Shree Ram Co.-Op. Credit Society Ltd., Dahod V. The Income Tax Officer, Ward-1, Vadodara

ITA 98/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8257 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 11-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Section: 143(3); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHREE RAM CO - OP. CREDIT SOCIETY LTD. CHAKALIYA ROAD, DAHOD - 389151 DIST: DAHOD PAN: AAGAS4007A (APPELLANT) VS THE ITO, WARD - 1, DAHOD (RESPONDENT) REVENUE BY : S H RI V.K. SINGH , SR. D . R. ASSESSEE BY: S H RI BANDISH SOPARKAR , A.R. DATE OF HEARING : 20 - 03 - 2 018 DATE OF PRONOUN CEMENT : 10 - 05 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , ARIS ES FROM ORDER OF THE CIT(A) - 4, VADODARA DATED 30 - 09 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS. 82, 21, 635/ - DEDUCTION CLAIMED U/S 80P(2)(A)(I) OF THE ACT. LD. CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION CLAIMED OF INTEREST RECEIVED ON THE OPERATIONAL FUNDS DEPOSITED WITH NATION ALIZED/COOPERATIVE BANKS. I T A NO . 98 / A HD/20 17 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 98 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHREE RAM CO - OP. CREDIT SOCIETY LTD. VS. ITO 2 2. LD. CIT (A) ERRED IN LAW AND ON THE FACTS CONFIRMING DISALLOWANCE MADE BY AO TREATING INTEREST EARNED AS INCOME FROM OTHER SOURCES. LD. CIT (A) OUGHT TO HAVE HELD INTEREST EARNED AS PROFITS & GAINS OF BUSINESS. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS HOLDING THAT INTEREST DERIVED BY DEPOSITING SURPLUS FUNDS WITH NATIONALIZED/CO OPERATIVE BANKS AS NOT ATTRIBUTABLE TO THE BUSINESS CARRIED ON BY THE APPELLANT CREDIT SOCIETY AND HENCE NOT DEDUCTIBLE U/S 80P(2)(A)(I) & 80P (2)(D) OF THE ACT. 4. LD. CIT (A) ERRED IN LAW AND ON FACTS IN NOT ADJUDICATING GROUND RAISED WITHOUT PREJUDICE TO THE ABOVE, CHALLENGING ACTION OF AO IN NOT ALLOWING PROPORTIONATE EXPENDITURE INCURRED FOR EARNING OF THE INTEREST INCOME. 5. LD. CIT (A) ERRED IN LAW AND ON FACTS CONFIRMING DISALLOWANCE OF THE CLAIM OF DEDUCTION RELYING ON JUDGMENT RENDERED IN RE VISIONARY PROCEEDINGS NOT APPLICABLE TO THE FACTS OF THE CASE. LD. CIT (A) OUGHT TO HAVE APPRECIATED RATIO OF THE JUDICIAL CITATIONS DIRECTLY ON THE ISSUE & ALLOWED DEDUCTION. 6. LEVY OF INTEREST U/S 234A/234B/234C & 234D OF THE ACT IS NOT JUSTIFIED. 7. INITIATION OF PENALTY U/S 271 (1)(C) OF THE ACT IS NOT JUSTIFIED. 3. THE BRIEF FACT OF THE CASE IS THAT DURING THE COURSE OF SC RUTINY ASSESSMENT, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON INTEREST INCOME EARNED FROM COMMERCIAL AND CO - OPERATIVE BANK TO THE AMOUNT OF RS. 82 , 21 , 635/ - . THE ASSESSING OFFICER OBSERVED THAT THE AFORESAID INTEREST INCOME WAS NOT DERIVED BY THE ASSESSEE FROM ITS ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. THEREFORE, THE INTEREST INCOME ACCRUED TO THE ASSESSEE ON THE FUNDS INVESTED WITH THE BANK WAS CONSIDERED AS INCOME FROM OTHER SOUR CES U/S. 56 OF THE ACT. HE HAS FURTHER STATED THAT AS PER SECTION 80P(2)(A)(I) OF THE ACT, THE CO - OPERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING BY PROVIDING CREDIT FACILITIES TO ITS MEMBERS . THE WHOLE OF THE PROFIT AND GAIN OF BUSIN ESS ATTRIBUTABLE TO SUCH ACTIVITIES WILL BE DEDUCTIBLE . HOWEVER, EARNING OF INTEREST INCOME FROM BANKING IS NOT ACTIVITY FOR WHICH INCOME WOULD BE DEDUCTIBLE . THEREFORE, THE INTEREST INCOME EARNED FROM BANK/CO - OPERATIVE BANK AMOUNTING TO RS. 82 , 21 , 635/ - WAS TREATED AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT ON WHICH DEDUCTION U/S. 80P WAS DISALLOWED. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE EH LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AFTER PLACING REL IANCE ON THE DECISION OF JURISDICTIONAL HON BLE HIGH COURT OF GUJARAT IN THE CASE OF STATE BANK OF INDIA VS. CIT. THE LD. CIT(A) HAS STATED THAT ONLY THE INTEREST I.T.A NO. 98 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHREE RAM CO - OP. CREDIT SOCIETY LTD. VS. ITO 3 DERIVED FROM THE CREDIT PROVIDED TO ITS MEMBERS WHICH IS DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE ACT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. ON SCRUTINY, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS. 1,51,89,370 U/S. 80P(2)(A)(I) OF THE ACT. THE ASSESSING OFFICER OBSERV E THAT ASSESSEE HAS ALSO INCLUDED THE INTEREST INCOME EARNED ON DEPOSIT WITH COMMERCIAL BANK TO THE AMOUNT OF RS. 82,21,635/ - IN ITS CLAIM OF DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. THE INTEREST INCOME OF RS. 82,21,635/ - WAS TREATED AS INCOME FROM OTHER SOURCES U/S. 56 OF THE ACT AND CLAIM OF DEDUCTION WAS DISALLOWED. WE CONSIDER THAT EARNING OF INTEREST INCOME FROM BANK IS NOT THE ACTIVITY FOR WHICH INCOME WOULD BE DEDUCTIBLE FOR DEDUCTION 80P(2)(A)(I) OF THE ACT. HOWEVER, THE ASSESSEE HAS CLAIMED DED UCTION UNDER THE AFORESAID PROVISION ON INTEREST LEARNED FROM SURPLUS FUNDS DEPOSITED WITH THE NATIONALIZED BANKS IN THE FORM OF FIXED DEPOSIT. WE ARE INCLINED WITH THE FINDINGS OF THE LD. CIT(A) THAT INVESTING SURPLUS FUNDS IN A BANK IS NO PART OF THE B USINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS WHICH IS DEDUCTIBLE UNDER SECTION 80P(2)(A)(I) OF THE ACT, AND THE INTEREST DERIVED BY DEPOSITING SURPLUS FUNDS WITH THE NATIONALIZED BANK NOT BEING ATTRIBUTABLE TO THE BUSINESS CARRIED ON BY THE ASSESS EE AND THE SAME CANNOT BE DEDUCTED U/S. 80P(2)(A)(I). WE HAVE PERUSED ALL THE JUDICIAL PRONOUNCEMENT S REFERRED BY THE ASSESSEE, HOWEVER, WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE REVENUE VIDE STATE BANK OF INDIA VS. CIT (2016) 72 TAXMANN.COM 64 (GUJARAT) THAT INTEREST INCOME ON DEPOSIT PLACED WITH THE COMMERCIAL BANKS IS NOT EXEMPT U/S. 80P(2)(A)(I) OF THE ACT. 6. REGARDING THE OTHER PART OF THE GROUND OF APPEAL OF NOT ALLOWING THE DEDUCTION OF I NTEREST EXPENDITURE INCURRED ON EARNING INTEREST INCOME FROM COMMERCIAL BANK BY THE ASSESSING OFFICER, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE ASSESSEE S CLAM ON PRO RATA EXPENSES BY EXAMINATION ON THE RECORD TO I.T.A NO. 98 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHREE RAM CO - OP. CREDIT SOCIETY LTD. VS. ITO 4 BE SHOWN FOR VERIFICATION BY THE ASSES SEE AND ACCORDINGLY NETTING OF TO BE ALLOWED BY THE ASSESSING OFFICER AS DECIDED IN A MEMBER OF JUDICIAL PRONOUNCEMENTS BY THE C - ORDINATE BENCHES OF ITAT, AHMEDABAD. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE GROUNDS OF APPEAL OF CH ALLENGING OF INTEREST U/S. 234A, 234B,234C/234D AND INITIATION OF PENALTY ARE OF GENERAL NATURE AND THE SAME ARE DISMISSED 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 10 - 05 - 2 01 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 10 /05 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCER NED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,