Income Tax Appellate Tribunal - Chandigarh
The Sunam Primary Cooperative ... vs Acit, Circle, Sangrur on 7 September, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH 'B', CHANDIGARH BEFORE MS.DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.509/Chd/2018 (Assessment Year : 2014-15) The Sunam Primary Cooperative Vs. The A.C.I.T., Income Agricultural Development Circle Sangrur. Bank Ltd., Sunam.
PAN: AAAAT2624C
(Appellant) (Respondent)
Appellant by : Shri M.R. Sharma, Adv.
Respondent by : Shri Ankur Alya, JCIT DR
Date of hearing : 07.08.2018
Date of Pronouncement : 07.09.2018
O RDE R
PER ANNA PURNA GUPTA, A. M. :
Th i s a p p e a l h a s b e e n p r e f er r e d by t h e a s s es s e e ag a i n st t h e o r d e r o f L d. C o m m i s s i o ne r o f I n c o m e Ta x ( A p p e a l s ) , P a t i a l a da t e d 2. 1. 2 0 1 8 r e l a t i n g t o a s s e s s m en t y e ar 2 0 1 4 - 1 5 .
2. The sol e i ssue in the present appeal pertai ns to deducti on cl ai med under 80P of the I ncome Ta x Act, 1961 ( i n short 'the Act') o n account of i nco me earned by ass essee as a Cooperati ve Soci et y.
3. Bri efl y stated that assessee i s a regi stered cooperati ve soci et y engaged i n the busi ness of banki ng and provi di ng credi t faci l i ti es to i ts members, who are general l y smal l and margi nal farmers. For the i mpu gned assessment year, the assessee cl ai med the enti re profi ts and gai ns earned by i t as 2 ITA No.509/Chd/2018 A.Y.2014-15 deducti bl e under the provi si ons of secti on 80P ( 2) ( a) ( i ) of the Act, attri buti ng the same to i ts pri mar y acti vit y of provi di ng credi t faci l i ti es to i ts members. The Assessi ng Offi cer deni ed the sai d cl ai m of deducti on on the fol l o wi ng i ncome of the assessee, hol di ng that the y were not deri ved from the busi nes s of provi di ng cr edi t faci l i t y to th e members of the soci et y and hence were not el i gi bl e for deducti on under secti on 80P ( 2) ( a) ( i ) of the Act:
1) Pen al in teres t Rs. 5, 93, 487/-
2) In teres t rece ived on person al
Lo ans adv anced to e mpl o yees Rs. 11, 40, 610/-
3) In teres t f ro m PNB s we e p A/C Rs. 1, 37, 935/-
4) M iscel l aneous inc o me Rs. 6, 04, 606/-
T otal ( 1+2+3+4) Rs. 24, 76, 648/-
4. The matter was carri ed in appeal before the
Ld.CI T( Appeal s) , who al l o wed the assessees cl ai m of
deducti on on penal i nterest earned, fi ndi ng that the same was charged fro m the member who had defaul t ed on the terms of credi t, and thus hol di ng that i t was attributabl e to the acti vi t y of provi di ng credi t faci l i ti es to the members. The remai ni ng cl ai m was deni ed by the Ld.CI T( Appeal s) , uphol di ng the order of Assessi ng Offi cer that si nce the y were not di rectl y attri butabl e to the busi ness of the assessee soci et y of e xtend i ng credi t faci l i ti es to i ts member s, the sai d i ncomes di d not qual i f y for deduc ti on u/s 80P( 2) ( a )( i a) of the Act. Accordi ng the Ld.CI T( Appeal s) deni ed the assessees cl ai m of deducti on under 80P( 2) ( a) ( i ) of the Act on i nterest 3 ITA No.509/Chd/2018 A.Y.2014-15 earned from PNB, i nterest earned on personal l oans advanced to empl o yees and mi scel l aneous i ncome.
5. Aggri eved by the same assessee has come i n appeal before us rai si ng the fol l o wi ng effecti ve grounds:
"2. That the order of the Assessing Officer as upheld by the CIT(A) disallowing Rs.1140610/- being the amount of gross interest received on the loans advanced to the employees of the appellant as per the service rules and assessing the same under section 56 without allowing expenses u/s 57 is bad in law, against the judicial decisions and needs to be set aside.
3. That the order of the Assessing Officer as upheld by the CIT(A) disallowing Rs.604606/- being the amount of gross misc income received from the members on the loans advanced by the appellant being attributable to its business and assessing the same under section 56 without allowing expenses u/s 57 is bad in law, and is against the judicial decisions and needs to be set aside.
4. That the order of the Assessing Officer as upheld by the CIT(A) disallowing Rs.137935/- being the amount of gross interest received on the deposit with the Punjab National Bank and assessing the same under section 56 without allowing expenses u/s 57 is bad in law, against the judicial decisions and needs to be set aside.
5. That the order of the Assessing Officer as upheld by the CIT(A) not allowing deduction of Rs.50000/- under the provision of section of section 80P(2)(c) of the Act is bad in law, against the judicial decisions and needs to be set aside."
6. Duri ng the course of heari ng before us, Ld. counsel for the assessee contended that it was not chal lengi ng the di sal l o wance of deducti on u/s 80P( 2) ( a) ( i a) of the Act, on the aforesai d i ncomes, but was aggri eved by the acti on of the CI T( A) i n charging the gross i ncome to ta x as i ncome from other sources u/s 56 of the Act, wi thout al l o wi ng deducti on of e xpenses i ncu rred on earni ng t he sai d i ncomes as per the provi si on of sect i on 57 of the Ac t. I t was pl eaded that the sol e pra yer before us, rai sed by the assessee, i n ground 4 ITA No.509/Chd/2018 A.Y.2014-15 No.2, 3, & 4 above, was that the di sal l o wan ce of the deducti on be restri cted to the net i ncome earned, as agai nst the gross i ncome di sal l o wed by the l o wer authori ti es. Ld counsel for the assessee rel i ed on the order of the Juri sdi cti onal Hi gh Court i n the case of The Pu njab State Cooperati ve Federati on of House Bui l di ng Soci et y Ltd., Chandi garh Vs. CI T, Chandi garh and Another in I TA No.40/2016( O&M) dated 07.12.2016, poi nti ng out therefrom that the assessee i n the sai d case was al so a cooperati ve soci et y and one of the questi ons of l a w framed before the Hi gh court was whether the Tri bunal was ri ght i n hol di ng that i ncome, ea rned by wa y of i nterest, was ch argeabl e to ta x u/s 56 of the Act without al l o wi ng deducti on u/s 57 of the Act. The rel e vant questi on of l a w no.( v) reads as under:
"( v ) Whe ther in the f ac ts and in the c ir cu ms tances of the c ase, th e T ribun al was r igh t in l a w i n hol d ing th at the inco me b y wa y of in teres t on de pos its hel d wi th schedu l ed b anks was ch arge abl e to tax u/s 56 under the he ad ' inco me f ro m o ther source s' wi th ou t al l o wi ng an y deduc tion in res pec t of cos t of f unds and pro por tion ate ad min is tr ative an d o ther ex penses u/s 57?"
7. Our attenti on was dra wn to the order of the Hon'bl e Hi gh Court i n this regard poi nti ng out therefrom that fi ndi ng meri t i n the same the matter had been restored back to the I TAT to consi der thi s cl ai m of the assessee. Th e rel evant fi ndi ngs of the H on'bl e Hi gh Court at para 7 of i t s order as under:
5 ITA No.509/Chd/2018
A.Y.2014-15 "7. Re: Ques tions ( iv ) an d ( v ) T he appel l an t do es no t appe ar to h ave cl ai me d the deduc tion un der Sec tion 57 o f the In co me T ax Ac t ( in s hor t th e Ac t) in v ie w of the c on ten tio n bef ore the au thor i ties th at the gro ss in teres t inco me ough t to be cons idered as bus ines s inco me. It was tre ated b y the au thor i ties as i nco me f ro m o the r sources, T he ends of jus tice woul d be me t b y per mi tting the appel l an t to r ais e th is con ten tio n bef ore the T ribu n al . It is onl y f or th is l i mi te d pur pose th at the appe al on th is qu es tion is re mi tted to the T ribun al . It is o pen to the T ribun al to cons ider the issu e itself or to re mi t i t f urther.
8. I t was al so stated that even t he Hon'bl e Su preme Court, whi l e deal i ng wi th i denti cal i ssues of di sall o wance of deducti on u/s 80P of the Act, on i nterest earned by cooperati ve soci et y from banks and others, i n the case of M/s Totgars Cooperati ve Sal e Soci et y Li mi ted vs Income Ta x Offi cer, i n Ci vi l Appeal no. 1622 of 2010, had l eft the i ssue of al l o wi ng deducti on of e xpenses i ncurred on earning the sai d i ncome unans wered, remi tting the same to the Hon'bl e Hi gh Court to b e deci ded i n acc ordance wi th th e l a w. Our attenti on was i nvi ted to the rel evant fi ndi ngs of the Hon'bl e Supreme Court i n thi s regard at page 14 of i ts order as under:
" In this matter, one question advanced by the assessee(s) before the Authorities below has remained un-answered. That question is as follows:
Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income by way of interest on deposits held with scheduled banks, bonds and other securities was chargeable to tax under section 56 under the head 'Income from other sources' without allowing any deduction in respect of cost of funds and proportionate administrative and other expenses under section 57?
The above question requires an answer. It involves interpretation of Section 56 and Section 57 of the Act. It also involves 6 ITA No.509/Chd/2018 A.Y.2014-15 applicability of the said sections to the facts of the present case. We, accordingly, remit the said question to the High Court for consideration in accordance with law."
9. Copi es of both t he orders were pl aced before us . The Ld. counsel for assessee further stated that i t had not been granted deducti on under secti on 80P( 2) ( c) of the Act, whi ch al l o ws the deducti on of Rs.50,000 on the i ncome earned by the cooperati ve soci eti es and pra yed for the al l o wance of the same.
10. The Ld. DR, fai rl y agreed that the matter cou l d be restored back to the AO to be co nsi dered i n the l i ght of the judgements ci ted by the Ld.Counsel for the assessee.
11. I n vi e w of the above, we hol d that the i nterest of justi ce woul d be met by restori ng to the AO the i ssue of taxi ng the gross or net income earned by the assessee from the impugned sources as under:
Interest earned on personal loans advanced to employees Rs.1140610 Interest from PNB on Sweep a/c Rs.137935 Miscellaneous income Rs.604606
12. We di rect the AO to deci de the i ssue i n accordance wi th law appl i cabl e to the facts of the case. Further the contenti on rai sed by the assessee regardi ng al l o wance of deducti on under secti on 80P ( 2) ( c) of the Act i s also restored to the AO to be deci ded in accordance wi th the law appl i cabl e to the facts of the case.
Al l the grounds rai sed by the assessee, therefore are al l o wed for stati sti cal purposes.
7 ITA No.509/Chd/2018
A.Y.2014-15
13. I n the resul t, the appeal of the assessee i s all o w ed for stati sti cal purposes.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(DIVA SINGH) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 7 t h September, 2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh