Income Tax Appellate Tribunal - Amritsar
Mesers Khaira Majja Co-Operative ... vs Deputy Commisioner Of Income ... on 28 August, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR 'SMC' BENCH, AMRITSAR
BEFORE SH. B. R. BASKARAN, ACCOUNTANT MEMBER
I.T.A. No. 540/Asr/2017
Assessment Year: 2014-15
Khaira Majja Co-operative vs. Assistant Commissioner of Income
Agricultural Multipurpose Tax, Circle-IV, Jalandhar
Society Ltd., VPO Khaira
Majja, Jalandhar
[PAN: AAGFK 8620C]
(Appellant) (Respondent)
I.T.A. No. 491/Asr/2018
Assessment Year: 2015-16
Khaira Majja Co-operative vs. Deputy Commissioner of Income
Agricultural Multipurpose Tax, Circle-IV, Jalandhar
Society Ltd., VPO Khaira
Majja, Jalandhar
[PAN: AAGFK 8620C]
(Appellant) (Respondent)
Appellant by : Sh. Ashray Sarna (C.A.)
Respondent by: Sh. Amar Pal Meena (D.R.)
Date of Hearing: 28.08.2019
Date of Pronouncement: 28.08.2019
ORDER
Per B. R. Baskaran, Accountant Member:
Both the appeals filed by the assessee are directed against the orders passed by Ld CIT(A)-2, Jalandhar and they relate to the assessment years 2014-15 and 2015-16.
2 ITA Nos. 540 & 491/Asr/2017 & 2018(AYs 2014-15 & 2015-16) Khaira Majja Co-op. A. M. S. Ltd. v. Asstt.& Dy. CIT
2. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the action of the Assessing Officer in assessing the interest income earned from banks as income under the head income from the other source and thus denying deduction u/s. 80P of the Act thereon.
3. The facts relating to the case are stated in brief. The assessee is a cooperative society engaged in providing agricultural credit to its members. As per the submissions made by the assessee before AO, the assessee society has accepted deposits from its members in the form of saving deposits & fixed deposits and provided them financial assistance in the form of loans. Interest was earned from the loan so given and interest was paid on deposits. The assessee has also deposited its funds in fixed deposits and saving bank deposits with other banks. The assessee has earned income of Rs.27.17 lacs and 27.96 lacs respectively during the years relevant to the assessment years 2014-15 and 2015-16 from the deposits kept with the banks. The Assessing Officer took the view that the above said interest income is not part of its business profits and accordingly held that the same is non-business income. Accordingly he denied deduction u/s. 80P of the Act on the above said interest income. The Ld CIT(A) has also confirmed the same in both the years and hence the assessee has filed these appeals before the Tribunal.
4. The Ld AR brought to my notice a decision rendered by Mumbai SMC Bench of Tribunal in the case of Gandhinglaj Taluka Sahakari Patpedhi Ltd. v. Income Tax Officer (ITA No. 5793/Mum/2014 [2015] 44 ITR_TRIB 87 (Mum)) and submitted that the tribunal has considered an identical issue in the above said case. He submitted that the tribunal has distinguished the decision rendered by Hon'ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (322 ITR
283) and followed the decision rendered by Hon'ble Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State Co-operative Bank Ltd. (366 ITR 516).
3 ITA Nos. 540 & 491/Asr/2017 & 2018(AYs 2014-15 & 2015-16) Khaira Majja Co-op. A. M. S. Ltd. v. Asstt.& Dy. CIT The tribunal has held that interest income earned by the credit co-operative society is assessable as profits and gains of business and hence the said income is eligible for deduction u/s. 80P(2)(a)(i) of the Act.
5. I heard the Ld DR and perused the record. I notice that an identical issue was considered by Mumbai SMC Bench of the Tribunal in the case of Gandhinglaj Taluka Sahakari Patpedhi Ltd (supra) and decided the issue in favour of the assessee. For the sake of convenience I extract below the order passed by the Tribunal in the above said case:
"The assessee has filed this appeal challenging the order dated 3.6.2014 passed by ld CIT(A)-26, Mumbai and it relates to the assessment year 2010-11. The assessee is aggrieved by the decision of ld CIT(A) in holding that the interest income earned on the deposits kept with banks is not eligible for deduction u/s 80P(2)(a)(i) of the Act and hence liable to be assessed as income from other sources.
2. The facts relating to the above said issue are stated in brief. The assessee is a co- operative credit society registered under Maharashtra Co-operative Society Act, 1960. The main objects of the society is to provide credit/loans to its members and collect deposits from its members by way of fixed deposits, saving deposits and daily recurring deposits. The assessee filed its return of income for the year under consideration declaring NIL income after claiming deduction u/s 80P(2)(a)(i) of the Act. Sec. 80P(1) of the Act provides for deduction of income specified in sec. 80P(2) in case of an assessee, being a co-operative society. Sec. 80P(2)(a)(i) provides deduction of the whole of the amount of profits and gains of business attributable to any one or more of such activities. Since the assessee is a co-operative society engaged in carrying on the business providing credit facilities to its members, it claimed deduction u/s 80P(2)(a)(i) of the Act. However, sec. 80P(4) was inserted by Finance Act 2006 w.e.f. 1.4.2007 and the same reads as under:-4 ITA Nos. 540 & 491/Asr/2017 & 2018
(AYs 2014-15 & 2015-16) Khaira Majja Co-op. A. M. S. Ltd. v. Asstt.& Dy. CIT "80P(4) The provisions of this section shall not apply in relation to any co- operative bank other than primary agricultural credit society or primary co- operative agricultural and rural development bank.
According to Explanation given under sec. 80P(4), the expressions "Co-operative Bank"
and "Primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949. The expression "primary co- operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities.
3. The assessing officer, after referring to the provisions of Banking Regulation Act,held that the assessee is a bank and hence it is hit by the provisions of sec. 80P(4) of the Act. Accordingly he rejected the claim for deduction u/s 80P of the Act.
4. In the appellate proceedings, the ld CIT(A) held that the assessee cannot be considered to be a co-operative bank. On this decision, the revenue has not come on appeal before the Tribunal and hence the finding given by Ld CIT(A) has attained finality. Since the assessee is not considered as bank, the provisions of sec. 80P(4) shall not apply and hence the original ground on which the AO had denied deduction u/s 80P(2)(2)(a)(i) stood reversed by Ld CIT(A).
5. The Ld CIT(A), however, noticed that the assessee has earned interest income from fixed deposits maintained with various banks. The Ld CIT(A) took the view that the above said interest income cannot be held to be income generated from business activities and hence the same is required to be assessed under the head income from other sources, in which case the deduction u/s 80P(2)(a)(i) of the Act is not available to it. The assessee submitted that it is holding statutory reserves to the tune of Rs.115.51crores under various heads and they have been parked in deposits with Scheduled banks and co- operative banks. Accordingly it was submitted that these interest income also derived from carrying on its business activities and hence the same is exempt u/s 80P(2)(a)(i) of the Act. In the alternative, it was submitted that the interest received from deposits kept with Co-operative societies is exempt u/s 80P(2)(d). The Ld CIT(A) was not convinced 5 ITA Nos. 540 & 491/Asr/2017 & 2018 (AYs 2014-15 & 2015-16) Khaira Majja Co-op. A. M. S. Ltd. v. Asstt.& Dy. CIT with the contentions of the assessee and accordingly held that the interest income received from deposits cited above is assessable as income under the head Income from other sources and accordingly held that the deduction u/s 80P(2)(a)(i) is not available to it. In this regard, he placed reliance on the decision rendered by Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd (2010) (229 CTR (SC) 209 : [2010] 35 DTR (SC) 25 : [2010] 322 ITR 283 (SC) : [2010] 188 Taxman 282 (SC). Aggrieved, the assessee has filed this appeal.
6. I heard the parties and perused the record. I notice that an identical issue was considered by me in the case of M/s Jaoli Taluka Sahakari Patpedhi Maryadit vs. ITO in I.T.A. No. 6627/Mum/2014 relating to AY 2010-11and I have decided the issue in favour of the assessee, vide my order dated 10.8.2015.For the sake of convenience, I extract below the operation portion of the said order:
"9. I heard the parties and perused the record. In my view, the decision rendered by Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd (supra) squarely applies to the facts of the present case. In the case before the Hon'ble Karnataka High Court also, the assessee claimed deduction u/s 80P(2)(a)(i) on the interest income earned from deposits kept with banks on the reasoning that the same shall form part of its business income. The Hon'ble High Court upheld the said view by duly considering the decision rendered by Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd (supra). For the sake of convenience, I extract below the observations made by the Hon'ble Karnataka High Court:
"8. 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 from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit 6 ITA Nos. 540 & 491/Asr/2017 & 2018 (AYs 2014-15 & 2015-16) Khaira Majja Co-op. A. M. S. Ltd. v. Asstt.& Dy. CIT facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains 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.
9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee- Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee -Society was a liability and it was shown in the balance sheet on the liability side. Therefore, 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 assessing 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.7 ITA Nos. 540 & 491/Asr/2017 & 2018
(AYs 2014-15 & 2015-16) Khaira Majja Co-op. A. M. S. Ltd. v. Asstt.& Dy. CIT
10. 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 liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had 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 be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 244 CTR (AP) 86: [2011] 60 DTR (AP) 281: [2011] 336 ITR 516 (AP): [2011] 200 Taxman 220 (AP). In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order:"
7. Consistent with the view taken in the case of M/s Jaoli Taluka ahakari Patpedhi Maryadit (supra), I hold that the interest income is assessable as profit and gains of business in the hands of the assessee and accordingly, it is liable for deduction u/s 80P(2)(a)(i) of the Act. Accordingly, I set aside the order of the ld.CIT(A) on this issue and direct the AO to allow deduction u/s 80P of the Act on the interest income also."
6. I also notice that Amritsar SMC bench has also taken an identical view in the case of The Lambra Kangri Multipurpose Co-operative Service Society vs. DCIT (ITA Nos. 607 & 419 (Asr)/2015 dated 22.04.2016). Accordingly, consistent with the view taken in the above said cases, I hold that the interest income earned from bank deposits is assessable as profits and gains of business in the hands of assessee and accordingly deduction u/s. 80P(2)(a)(i) of the Act is allowable thereon. Accordingly I set aside the order passed by the Ld CIT(A) on this issue in both the 8 ITA Nos. 540 & 491/Asr/2017 & 2018 (AYs 2014-15 & 2015-16) Khaira Majja Co-op. A. M. S. Ltd. v. Asstt.& Dy. CIT years under consideration and direct the AO to allow the deduction u/s. 80P of the Act on the impugned interest income also in both the years.
7. In the result, both the appeals filed by the assessee are allowed.
Order pronounced in the open court on August 28, 2019 Sd/-
(B. R. Baskaran) Accountant Member Date: 28.08.2019 /GP/Sr. Ps.
Copy of the order forwarded to:
(1) The Appellant:
(2) The Respondent:
(3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T True Copy By Order