Income Tax Appellate Tribunal - Chandigarh
Ito, Sunder Nagar vs M/S Gahar Gram Service Co-Operative ... on 12 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES, 'SMC', CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
ITA No 1223/CHD/2017
Assessment year: 2012-13
The ITO, Vs. M/s Gahar Gram Service
Sunder Nagar, Co-operative Society,
(H.P.) VPO Gahar, Teh-Sarkaghat,
Distt. Mandi.
PAN No. AAAJT1341F
(Appellant) (Respondent)
Appellant by : Smt. Chander Kanta, Sr.DR
Respondent by : None
Date of hearing : 07.11.2017
Date of Pronouncement : 12.12.2017
ORDER
The present appeal has been filed by the Revenue assailing the correctness of the order dated 19.05.2017 of ld. CIT (Appeals) Palampur pertaining to 2012-13 assessment year on the following grounds :
1. On the facts and in the circumstances, the Ld. CIT(A) has erred in deleting the addition of Rs. 36,18,785/- made by A.O. u/s 80 P(2)(a)(i) by disallowing the interest income generated by the society by investing its surplus funds which are not related to business.
2. On the facts and in the circumstances, the Ld. CIT(A) has erred in providing, relief to the assessee u/s 80P(2)(d) by misconstruing the said section as the same is not applicable in this case as society has invested the surplus funds in HP State Co-operative Bank which is a scheduled bank as per notification of RBI dated 15.12.2014.
3. The Ld.CIT(A) has erred by giving relief of Rs. 36,18,785/- to the assessee u/s 80P(2)(d ) which was not claimed by the assessee under the said section?
4. The Ld. CIT(A) has further erred by not giving reasonable opportunity to the Assessing Officer as per Rule 46A before adjudicating the issue on the section 80P(2)(d).
2. At the time of hearing, no one was present on behalf of the assessee respondent, however, since present appeal can be decided on the basis of material available on record, it was deemed appropriate to proceed with the present appeal ex-parte qua assessee respondent on merits.
3. The ld. DR relies upon the assessment order.
4. The relevant facts of the case are that the assessee society had invested surplus funds in bank deposits and government securities and earned an interest of Rs. 36,23,538/-. The assessee was required to explain how the interest earned was allowable u/s 80(P)(2)(d) of the Income Tax Act. Relying ITA 1223/CHD/2017 A.Y. 2012-13 Page 2 of 3 upon decision of the Apex Court in the case of Totgars Co-op Sales Society Ltd. Vs ITO Karnataka (2010) 322 ITR 283, AO held the interest earned from the deposits maintained in Himachal Pradesh State Cooperative Bank amounting to Rs. 36,23,538/- as 'income from other sources' considering following details given by the assessee society :
Sr.No. Particular Amount
Interest Income
1. Interest income from members on loans Rs. 6,10,281/-
2. Interest income from other Banks Deposits Rs. 36,23,538/-
(FDRs)(H.P.State Coop Bank)
Interest Paid
1. Interest paid on Members Deposits Rs. 32,23,802/-
2. Interest paid on deposit in Banks Rs. 5,753/-
5. It is seen that before the First Appellate Authority, the assessee submitted that the facts as taken into consideration by the Apex Court were different in the case of Totgars Co-op Sales Society Ltd., the assessee society marketed the produce of its members whose sale proceeds were retained by it and the surplus money was invested in specified securities. However, in the facts of the present case, the assessee is marketing the produce of its members and the surplus funds received from its members are deposited by the assessee in a Cooperative Bank which is also entitled to deduction u/s 80(P)(2)(d) of the Income Tax Act,1961. Thus, the assessee has invested and received interest only from H.P. Cooperative State Bank only and it has not received any bank interest from any nationalized bank. The assessee society, it was submitted, was a primary agriculture cooperative society and provided credit facility to members for agricultural purposes and thus, was a PACS as per definition of Schedule-5 of Banking Regulation Act.
6. Considering these submissions, the CIT(A) proceeded to grant relief to the assessee holding as under :
4.3 I have considered the facts of the case and the written submissions of the appellant. The assessee is a Co-operative Agriculture Service Society providing short term agricultural credit to its members and is also engaged in supply of food grains under the PDS on behalf of the H.P. Govt. It is submitted by the appellant in its written submission that it is a Primary Agricultural Co-op. Society (PACS) as per definition given in Schedule-V of the Banking Regulation Act. It has been further submitted that the society provides credit M/s Gahar Gram Service Society, Appeal No. CIT(A) PLP/ IT/13/2014-15, A.Y. 2012-13 facility to its members for agricultural purposes only. Regarding the investment in FDRs, it has been stated that the society has invested the amount with H.P. State Co-operative Bank only and has not received any bank interest from any nationalized or private bank.
Ld. AO has made an addition of Bank / FDR interest of Rs. 36,18,785/- on the ground that the interest has been earned on the surplus funds which were not required for business purposes 7 objectives of the society at the given time of investment. It has been held that the interest is not eligible for deduction u/s 80P(2)(a)(i) of the Act. Out of the above interest from FDRs with Banks, interest paid on other bank loans of Rs. 5,753/- only has been allowed as deduction.
ITA 1223/CHD/2017 A.Y. 2012-13 Page 3 of 3 During appeal, the appellant filed copy of its Balance Sheet and Trading and P & L account for the year ending 31.3.2012. Upon perusal of the same, the following particulars are seen :
Members share Rs. 13,88,780/-
Members deposits Rs. 4,82,81,023/-
Loans to members Rs. 56,80,170/-
Cash at Bank 7 FDRs Rs. 4,49,02,269/-+Rs. 3,45,000/-
Interest received on member Rs. 36,24,932/-+Rs. 6,08,887/-
Loans and bank FDRs
Interest paid Rs. 32,23,802/-
As also mentioned in the assessment order, interest of Rs. 36,23,538/- has been earned on FDRs maintained with FLP. State Co-op Bank. As the entire deposits raised from members could not be given as loans to members, the surplus was kept with H.P. State Co-op. Bank in FDRs. Anyways, the interest paid to members of Rs. 32,23,802/- is cost to the appellants society. Ld. A.O. was not justified in not allowing the same. No doubt the society has surplus funds which were not immediately required for the objectives of the society, i.e., providing credit to the members of the society, and have been invested in fixed term deposits with the Bank. However, since these are invested with the H.P. State Coop. Bank, the interest on FDRs M/s Gahar Gram Service Society, Appeal No. CIT(A) PLP/IT/13/2014-15, A.Y. 2012-13 is also eligible for deduction u/s 80P(2)(d)of the Act which provides for deduction of the whole of interest or dividend derived by the cooperative society from its investment with any other co-op society.
In view of the foregoing facts and position of law, it is held that ld. AO was not justified to make an addition of Rs. 36,18,785/-. Even if the interest on surplus funds were held to be income from other sources, it would still be exempt u/s 80P(2)(deduction) of the Act. The addition of Rs. 36,18,785/- is accordingly deleted."
7. The ld. Sr.DR was required to address as to what is the fresh evidence filed by the assessee as agitated in ground No. 4 as admittedly the fact that the surplus funds not availed of by the members were invested in H.P. State Cooperative Bank was a fact before the AO also. Accordingly, considering the peculiar facts and circumstances and the position of law, I find no infirmity in the impugned order. Being satisfied by the explanation offered by and on behalf of the assessee, the impugned order is upheld. Departmental grounds are dismissed. Said order was pronounced in the Open Court at the time of hearing itself.
8. In the result, appeal of the Department is dismissed.
Order pronounced in the Open Court on 12.12. 2017.
Sd/-
(DIVA SINGH) JUDICIAL MEMBER ' P o on am ' C o py t o:
1. Th e A p p ell ant
2. Th e R e s p on d ent
3. Th e CI T
4. Th e CI T( A)
5. Th e DR Asstt. Registrar ITAT,Chandigarh.