M/s. Rajapura Saraswatha Credit Co-operative Society Limited, Karkala v. Income Tax Officer, Ward - 3, Udupi

ITA 1291/BANG/2019 | 2015-2016
Pronouncement Date: 10-03-2021 | Result: Allowed

Appeal Details

RSA Number 129121114 RSA 2019
Assessee PAN AAAAR2039P
Bench Bangalore
Appeal Number ITA 1291/BANG/2019
Duration Of Justice 1 year(s) 9 month(s) 3 day(s)
Appellant M/s. Rajapura Saraswatha Credit Co-operative Society Limited, Karkala
Respondent Income Tax Officer, Ward - 3, Udupi
Appeal Type Income Tax Appeal
Pronouncement Date 10-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 10-03-2021
Date Of Final Hearing 10-03-2021
Next Hearing Date 10-03-2021
Last Hearing Date 25-02-2020
First Hearing Date 15-06-2020
Assessment Year 2015-2016
Appeal Filed On 06-06-2019
Judgment Text
ITA NO.1291/BANG/2019 RAJAPURA SARASWATHA CREDIT CO-OP. SOCIETY LTD. BEN GALURU IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN VICE PRESIDENT AND SHRI B.R. BASKARAN ACCOUNTANT MEMBER ITA NO.1291/BANG/2019 ASSESSMENT YEAR: 2015-16 RAJAPURA SARASWATHA CREDIT CO-OP. SOCIETY LTD. NO.22291 SARASWATHA SOUDHA POST KUKKUNDOOR KARKALA TALUK PAN NO : AAAAR2039P VS. ITO WARD-3 UDUPI APPELLANT RESPONDENT APPELLANT BY : SHRI S.V. RAVI SHANKAR A.R. RESPONDENT BY : SMT. R. PREMI D.R. DATE OF HEARING : 10.03.2021 DATE OF PRONOUNCEMENT : 10.03.2021 O R D E R PER B.R. BASKARAN ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 29-03-2019 PASSED BY LD CIT(A) MANGALURU AND IT RE LATES TO THE ASSESSMENT YEAR 2015-16. THE ISSUES URGED BY THE A SSESSEE IN ITS GROUNDS OF APPEAL RELATE TO THE FOLLOWING ISSUES:- (A) REJECTION OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF ITS BUSINESS INCOME. (B) REJECTION OF DEDUCTION U/S 80P(2)(D) OF THE AC T IN RESPECT OF INTEREST INCOME. ITA NO.1291/BANG/2019 RAJAPURA SARASWATHA CREDIT CO-OP. SOCIETY LTD. BEN GALURU PAGE 2 OF 5 2. AT THE TIME OF HEARING BOTH THE PARTIES ADMI TTED THAT THE BOTH THE ISSUES ARE COVERED BY THE DECISION RENDERED BY CO-ORDINATE BENCH IN THE CASE OF KARKALA CO-OP S BANK LTD VS ITO (IT A NOS.1288 & 1289/BANG/2019 DATED 18-02-2021). ACCORDINGLY WE EXTRACT BELOW THE ORDER PASSED BY THE TRIBUNAL IN THE ABOVE SAID CASE:- 2. THE FIRST COMMON ISSUE URGED BY THE ASSESSEE IN BOTH THE YEARS RELATE TO REJECTION OF CLAIM OF DEDUCTION UNDER 80P (2)(A)(I) OF THE INCOME-TAX ACT 1961 ['THE ACT' FOR SHORT]. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A COOPERATIVE SOCIETY PROVIDING CRE DIT FACILITIES TO ITS MEMBERS. THE ASSESSEE CLAIMED DEDUCTION U/S 80 P OF THE ACT IN BOTH THE YEARS UNDER CONSIDERATION. THE A.O. NOTIC ED THAT THE ASSESSEE HAS EXTENDED CREDIT FACILITIES TO NOMINAL MEMBERS WHO HAVE NO ROLE IN THE MANAGEMENT OF THE SOCIETY AND A LSO DOES NOT HAVE ANY RIGHT TO VOTE. HE ALSO OBSERVED THAT MANY NOMINAL MEMBERS DID NOT POSSESS ANY SHARE CERTIFICATE. ACC ORDINGLY THE A.O. TOOK THE VIEW THAT THE NOMINAL MEMBERS ARE NO N-MEMBERS. HE ALSO OBSERVED THAT THE ASSESSEE HAS RECEIVED DEP OSITS AND LENT LOAN TO GENERAL PUBLIC AND NOMINAL MEMBERS. ACCORD INGLY HE TOOK THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR DEDU CTION U/S 80P(2)(A)(I) OF THE ACT AS PER THE DECISION RENDERE D BY HONBLE SUPREME COURT IN THE CASE OF CITIZEN CO-OPERATIVE S OCIETY LTD. (2017) 397 ITR 1. THE A.O. ALSO OBSERVED IN AY 201 5-16 THAT THE INTEREST INCOME RECEIVED BY THE ASSESSEE FROM DEPOS ITS KEPT WITH BANKS IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(C) & 80P(2)(D) OF THE ACT SINCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTIO N U/S 80P(2)(A)(I) OF THE ACT. ACCORDINGLY THE A.O. DENIED DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN BOTH THE YEARS. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 4. THE LD. A.R. SUBMITTED THAT THE LAW ON DEDUCTION OF 80P(2)(A)(I) OF THE ACT AVAILABLE TO CREDIT CO-OPER ATIVE SOCIETIES HAS SINCE BEEN SETTLED BY HONBLE SUPREME COURT IN THE CASE OF MAVILAYI SERVICE CO-OPERATIVE BANK LTD. VS.CIT (2021) 123 TA XMANN.COM 161 (SC). HE SUBMITTED THAT THE HONBLE SUPREME CO URT HAS HELD THAT THE EXPRESSION MEMBERS IS NOT DEFINED IN THE INCOME-TAX ACT. HENCE IT IS NECESSARY TO CONSTRUE THE EXPRESSION MEMBERS IN SECTION 80P(2)(A)(I) OF THE ACT IN THE LIGHT OF DEF INITION OF THAT EXPRESSION AS CONTAINED IN THE CONCERNED CO-OPERATI VE SOCIETIES ACT. THE LD. A.R. SUBMITTED THAT THE HONBLE SUPREME COU RT HAS CONSIDERED THE DECISION RENDERED BY IT IN THE CASE OF CITIZEN CO- OPERATIVE SOCIETY LTD. (SUPRA) AND OBSERVED THAT TH E RATIO DECIDENDI ITA NO.1291/BANG/2019 RAJAPURA SARASWATHA CREDIT CO-OP. SOCIETY LTD. BEN GALURU PAGE 3 OF 5 OF CITIZEN CO-OPERATIVE SOCIETY LTD. MUST BE GIVEN EFFECT TO. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. 5. THE LD. D.R. ON THE CONTRARY SUBMITTED THAT TH E ISSUE OF DEDUCTION NEEDS TO BE EXAMINED AFRESH IN THE LIGHT OF DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF MA VILAYI SERVICE CO-OPERATIVE BANK LTD. (SUPRA). ACCORDINGLY HE SU BMITTED THAT THIS ISSUE MAY BE RESTORED TO THE FILE OF THE A.O. 6. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. WE FIND MERIT IN THE SUBMISSION MADE BY LD. D.R. S INCE THE HONBLE SUPREME COURT HAS SETTLED MANY ISSUES IN THE DECISI ON RENDERED BY IT IN THE CASE OF MAVILAYI SERVICE CO-OPERATIVE BAN K LTD. (SUPRA) AND SINCE THE FACTS PREVAILING IN THE INSTANT CASE NEEDS TO BE EXAMINED AFRESH IN THE LIGHT OF THE PRINCIPLES ENUN CIATED BY HONBLE SUPREME COURT IN THE ABOVE SAID CASE WE ARE OF THE VIEW THAT THE ISSUE OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT REQU IRES FRESH EXAMINATION AT THE END OF THE A.O. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE IN BOTH TH E YEARS UNDER CONSIDERATION AND RESTORE THEM TO THE FILE OF THE A .O. IN BOTH THE YEARS FOR EXAMINING IT AFRESH AS DISCUSSED ABOVE. 7. THE NEXT COMMON ISSUE RELATES TO REJECTION OF DE DUCTION CLAIMED U/S 80P(2)(D) OF THE ACT IN RESPECT OF INTE REST INCOME EARNED FROM FIXED DEPOSITS KEPT WITH BANK. WE NOTICED EAR LIER THAT THE A.O. HAS OBSERVED IN ASSESSMENT YEAR 2015-16 THAT THE IN TEREST INCOME RECEIVED BY THE ASSESSEE FROM DEPOSITS KEPT WITH BA NKS IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(C) & 80P(2)(D) OF THE ACT SINCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF T HE ACT. IN AY 2016- 17 THE AO ASSESSED THE INTEREST INCOME RECEIVED ON BANK DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOURCES AND DENI ED DEDUCTION CLAIMED U/S 80P(2)(D) OF THE ACT. THE LD CIT(A) CO NFIRMED THE ACTION OF THE AO ON THIS ISSUE. 8. THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ALLOWABLE U/S 57 OF THE ACT IN RESPECT OF COST OF FUNDS AND PROPORTIONATE ADMINISTRATIVE AND OTHER EXPENSES. I N SUPPORT OF THIS SUBMISSION THE LD. A.R. PLACED RELIANCE ON THE DEC ISION RENDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF T OTGARS CO- OPERATIVE SALE SOCIETY LTD. VS. ITO (2015) 58 TAXMA NN.COM 35 (KARN). THE LD. A.R. SUBMITTED THAT THE ASSESSEE I N THE ABOVE SAID CASE HAD PUT FORTH IDENTICAL CLAIM CLAIM BEFORE HON BLE SUPREME COURT IN THE CASE REPORTED AS TOTGARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO (2010) 188 TAXMANN.COM 282 AND THE HONBLE SUPREME COURT VIDE 14 OF ITS ORDER HAD RESTORED THE QUEST ION RAISED BY THE ASSESSEE TO THE FILE OF HONBLE HIGH COURT OF KARNA TAKA. CONSEQUENT THERETO THE HONBLE HIGH COURT OF KARNA TAKA HAS ITA NO.1291/BANG/2019 RAJAPURA SARASWATHA CREDIT CO-OP. SOCIETY LTD. BEN GALURU PAGE 4 OF 5 PASSED THE ORDER IN THE CASE REPORTED IN 58 TAXMANN .COM 35 AND HELD THAT THE TRIBUNAL WAS NOT RIGHT IN COMING TO T HE CONCLUSION THAT THE INTEREST EARNED BY THE APPELLANT IS AN INCOME F ROM OTHER SOURCES WITHOUT ALLOWING DEDUCTION IN RESPECT OF PROPORTION ATE COST ADMINISTRATIVE EXPENSES INCURRED IN RESPECT OF SUCH DEPOSITS. ACCORDINGLY THE LD. A.R. PRAYED THAT THE A.O. MAY BE DIRECTED TO ALLOW DEDUCTION OF PROPORTIONATE COST ADMINISTRATI VE AND OTHER EXPENSES IF THE A.O. PROPOSES TO ASSESS THE INTERE ST INCOME EARNED FROM BANK DEPOSITS AS INCOME UNDER THE HEAD OTHER SOURCES. 9. WE HEARD LD. D.R. ON THIS ISSUE. WE FIND MERIT IN THE PRAYER OF THE ASSESSEE SINCE IT IS SUPPORTED BY THE DECIS ION RENDERED BY HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF TOTG ARS CO- OPERATIVE SALE SOCIETY LTD. VS. ITO (2015) 58 TAXMA NN.COM 35 (KARN). ACCORDINGLY WE DIRECT THE A.O. TO ALLOW D EDUCTION OF PROPORTIONATE COST ADMINISTRATIVE AND OTHER EXPENS ES IF THE A.O. PROPOSES TO ASSESS THE INTEREST INCOME EARNED FROM BANK DEPOSITS AS INCOME UNDER THE HEAD OTHER SOURCES. 3. SINCE THE ISSUES AND FACTS SURROUNDING BOTH THOSE ISSUES ARE IDENTICAL WITH THE CASE DECIDED BY THE TRIBUNAL IN THE CASE OF KARKALA CO-OP S BANK LTD (SUPRA) FOLLOWING THE SAID DECISI ON WE RESTORE BOTH THE ISSUES TO THE FILE OF THE AO WITH SIMILAR DIREC TIONS. 4. BY WAY OF ADDITIONAL GROUNDS THE ASSESSEE I S CONTESTING THE DISALLOWANCE MADE BY THE AO IN RESPECT OF PROVISION FOR BAD DEBTS PROVISION FOR GRATUITY FUND PROVISION OF AUDIT FEE S AND PROVISION FOR LEAVE ENCASHMENT. THE LD A.R SUBMITTED THAT THE ASS ESSEE HAS OMITTED TO CHALLENGE THE ABOVE SAID ADDITIONS BEFOR E LD. CIT(A). HENCE THE ASSESSEE HAS RAISED THE ABOVE SAID ISSUES BEFORE US BY WAY OF ADDITIONAL GROUNDS. HE SUBMITTED THAT THESE ARE LEGAL ISSUES AND ALL THE FACTS ARE AVAILABLE ON RECORD. ACCORDINGLY WE ADMIT THEM. HOWEVER WE ARE OF THE VIEW THAT BOTH THE ABOVE SAI D ISSUES REQUIRE FRESH CONSIDERATION AT THE END OF THE A.O. SINCE T HE MAIN ISSUES HAVE BEEN RESTORED TO THE FILE OF THE A.O. AND THE DECIS ION TAKEN ON THEM MAY HAVE IMPACT ON THE ABOVE SAID ADDITIONS. ACCOR DINGLY WE RESTORE ALL THE ABOVE SAID ISSUES TO THE FILE OF TH E A.O. FOR EXAMINING THEM AFRESH. ITA NO.1291/BANG/2019 RAJAPURA SARASWATHA CREDIT CO-OP. SOCIETY LTD. BEN GALURU PAGE 5 OF 5 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MAR 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE DATED 10 TH MAR 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT BANGALORE.