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Income Tax Appellate Tribunal - Bangalore

M/S Sri Arya Vysya Sri Rama Sahakara ... vs The Income Tax Officer Ward-1 , ... on 13 July, 2018

               IN THE INCOME TAX APPELLATE TRIBUNAL
                       "SMC-C" BENCH : BANGALORE

     BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER

                               ITA No.1955/Bang/2018
                              Assessment Year :2012-13

        M/s. Sri Arya Vysya Sri Rama
        Sahakara Sangha Niyamitha,                 The Income Tax Officer,
        Kuvempu Road,                          Vs. Ward - 1,
        Shivamogga - 577 201.                      Shivamogga.
        PAN: AACAA2170L
                   APPELLANT                               RESPONDENT

              Appellant by           :    Shri Ravi Shankar, Advocate
              Respondent by          :    Shri S. Venkatesh, JCIT (DR)

                    Date of hearing               :    05.07.2018
                    Date of Pronouncement         :    13.07.2018

                                         ORDER
Per Shri A.K. Garodia, Accountant Member

This appeal is filed by the assessee which is directed against the order of ld. CIT (A), Davangere dated 30.06.2017 for Assessment Year 2012-13.

2. The grounds raised by the assessee are as under.

"1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2. The learned CIT[A] is not justified in holding that the appellant was not entitled to deduction in respect of the interest earned from investments in Schedule Banks holding that the same has to be assessed under the head "Other Sources" that was not entitled to deduction u/s. 80P[2][d] of the Act under the facts and in the circumstances of the appellant's case.

2.1 The learned CIT [A] ought to have appreciated that the appellant had claimed deduction u/s.80P [2] [a] [i] of the I.T.Act, in respect of the aforesaid interest income and the same could not be denied on the ground that the said interest was earned by schedule banks without appreciating that the appellant had placed its own funds by way of investment and the same was liable for assessment as part of income ITA No.1955/Bang/2018 Page 2 of 4 from business itself.

3. The learned CIT[A] is not justified in holding that the interest income and dividend income earned in deposit investment in schedule banks and cooperative banks was liable to be taxed under the head Income from Other Sources under the facts and in the circumstances of the appellant's case.

4. Without prejudice to the above, the learned CIT [A] ought to have appreciated that the gross interest earned by the appellant cannot be regarded as income without allowing proportionate expenses incurred by the appellant under the facts and in the circumstances of the appellant's case.

5. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234B and 234C of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.

5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs."

3. This appeal is filed by the assessee after a delay of 269 days. The assessee has filed an application for condonation of delay along with an affidavit in which it has been stated that as per the order of CIT(A), certain relief were allowed by CIT(A) and it was advised by ld. AR of assessee that the assessee should wait for the order giving effect to the order of CIT(A) before taking any further action and order giving effect to the order of CIT(A) was not passed by the AO and for this reason, there was delay in filing the appeal before Tribunal and subsequently the assessee approached some other Chartered Accountants i.e. S. Venkatesan & Co., Chartered Accountants, Bangalore for advice in another matter and there, the assessee discussed with him about this matter also and then the assessee was advised that the assessee should not wait for appeal effect order and should file the appeal before the Tribunal. It was submitted by ld. AR of assessee that after such advice of S. Venkatesan & Co., the appeal was filed before Tribunal and under these facts, the delay should be condoned. Considering these facts of present case, the delay is condoned and the appeal is admitted.

4. Regarding the merit of the appeal, it was submitted by ld. AR of assessee that the only issue in dispute is regarding allowability of deduction to assessee u/s. 80P[2][a][i] in respect of interest income from bank. He submitted that the authorities below has followed the judgement of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. as reported in 395 ITR 611 (Karn) and the judgment of Hon'ble Apex Court rendered in the case of Totgars Cooperative Sales Society Ltd. vs. ITO as reported in 322 ITR 283 (SC). But in the present case, the judgement of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO as reported in 230 Taxman 309 is applicable. He also placed reliance on a recent judgment of Hon'ble Karnataka High Court rendered in the case of Lalitamba Pattina Souharda Sahakari Niyamitha vs. ITO as reported in 166 DTR 400. He submitted a copy of this judgement of Hon'ble Karnataka High Court and pointed out that in this case, the Hon'ble Karnataka High Court has duly considered both the judgements of Hon'ble Karnataka High Court and Supreme Court rendered in the case of Totgars Cooperative Sales Society Ltd. (supra). But Hon'ble Karnataka High Court in this case has followed the recent judgment of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra). At this juncture, the bench pointed out that there is no conflict in the judgement of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra) and two judgements of Hon'ble Karnataka High Court and Hon'ble Apex Court rendered in the case of Totgars Co-operative Sales Society Ltd. (supra) but the ultimate conclusion is different because in the case of Totgars Co-operative Sales Society Ltd. (supra), it was found that the money deposited in bank was out of liability of the assessee whereas in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra), the money deposited in bank was out of assessee's own funds and not out of liability of the assessee. The bench wanted to know about the factual position in the present case and what is the finding of authorities below regarding this factual aspect. In reply, it was submitted by ld. AR of assessee that the facts of present case are in line with the facts in the case of Tumkur Merchants Souharda Credit Cooperative ITA No.1955/Bang/2018 Page 4 of 4 Ltd. Vs. ITO (supra) but there is no finding of any of the authorities below on this factual aspect and therefore, the matter may be restored back to the file of AO for fresh decision by examining the facts of present case in light of both these judgments of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra) and Totgars Co-operative Sales Society Ltd. (supra). The ld. DR of revenue supported the orders of authorities below.

5. I have considered the rival submissions. In view of the above discussion, I feel it proper to set aside the order of CIT(A) and restore the matter back to the file of AO for fresh decision after examining the facts of the present case in the light of these two judgements of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra) and PCIT and Another Vs. Totagars Co-operative Sale Society Ltd. (supra) after providing adequate opportunity of being heard to the assessee. I order accordingly.

6. In the result, the appeal filed by the assessee stands allowed for statistical purposes.

Order pronounced in the open court on the date mentioned on the caption page.

Sd/-

(ARUN KUMAR GARODIA) Accountant Member Bangalore, Dated, the 13th July, 2018.

/MS/ Copy to:

1. Appellant 4. CIT(A)

2. Respondent 5. DR, ITAT, Bangalore

3. CIT 6. Guard file By order Senior Private Secretary, Income Tax Appellate Tribunal, Bangalore.