Income Tax Appellate Tribunal - Amritsar
Mesers The Hoshiarpur Telecom ... vs Deputy Commissioner Of Income ,Circle ... on 5 April, 2019
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ITA No. 385/Asr./2018 A.Y. 2015-16
The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT
IN THE INCOME TAX APPELLATE TRIBUNAL
Camp Bench at Jalandhar
Before Shri N.K. Saini, Vice President
and Shri Ravish Sood, Judicial Member
ITA No. 385/Asr./2018
(Assessment Year: 2015-16)
The Hoshiarpur Telecom Dy. CIT,
Exmployees Coop. Thrift & Circle Hoshiarpur.
Credit Society Ltd., Telecom Vs.
Exchange Building,
Hoshiarpur.
PAN - AACAT1752D
(Appellant) (Respondent)
Appellant by: Shri J.S. Bhasin, A.R.
Respondent by: Shri Lalit Mohan Jindal, D.R
Date of Hearing: 16.01.2019
Date of Pronouncement: 05.04.2019
ORDER
PER RAVISH SOOD, JM
The present appeal filed by the assessee for A.Y. 2015-16 is directed against the order passed by the CIT(A)-1, Jalandhar, dated 30.03.2018, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income Tax Act, 1961 (for short 'IT Act'), dated 31.10.2017. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal:
"1. That the facts and the circumstances of the case, the ld. CIT(A) has grossly misdirected herself in arbitrarily confirming the addition of Rs. 2,60,312/- as had been wrongly made by the ld. AO in terms of section 80P(2)(d) of the Income Tax Act.
2. That the impugned order is unsustainable being in violation of the principles of natural justice, inasmuch as it has been passed not only by taking a view contrary the one already taken in assessee's own case in preceding two years, but also without confirming the assessee that the earlier view was not to be followed.
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3. That while passing the above order, the ld. CIT(A) erred in following the Hon'ble Apex Court decision in the case of Totgar's Coop. Society vs ITO in Civil Appeal No. 1622/2010, when the said decision had already been distinguished by the Hon'ble ITAT Bench Amritsar, which was followed by the CIT(A) in earlier two years.
4. That by an reckoning, the impugned order, bring arbitrary, unlawful and contrary to judicial discipline, does not deserve to be sustained at all."
2. Briefly stated, the assessee which is a co-operative society registered with the Assistant Registrar Co-operative Societies, Hoshiarpur had filed its return of income for A.Y. 2015-16 on 26.09.2015, declaring total income at Rs. 2,15,990/- after claiming deduction of Rs. 86,24,254/- under Sec. 80P(2) of the IT Act. The return of income filed by the assessee was processed as such under Sec. 143(1). Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2).
3. During the course of the assessment proceedings it was observed by the A.O that the surplus funds of the assessee society amounting to Rs. 25,43,50,900/- were advanced as loans to its members, while for an amount of Rs. 60,54,343/- was lying deposited in the banks. It was noticed by the A.O that during the year the assessee society had earned interest of Rs. 2,36,45,452/- on loans advanced to the members and interest of Rs. 2,66,630/- on the funds lying deposited in the banks. The assessee society after inter alia claiming the interest of Rs. 1,26,83,982/- paid on deposits which was a major expenditure, had shown the net profit at Rs. 88,19,885/- which was claimed as a deduction under Sec. 80P(2)(a)(i) of the IT Act. Insofar the claim of deduction under Sec. 80P in respect of the interest income of the assessee on the amounts lying with the banks viz. (i) interest on bank account with Punjab National Bank : Rs. 1,29,501/-; (ii) interest on bank account with Indian Bank : Rs. 1,12,706/-; and (iii) interest on bank account with State Bank of India : Rs. 18,105/- was concerned, the A.O was of the view that the same were not eligible for deduction P a g e |3 ITA No. 385/Asr./2018 A.Y. 2015-16 The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT under Sec. 80P of the IT Act. In the backdrop of his aforesaid deliberations the A.O declined the claim of deduction under Sec. 80P raised by the assessee as regards the interest from banks amounting to Rs. 2,60,312/-.
4. Aggrieved, the assessee assailed the assessment order in appeal before the CIT(A). The CIT(A) after necessary deliberations observed that the assessee which was a co-operative credit society had invested its surplus funds with the public sector banks and had earned interest on the same. The CIT(A) relying on the judgment of the Hon'ble Supreme Court in the case of M/s The Totgars Co-op. Sale Society Ltd. Vs. ITO, Karnataka (Civil Appeal No. 1622 of 2010, dated 08.02.2010), observed that as held by the Hon'ble Apex Court the assessee would not be eligible for claim of deduction under Sec. 80P on the interest income earned by it on the funds lying with the banks. On the basis of his aforesaid observations the CIT(A) upheld the order of the A.O and dismissed the appeal.
5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The Ld. Authorized Representative (for short 'A.R) for the assessee at the very outset of the hearing of appeal submitted that a similar disallowance of the claim of deduction under Sec. 80P(2)(a) raised by the assessee society in the immediately preceding two years viz. A.Y. 2013-14 and A.Y. 2014-15 was deleted by the then CIT(A), vide his appellate orders dated 24.01.2017 and 15.06.2017, for the said respective years. It was averred by the Ld. A.R that the assessee being of the view that the issue was squarely covered by the aforesaid orders of the said appellate authority, had thus merely relied on the same and did not advance any contentions on the merits of the case. It was submitted by the Ld. A.R that the CIT(A) while disposing off the appeal for the P a g e |4 ITA No. 385/Asr./2018 A.Y. 2015-16 The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT year under consideration had failed to make any reference to the earlier two orders passed in the case of the assessee and had dismissed the appeal by relying on the judgment of the Hon'ble Supreme Court in the case of M/s The Totgars Co-op. Sale Society Ltd. Vs. ITO, Karnataka (Civil Appeal No. 1622 of 2010, dated 08.02.2010). In sum and substance, it was the claim of the assessee that the first appellate authority was in error in not confronting the assessee with her intention of not accepting the view taken by her predecessor in the assesses own case for the immediately preceding two years and had dismissed the appeal by relying on the aforesaid judgment of the Hon'ble Apex Court. It was averred by the Ld. A.R that not only the CIT(A) had erred in passing the order without affording a sufficient opportunity to the assessee to distinguish the facts of its case as against those involved in the case before the Hon'ble Apex Court, but even otherwise by taking recourse to an inconsistent approach had clearly violated the basic principle of consistency. In support of the aforesaid contention the Ld. A.R relied on the judgment of the Hon'ble Apex Court in the case of Radha Soami Satsang Vs. CIT (1992) 193 ITR 321 (SC). On merits, it was submitted by the Ld. A.R that the ITAT, Bangalore Bench in the case of Honnali Credit Co-op Society Ltd. Vs. ITO (2018) Taxpub (DT) 1052 (Bang) had distinguished the facts involved in the case before them as against those which were there in the case before the Hon'ble Apex Court in the case of M/s The Totgars Co-op. Sale Society Ltd. Vs. ITO, Karnataka (Civil Appeal No. 1622 of 2010, dated 08.02.2010). It was submitted by the Ld. A.R that the Tribunal in the aforementioned case had observed that as in the case of Totgars Co-op Sale Society Ltd (supra) the society besides providing credit facilities to its members was also purchasing agriculture produce of its members, therefore, in the backdrop of the said facts it was concluded by the Hon'ble Apex Court that the interest P a g e |5 ITA No. 385/Asr./2018 A.Y. 2015-16 The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT earned on the surplus of the co-operative society lying by way of deposits with the public sector undertaking banks could not be held as "attributable" to its activities mentioned in Sec. 80P(2)(a)(i) or 80P(2)(a)(iii). It was thus the claim of the Ld. A.R that as the core activity of the present assessee was to provide credit facilities to its members and to accept deposits from them, thus it was duly entitled for claim of deduction under Sec. 80P(2)(a)(i) r.w.s. 80P(2)(d). Apart there from, it was the contention of the Ld. A.R that the assessee society was not parking its surplus funds with the banks, but the same were being deposited by virtue of its business exigency. The Ld. A.R had also relied on a recent order of a coordinate bench of the Tribunal viz. ITAT, Chandigarh Bench i.e. The Tiara Co-op. Agriculture Service Society Ltd., Kangra Vs. ITO, Dharamshala (ITA No. 905/Chandi/2017; dated 01.05.2018), wherein a similar addition was deleted by the Tribunal after distinguishing the aforesaid order of the Hon'ble Apex Court in the case of Totgars Co-op Sale Society Ltd. (supra).
6. Per contra, the Ld. Departmental Representative (for short 'D.R') relied on the orders of the lower authorities.
7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. It is a matter of record that the CIT(A)-1, Jalandhar, while disposing off the appeals of the assessee for the immediately preceding years i.e. A.Y. 2013-14 and A.Y. 2014-15, had vide his respective orders dated 24.01.2017 and 15.06.2017 vacated the disallowance by the A.O of the assesses claim of deduction under Sec. 80P as regards the interest income earned on the funds of the assessee lying with the same banks i.e. Punjab National Bank, Indian Bank and State Bank of India. As is discernible from the order of the P a g e |6 ITA No. 385/Asr./2018 A.Y. 2015-16 The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT CIT(A) in the case before us, there is no reference by her to the view taken by her predecessor in the assesses own case on the identical issue in the aforementioned preceding years. We are persuaded to subscribe to the contentions advanced by the Ld. A.R that in case the CIT(A) intended not to rely on the view taken by her predecessor, despite the fact that there was no change in the facts during the year as in comparison to the said preceding years, she was obligated to have at least conveyed her said intention so that the assessee who remained under a bonafide belief that the issue was squarely covered by the order passed in its own case for the preceding two years would have been able to advance its contentions on the merits of the case. Be that as it may, we find that a bare perusal of Sec. 80P(2)(a)(i) provides that in the case of a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, the whole of the amount of the profit and gains of business attributable to such activity would be eligible for deduction under the said statutory provision. Insofar the term "attributable to" is concerned, we find that the same as defined by the Hon'ble Supreme Court in the case Cambay Electric Supply Industrial Co. Ltd. Vs. CIT (1978) 113 ITR 84 (SC) is a term which is much wider in impact than the expression "derived from". In our considered view, in the case of the assessee before us the term "attributable to" covered receipts from activities related to the business of providing credit facilities of the co-operative society. In fact, the conscious, intentional and purposive usage of the word "attributable to" by the legislature in Sec. 80P(2)(a)(i) would mean that if in the course of the business of providing credit facilities to its members the society received any income which was the outcome of such business of providing credit facilities to them, the said income was to be construed as the profit and gains of the business which would be eligible for deduction under Sec. 80P(2)(a)(i) of the IT Act. It P a g e |7 ITA No. 385/Asr./2018 A.Y. 2015-16 The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT would also be relevant to point out that the Hon'ble Supreme Court in the case of Totagars Co-operative Society Vs. ITO (2010) 322 ITR 283 (SC) was dealing with a proposition that where the interest income had accrued on funds invested in the banks which were not immediately required by the assessee for its business and were invested in securities and short term deposits with other banks, then such interest earned on the deposits would fall within the category of 'income from other sources' taxable under Sec. 56 and would not be eligible for deduction under Sec. 80P(2)(a)(i). Apart there from, in the aforementioned case before the Hon'ble Apex Court, the assessee society viz. Totgars Co-op Sale Society Ltd. was not solely providing credit facilities to its members, but was also helping them in marketing their agricultural produce.
8. We have given a thoughtful consideration to the issue before us and are of the considered view that the CIT(A) while disposing off the present appeal had erred in not distinguishing the view taken by her predecessor in the assesses own case for the immediately two preceding years i.e. A.Y. 2013-14 and A.Y. 2014-15, wherein on identical facts her predecessor had concluded that the interest earned by the assessee society on the bank accounts held with the nationalized banks was eligible for claim of deduction under Sec. 80P(2)(a)(i). Apart there from, we find that though it is the case of the assessee that the amounts deposited in the bank account were by virtue of its business exigency, however, the CIT(A) observing that the assessee had deposited its surplus funds with the public sector banks, had thus on the said count concluded that the interest on such bank accounts would not be eligible for claim of deduction under Sec. 80P(2)(a)(i) or Sec. 80P(2)(a)(iii) by relying on the judgment of the Hon'ble Supreme Court in the case of Totagars Co-operative Society P a g e |8 ITA No. 385/Asr./2018 A.Y. 2015-16 The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT Vs. ITO (2010) 322 ITR 283 (SC). In our considered view the aforesaid assumption by the CIT(A) that the assessee had deposited its surplus/idle funds in the bank accounts clearly militates against the claim of the assessee that the amounts were being deposited in the bank on account of a business exigency. In fact, we find that a similar claim of the assessee was accepted by the CIT(A) while disposing off the appeals of the assessee for the immediately two preceding years i.e. AY. 2013-14 and A.Y. 2014-15. On the basis of our aforesaid observations, we are of the considered view that the matter in all fairness requires to be restored to the file of the CIT(A), who shall after making necessary verifications of the facts of the case readjudicate the issue as regards the entitlement of the assessee towards claim of deduction under Sec. 80P(2) i.e after considering the view taken by her predecessor in the preceding years i.e. A.Y. 2013-14 and A.Y. 2014-15 and our observations recorded hereinabove. Needless to say, the CIT(A) shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate its aforesaid claim for deduction under the said statutory provision.
9. The appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 05/04/2019
Sd/- Sd/-
(N.K. Saini) (Ravish Sood)
VICE PRESIDENT JUDICIAL MEMBER
Place : Chandigarh; Dated 05.04.2019
Ps. Rohit
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ITA No. 385/Asr./2018 A.Y. 2015-16
The Hoshiarpur Telecom Employees Coop. Thrift & Credit Society Ltd. Vs. DCIT आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु त(अपील) / The CIT(A)-
4. आयकर आयु त / CIT
5. DR, ITAT, Camp Bench, Jalandhar
6. गाड फाईल / Guard file.
स या पत त //True Copy//
आदे शानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील&य अ'धकरण/ITAT, Camp.
Bench, Jalandhar