Income Tax Appellate Tribunal - Chandigarh
Punjab State Coop. Agrl. Dev. Bank, ... vs Department Of Income Tax on 13 October, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. RANO JAIN, ACCOUNTANT MEMBER
ITA No.710/Chd/2015
(Assessment Year : 2012-13)
The A.C.I.T., Vs. M/s Punjab State Coop.Agrl. Dev. Bank,
Circle 2(1), SCO 53-54, Sector 17-E,
Chandigarh Chandigarh.
PAN: AABAP8596L
(Appellant) (Respondent)
Appellant by : Shri Manjit Singh, DR
Respondent by : Shri M.R. Sharma
Date of hearing : 08.10.2015
Date of Pronouncement : 13.10.2015
O R D E R
PER RANO JAIN, A.M. :
This appeal filed by the Revenue is directed against the order of learned Commissioner of Income Tax (Appeals)-I, Chandigarh dated 15.5.2015 for assessment year 2012-13.
2. At the outset, it was stated at the Bar that all the issues raised in this appeal are covered by the order of the Chandigarh Bench of the I.T.A.T. in assessee's own case for assessment year 2010-11 in ITA No.829/Chd/2013 dated 3.8.2015.
23. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record.
4. The ground No.1 is general and requires no adjudication. The ground No.2 is with regard to interest arising out of surplus funds for the purpose of deduction under section 80P of the Income Tax Act, 1961 (in short 'the Act'). The said issue has been dealt with by the I.T.A.T., Chandigarh Bench in assessment year 2010-11 at page 2 in para 4 onwards while the findings are at page 4 in paras 9 and 10, which read as under :
"9. We have considered the rival submissions carefully. No doubt that in the earlier year this issue was decided in favour of the assessee. Originally this issue was decided for assessment years 1998-99, 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 & 2005-06 in ITA Nos. 120, 563 to 565/Chandi/2007 & 392 to 395/Chandi/2008 by consolidated order dated 25.3.2009. It has to be noted that decision of Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd (supra) was rendered on February 8, 2010. Therefore, clearly when the matter was decided the benefit of decision of Hon'ble Supreme Court was not available. In the later years also it seems that Revenue has not cited the decision of Hon'ble Supreme Court. In fact, similar view was taken in the case of CIT v Punjab State Cooperative Federation of Housing Building Societies Ltd (supra) but that decision was reversed by the Hon'ble High Court in ITA No. 643 of 2010 vide order dated 10.5.2011. It was observed at paras 3 & 4 as under:-
"3. We have heard Ld. Counsel for the Revenue. None appears for the assessee despite service.3
4. Plea on behalf of the Revenue is that interest received by the assessee from commercial banks was not covered by Section 80P(2)(a)(i) It has nothing to do with the interest income on the loan advanced to the members. Reliance has been placed on the judgement of Hon'ble Supreme Court in The Totgars Cooperative Sale Society Ltd vs ITO 2010 (35) DTR 25 holding that interest on bank deposits of Government Securities derived by a Cooperative Society could not be attributed to the activities of the Society of providing various facilities to its members and was taxable under Section 56 being income from other sources. It appears that since the judgment of the Tribunal is prior to the judgement of the Hon'ble Supreme Court relied upon on behalf of the Revenue. The Tribunal did not have advantage of the law laid down therein. The matter is thus, covered in favour of the Revenue by the judgment of Hon'ble Supreme Court. Contrary view of the Tribunal cannot be sustained."
10. We do not find any force in the submissions thatthe decision of Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd (supra) is not applicable to the present facts of the case. In fact, the Hon'ble Supreme Court has observed as under:-
"The interest income arising to a co-operative society carrying on the business of providing credit facilities to its members or marketing of agricultural produce of its members, on the surplus, which is not required immediately for business purposes, from investment in short-term deposits and securities, has to be taxed as income from other sources under section 56 of the Income-tax Act, 1961. Such interest cannot be said to be attributable to the activities of the society, viz., carrying on the business of providing credit facilities to its members or marketing of agricultural produce of its members. Interest income of such society from amounts retained by it cannot be said to be attri-butable either to the activity mentioned in section 80P(2)(a)(i) or section 80P(2)(a)(iii) of the Act.
Section 80P(2)(a)(i) cannot be placed on a par with Explanation (baa) to section 80HHC , section 80HHD(3) and section 80HHE(5)."4
The reading of the above head note would show clearly that deduction u/s 80P(2) is available only from the core activities i.e. activity of providing credit to its members and the same is not available on the deployment of surplus funds with other banks. Therefore, following the decision of Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd (supra) as well as Hon'ble High Court in the case of CIT v Punjab State Cooperative Federation of Housing Building Societies Ltd (supra) we decide this issue against the assessee."
5. Since none of the parties has distinguished the facts of the relevant assessment year from the facts in assessment year 2010-11, respectfully following the order of the Coordinate Bench of the I.T.A.T., Chandigarh we decide this issue against the assessee. The ground of appeal No.2 raised by the Revenue is decided in its favour.
6. The ground of appeal No.3 raised by the Revenue relates to provisions of NPA for the purpose of deduction under section 80P of the Act. Similar ground has been adjudicated by the Coordinate Bench of the I.T.A.T., Chandigarh at page 6 in para 11 onwards, the relevant findings are at paras 15 and 16, which read as under :
"15. We have considered the rival submissions carefully and find that this issue was decided for assessment year 2009-10 vide paras
7 & 8 which are as under:-
"7. Ground No.2, raised by the revenue is also covered by the decision of the Tribunal, as indicated by the CIT(Appeals) in his impugned order and by the decision of the Tribunal for the assessment year 2008-09 dated 19.09.2012 in assessee's own case. The relevant findings of the CIT(Appeals), as contained in para 4 to 4.2 is reproduced hereunder :5
"4. Ground of appeal No. 3 is against disallowance of Rs. 756966/- on account of provision for NPA made by the appellant.
4.1 Similar addition was made in the case of the appellant in A.Y. 2007-08, which has been deleted by my predecessor by following the decision of Hon'ble ITAT, Chandigarh in the appellant's own case for A.Y. 2006-07 (supra). The Hon'ble ITAT had adjudicated in para 5 of its order, cited supra, as under: -
"The facts are that the assessee claimed deduction of a sum of Rs. 16,75,070/- representing the provision on account of NPAs. The provision of NPAs was made in those cases in which the loanees started making defaults in re-payment of loans. In terms of the guidelines issued by NABARD for creating provisions depending upon the length of default, the deduction of Rs. 16,75,070/- was sought to be justified. The Assessing Officer observed that such a claim could only be allowed if the assessee was engaged in a business of banking. Since, it was held that assessee was not engaged in the banking business, the claim was denied. In appeal, the CIT(Appeals) held that though the Assessing Officer was justified in disallowing the said claim but the consequential increase in income would result in a higher claim of deduction u/s 80P(2)(a) (i) of the Act . Against such decision, the Revenue is in appeal.
In our considered opinion, the disallowance of the provision for NPA has been sustained by the CTT (Appeals), but evidently, the income resulting thereof has been held to be eligible for SOP (2)
(a)(i) of the Act. On this aspect, we find no justification for the Ground raised by the Revenue. There is nothing brought on record to disregard that the interest irrecoverable, which is embedded in the NPAs is nothing but interest receivable from members, though not regularly received. It is only the defaulted interest income, which is sought to be claimed as a deduction. If the said deduction is not allowed, the natural corollary is that the enhanced income would become eligible for80P(2(a) (i), to which the assessee is otherwise entitled. In fact, similar issue came up before the Tribunal in the case of H.P.State Co-operative Bank Ltd. (supra) wherein the same claim was held as eligible for benefit u/s 80P(2)(a)(i) of the Act for the reason that even the interest was also earned from the business of providing credit facilities to its members. Therefore, on this aspect, we find no justifiable grievance for the Revenue and the Revenue fail on this aspect."
4.1.1. Hon'ble ITAT has also upheld the order of my predecessor in A.Y. 2007-08 vide para 6 & 7 of order dated 09.12.2010 in ITA No. 1113/Chandi/2010.
4.2 I have gone through the decision of my predecessor and Hon'ble ITAT, Chandigarh on this issue and I am entirely in agreement with the findings given by my predecessor which have been affirmed by Hon'ble ITAT. In fact, the addition made on this account was deleted by me in A.Y. 2008-09. Hence, the 6 addition made on this account is deleted in this year also. Ground of appeal No. 3 is allowed."
8. Similarly, findings of the order dated 19.09.2011 of the Tribunal in ITA No.742/Chd/2011 are also reproduced hereunder :
"7. The issue raised by the Revenue in ground No. 2 is against the order of the CIT(A) in holding disallowance of provisions of NPA is eligible for deduction u/s 80(P)(2)(a)(i) of the Act. We find that this issue has also been deliberated upon by the Tribunal vide its order dated
9.12.2010 in turn relying upon the order of the Tribunal dated 24.9.2009 (vide paras 5 & 6) which in turn, followed its own precedent of order dated 25.3 2009 in ITA Nos. 120/Chandi/2007 and others for assessment year 1998-99 to 2005-06, affirming the stand of the CIT(A) dismissed the ground of appeal raised by the Revenue by holding as under:-
"5. The second Ground raised by the Revenue is with regard to the action of the CIT(Appeals) in deleting the disallowance of Rs. 41, 20,183/- representing provision of Non Performing Assets (NPAs). On this aspect also, the Tribunal in i t s order dated 25.3.2009 (supra) has adjudicated the issue in following words:
12. The second aspect is in relation to income resulting on account of disallowance of Rs. 16,75,070/-
representing provision of non-performing assets (NPAs). The facts are that the assessee claimed deduction of a sum of Rs. 16, 75, 070/- representing the provision on account of NPAs. The provision of NPAs was made in those cases in which the loanees started making defaults in re-payment of loans. In terms of the guidelines issued by NABARD for creating provisions, depending upon the length of default, the deduction of Rs. 16,75,070/- was sought to be justified. The Assessing Officer observed that such a claim could only be allowed if the assessee was engaged in a business of banking. Since, it was held that assessee was not engaged in the banking business, the claim was denied. In appeal, the ClT(Appeals) held that though the Assessing Officer- was justified in disallowing the said claim, but the consequential increase in income would result in a higher claim of deduction u/s 80P(2)(a)(i) of the Act. Against such decision, the Revenue is in appeal.
13. In our considered opinion, the disallowance of the provision for NPA has been sustained by the CIT (Appeals), but evidently, the income resulting thereof has been held to be eligible for 80P(2)(a)(i) of the Act. On this aspect, we find no justification for the Ground raised by the Revenue. There is nothing brought on record to disregard that the interest irrecoverable, which is embedded in the NPAs is nothing but interest receivable from members, though not 7 regularly received. It is only the defaulted interest income, which is sought to be claimed as a deduction. If the said deduction is not allowed, the natural corollary is that the enhanced income would become eligible for SOP(2) (a) (i), to which the assessee is otherwise entitled. In fact, similar issue came up before the Tribunal in the case of H.P.State Co-operative Bank Ltd. (supra) wherein the same claim was held as eligible for benefit u/s 80P(2)(a)(i) of the Act for the reason that even the defaulted interest, was also earned from the business of providing credit facilities to its members. Therefore, on this aspect, we find no justifiable grievance for the Revenue and the Revenue fail on this aspect. "
6. In view of the aforesaid discussion, as the facts and ci r cums tances ar e i denti cal i n the year under consideration, following the precedent, the order of the CIT(Appeals) on this aspect is also hereby affirmed. As a result, on this Ground also, the Revenue fails.
8. T he is sue i n the pr es ent appeal is i denti cal t o the i ssue raised in the earlier years and fo11owing the aforesaid precedent, we are in conformity with the order of CIT(A). The ground of appeal No, 2 raised by the Revenue is dismissed."
8. Respectfully following the decision of the Tribunal, referred to above, this ground of appeal of the revenue is dismissed."
16. Following the above, we decide this issue in favour of the assessee."
7. In view of the same, respectfully following the order of the Coordinate Bench of the I.T.A.T., Chandigarh we decide this issue in favour of the assessee. The ground of appeal No.3 raised by the Revenue is dismissed.
8. The ground of appeal No.4 raised by the Revenue is with regard to gross interest received on loans advanced to the employees treating the same as 'income from other sources' instead of 'business income'. The said ground has been adjudicated by the Chandigarh Bench of the I.T.A.T. at page 9 in para 17 onwards. The relevant findings are in para 19, which read as under :
8"19. After considering the rival submissions we find no force in these contentions because of our findings in respect of ground No.2 contained in above Para Nos. 4 to 10. We may emphasize that Hon'ble Supreme Court has clearly laid down that deduction is available only against the core activity of the assessee i.e. extending of loans to the Members of the society and giving loans to the staff cannot be said to be the core activity of the society. Therefore, we decide this issue against the assessee."
9. Respectfully following the order of the Coordinate Bench of the I.T.A.T., Chandigarh, we decide this issue against the assessee. The ground of appeal No.4 is decided in favour of the Revenue.
10. The ground Nos.5 and 6 are general in nature, therefore, needs no adjudication.
11. In the result, the appeal of the Revenue is partly allowed.
Order pronounced in the open court on this 13th day of October, 2015.
Sd/- Sd/- (BHAVNESH SAINI) (RANO JAIN) JUDICIAL MEMBER ACOUNTANT MEMBER Dated : 13 t h October, 2015 *Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh 9