Income Tax Appellate Tribunal - Amritsar
Pacca Kalan Multi Purpose Coop. ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR
SINGH, ACCOUNTANT MEMBER
I.T.A. No.109(Asr)/2010
Assessment year:2006-07
PAN :AAAAT4686N
The Pacca Kalan Multipurpose Vs. Dy. Commr. of Income-tax,
Co-op. Society, Circle II,
Pacca Kalan. Bhatinda.
(Appellant) (Respondent)
Assessee by: Sh. Sudhir K. Sehgal, Adv
Department by: Sh. Tarsem Lal, DR
ORDER
Per Mehar Singh, AM,
The assessee filed the present appeal against the order of the CIT(A), Bhatinda, dated 14.12.2009, passed under section 250(6) of the Income-tax Act, 1961 ( hereinafter referred to in short the 'Act') for the assessment year 2006-07.
2. The assessee has raised following grounds in this appeal:
"1. That the order of the Ld. CIT(A), Bhatinda is against facts and law.
2. That the Ld. CIT(A) erred on facts and law in upholding the action of the A.O. of disallowing the deduction under section 80P(2)(a)(iv) of the Act.
3. That the Ld. CIT(A) erred on facts and law in upholding the action of the A.O. of not allowing deduction on interest income from the members.2
4. That the Ld. CIT(A) erred on facts and law in upholding the action of the A.O. in considering ½ of the interest income as taxable income.
5. That the Ld. CIT(A) erred on facts and law in upholding the action of the A.O. in disallowing proportionate amount of the total expenses debited to income and expenditure statement.
6. That the Ld. CIT(A) erred on facts and law in upholding the action of the A.O. charging of interest u/s 234B & 234D & 244A(3)."
3. The brief and neat facts of the case, as culled out, from the relevant records are that the assessee is co-operative society registered with the Registrar of Co-operative. Societies Act. The members of the co-operative society are farmers and main object of the co-operative society is to provide loans, fertilizers, cattle feed, pesticides etc. to the farmers only on subsidized rates. The society derives its income from interest on the loans given to its members and also from interest on the credit facility provided to the members on account of supply of fertilizers/pesticides/seeds etc. The society claimed deduction under section 80P(2)(a)(iv) of the Act. The AO disallowed interest income earned by the assessee, from providing credit facilities on supply to fertilizers /pesticides/seeds etc.
i) Decision of Hon'ble Kerala High Court in the case of Kerala Co-operative Consumers Federation Ltd. Vs. CIT 170 ITR 455 (Ker), wherein it has been held as under:
"The assessee being a co-operative society in this case was only carrying on the business of purchase/sale of consumer goods on credit basis and tried to claim the deduction u/s 80P(2)(a)(iv). The deduction was disallowed only because as per the findings of the Hon'ble High Court, the assessee co-operative society engaged in purchase/sales of consumer 3 goods effecting credit sales to its members cannot said to be engaged in providing credit facilities.
ii) Decision of Hon'ble Madras High Court in the case of CIT Vs. Coral Mills Workers Co-operative Stores Ltd. (1977) 106 ITR 868 (Mad), wherein it has been held as under:
"The assessee co-operative society was dealing in grocery articles and piece goods and it was neither carrying on business of banking nor provided credit facilities to its members by way of giving loans. The Hon'ble High Court rejected the contention of the assessee that it sells goods on credit to its members and it should be treated as a society providing credit facilities to its members for claiming deduction u/s 80P.
iii) Decision of Hon'ble Allahabad High Court in the case of Addl.
CIT Vs. U.P. Co-operative Cane Union (1978) 114 ITR 70 (All) wherein it has been held as under:
" The assessee co-operative society was running a printing press and business of purchases/sales of kolhus to its members The Hon'ble High Court held that " A person or a society may not be banker in that wide ssense yet he may be providing credit facilities which is a part of a banking business. The expression "providing credit facility" thus takes its colour from the activity of banking. In order that a banking or providing of credit facility may constitute a business, it is necessary that these activities must be the chief source of income". The deduction claimed u/s 80P(2) was disallowed because the income was not covered by the section."
(iv) Decision of Hon'ble Madras High Court in the case of Rodier mill Employees Cooperative Stores Ltd. Vs. CIT (1982) 135 ITR 355 (Mad), wherein it has been held as under:
" The Hon'ble High Court has held that section 80P(2)(a)(i) refers to a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members but the assessee was neither engaged in the business of banking or providing loans to its members and it was only selling goods on credit to its members and further that " when the section refers to a co-operative society engaged in providing credit facilities to its members it really refers to a credit society, 4 whose primary object is the provision of loans or other credit facilities to its members, it does not include any society whose primary subject is something other than the provision of loans or other credit facilities, such as, a consumer co-operative ."
On appeal, the Ld. CIT(A), dismissed the appeal of the assessee and confirmed the findings of the AO. Now aggrieved with the findings of the Ld. CIT(A), the assessee is in appeal before us.
4. In the course of present appellate proceedings, the Ld. Counsel for the assessee to support the eligibility of claim under section 80P(2)(a)(iv), placed reliance on the following decisions:
i) CIT Vs. Iqbalpur Co-operative Cane Development Union Ltd.
(2009) 315 ITR 441 "Deduction u/s 80P Allowability-Inteerst from investment with banks and kisan Vikas Patra - Each category contained in Clause (a) (b), (c) and (d) of section 80P(2) cover different kinds of co-operative societies - Assessee Co-operative society being engaged not only in providing credit facility but also in marketing of agricultural produce grown by its members and providing loans for purchase of agricultural implements, seeds for agriculture etc., and thus covered under sub cls. (i), (iii) and (iv0 of c. (a) of sub-s (2), was entitled to deduction to the extent of whole of the amount of profits and gains of business attributable to any one or more of such activities-Whether such society earned its income earned its income in the form of interest on fixed deposit receipts or kisan vikas patra makes no difference. Such interest is also part of amount of profits and gains of business or activities of such socieity."
ii) CIT Vs. Krishak Sahkari Ganna Samiti Ltd. (2002) 258 ITR 594 (All) The Hon'ble High Court has held in this case that "interest earned by the assessee-co-operative society from its farmer members on loans advanced to them to enable them to purchase good seeds of sugarcane, fertilizers, etc. was exempt under 5 section 80P(2)(a)(i), while relying on the judgment of Hon'ble Supreme Court in the case of Cambay Electric Supply Industrial Co. ltd. Vs. CIT 113 ITR 84 (SC).
iii) Cambay Electric Supply Industrial Co. Ltd. Vs. CIT 113 ITR 94 (SC) The Hon'ble Supreme Court held that the expression 'attributable' to suggests that the legislature intended to cover receipts from sources other than the actual conduct of the wrong because the judgments are distinguishable on facts.
4.1. The Ld. Counsel vehemently contended that the AO in the assessment years 2003-04, 2004-05 after making detailed enquiry allowed deduction to the assessee u/s 80P(2)(a)(iv) of the Act. It was also contended by the Ld. Counsel for the assessee that subsequent to the assessment year 2006-07, the AO also allowed the claim of the assessee for the assessment year 2009-10 vide assessment order dated 15.03.2011 passed under section 143(3) of the Act. The AO assessed the income of the society at 'Nil'. The Ld. Counsel, further, contended that principle of consistency and res- judicata, is applicable to the fact situation of the present case. As mentioned earlier, the AO has allowed the claim of the assessee under section 80P(2)(a)(iv) under scrutiny assessment for the assessment years 2003-04, 2004-05 & 2009-10. Therefore, the Ld. Counsel argued vehemently that under identical set of fact situation of the case of the assessee, in the assessment year under consideration i.e. 2006-07, the claim of the assessee cannot be treated differently, as the AO has allowed the claim of the assessee-society, in the previous assessment year as well as subsequent to the assessment year 2006-07, as indicated above.
5. The Ld. 'DR', on the other hand placed reliance on the orders of the authorities below.
66. We have carefully perused and considered the entire fact situation of the case as well as rival submissions made by the contending parties. It is an undisputed fact that the AO under identical set of facts and circumstances of the case, duly considered and accepted the claim of the assessee for the assessment years 2003-04, 2004-05 & 2009-10 under scrutiny assessment made under section 143(3) of the Act. However, during the assessment year 2006-07, the claim was not accepted. In view of this, the quasi-judicial authority like A.O. cannot change his opinion on the foundation of subjectivity, arbitrariness and surmises without bringing on record clearly different set of facts and circumstances. In the assessment year under consideration, this becomes more imperative and relevant particularly, when the AO has accepted the claim of the assessee under scrutiny assessment, as mentioned earlier. Therefore, the concept of consistency and doctrine of res- judicata is applicable to the facts and circumstances of the present case. In this case, the assessee placed reliance on the following decisions:
i) Berger Paints India Ltd. CIT, 266 ITR 99 (SC)
ii) Radhasoami Satsang Vs. CIT 193 ITR 321 (SC)
6.1 The case of the assessee is that the appellant is co-operative credit society, whereas the case laws relied upon by the AO pertain to Consumer Co-operative Society. We have gone through the case laws relied upon by the AO and found the same are not applicable to the fact situation of the present case, as the object of the assessee, in such a case is diametrically opposite, to the object of the present assessee. The contention of the Ld. Counsel for the assessee that the phrase 'attributable' is appearing under section 80P, has wide ambit vis-à-vis, the phrase derived from. He submitted his contention on the basis of the decision of Cambay Electric 7 Supply Industrial Co., Ltd. Vs. CIT 113 ITR 84 (SC). We are in complete agreement with the contention raised by the assessee and found that the contention has merit based on the phrase used under section 80P(2)(a)(iv) of the Act. In view of this, the findings of the Ld. CIT(A) are set aside and the appeal of the assessee is allowed.
7. The last ground of appeal relates to upholding the action of charging of interest under section 234B & 234D & 244A(3). The Ld. Counsel submitted that this ground is consequential only. The AO is directed to allow consequential relief, if any, at the time of giving effect to the order. This ground of appeal is disposed of in these terms.
8. In the result, the appeal filed by the assessee is allowed.
Decision pronounced in the open court on 10th June, 2011.
Sd/- Sd/-
(H.L. KARWA) (MEHAR SINGH)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: 10th June, 2011
/SKR/
Copy of the order is forwarded to :
1. The Assessee:M/s. Pacca Kalan Multi-purpose Co-op. Socieity, Pacca Kalan.
2. The DCIT,Cir.II, Bhatinda.
3. The CIT(A), Bhatinda.
4. The CIT, Bhatinda.
5. The SR DR Asr True copy By Order (Assistant Registrar) Income Tax Appellate Tribunal Amritsar Bench : Amritsar.
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