Income Tax Appellate Tribunal - Chandigarh
Punjab State Coop. Agrl. Dev. Bank, ... vs Department Of Income Tax on 7 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI H.L. KARWA, HON'BLE VICE PRESIDENT AND
MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER
ITA No. 1102/Chd/2014
Assessment year: 2011-12
The ACI T Vs. The Punjab State Coop. Agrl.
Circle 2(1), Dev. Bank, SCO 53-54
Chandigarh Sector 17E
Chandigarh
PAN No. AABAP8596L
(Appellant) (Respondent)
Appellant By : Sh. Sushil Kumar
Respondent By : Sh. M.R. Sharma
Date of hearing : 18/11/2015
Date of Pronouncement : 07/01/2016
ORDER
PER ANNAPURNA MEHROTRA A.M. This appeal filed by the Revenue is directed against the order dt. 16/09/2014 of CIT(A), Chandigarh.
2. In this appeal the Revenue has raised the following grounds :
1. The Ld. CIT(A) has erred in holding that the interest of Rs. 8,61,15,004/- arising out of surplus funds in reserve accounts is eligible for deduction u/s 80P(2)(a)(i).
2. The Ld. CIT(A) has erred in deleting the addition of Rs. 36,30,999/- made by the A.O. by holding that the provision of NPA is eligible for deduction u/s 80P(2)(a)(i).
3. The Ld. CIT has erred in deleting the addition of Rs. 2,21,57,661/- made by the A.O. on account of 'Gross Interest received on the loans advanced to the employees' treating the same as income from other sources instead of business income.
3. Brief facts relating to the case are that the return of income for the impugned AY was filed by the assessee on 30/09/2011 declaring total income of Rs. 5,85,560/-. The assessee had claimed deduction under section 80P(2)(a)(i) of Rs. 19,33,42,382/- from its gross total income of Rs. 19,39,27,939/-. Assessment under section 143(3) was framed on the assessee at an income of Rs. 2 11,25,25,220/- after disallowing deduction under section 80P(2)(a)(i) on the following:
Interest received on reserve fund Rs. 8,61,15,004/-
Interest on loans Rs. 2,21,57,661/-
Interest received on computer loans Rs. 33,000/-
Total Rs. 108305665/-
And further disallowing the provisions on account of Non Performing Assets [NPA] amounting to Rs. 36,30,999/-.
4. Aggrieved by the same the assessee filed an appeal before Ld. CIT(A) who vide his order dt. 16/09/2014 deleted all the disallowances made by following his own order for AY 2010-11.
5. Aggrieved by the same the Revenue filed the present appeal before us.
6. At the outset it was stated by the Ld. AR that all the issues raised in the present appeal are covered by the decision of the Hon'ble ITAT Chandigarh in the assessees own case for AY 2010-11 in ITA No. 829/Chd/2013 dt. 03/08/2015. In view of the same we proceed to decide the appeal as follows:
7. Ground No. 1 raised by the Revenue is against the claim of deduction under section 80P(2)(a)(i) on interest of Rs. 8,61,15,004/- arising out of surplus funds in reserve accounts.
8. Brief facts relating to the issues are that during the impugned AY the assessee had reserve fund and other funds totaling Rs. 3,75,16,51,776/- as follows:
Sr. No. Amount
i) Reserve fund Rs. 1,18,16,60,877/-
ii) Bad and Doubtful debt reserves Rs. 1,11,06,93,767/-
iii) Building fund Rs. 10,96,74,323/-
iv) Education fund Rs. 1,71,80,950/-
v) Common Goods Fund Rs. 11,97,00,727/-
vi) Agricultural Credit Stabilization fund Rs. 70,06,25,246/-
vii) Employees Benefit Fund Rs. 5,65,76,429/-
Viii) Investment Fluctuation Fund Rs. 1,50,08,100/-
ix) NPA Provisions Rs. 5,97,26,066/-
x) Building & Infrastructure Development Fund Rs. 6,25,32,000/-
xi) Goods pay master rebate fund Rs. 3,78,39,852/-
Total Rs. 3,75,16,51,776/-
3
Beside the above a balance of 19,32,08,336/- was lying in the surplus under Profit and loss account'. These funds had been parked in investment with different banks and other agencies and interest had been earned thereon amounting to Rs. 8,61,15,004/-. The assessee had claimed deduction under section 80P(2)(a)(i) on the same. In the assessment order framed u/s 143(3) of the Act, the Ld. AO held that the interest earned on surplus funds was chargeable to tax under the head income from other sources and could not be said to be attributable to providing credit facilities to the members. He therefore held that the assessee is not entitled to deduction under section 80P(2)(a)(i)of the same and added the amount of Rs. 8,61,15,004/- to income of the assessee.
9. On appeal the deduction was allowed by the Ld. CIT(A) for the reason that similar addition made in AY 2010-11 had been deleted in appeal by the Ld. CIT(A).
10. Aggrieved by the same, the Revenue filed the present appeal before us.
11. Before us the Ld. DR relied upon the order of the Hon'ble ITAT Chandigarh in ITA No. 829/Chd/2013, in the assesses own case in AY 2010-11wherein it was held that the assessee was not entitled to deduction under section 80P(2)(a)(i) on interest earned on surplus fund.
12. We find that the issue is squarely covered by the decision of Hon'ble ITAT Chandigarh in ITA No. 829/Chd/2013 wherein on identical set of facts the Hon'ble ITAT had held at para 9 and 10 of its order as follows:
"9. We h a ve c on si de re d t h e ri val s ub m i ssi on s ca ref ul l y. N o d o ub t t h at i n t h e ea rl i er y ea r t h i s i ss u e wa s deci de d i n f avo ur of t h e a s se s see . Ori gi n al l y t h i s i ss ue wa s d eci ded f or a s se s sm en t y ea r s 19 98- 99, 1 99 9- 2 00 0, 20 00- 01, 2 00 1- 0 2, 20 02- 03, 2 00 3 - 0 4 & 20 0 5- 0 6 i n IT A N o s. 12 0, 56 3 t o 56 5/ C h an di / 20 07 & 39 2 t o 39 5 / Ch an di /2 00 8 b y con s ol i dat ed ord er dat ed 25 .3 .2 00 9. It h a s t o b e n ot e d t h at deci si on of Hon 'b l e S up r em e C o urt i n t h e ca s e of Tot g a r ' s Co- op erat i ve Sal e S oci et y Lt d ( s up ra ) wa s ren d er ed on F eb r u a r y 8, 20 10. Th er ef o re, cl e a rl y wh en t h e m at t e r wa s d eci ded t h e b en ef i t of d eci si on of H on 'b l e S up r em e C o u rt wa s n ot a vai l ab l e . In t h e l at e r y ea r s al so i t seem s t h at Rev en ue h a s n ot ci t ed t h e deci s i on of Hon 'b l e S up rem e C o urt . In f act , si m i l a r v i e w wa s t ak en i n t h e ca se of CI T v P un jab St at e C o op erat i ve F ed e rat i on of Ho usi n g B u i l di n g S oci et i es Lt d ( s up ra ) b ut t h at d eci si on wa s r e ver s ed b y t h e H on 'b l e 4 Hi gh C o u rt i n IT A N o . 64 3 of 2 01 0 vi de or d er dat ed 1 0. 5. 20 11 . It wa s ob se rv ed at p a ra s 3 & 4 a s un de r :-
" 3. We h av e h e a rd Ld . C o un sel f o r t h e R ev en ue . N on e ap p e a r s f or t h e a ss e ss ee d es p i t e ser vi ce.
4. Pl ea on b eh al f of t h e Re ve n ue i s t h at i n tere st rec ei ved b y t h e a s se s see f rom c om m erci al b an k s wa s n ot c o ve red b y Se ct i on 80 P( 2 ) ( a )( i ) It h a s n ot h i n g t o d o wi t h t h e i n t ere st i n com e on t h e l oan ad van c ed t o t h e m em b er s. R el i an ce h a s b een p l ac ed on t h e ju dg em en t of Ho n ' b l e S up r em e C o urt i n Th e T ot ga r s Co op e rat i ve Sal e So ci et y Lt d v s IT O 2 01 0 ( 35 ) D TR 2 5 h ol di n g t h at i n t erest on b an k de p osi t s of G o ver n m en t Se c uri t i es deri ve d b y a Co o p e rat i ve S oci et y c o ul d n ot b e at t ri b ut ed t o t h e act i vi ti es of t h e S oc i et y of p ro vi di n g va ri o u s f a ci li ti es t o i t s m em b e rs an d wa s t a xa b l e un der Se ct i on 56 b ei n g i n com e f rom ot h er s o u r ces . It ap pea r s t h at si n ce t h e j ud gm en t of t h e Tri b u n al i s p ri or t o t h e j ud gem en t of t h e Hon 'b l e S up rem e C o urt rel i ed u p on on b eh al f of t h e Re ve n u e. Th e Tri b u n al di d n ot h av e adv an t ag e of t h e l a w l ai d do wn t h er ei n . Th e m at t er i s t h us, co ver ed i n f avo ur of t h e R ev en ue b y t h e j u dg m en t of Hon 'b l e S up rem e C o urt . C on t ra r y vi e w of t h e Tri b unal can n ot b e s ust ai n ed ."
10. We d o n ot f i n d an y f orc e i n t h e sub m i ssi on s t h at t h e deci si on of H on 'b l e S up rem e C o urt i n t h e ca se of T ot ga r ' s C o- op e rat i ve S al e S oci et y Lt d ( s up r a ) i s n ot ap p l i cab l e t o t h e p re s ent f act s of t h e ca s e. In f act , t h e H o n 'b l e S up rem e C o u rt h a s o b s er ve d a s u n d er :-
" Th e i n t erest i n com e a ri si n g t o a co- op e rat i ve s oci et y ca rr yi n g on t h e b u si n es s of p r ovi di n g c r edi t f aci l i ti es t o i t s m em ber s or m a rk et i n g of a gri cul t ural p r od u ce of i t s m em b er s, on t h e s ur p l us, wh i ch i s n ot req ui r ed i m m edi at el y f or b u si n es s p urp o s es, f rom i n vest m en t i n sh o rt - t erm de p osi t s an d s e cu ri ti es, ha s t o b e t a xed a s i n com e f rom ot h e r s o ur ce s un d er sect i on 56 of t h e In c om e- t a x Act , 19 61. S uch i n t erest can n ot b e sai d t o b e at t ri b ut abl e t o t h e act i vi ti es of t h e so ci et y, vi z., ca r r yi n g on t h e b u si n es s of p r o vi di n g c re di t f aci li ti es t o i t s m em b ers o r m a rk et i n g of a gri cul t ur al p r od u ce of i t s m em b ers . In t ere st i n com e of s u ch s oci et y f rom a m ou n t s ret ai n ed b y i t can n ot b e sai d t o b e a t t ri - b ut ab l e ei t h er to t h e act i vi t y m en t i on ed i n se ct i on 80 P( 2 )( a )( i ) or s ect i on 8 0P( 2 )( a )( i i i ) of t h e Act .
Se ct i on 8 0P( 2 )( a ) ( i ) can n ot b e p l a ced on a p a r wi t h E xp l a n at i on ( b aa ) t o se ct i on 8 0H HC , s ect i on 80H HD( 3 ) an d s ect i on 80 HHE ( 5 ). "
Th e r ea di n g of t h e ab ov e h ea d n ot e wo ul d sh o w cl ea rl y t h at ded u ct i on u / s 8 0P( 2 ) i s av ai l ab l e o n l y f rom t h e c ore act i vi ti es i .e. act i vi t y of p r o vi di ng c r edi t t o i t s m emb er s an d t h e sam e i s n ot avai l ab l e o n t h e d ep l o ym en t of s u rp l u s f un d s wi t h ot h e r b an k s . Th e ref or e, f ol l o wi n g t h e de ci si on of Ho n ' b l e S up r em e C o urt i n t h e ca s e of T ot g a r 's C o - op erat i ve S al e S oci et y Lt d ( s up ra ) a s we l l a s Hon 'b l e Hi gh C o u rt i n t h e ca s e of CI T v P un ja b St at e C o op e rat i ve Fe de rat i on of H o usi n g B ui l di n g S oci et i es Lt d ( s up ra ) we d eci de t h i s i ssu e agai n st t h e a ss es se e.
In view of the above, following the decision of the Hon'ble I TAT in the assesses own case in the preceding year we hold that the assessee is not entitled to deduc tion under section 80P(2)(a)(i) on the income earned on deployment of surplus funds with other banks. The deduction 5 under section 80P(2)(a)(i) on an amount of Rs. 8,61,15,004/- being interest on reserve fund earned during the year is therefore disallowed.
13. Appeal of the Revenue on this ground is therefore allowed.
14. In Ground No. 2 Revenue has agitated the deletion of addition of Rs. 36,30,999/- made by the AO by holding that the provision of NPA is eligible for deduction under section 80P(2)(a)(i).
15. Brief facts relating to the issue are that the assesse had debited an amount of Rs. 36,30,999/- to its profit & loss account as provision for NPA as per the norms of the NABARD and RBI. The AO held that guideline issued by the RBI or NABARD cannot over-ride the provision of the Income Tax Act which is independent code itself and total income is to be computed in accordance with the provisions of Income Tax Act, 1961. He further observed that provisions of any nature is not allowable under the Income Tax Act as deduction. He also observed that provision for bad debt is allowable under section 36(i)(viia) of the Income Tax Act only if the assessee is engaged in the banking business. Since the assessee in the impugned case was not engaged in the business of banking the claim of the provision was disallowed.
16. On appeal the Ld. CIT(A) allowed the claim of the assessee since similar addition made in Assessment year 2010-11 had been deleted in appeal by the Ld. CIT(A).
17. Aggrieved by the same, the Revenue filed the present appeal before us.
18. Before us the Ld. DR submitted that though this issue has been decided in favour of the assessee by the Hon'ble ITAT in Assessment year 2010-11 but the same is not to be allowed since the department had filed an appeal before the Hon'ble High Court on this issue.
19. Ld. AR on the other hand relied upon the order of the Hon'ble ITAT Chandigarh in ITA No. 829/Chd/2013 passed in the assesses case for AY 2010-11. 6
20. We have heard the rival submissions and have gone through the orders of the authorities below and the documents placed before us.
21. We find that this issue has been decided in favour of the assessee in assessees own case for AY 2010-11 by the Hon'ble ITAT Chandigarh Bench in ITAT No. 829/Chd/2013 wherein at para 15 of the order it was held as under :
15. We h a ve c o n si de red t h e ri val s ub m i ssi on s ca ref ul l y an d f i n d t h at t hi s i ss ue wa s d eci ded f or a s se s sm e n t ye a r 20 09- 10 vi de p a ra s 7 & 8 wh i ch a re a s u n der :-
" 7. Gr o un d N o.2, rai se d b y t h e r ev en ue i s al s o c ov er ed b y t h e deci si on of t h e Tri b un al , a s i n di cat ed b y t h e CI T( Ap p eal s ) i n hi s i m p ugn ed ord er an d b y t h e de ci si on of t h e Tri b un al f or t h e a s se s sm en t y ea r 20 0 8- 0 9 dat e d 19 .0 9. 20 12 i n a s se ss ee ' s o wn ca s e. Th e rel ev an t f i n di n gs of t h e CI T( Ap p eal s ), a s c on t ai n ed i n p a r a 4 t o 4.2 i s r ep r o d uc ed h e re un d er :
" 4. Gr o u n d o f ap p eal N o. 3 i s a gai n st di sal l o wa n ce of Rs . 7S 69 66 /- on a cc o un t of p r ovi si on f or NP A m ade b y t he ap p el l an t .
4.1 Si mi l a r addi t i on wa s m ad e i n t h e ca se of t h e a pp el l an t i n A. Y. 20 07- 08, wh i ch h a s b een del et ed b y m y p re dec e ss o r b y f o l l o wi n g t h e deci si on of Hon 'b l e IT A T, C h an di ga r h i n t h e ap pel l an t ' s o wn ca s e f or A. Y. 2 00 6- 0 7 ( s up r a ). Th e H on 'b l e IT A T h ad ad j udi ca t ed i n p a ra 5 of i t s or de r, ci t ed s up ra , a s un d er : -
" Th e f act s a re t h at t h e a ss e ss ee cl ai m ed ded u ct i on of a s um of Rs . 16, 75, 0 70 /- rep re s en t i n g t h e p ro vi si on on acc o un t of N P A s. Th e p ro vi si on of N P A s wa s m ad e i n t h o se c a se s i n wh i ch t h e l o an ee s st a rt ed m ak i n g def aul t s i n re- p a ym en t of l oan s. In t e rm s of t h e gui del i n e s i ss ue d b y N AB A RD f o r c r ea t i n g p rovi si on s d ep en di n g up on t h e l en gt h of def a ul t , t h e ded uct i on of R s. 1 6, 75, 0 70 / - wa s s o ugh t t o b e j ust i fi ed. Th e As s es si n g Of f i cer ob s er ved t h at s uch a cl ai m coul d on l y b e al l o we d i f t h e a s se s se e wa s en gag e d i n a b u si n es s of b an k i n g. Si n ce, i t wa s h el d t h at a ss es s ee wa s n ot en ga ge d i n t h e b an k i n g b usi n e ss, t h e cl ai m wa s d en i ed. I n ap p eal , t h e CI T( Ap p eal s ) h el d t h at t h o ugh t h e A s se s si n g Of f i cer wa s ju st i fi ed i n di sal l o wi n g t h e s ai d cl ai m b ut t h e c on se q ue n t i al i n c rea s e i n i n com e wo u l d re s ul t i n a h i gh er cl ai m of de d uct i on u / s 80 P( 2 ) ( a ) ( i ) of t h e Act . Agai n st s uch deci si on , t h e Re ve n ue i s i n ap p eal .
In o u r c on si der ed op i ni on , t h e di sal l o wa n ce of t h e p r o vi si on f or N P A h a s b e en s u st ai n ed b y t h e CT T ( Ap p eal s ) , b ut evi dent l y, t h e i n com e re s ul t i n g t h ereof h a s b een h el d t o b e el i gi b l e f or 80 P ( 2 ) ( a )( i ) of t h e Act . On t h i s a sp ect , we f i n d n o ju st i fi cati on f or t h e G ro un d rai sed b y t h e R ev e n u e. T h er e i s n ot h i n g b r o ugh t on r ec or d t o di sreg a r d t h at t h e i n t ere st i rrec o ver ab l e, wh i ch i s em b e dd ed i n t h e N P As i s n ot h i n g b ut i n t erest r ecei vab l e f rom m em b e rs, t h o u gh n ot reg ul a rl y r ec ei ved . It i s on l y t h e def a ul t e d i n t erest i n com e, wh i ch i s s o ugh t t o b e cl ai m ed a s a de d uct i on . If t h e s ai d de d uct i on i s n ot al l o we d, t h e n at u ral cor ol l a r y i s t h at t h e en h an c ed i n com e wo u l d b ec om e el i gi b l e f or80 P( 2( a ) ( i ), t o wh i c h t h e a ss es s ee i s ot h er wi s e en t i t l ed. In f act , si m i l a r i ss ue c am e up b ef o re t he T ri b un al i n t h e ca s e of H. P. St at e Co - op erat i ve B an k Lt d. ( su p ra ) whe rei n t h e sam e cl ai m wa s h el d a s el i gi b l e f or b en ef i t u/s 80 P( 2 ) ( a )( i ) of t h e Act f o r t h e rea s on t h at ev en t h e i n t erest wa s al s o e a rn ed f r om t h e b u si n es s 7 of p r ovi di n g c r edi t f aci li ti es t o i t s mem b er s. Th er ef or e, on t h i s a sp ect , we f i n d n o ju st i fi ab l e gri evan ce f or t h e R ev en ue a n d t h e Re ve n ue f ai l on t h i s a sp ect . "
4.1 .1 . H on 'b l e I T A T h a s al s o up h el d t h e ord er of m y p r ed ec es s or i n A. Y. 20 07- 08 vi de p a ra 6 & 7 of o rd er d at ed 0 9. 12 .2 01 0 i n IT A N o. 11 13 / Ch a n di /2 01 0.
4.2 I h av e g on e t h ro u gh t h e d eci si o n of m y p r ed ece s s or a n d Hon 'b l e IT A T, Ch an di ga rh on t h i s i ssu e an d I am en t i rel y i n agr eem en t wi t h t h e f i n di n gs gi ven b y m y p re de ce ss o r wh i ch h av e b een af f i rm ed b y H on 'b l e IT A T. In f act , t h e addi t i on m ade on t h i s acc o un t wa s del et e d b y m e i n A. Y. 2 00 8- 0 9. He n ce, t h e ad di ti on m ade on t h i s acc o u n t i s del et e d i n t hi s yea r al s o. Gr o un d of ap p eal N o. 3 i s al l o wed . "
8. Si mi l a rl y, f i n di n gs o f t h e order d at ed 19. 09. 20 1 1 of t h e Tri b u n al i n I T A N o .7 42 / Ch d / 20 11 a r e al s o r ep r od u ce d h er e un d er :
" 7. Th e i ss u e rai se d b y t h e Re ven u e i n gro u n d No . 2 i s ag ai n st t h e ord er of t h e C IT ( A ) i n h ol di n g di sal l o wa n c e of p r ovi si on s of N PA i s el i gi b l e f or d ed uc t i on u /s 80 ( P )( 2 )( a ) ( i ) of t h e Act . We f i nd t h at t h i s i ss ue h a s al s o b een d el i b erat e d up on b y t h e Tri b un al v i de i t s or de r dat e d 9. 12 .2 01 0 i n t urn rel yi n g up o n t h e ord er of t h e Tri b un al dat ed 2 4.9 .2 00 9 ( vi de p a ra s 5 & 6 ) wh i c h i n t urn , f ol l o we d i t s o wn p rec ed en t of or de r dat ed 2 5. 3 20 09 i n IT A N o s. 1 20 / Ch a n di /2 00 7 an d ot h e rs f or a s se s s m en t ye a r 19 98- 99 t o 20 05- 06, af f i rmi ng t h e st an d of t h e CI T( A ) di sm i sse d t h e gr o un d of ap p e al rai sed b y t h e R ev en ue b y h ol di n g a s un d er :-
" 5. T h e s ec on d G r o u n d rai sed b y t h e Re v en ue i s wi t h reg a rd t o t h e act i on of t h e CI T( A p p eal s ) i n del et i n g t h e di sal l o wan c e of Rs . 41, 20, 18 3 /- re p r es en t i n g p r ovi si on of N on P erf o rm i n g As set s ( NP A s ). On t h i s a sp e ct al s o, t h e Tri b u n al i n i t s o rd er d at ed 25 .3 .2 00 9 ( s up r a ) h a s adj udi cat ed t h e i s s u e i n f ol l o wi n g wo r ds :
1 2 . Th e se c on d a sp ect i s i n rel at i on t o i n co m e res ul t i ngo n acco u n t of di sal l o wan c e of Rs . 1 6, 75, 0 70 / - rep re sen t i n g p r o vi si on of n on - p erf orm i n g a ss et s( N P As ) . Th e f act s are t h at the a s se s see cl ai m ed ded u ct i on of a s um of Rs. 16, 75, 070 /-
rep r e sen t i n gt h e p r o vi si on on acc o un t of N P A s. Th e pr o vi si on of N P As wa s m ade i n t h ose ca s es i n wh i ch t h e l oan ee s s t a rt ed m ak i n g def aul t s in re- p aym en t of l oan s. In t erm s of the gui del i n e s i ssu ed by NAB A R D f or c re at i n g p rov i si on s, dep en di n g up on t h e l en gt h of d ef aul t , t h e de d uct i on of Rs . 16, 75, 0 70 /- wa s s o ugh t t o b e j ust i f i ed. Th e As se s si n g O f fi cer ob se rv ed t h at s uch a cl ai m co ul d on l y be al l o we d i f t h e a s se s see wa s en ga g ed i n a b usi n es s of b an k i n g.Si n ce, i t wa s h el d t h at a ss es s ee wa s n ot en gag ed i n t h e b an k i ng b usi n es s, t h e cl ai m wa s d en i ed. In a p p eal , t h e Cl T( Ap p eal s ) h el d t h at t h o ugh t h e As s es si n g Of f i cer- wa s j u st i fi ed i n di sal l o wi n g t h e sai d cl ai m, b ut t h econ seq u en t i al i n c rea s e i n i n com e wo ul d re s ul t i n ah i gh er cl ai m of de d uct i on u /s 80 P( 2 ) ( a )( i ) of t h e Act . Ag ai n st s u ch de ci si on , the Re ve n ue is i n ap p eal .
1 3 . In o u r c on si de re d op i n i on , t h e di sal l o wa n c e of t h e p ro vi si on f or N P A h a s been s u st ai n ed by t h e CI T ( Ap p e al s ), b ut evi den t l y, t h e i n com e res ul t i n g t h e re of h a s b e en h el d t o b e el i gi b l e f or 8 0P( 2 )( a ) ( i ) of t h e Act . O n t h i s a sp e ct , we f i n d n o ju st i fi cati on f o r t h e Gr o un d rai se d b y t h e Re ve n ue . Th ere i s n ot h i n g b r o ugh t on rec o rd to di sr ega rd t h at the i n t erest i rreco ve ra b l e, wh i ch is em b ed ded in t h e N P As is n ot h i n g but i n t erest r ec ei vab l e f rom m e m b ers, t h o ugh n ot reg ul a r l y r ec ei ved. It i s o n l y t h e d ef a ul t ed i n t ere st i n com e, wh i ch i s s o ug h t t o b e cl ai m ed a s a d ed u ct i on . If t h e sai d ded u ct i on i s n ot al l o we d, the n at u r al c or ol l a r y i s t h at t h e en h an c ed i n c om e wo u l d b e com e e l i gi b l e f or S O P( 2 ) ( a ) ( i ), 8 t o wh i ch the a ss es se e is ot h er wi s e en t i t led. In f act , si mi l a r i ssu e c am e up b ef or e t h e Tri b un al i n t h e c a s e of H .P .St at e C o- op erat i ve B an k L t d. ( s up r a ) wh e rei n the sam e cl ai m wa s h el d as el i gi b l e f or b en ef i t u /s 8 0P ( 2 )( a )( i ) of t h e A ct f or the re a s on t h at ev en t h e def a ul t ed i n t erest , wa s al s o ea rn ed f r om t h e b u si n es s of p r ovi di n g c re di t f aci liti es t o i t s m em b ers . Th eref or e, on this a sp e ct , we find n o j u st i fi ab l e gri evan ce for the R ev en u e an d t h e R ev en u e f ai l on t h i s a sp ect . "
6. In vi e w of t h e af o re sai d di sc u s si on , a s t h e f act s an d ci rcum st an c e s a r e i den t i cal i n t h e y ea r u n de r c on si d erat i on , f ol l o wi n g t h e p rec e den t , t h e ord er of t h e CI T( Ap p e al s ) on t h i s a sp ect i s al s o h er eb y af f i rm ed. A s a r es u l t , on t hi s Gr o un d al s o, t h e Re ve n ue f ai l s.
8. T h e i ss u e i n t h e p res en t ap p e al i s i den t i cal t o t h e i ssu e rai s ed i n t h e ea rl i er y ea rs an d f o11 o wi n g t h e af or e sai d p rec ed en t , we a re i n con f orm i t y wi t h t h e or de r of CI T( A ) . Th e gr o un d of ap p eal N o, 2 rai sed b y t h e Re ve n u e i s di sm i ss ed. "
8. Re sp ect f ul l y f ol l o wi n g t h e de ci si on of t h e T ri b un al , ref er re d t o ab o ve, t h i s g r o un d o f ap p eal of t h e re ve n u e i s di sm i ssed ."
16. Following the above, we decide this issue in favour of the assessee. In view of the same we delete the addition made on account of Provisions of NPA amounting to Rs. 36,30,999/-.
22. This ground of appeal raised by the Revenue is thereby dismissed
23. Ground No. 3 relates to the deletion of addition of Rs. 2,21,57,661/- made by the AO on account of gross interest received on loans advanced to the employee treating the same as income from other sources instead of business income. This issue is identical to the issue raised in ground no. 1. During the impugned AY the assessee had received interest on various kinds of loans advanced to its employees as per details hereunder :
1. Interest Received on House Building Loan Rs. 1,53,09,359
2. Interest Received on Vehicle Loan-Car Rs. 20,68,475/-
3. Interest Received on Consumer Loans Rs. 90,803/-
4. Interest Received on personal loans Rs. 44,29,701/-
5. Interest Received on Vehicles / Scooters Loan Rs. 2,59,323/-
6. Interest Received on computer loan advanced to employee Rs. 33,000/-
The Ld. AO held the above interest income to be income from other sources and non business income of the assessee and accordingly disallowed deduction under section 80P(2)(a)(i) on the same. 9 Ld. CIT(A) following his order for AY 2010-11 deleted the addition made.
24. Before us Ld. DR argued that this issue has been decided against the assessee by Hon'ble ITAT Chandigarh in its decision rendered in the case of the assessee for AY 2010-11 vide order dt. 03/08/2015 in ITA No. 829/Chd/2013.
25. We find that this issue has already been decided in AY 2010-11 at para 17- 20 of the order as follows :
17. Gr o un d N o .4 : Th i s i s s ue i s al m o st i d en t i cal t o t h e i ss u e adj udi cat ed b y u s t h ro u gh gr o un d N o. 2.
18. B ot h t h e p a rt i es m a de sam e c on t en t i on s i n r es p ect of t h e s e i ssu e s al s o. In f act Ld . C o un s el on l y st res se d t h at gi vi n g l o an s t o em p l o y ee s wa s on e of t h e co n di t i on of e m p l o ym en t , an d t h er ef or e, t h i s wa s b u si n es s i n c om e of t h e a ss e ss ee .
19. Af t er c on si deri n g t h e ri val s ub m i ssi on s we f i n d n o f orc e i n t h ese c on t en t i on s b e ca us e of o u r f i n di n gs i n resp ect of g r o un d N o. 2 con t ai n ed i n ab ov e Pa ra N o s. 4 t o 10. We m ay em p h asi z e t h at Hon 'b l e S up r em e C o urt h a s cl ea rl y l ai d d o wn t h at de d u ct i on i s avai l ab l e on l y ag a i n st t h e co re act i vi t y of t h e a ss es s e e i .e.
ext en di n g of l o an s t o t h e Mem b er s of t h e s oci et y and gi vi n g l oan s t o t h e st af f can n ot b e sai d t o b e t h e c or e act i vi t y of t h e soci et y . Th e ref or e, we d eci d e t h i s i ss u e a gai n st t h e a s se s se e.
20. In t h e re s ul t , ap p e al i s p a rt l y al l o we d.
Following the same we decide this issue in favour of the Revenue. Therefore, this ground of appeal of the Revenue is allowed.
26. In the resul t appeal of the Revenue is partl y allowed.
Order pronounced in the Open Court on 07/01/2016.
Sd/- Sd/-
(H.L. KARWA) (ANNAPURNA MEHROTRA)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated : 07/01/2016
AG
Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR