The HWPMO & T Emp.Co-operative Credit Society Limited, , Kothagudem v. Asst. Commissioner of Income Tax, Circle-1, Khammam

ITA 1315/Hyd/2019 | 2016-2017
Pronouncement Date: 21-11-2019 | Result: Allowed

Appeal Details

RSA Number 131522514 RSA 2019
Assessee PAN ITANO1315O
Bench Hyderabad
Appeal Number ITA 1315/Hyd/2019
Duration Of Justice 2 month(s) 30 day(s)
Appellant The HWPMO & T Emp.Co-operative Credit Society Limited, , Kothagudem
Respondent Asst. Commissioner of Income Tax, Circle-1, Khammam
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB-A
Tribunal Order Date 21-11-2019
Date Of Final Hearing 14-11-2019
Next Hearing Date 14-11-2019
Last Hearing Date 14-11-2019
First Hearing Date 04-11-2019
Assessment Year 2016-2017
Appeal Filed On 22-08-2019
Judgment Text
ITA NO 1315 OF 2019 THE HWPMO & T EMP. COOP. CREDIT SOCIETY LTD BHADRADRIKOTHAGUDEM. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A SMC BENCH HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER ITA NO.1315/HYD/2019 ASSESSMENT YEAR:2016-17 THE HWPMO & T. EMP. COOPERATIVE CREDIT SOCIETY LTD ASWAPURAM 507116 BHADRADRIKOTHAGUDEM DISTT. TELANGANA PAN:AADAT6469L VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE -1 KHAMMAM (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI S. RAMA RAO REVENUE BY : SRI SUNKU SRINIVAS DR DATE OF HEARING: 14/11/2019 DATE OF PRONOUNCEMENT: 21/11/2019 ORDER THIS IS ASSESSEES APPEAL FOR THE A.Y 2016-17 AGAIN ST THE ORDER OF THE CIT (A)-7 HYDERABAD DATED 10.06. 2019. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF EXTE NDING CREDIT FACILITIES TO ITS MEMBERS. IT FILED ITS RETURN OF I NCOME FOR THE A.Y 2016-17 ON 24.01.2018 ADMITTING NIL INCOME AFTER CLAIMING EXEMPTION U/S 80P(2)(A)(I) OF THE INCOME TAX ACT. I N REPLY TO THE SHOW-CAUSE NOTICE AS TO WHY THE INTEREST ON THE FD S SHOULD NOT BE DISALLOWED THE ASSESSEE SUBMITTED THAT THE BUSI NESS OF THE ASSESSEE INVOLVES COLLECTION OF DEPOSITS FROM MEMBE RS AND LENDING THE SAME TO THE NEEDY MEMBERS AND THAT THE ASSESSEE HAS TO PAY INTEREST ON DEPOSITS COLLECTED FROM MEMBERS WHILE IT EARNS INTEREST ON MONEY LENT TO ITS MEMBERS AND IN THIS P ROCESS THE ITA NO 1315 OF 2019 THE HWPMO & T EMP. COOP. CREDIT SOCIETY LTD BHADRADRIKOTHAGUDEM. PAGE 2 OF 5 ASSESSEE IS ALWAYS REQUIRED TO MAINTAIN FUNDS FOR T HE PURPOSE OF LENDING THE MONEY TO THE MEMBERS WHENEVER REQUIRED. IT IS SUBMITTED THAT THE IDLE FUNDS BEFORE BEING LENT TO MEMBERS ARE KEPT DEPOSITED IN SCHEDULED BANKS AND IN THIS PROCE SS THE ASSESSEE EARNS INTEREST WHICH IS TO BE TREATED AS B USINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES. IT WAS SUBM ITTED THAT THE COLLECTION OF DEPOSITS ADVANCING OF LOANS AND MAIN TAINING BANK BALANCES IS PART AND PARCEL OF THE BUSINESS OF THE ASSESSEE AND THAT SEVERAL COURTS HAVE HELD THAT THE INTEREST INC OME FROM FIXED DEPOSITS IS BUSINESS INCOME. HE PLACED RELIANCE UPO N THE DECISION IN THE CASE OF CIT VS. MUSHEERABAD DISTT. COOPERATI VE BANK LTD DECIDED BY THE HON'BLE HIGH COURT OF ALLAHABAD IN I TA NO.509 OF 2009. 3. THE EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO AND HE HELD THAT THE FDS ARE IN THE NATURE O F INVESTMENTS AND THEREFORE THE INTEREST EARNED THEREON HAS TO B E TREATED AS INCOME FROM OTHER SOURCES. HE HELD THAT EVEN IF O NLY THE SURPLUS MONEY IS DEPOSITED THE INTEREST INCOME HAS TO BE O FFERED AS INCOME FROM OTHER SOURCES. FOR COMING TO THIS CON CLUSION THE AO ALSO PLACED RELIANCE UPON THE DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF TOTGARS COOP. SALES SOCIETY LT D VS. ITO REPORTED IN (2010) 322 ITR 283 (S.C). THUS HE TREA TED THE SUM OF RS.1 21 248/- BEING THE INTEREST EARNED BY THE SOCI ETY ON FDS AS INCOME FROM OTHER SOURCES AND BROUGHT IT TO TAX. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WH O CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND A PPEAL BEFORE THE TRIBUNAL. ITA NO 1315 OF 2019 THE HWPMO & T EMP. COOP. CREDIT SOCIETY LTD BHADRADRIKOTHAGUDEM. PAGE 3 OF 5 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND ALSO PLACED RELI ANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF TOTGARS COOP. SALES SOCIETY LTD VS. ITO (SUPRA) AND ALSO TH E DECISION OF THE B BENCH OF THE TRIBUNAL AT KOLKATA IN THE CASE OF ITO VS. KOLKATA RESERVE BANK EMPLOYEES COOP. CREDIT SOCIETY LTD IN ITA NO.1340/KOL/2015 DATED 18.10.2017. FURTHER HE ALS O SUBMITTED THAT THE ASSESSEE HAS BEEN MAKING THE CLAIM BY FILI NG THE RETURN OF INCOME FROM A.Y 2013-14 ONWARDS AND THE ASSESSME NTS U/S 143(3) WERE COMPLETED FOR THE A.YS 2014-15 AND 2015 -16 BUT NO DISALLOWANCE OF THE CLAIM U/S 80P(2)(A)(I) WAS MADE . A COPY OF THE SAME HAS BEEN FILED BEFORE THE TRIBUNAL. 5. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO PLACED REL IANCE UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F TOTGARS COOP. SALES SOCIETY LTD VS. ITO (SUPRA). HE FURTHER SUBMITTED A REPORT OF THE AO THAT HE HAS INTENDED TO REOPEN THE ASSESSMENTS COMPLETED FOR THE A.YS 2014-15 AND 2015-16. HE ALSO FILED COPIES OF THE ASSESSMENT ORDERS FOR THE A.YS 2013-14 AND 2 015-16 WHEREIN THE CLAIM OF THE EXEMPTION U/S 80P(2)(A)(I) WAS ALLOWED WHICH ARE NOW TO BE REOPENED BY THE AO. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD I FIND THAT THE RELIANCE OF THE AO AS WE LL AS THE CIT (A) IS ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TOTGARS COOP. SALES SOCIETY LTD VS. ITO (SUPRA). TH EREFORE IT IS NECESSARY TO EXAMINE THE FACTS OF THE SAID CASE AND THE APPLICABILITY OF THE SAID DECISION TO THE FACTS OF THE CASE BEFORE THE TRIBUNAL. IN THE SAID CASE THE ASSESSEE WAS A COO PERATIVE SALE ITA NO 1315 OF 2019 THE HWPMO & T EMP. COOP. CREDIT SOCIETY LTD BHADRADRIKOTHAGUDEM. PAGE 4 OF 5 SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND ALSO MARKETING THEIR AGRICULTURAL PRODUCE. THE SURPLUS F UND AVAILABLE DURING THE RELEVANT FINANCIAL YEAR WERE INVESTED IN SHORT TERM DEPOSITS IN THE BANK AND IN THE GOVT. SECURITIES AN D INTEREST WAS EARNED THEREON. THE INTEREST INCOME WAS TREATED AS INCOME FROM OTHER SOURCES AND DEDUCTION U/S 80P(2)(A) WAS DISAL LOWED. THE HON'BLE SUPREME COURT HELD THAT THE INTEREST INCOME WAS NOT THE INTEREST RECEIVED FROM THE MEMBERS FOR PROVIDING CR EDIT FACILITIES TO IT BUT THE INTEREST INCOME HAD ARISEN OUT OF THE S URPLUS SHORT- TERM DEPOSITS AND SECURITIES AS SUCH SURPLUS WAS N OT REQUIRED FOR BUSINESS PURPOSES. IN SUCH CIRCUMSTANCES THE H ON'BLE SUPREME COURT HELD THAT THE INTEREST INCOME EARNED FROM FDS OF SURPLUS FUNDS WAS NOT ELIGIBLE FOR DEDUCTION U/S 80 P(2)(A)(I) OF THE ACT. 7. IN THE CASE BEFORE US THE ASSESSEE BEING A COOP ERATIVE SOCIETY IS REQUIRED TO MAINTAIN BALANCES FOR LENDIN G THE MONEY TO ITS MEMBERS AS AND WHEN REQUIRED. FOR THIS PURPOSE THE ASSESSEE IS REQUIRED TO MAINTAIN A RESERVE FUND WHICH HAS BE EN DEPOSITED IN THE SCHEDULED BANK. THE EARNING OF INTEREST INCO ME ON SUCH DEPOSITS WITH THE SCHEDULED BANK IS INCIDENTAL TO T HE DEPOSITS. THE PURPOSE OF THE DEPOSITS IS OF PARAMOUNT IMPORTA NCE TO CONSIDER THE NATURE OF THE INTEREST INCOME. IT IS N OT THE SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE WHICH ARE DEPOSIT ED IN THE SCHEDULED BANK IN ORDER TO EARN INTEREST INCOME BUT THE ASSESSEE IS MAKING FD OF THE FUNDS IN THE SCHEDULED BANK TO ENSURE ITS AVAILABILITY AS AND WHEN REQUIRED TO LEND IT TO ITS MEMBERS. THE LEARNED DRS CONTENTION THAT THE ASSESSEE HAS NEVER BROKEN THE FDS AND HAS BEEN EARNING HUGE INTEREST INCOME THERE ON IS OF NO RELEVANCE AS THE PURPOSE OF THE DEPOSITS IS TO BE S EEN AND NOT THE ITA NO 1315 OF 2019 THE HWPMO & T EMP. COOP. CREDIT SOCIETY LTD BHADRADRIKOTHAGUDEM. PAGE 5 OF 5 QUANTUM OF INCOME FROM SUCH DEPOSITS. THE ASSESSEE MAY HAVE BEEN RECEIVING HUGE CASH DEPOSITS WHICH ARE SUFFICI ENT FOR LENDING THE SAME TO ITS MEMBERS AND MAY NOT HAVE BEEN REQUI RED TO BREAK THE FDS. AS THE PURPOSE OF THE ASSESSEE IS TO MAINTAIN A RESERVE FUND FOR THE PURPOSE OF ITS BUSINESS THEN THE INTEREST EARNED THEREFROM WHICH IS INCIDENTAL IS ALSO TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE AND SUCH BUSINESS I NCOME IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THEREFORE THE ASSESSEES APPEAL IS ALLOWED. 8. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER 2019. SD/- HYDERABAD DATED 21 ST NOVEMBER 2019. VINODAN/SPS COPY TO: 1 THE HWPMO & T. EMP. COOPERATIVE CREDIT SOCIETY LTD ASWAPURAM 507116 BHADRADRIKOTHAGUDEM DISTT. TELANG ANA 2 ACIT CIRCLE-1 SARATHI NAGAR KHAMMAM 507003 3 CIT (A)-7 HYDERABAD 4 PR. CIT 7 HYDERABAD 5 THE DR ITAT HYDERABAD 6 GUARD FILE BY ORDER (P. MADHAVI DEVI) JUDICIAL MEMBER