The Income-tax Officer. Ward 6(2), Pune v. Sadhana Sahakari Bank, Pune

ITA 471/PUN/2009 | 2004-2005
Pronouncement Date: 13-08-2010 | Result: Dismissed

Appeal Details

RSA Number 47124514 RSA 2009
Bench Pune
Appeal Number ITA 471/PUN/2009
Duration Of Justice 1 year(s) 3 month(s) 23 day(s)
Appellant The Income-tax Officer. Ward 6(2), Pune
Respondent Sadhana Sahakari Bank, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 13-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 13-08-2010
Assessment Year 2004-2005
Appeal Filed On 20-04-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE. BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI A.L. GEHLOT ACCOUNTANT MEMBER. I.T.A. NOS. 471 & 472/PN/2009 ASSESSMENT YEAR : 2004-05 & 2005-06. THE INCOME-TAX OFFICER SADHANA SAHAKARI BANK WARD-6(2) PUNE. VS. SHIVAM COMPLEX PUNE SHOLAPUR ROAD PAN : HADAPSAR PUNE-28. APPELLANT RESPONDENT. APPELLANT BY : SMT. MANJU AAJWANI. RESPONDENT BY : NONE. O R D E R PER I.C. SUDHIR J.M. IN THESE APPEALS THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER MAINLY ON THE GROUNDS THAT THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF : (I) RS.2 02 251/- IN ASSESSMENT YEAR 2004-05 AND RS.2 41 691/- IN ASSESSMENT YEAR 2005-06 MADE BY THE AO FROM OUT OF ASSESSEES CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT WITH REFERENCE TO NET INTEREST INCOME EARNED BY THE ASSESSEE FROM INVESTM ENT OF VOLUNTARY RESERVE; AND (II) RS.18 92 760/-IN ASSESSMENT YEAR 2004-05 AND RS.17 96 891/- IN ASSESSMENT YEAR 2005-06 BY THE AO ON DENIAL OF THE ASSESSEES CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF PROFIT EARNED ON SALE OF GOVT. SECURITIES. 2. IN SUPPORT OF THE GROUNDS THE LEARNED DR HAS B ASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. SHE HOWEVER FAI RLY SUBMITTED THAT THE ISSUES RAISED IN THE GROUNDS HAVE BEEN DECIDED IN FAVOUR O F THE ASSESSEE BY PUNE BENCH OF THE TRIBUNAL IN SEVERAL CASES. SHE SUBMITTED THA T THE LEARNED CIT(APPEALS) HAS 2 DELETED THE ADDITION IN QUESTION WITHOUT APPRECIATI NG THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MEHSANA DISTRICT CENTR AL COOP. BANK LTD. VS. ITO 251 ITR 522 (SC) RELIED UPON BY THE AO. THE LEARNED CIT (APPEALS) HAS ALSO FAILED TO APPRECIATE THAT INCOME EARNED ON INVESTMENT OF VOLU NTARY RESERVE AND SALE RECEIPT FROM GOVERNMENT SECURITIES CANNOT BE CONSID ERED AS PART OF THE ASSESSEES BANKING BUSINESS. 3. HAVING GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES AND IN VIEW OF THE ARGUMENTS ADVANCED BY THE LEARNED DR WE FIN D THAT THE LEARNED CIT(APPEALS) HAS DECIDED THE ISSUES RAISED IN THE A BOVE GROUNDS IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO. 727/PN/2006. THE LEARNED CIT(APPEALS) HAS ALSO REFERRED THE FOLLOWING DECISIONS RELIED UPON B Y THE ASSESSEE BEFORE HIM : I) CIT VS. NAWANSHAHAR CENTRAL CO-OPERATIVE BANK L TD. (2007) 289 ITR 6 (SC) II) CIT VS. RAMANATHAPURAM DISTT. CO-OP. CENTRAL B ANK LTD. (2002) 255 ITR 423 (SC). III) CIT VS. KARNATAKA STATE CO-OP. APEX BANK (200 1) 251 ITR 194. IV) SURAT DISTRICT CO-OP. BANK LTD. VS. ITO (2003) 85 ITD 1 (AHD) (SB). V) RAJKOT NAGARIK SAHAKARI BANK (2005) 98 TTJ 330. 4. THE ASSESSEE A COOPERATIVE BANK ENGAGED IN TH E BUSINESS OF COLLECTING DEPOSITS ADVANCING LOANS INVESTING PRO CEEDS INTO SAFE SECURITIES ETC. DURING THE ASSESSMENT YEARS IN QUESTION THE ASSESSE E HAD EARNED INCOME FROM INVESTMENTS MADE FROM VOLUNTARY RESERVE. THE AO CAL CULATED PROPORTIONATE EXPENSES AND WORKED OUT NET INTEREST INCOME ON INVE STMENT OUT OF VOLUNTARY RESERVE. THE ASSESSEE EARNED INCOME FROM VARIOUS AC TIVITIES; CONSIDERED THE VARIOUS EXPENSES AND DISTRIBUTED DIVIDEND TO THE MEMBERS OUT OF THE PROFIT EARNED. THE AO HELD THAT THE DISTRIBUTION OF DIVIDE ND WAS NOT PART OF THE BANKING BUSINESS AND ACCORDINGLY INTEREST ON INVESTMENTS FR OM THE BANKING BUSINESS WAS NOT USED FOR THE BANKING BUSINESS. HE ACCORDINGLY H ELD THE AMOUNT NOT ELIGIBLE FOR 3 DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE LEARNED CIT(APPEALS) HAS HOWEVER DELETED THE ADDITION WHICH HAS BEEN QUESTIONED BY T HE REVENUE IN GROUND NO. 1. THE RELEVANT FACTS RELATING TO THE ISSUE RAISED I N GROUND NO. 2 ARE THAT THE ASSESSEE HAD INVESTED MONEY IN VARIOUS GOVERNME NT SECURITIES AS REQUIRED UNDER RBI NORMS. THESE SECURITIES WERE SOLD IN THE MARKET AND THE AMOUNT FETCHED THERE-FROM WERE SHOWN AS PROFITS ON SALE OF GOVERNMENT SECURITIES IN THE PROFIT AND LOSS ACCOUNT. THE AO WAS NOT AGREEABLE T O THE APPROACH OF THE ASSESSEE ON THIS AMOUNT AND HE TREATED THE PROFITS ON THE DISPOSAL OF THE SAID SECURITIES AS INCOME NOT FORMING PART OF THE BANKIN G BUSINESS AND THEREFORE NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE LEARNED CIT(APPELS) HAS DELETED THE ADDITION QUESTIONED IN GROUND NO. 2. 5. IN ITS RECENT DECISION ON THE ISSUES THE COORDI NATE BENCH OF THE TRIBUNAL HAS BEEN FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SOLAPUR NAGARI AUDYOGIC SAHAKARI BA NK LTD. (2009) 182 TAXMAN 231 (BOM) WHEREIN ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE HONBLE BOMBAY HIGH COURT IN THAT CASE HAS BEEN PLEASED TO HOLD THAT INVESTMENT IN KVP/IVP BY A COOPERATIVE BANK IS A PERMISSIBLE BANK ING BUSINESS AND FOR AVAILING OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT COOPERATI VE BANK HAS ONLY TO SHOW THAT INVESTMENT IN KVP/IVP HAS BEEN MADE FROM FUNDS GENE RATED FROM BANKING BUSINESS. THE HONBLE HIGH COURT HAS BEEN FURTHER PLEASED TO HOLD THAT FOR THIS PURPOSE IT IS WHOLLY IRRELEVANT WHETHER INVESTMENT IN KVP/IVP HAS BEEN MADE OUT OF STATUTORY RESERVES OR NON STATUTORY RESERVES SO BEING AS FUNDS IN STATUTORY RESERVE OR NON STATUTORY RESERVES ARE FUNDS GENERAT ED FROM BANKING BUSINESS. THE HONBLE COURT HELD THAT WHERE SURPLUS FUNDS NOT IMM EDIATELY REQUIRED FOR DAY TO DAY BANKING WERE KEPT BY ASSESSEE IN VOLUNTARY RESE RVES AND WERE INVESTED IN KVP/IVP INTEREST INCOME RECEIVED FROM KVP/IVP WOUL D BE INCOME FROM BANKING BUSINESS ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE HONBLE BOMBAY HIGH COURT WHILE DECIDING THE ISSUE HAS REFERRED SE VERAL DECISIONS INCLUDING DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF M EHASANA DISTRICT CENTRAL COOPERATIVE BANK LTD. VS. ITO (SUPRA) RELIED UPON B Y THE LEARNED DR. WE THUS RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF SOLAPUR NAGARI AUDYOGIC SAHAKARI BANK LTD. (SUPRA) DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. 4 5. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE O F SURAT DISTRICT COOPERATIVE BANK LTD. 85 ITD 1 (S.B.) KEEPING IN VI EW THE GUIDE LINE OF HONBLE SUPREME COURT IN THE CASE OF MEHSANA DISTRICT CENTR AL COOPERATIVE LTD. VS. ITO (SUPRA) HAS HELD THAT WHEN FROM RECORDS IT IS NOTIC ED THAT THE ASSESSEE BANK HAS NOT UTILIZED VOLUNTARY RESERVE OR INTEREST THEREON IN ANY OTHER ACTIVITY THAN BANKING ACTIVITY DEDUCTION U/S 80P(2)(A)(I) HAD TO BE ALLOWED TO THE BANK. THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF RAJKOT NAGRI SAHAKARI BANK LTD. VS. ITO 98 TTJ 330 HAS HELD THAT INVESTMENTS MADE BY THE A SSESSEE COOPERATIVE BANK IN GOVERNMENT SECURITIES APPROVED BY THE RBI FROM TIME TO TIME AND TRADING IN THE SECURITIES CARRIED OUT IN THE ORDINARY COURSE OF BU SINESS OF THE ASSESSEE BANK AND SUCH ACTIVITIES OF DEALING IN THESE SECURITIES FELL WITHIN THE AMBIT OF SECTION 6(1)(A) OF THE BANKING REGULATION ACT AND THE INCOME EMANAT ING THEREFROM IS ATTRIBUTABLE TO THE BUSINESS OF BANKING AND IS ELIG IBLE FOR DEDUCTION U/S 80P(2)(A)(I) IN THE HANDS OF THE ASSESSEE BANK. WE THUS FIND THAT THE ISSUES UNDER APPEAL I.E. PROFIT EARNED FROM GOVERNMENT SECURITIE S AND INTEREST INCOME ON NON SLR INVESTMENT ARE FULLY COVERED BY THE ABOVE CITED DECISIONS INCLUDING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THIS REGARD IN THE CASE OF CIT VS. SOLAPUR NAGARI AUDYOGIC SAHAKARI BANK LTD. (SUP RA). THE FIRST APPELLATE ORDER IN QUESTION IS THUS UPHELD. THE GROUNDS ARE ACCORDINGL Y REJECTED. 6. CONSEQUENTLY THE APPEALS ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH AUGUST 2010. SD/- SD/- (A.L. GEHLOT) (I.C. SUDHIR) ACCOUNTANT MEMBER JUDICIAL MEMBER. PUNE DATED : 13 TH AUGUST 2010 5 COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT. 3. C.I.T. 4. CIT(APPEALS). 5. D.R. ITAT B-BENCH PUNE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE. WAKODE