSMENT P ROCEEDINGS HAS CLAIMED AN AMOUNT OF A52,50,233/- HAS DEDUCTION U/S.80P(2)(D) OF THE ACT. IN THE PROFIT AND LOSS A CCOUNT THE ASSESSEE HAS CREDITED A58,90,987/- UNDER THE HEAD M ISCELLANEOUS INCOME. THE ASSESSEE HAS CLAIMED THE FOLLOWING AMO UNT AS DEDUCTION U/S.80P(2)(D) OF THE ACT. SL.NO DIVIDEND ON SHARES ) 1 SDCCB LTD SALEM 8,250 2 IFFCO 2,00,200 3 KRIBCO 1,00,000 4 SDCC WS LTD, SALEM 14 TOTAL 3,08,464 INTEREST ON INVESTMENT IN SDCCB 1 FD & RD 26,88,872 2 LIQUIDITY COVER DEPOSIT 12,76,706 3 RESERVE FUND 5,88,127 ITA NO.946/MDS/2015 :- 3 -: 4 SAVINGS A/C.02 28,755 5 SPL. SB 3,43,413 6 SPL. CURRENT A/C. 3,117 7 ESCROW SAVINGS A/C. 3,969 8 INT. INCENTIVE 8,810 TOTAL 49,41,769 GRAND TOTAL 52,50,233 THE ASSESSEE CLAIMED THE ENTIRE AMOUNT OF A52,50,23 3/- AS DEDUCTION U/S.80P(2)(D) OF THE ACT. ACCORDING TO T HE ASSESSING OFFICER THE CLAIM OF DEDUCTION OF THE ASSESSEE SEEM S TO BE EXCESSIVE. THE ASSESSEE HAS NOT FURNISHED NET INCOM E ELIGIBLE FOR DEDUCTION INSPITE OF OPPORTUNITY GIVEN. SO, THE ASS ESSING OFFICER DERIVED THE NET INCOME WORKED OUT AS UNDER:- TOTAL AVAILABLE FUNDS A.23,95,53,103/- TOTAL INTEREST BEARING FUNDS DEPOSITS FROM 1. MEMBERS A17,54,01,016/- 2. NON MEMBERS A58,00,780/- BORROWINGS FROM 1. SDCCB 2. T.N. STATE GOVT A34,920/- TOTAL 18,12,36,716/- PROPORTIONATE OF INTEREST BEARING FUNDS TO THE TOTAL FUNDS IS 76% ITA NO.946/MDS/2015 :- 4 -: 3.1 THUS, OUT OF A6,27,34,976/- INVESTED IN SALEM D ISTRICT CENTRAL CO-OPERATIVE BANK 76% I.E. A4,76,78,582/- W AS THE PRO- RATE INVESTMENT MADE OUT OF INTEREST BEARING FUNDS. TOTAL INTEREST PAID = 1,48,56,731/- = 8.2% TOTAL DEPOSITS 18,12,36,716/- THUS, THE COST OF THE FUNDS INVESTED BY THE ASSESSE E WITH SALEM DISTRICT CENTRAL CO-OPRATIE BANK AND OTHER CO-OPEAT IE SOCIETY WORKS OUT TO A4,76,78,582 * 8.2% = A39,09,644/-. THE N ET INCOME FROM INVESTMENT WITH SDDCB AND OTHER CO-OPERATIVE S OCIETIES IS A52,50,233/- - A39,09,644/- = A13,50,589/-. THE A SSESSING OFFICER COMPUTED THE QUALIFYING AMOUNT ELIGIBLE FOR 80P(2)(D) DEDUCTION IS A13,40,589/-. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). 4. ON APPEAL, THE COMMISSIONER OF INCOME TAX (A PPEALS) FOLLOWED THE EARLIER ORDER OF THE TRIBUNAL CHENNAI BENCH IN THE CASE OF M/S. SL(SPL) 151 KARKUDALPATTY PACCS LTD VS. ITO IN ITA NO.292/MDS/2014 DATED 17.03.2014 WHEREIN THE TRIBUNAL HELD THAT IN THE LOWER APPELLATE PROCEEDINGS, SO FAR AS THE FINDINGS OF THE ASSESSING OFFICER HOLDING THE ASSESSEE AS A BANK U/S 80P(4) ARE CONCERNED, THEY STAND OVERRULED IN VIEW OF THE DECISION OF THE 'TRIBUNAL' IN ITO VS KASIPALAYAM PRIMARY AGRICULTURAL CO-OPERATIVE BANK LTD 2014(2) TMI 676. HOWEVER, IN CIT(A)S VIEW, SINCE THE ASSESSEE HAD ALSO ADVANCED CREDIT AND OTHER FACILITIES TO TH E NOMINAL OR B CLASS MEMBERS, ITS CLAIM IS HIT BY 80P(2)(A)(I) OF THE ACT. THE CIT(A) OBSERVES THAT AS ASSESSEES NOMINAL/B CLASS MEMBERS ARE NOT ITA NO.946/MDS/2015 :- 5 -: TREATED AS MEMBERS IN ITS AUDIT RECORD ETC, IT IS NOT ENTITLED FOR DEDUCTION. THUS, HE HAS CANCELLED DEDUCTION OF 3,75,420/- GRANTED BY THE ASSESSING OFFICER. THEREFORE, THE ASSESSEE IS IN APPEAL. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS STATED IN THE PRECEDING PARAGRAPHS, THE CIT(A) HAS PROCEEDED TO ENHANCE THE ASSESSMENT(SUPRA) ONLY ON THE GROUND THAT THE ASSESSEES CREDIT AND VARIOUS OTHER LOAN FACILITIES HAVE BEEN ALLOWED TO BE AVAILED BY B CLASS NOMINAL MEMBERS WHOSE LIABILITY IS LIMITED, AT TH E BEST; TO THE EXTENT OF LOAN REPAYABLE INSTEAD OF A CLASS MEMBERS WHO HAVE VOTING RIGHTS AND DIVIDEND CLAIM, AND ALSO THAT THE LATTER MEMBERS ARE JOINTLY AND SEVERELY LIABLE. IN THIS BACKDROP, WHEN WE PERUSE THE RELEVANT PROVISIONS OF THE STATE CO-OPERATIVE SOCIETIES ACT, 1983, GOVERNING THE ASSESSEE-SOCIETY, IT IS EVIDENT FROM THE DEFINITION OF MEMBER U/S 2(16) THAT THE SAME INCLUDES AN ASSOCIATE MEMBER U/S 2(6) APPENDED THEREIN. IN OTHER WORDS, THE NOMINAL MEMBERS ALSO ENJOY STATUTORY RECOGNITION AS PER THE ACT. THE NET RESUL T IS THAT ONCE THE NOMINAL MEMBERS OR NON-VOTING MEMBERS ARE THEMSELVES INCLUDED IN THE DEFINITION OF MEMBERS, THEY SATISFY THE RELEVANT CONDITION IMPOSED BY THE LEGISLATURE U/S 80P(2)(A)(I). WE MAKE IT CLEAR THAT WE ARE DEALING WITH A DEDUCTION PROVISION TO BE INTERPRETED LIBERALLY. IN OUR CONSIDERED OPINION, THE OBJECTIONS OF THE REVENUE THAT THE MEMBERS DEFINED IN SUB-CLAUSE(I) OF SECTION 80P(2) SHOULD ONLY INCLUDE VOTING MEMBERS WOULD AMOUNT TO A CLASSIFICATION WITHIN CLASSIFICATION WHICH IS BEYOND THE PURVIEW OF TAX STATUTE; UNLESS PROVIDED SPECIFICALLY BY THE LEGISLATURE. MOREOVER, WE FIND THAT THE CASE LAW OF HON'BLE PUNJAB & HARYANA HIGH COURT (SUPRA) ALSO SUPPORTS THE ASSESSEES CASE WHEREIN IT HAS BEEN HELD UNDER THE VERY PROVISION THAT FOR THE PURPOSE OF IMPUGNED DEDUCTION, IT IS IRRELEVANT SO FAR AS CLASSIFICATION OF THE MEMBERS IN A OR B CATEGORY IS CONCERNED. WE FOLLOW THE SAME AND ACCEPT CONTENTIONS OF THE ASSESSEE. ITA NO.946/MDS/2015 :- 6 -: THE COMMISSIONER OF INCOME TAX (APPEALS) ALSO PLACE D RELIANCE ON THE ORDER OF THE TRIBUNAL CHENNAI BENCH IN THE CAS E OF M /S. THE SALEM AGRICULTURAL PRODUCERS CO-OPERATIVE MARKETING SOCIETY LTD VS. ITO, SALEM IN ITA NOS.730, 731 & 732/MDS/2014, DATED 30.06.2014, WHEREIN THE TRIBUNAL HELD THAT WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE CASE OF THE ASSESSEE IS THAT THE INCOME BY WAY OF INTEREST AND DIVIDEND EARNED BY THE ASSESSEE SOCIETY ARE FROM INVESTMENTS MADE IN SALEM DISTRICT CENTRAL COOPERATIVE BANK, WHICH IS ALSO ADMITTEDLY, A CO-OPERATIVE SOCIETY AND ARE ALLOWABLE DEDUCTION. THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS MADE ONLY WITH SALEM DISTRICT CENTRAL COOPERATIVE BANK AND THEREFORE, THE INCOME FROM INVESTMENT WITH THE BANK IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. ON APPEAL, THE LD. CIT(APPEALS CONFIRMED THE ORDER PASSED BY THE LD. CIT(APPEALS). WE FIND THAT IN THE CASE OF CIT V. KANGRA CO-OPERATIVE BANK LTD. [2009] 309 ITR 106 (HP), THE HONBLE HIMACHAL PRADESH HIGH COURT HAS CONSIDERED SECTION 80P(2)(D) OF THE ACT. THE INTEREST EARNED BY THE ASSESSEE CO-OPERATIVE BANK ON FIXED DEPOSITS WITH HIMACHAL PRADESH STATE CO-OPERATIVE BANK IN COMPLIANCE WITH THE PROVISIONS OF SECTION 57 OF THE HIMACHAL PRADESH CO-OPERATIVE SOCIETIES ACT, 1968, THE INCOME DERIVED FROM BANKING BUSINESS IS ELIGIBL E FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT . EXEMPTION IS ALSO AVAILABLE UNDER SECTION 80P(2)(D) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE IS AN AGRICULTURAL PRODUCERS CO-OPERATIVE MARKETING SOCIETY LTD., REGISTERED UNDER TAMILNADU CO- OPERATIVE SOCIETIES ACT AND ESTABLISHED FOR THE BENEFIT OF THE AGRICULTURAL PRODUCERS AND THE INTER EST OR DIVIDEND EARNED BY THE ASSESSEE WILL BE BENEFICI AL TO THE MEMBERS ALONE. THEREFORE, KEEPING IN VIEW OF THE DECISION IN THE CASE OF CIT V. KANGRA COOPERATIVE BANK LTD. (SUPRA), WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR BENEFIT UNDER SECTION 80P( 2) (D) OF THE ACT AND ALSO THIS BEING A BENEFICIAL SEC TION TO THE CO-OPERATIVE SOCIETIES. ITA NO.946/MDS/2015 :- 7 -: 9. IN RESULT, ALL THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. AND ALLOWED THE DEDUCTION. AGAINST THIS, THE REVENU E IS IN APPEAL BEFORE US. 5 NONE APPEARED ON BEHALF OF THE ASSESSEE. WE PROCE ED TO DISPOSE OF THE CASE AFTER HEARING THE LD. DEPART MENTAL REPRESENTATIVE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS LAID DOWN U/S.80P(2)(D) OF THE ACT AND THEREFORE DEDUCTION C ANNOT BE GRANTED TO THE ASSESSEE, AS THE ASSESSEE IS NOT A CO-OPERATIVE SOCIETY AS THE ASSESSEE IS ENGAGED IN BANKING ACTI VITY AND RELIED ON PANAJI BENCH DECISION OF TRIBUNAL IN THE CASE OF SHRI CHANDRAPRABHU URBAN CO-OPERATIVE CREDIT SOCIETY LTD IN ITA NO.142 & 143/PNJ/2013, DATED 14.03.2014. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. THE ARGUMENT OF THE LD. DEPARTMENTAL REPRESENTATIVE IS MISCONCEIVED. THE DEPARTMENTAL REPRESENTATIVE CANNOT RAISE THE I SSUE WHAT WAS NOT CONSIDERED BY THE ASSESSING OFFICER. THE ISSUE BEFORE THE ASSESSING OFFICER WAS WHETHER THE GROSS INCOME OR N ET INCOME TO BE CONSIDERED FOR DEDUCTION U/S.80P(2)(D) OF THE AC T. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE DECIDING THE ISSUE FOLLOWED THE CO-ORDINATE BENCH DECISIONS (CITED SUP RA) AND ALLOWED ITA NO.946/MDS/2015 :- 8 -: THE CLAIM OF THE ASSESSEE. SO, WE ARE NOT IN A POSI TION TO REVERSE THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APP EALS) AS THE DECISION OF COMMISSIONER OF INCOME TAX (APPEALS) WA S BASED ON THE ORDERS OF CO-ORDINATE BENCH WHICH IS BINDING ON THIS TRIBUNAL. 7. ACCORDINGLY, WE HAVE NO HESITATION IN CONF IRMING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.946/MDS/2015 IS DISMISSED. ORDER PRONOUNCED OF FRIDAY, THE 17TH DAY OF JULY, 2 015 AT CHENNAI. SD/- SD/- ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ' ) (CHANDRA POOJARI) # / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:17.07.2015 KV %&'' ()'*) / COPY TO: ' 1 . / APPELLANT 4. ' + / CIT 2. / RESPONDENT 5. ),-' . / DR 3. ' +'/! / CIT(A) 6. -0'1 / GF