SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR V. DEPUTY COMMISSIONER OF INCOME TAX, ALWAR

ITA 957/JPR/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6121 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DHK
• Section: 56

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,O A JH HKKXPUN KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 957 & 958/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEARS : 2013-14 & 14-15. SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, MALAKHERA GATE BAHAR, NEAR POST OFFICE, ALWAR. CUKE VS. THE DCIT, CIRCLE-1, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAGAS 4023 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM RAI (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17.05.2018. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/05/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF LD. CIT (A), ALWAR BOTH DATED 04.10.2017 FOR TH E ASSESSMENT YEARS 2013-14 AND 14-15 RESPECTIVELY. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THESE APPEALS EXCEPT QUANTUM OF ADDITION. THE GROUND RAISED FOR T HE ASSESSMENT YEAR 2013-14 ARE REPRODUCED AS UNDER :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF IN NOT ALLOWING THE DEDUCTION IN RESPECT OF INTEREST RECEIPT OF RS. 2,33,780/- FROM BANKS U/S 80P(2)(A)( I) OF THE IT ACT, 1961. 2 ITA NOS. 957 & 958/JP/2017 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. 2. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 3. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 2. THE ASSESSEE IS A COOPERATIVE SOCIETY AND REGIST ERED WITH THE REGISTRAR OF COOPERATIVE SOCIETIES. THE ASSESSEE IS ACCEPTING T HE DEPOSITS FROM THE MEMBERS AND ALSO PROVIDING CREDITS TO THE MEMBERS AS PER TH EIR NEEDS AT A REASONABLE INTEREST RATE. THE AO NOTED THAT DURING THE YEAR U NDER CONSIDERATION THE ASSESSEE SOCIETY HAS RECEIVED INTEREST FROM BANKS AND ACCORD INGLY ASKED THE ASSESSEE TO OFFER THE EXPLANATION FOR ALLOWING DEDUCTION UNDER SECTIO N 80P(2)(A)(I) OF THE ACT IN RESPECT OF THE INTEREST RECEIVED FROM THE BANKS. I N RESPONSE, THE ASSESSEE FILED ITS REPLY AND SUBMITTED THAT THE INTEREST IS RECEIVED B Y THE ASSESSEE ON THE SAVING BANK ACCOUNTS AS THE ASSESSEE IS CARRYING OUT ITS OPERAT ION THROUGH ITS SAVING BANK ACCOUNT. THEREFORE, THE INTEREST WAS EARNED IN THE NORMAL COURSE OF ITS ACTIVITY OF GRANTING CREDITS TO THE MEMBERS. THE AO DID NOT ACC EPT THE CLAIM OF THE ASSESSEE AND DISALLOWED THE CLAIM UNDER SECTION 80P(2)(A)(I) IN RESPECT OF THE INTEREST RECEIVED FROM BANKS THOUGH THE DEDUCTION UNDER SECT ION 80P(2)(A)(I) WAS ALLOWED BY THE AO IN RESPECT OF INTEREST INCOME FROM MEMBERS. ON APPEAL, THE LD. CIT (A) HAS CONFIRMED THE DISALLOWANCE/ADDITION MADE BY THE AO ON THE GROUND THAT THE INTEREST INCOME EARNED FROM BANKS OTHER THAN COOPERATIVE BAN K IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE ISSUE IS COVERED BY THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO, 377 ITR 464 (KAR .) AND SUBMITTED THAT THE HONBLE 3 ITA NOS. 957 & 958/JP/2017 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. HIGH COURT HAS HELD THAT THE INTEREST EARNED FROM D EPOSITS AND FROM SAVINGS BANK ACCOUNT BY THE CO-OPERATIVE SOCIETY PROVIDING CREDI T FACILITIES TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I). THE LD. A/R HAS FURTHER SUBMITTED THAT THE HONBLE HIGH COURT HAS DECIDED THIS ISSUE AFTER CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN CASE OF M/S. TOTGARS CO-OP ERATIVE SALE SOCIETY LTD. VS. ITO, 322 ITR 283 (SC). THUS THE LD. A/R HAS SUBMIT TED THAT WHEN THE ASSESSEE HAS EARNED THE INTEREST IN THE NORMAL COURSE OF ITS ACT IVITY PROVIDING CREDIT FACILITIES TO ITS MEMBERS, THEN THE SAID INTEREST FROM THE SAVINGS BA NK ACCOUNT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I). 3.1. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT AS PER THE PROVISIONS OF S ECTION 80P(2)(D) THE INTEREST FROM OTHER CO-OPERATIVE BANKS IS ELIGIBLE FOR DEDUC TION AND NOT FROM OTHER BANKS. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSESSEE HAS EARNED THE IN TEREST FROM SAVINGS BANK ACCOUNT WHICH IS MAINTAINED BY THE ASSESSEE WITH TH E SCHEDULED BANKS FOR THE PURPOSE OF ITS DAY TO DAY ACTIVITY OF PROVIDING CRE DIT FACILITIES TO ITS MEMBERS AND KEEPING ITS FUNDS WITH THE BANK. THE HONBLE KARNAT AKA HIGH COURT IN THE CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO (SUPRA) WHILE CONSIDERING AN IDENTICAL ISSUE HAS OBSERVED AND HELD IN PARA 7 TO 12 AS UNDER :- 7. FROM THE AFORESAID FACTS AND RIVAL CONTENTIONS, TH E UNDISPUTED FACTS WHICH EMERGE ARE, CERTAIN SUMS OF INTEREST WERE EARNED FR OM SHORT-TERM DEPOSITS AND FROM SAVINGS BANK ACCOUNT. THE ASSESSEE IS A CO-OPE RATIVE SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS. IT IS NOT CARRYIN G ON ANY OTHER BUSINESS. THE INTEREST INCOME EARNED BY THE ASSESSEE BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS DEPOSITED IN THE BANKS FOR A SHORT DURAT ION WHICH HAS EARNED 4 ITA NOS. 957 & 958/JP/2017 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. INTEREST. THEREFORE, WHETHER THIS INTEREST IS ATTRI BUTABLE TO THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS, IS THE QUESTION. 8. IN THIS REGARD, IT IS NECESSARY TO NOTICE THE RELE VANT PROVISION OF LAW I.E., SECTION 80P(2)(A)(I): '80P DEDUCTION IN RESPECT OF INCOME OF CO- OPERATIVE SOC IETIES : (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERATIVE SOC IETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH IS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTA L INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY: ( A ) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN ( I ) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR ( II ) TO ( VII ) ** ** ** THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES.' 9. THE WORD 'ATTRIBUTABLE' USED IN THE SAID SECTION I S OF GREAT IMPORTANCE. THE APEX COURT HAD AN OCCASION TO CONSIDER THE MEANING OF THE WORD 'ATTRIBUTABLE' AS SUPPOSED TO DERIVE FROM ITS USE IN VARIOUS OTHER PR OVISIONS OF THE STATUTE IN THE CASE OF CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD. V. CIT [1978] 113 ITR 84 (AT PAGE 93) AS UNDER: 'AS REGARDS THE ASPECT EMERGING FROM THE EXPRESSION 'ATTRIBUTABLE TO' OCCURRING IN THE PHRASE 'PROFITS AND GAINS ATTRIBUT ABLE TO THE BUSINESS OF' THE SPECIFIED INDUSTRY (HERE GENERATION AND DISTRIBUTIO N OF ELECTRICITY) ON WHICH THE LEARNED SOLICITOR-GENERAL RELIED, IT WILL BE PERTIN ENT TO OBSERVE THAT THE LEGISLATURE HAS DELIBERATELY USED THE EXPRESSION 'A TTRIBUTABLE TO' AND NOT THE EXPRESSION 'DERIVED FROM'. IT CANNOT BE DISPUTED TH AT THE EXPRESSION 'ATTRIBUTABLE TO' IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION 'DERIVED FROM'. HAD THE EXPRESSION 'DERIVED FROM' BEEN USED, IT COULD HAVE WITH SOME FORCE BEEN CONTENDED THAT A BALANCING CHARGE ARISIN G FROM THE SALE OF OLD MACHINERY AND BUILDINGS CANNOT BE REGARDED AS PROFI TS AND GAINS DERIVED FROM THE CONDUCT OF THE BUSINESS OF GENERATION AND DISTR IBUTION OF ELECTRICITY. IN THIS CONNECTION, IT MAY BE POINTED OUT THAT WHENEVER THE LEGISLATURE WANTED TO GIVE A RESTRICTED MEANING IN THE MANNER SUGGESTED BY THE LEARNED SOLICITOR- GENERAL, IT HAS USED THE EXPRESSION 'DERIVED FROM', AS, FOR INSTANCE, IN SECTION 80J. IN OUR VIEW, SINCE THE EXPRESSION OF WIDER IMP ORT, NAMELY, 'ATTRIBUTABLE TO', HAS BEEN USED, THE LEGISLATURE INTENDED TO COV ER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS OF GE NERATION AND DISTRIBUTION OF ELECTRICITY.' 10. 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 FRO M'. THE EXPRESSION 'ATTRIBUTABLE 5 ITA NOS. 957 & 958/JP/2017 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. TO' BEING OF WIDER IMPORT, THE SAID EXPRESSION IS U SED BY THE LEGISLATURE WHENEVER THEY INTENDED TO GATHER RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF THE BUSINESS. A CO-OPERATIVE SOCIETY WHICH IS CARRYING ON THE BUS INESS 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 CAPI TAL, IF NOT IMMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS, THE SOCIETY CANNOT KEEP THE SAID AMOUNT IDLE. IF THEY DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST, THE SAI D INTEREST INCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CRED IT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SEPARATE BUSINESS FO R EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAIN S 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 GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. 11. IN THIS CONTEXT WHEN WE LOOK AT THE JUDGMENT OF TH E APEX COURT IN TOTGARS CO- OPERATIVE SALE SOCIETY'S CASE ( SUPRA ), ON WHICH RELIANCE IS PLACED, THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE/CO-OPERA TIVE SOCIETY, APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS, WAS ALS O IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS R ETAINED IN MANY CASES. THE SAID RETAINED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FR OM WHOM PRODUCE WAS BOUGHT, WAS INVESTED IN A SHORT-TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE-S OCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. T HEREFORE, 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 ASS ESSING 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 CLEAR, SUPREME COURT WAS NOT LAYING DOWN ANY LAW. 12. 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 LI ABILITY. IT WAS NOT SHOWN AS LIABILITY IN THEIR ACCOUNT. IN FACT THIS AMOUNT WHI CH IS IN THE NATURE OF PROFITS AND GAINS, WAS NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR LENDING MONEY TO ITS MEMBERS, AS THERE WERE NO TAKERS. THEREFORE THEY HA D DEPOSITED THE MONEY IN A BANK SO AS TO EARN INTEREST. THE SAID INTEREST INCOME IS ATTRIBUTABLE TO CARRYING ON THE BUSINESS OF BANKING AND THEREFORE IT IS LIABLE TO B E DEDUCTED IN TERMS OF SECTION 80P(1) OF THE ACT. IN FACT SIMILAR VIEW IS TAKEN BY THE AN DHRA PRADESH HIGH COURT IN THE CASE OF CIT V. ANDHRA PRADESH STATE CO-OPERATIVE BANK LTD. [2011] 336 ITR 516/200 TAXMAN 220/12 TAXMANN.COM 66 . THUS IT IS CLEAR THAT THE HONBLE HIGH COURT HAS AN ALYZED THE PROVISIONS OF SECTION 80P(2) AND PARTICULARLY THE TERM ATTRIBUTABLE USE D IN THE SECTION AND HELD THAT THE 6 ITA NOS. 957 & 958/JP/2017 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. WORD ATTRIBUTABLE TO IS CERTAINLY WIDER IN IMPORT THAN THE EXPRESSION DERIVED FROM. THUS ON THE IDENTICAL FACT, THE HONBLE HIGH COURT HAS HELD THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/S. TOTGARS C O-OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE P RESENT CASE AS IN THE SAID CASE BEFORE THE HONBLE SUPREME COURT THE AMOUNT DEPOSIT ED WITH BANK DID NOT BELONG TO THE SOCIETY BUT IT WAS A LIABILITY OF THE SOCIETY T O BE PAID TO THE MEMBERS AGAINST THE SALE OF AGRICULTURAL PRODUCE. THUS THE SALE CONSID ERATION RECEIVED BY THE SOCIETY TO BE PAID TO THE MEMBERS WAS KEPT WITH THE BANK AND E ARNED INTEREST AND ACCORDING THE HONBLE SUPREME COURT HELD THAT SUCH AN AMOUNT WAS RETAINED BY THE SOCIETY WAS A LIABILITY AND IT WAS SHOWN IN THE BALANCE SHE ET ON THE LIABILITY SIDE. THEREFORE, ON THE SPECIFIC FACTS OF THE SAID CASE THE INTEREST INCOME WAS HELD TO BE NON ATTRIBUTABLE EITHER TO THE ACTIVITIES MENTIONED IN SECTION 80P(2)(A)(I) OR UNDER SECTION 80P(2)(A)(III) OF THE ACT. IN THE CASE IN HAND, TH E INTEREST INCOME RECEIVED BY THE ASSESSEE IS ON ITS OWN FUNDS AND NOT ON THE FUNDS W HICH IS A LIABILITY TOWARDS THE MEMBERS. FURTHER, THIS INTEREST INCOME IS EARNED FR OM THE SAVINGS BANK WHICH IS MAINTAINED FOR DAY TO DAY ACTIVITY OF THE ASSESSEE SOCIETY FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, FOLLOWING TH E ORDER OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF GUTTIGEDARARA CREDIT CO-O PERATIVE SOCIETY LTD. VS. ITO (SUPRA), WE HOLD THAT THE SAID INTEREST INCOME EARN ED BY THE ASSESSEE FROM SAVINGS BANK ACCOUNT IS ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80P(2)(A)(I) OF THE ACT. 5. BEFORE PARTING WITH, WE CLARIFY THAT FOR THE ASS ESSMENT YEAR 2014-15 THE AO MADE AN ADDITION WHILE PROCESSING THE RETURN OF INC OME UNDER SECTION 143(1) WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE THE LD. CIT ( A) BUT COULD NOT SUCCEED. 7 ITA NOS. 957 & 958/JP/2017 SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. HOWEVER, THE ISSUE IN BOTH THE APPEALS IS IDENTICAL . ACCORDINGLY, BOTH THE APPEALS ARE ALLOWED. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/05/20 18. SD/- SD/- HKKXPUN FOT; IKY JKWO (BHAGCHAND) ( VIJAY PAL RAO ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21/05/2018. DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHIKSHA COOPERATIVE THRIFT & CREDIT SOCIETY, ALWAR. 2. IZR;FKHZ@ THE RESPONDENT-THE DCIT CIRCLE-1, ALWAR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 957 & 958/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR