Addl. CIT, Muzaffarnagar v. M/s Co-Operative Cane Development Union Ltd., Muzaffarnagar

ITA 4980/DEL/2010 | 2007-2008
Pronouncement Date: 21-01-2011 | Result: Dismissed

Appeal Details

RSA Number 498020114 RSA 2010
Bench Delhi
Appeal Number ITA 4980/DEL/2010
Duration Of Justice 2 month(s) 9 day(s)
Appellant Addl. CIT, Muzaffarnagar
Respondent M/s Co-Operative Cane Development Union Ltd., Muzaffarnagar
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 21-01-2011
Date Of Final Hearing 17-01-2011
Next Hearing Date 17-01-2011
Assessment Year 2007-2008
Appeal Filed On 12-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A NO. 4980/DEL/10 ASSTT. YEAR 2007-08 ADDL. CIT RANGE-2 MUZAFFARNAGAR VS. CO-OPERATI VE CANE DEVELOPMENT UNION LTD. MANSOORPUR DISTTT. MUZAFFARNAGAR (APPELLANT) (RESPONDENT) APPELLANT BY: MS. MONA MOHANTY SR. DR RESPONDENT BY: NONE ORDER PER RAJPAL YADAV JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 13 TH AUGUST 2010 PASSED FOR ASSTT. YEAR 2007-08. THE G RIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERRED IN DELE TING THE DISALLOWANCE OF ` 10 80 600/-. ACCORDING TO THE AO SUCH INTEREST INC OME DOES NOT QUALIFY FOR EXEMPTION U/S 80P(2)(A)(I) OF THE INCOM E TAX ACT. ITA NO. 4980/DEL/10 ASSTT. YEAR 2007-08 2 2. THE NOTICE OF HEARING WAS ISSUED THROUGH REGISTE RED POST BUT NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. WIT H THE ASSISTANCE OF LD. DR WE HAVE GONE THROUGH THE RECORD AND PROCEED TO DECIDE THE APPEAL EX PARTE QUA THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A SOCIETY REGISTERED UNDER CO-OPERATIVE SOCIETIES ACT 1965. IT HAS FILED ITS RETURN OF INCOME ON 31 ST OCTOBER 2007 DECLARING NIL INCOME. ON PERUSAL OF BALANCE SHEET LD. AO FOUND THAT ASSESSEE HAS INVESTED ` 27 54 242/- AND ` 1 76 87 764/- IN SHARE OF CO-OPERATIVE SOCIETY AND FDRS RESPECTIVELY. ACCORDING TO THE AO IN THE FINANCIAL YEAR RELEVANT TO ASSTT. YEAR 2006-07 THE INVESTMENT WAS OF ` 27 54 242/- IN THE SHARE OF THE SOCIETIES. ONLY IN THIS YEAR ASSESSEE HAS ACQUIRED A FRESH FDRS OF ` 1 76 87 764/-. IN HIS OPINION THE INTEREST INCOME ON THE FDRS MADE WITH T HE BANK OTHER THAN CO-OPERATIVE BANK OUT OF RESERVE FUNDS WOULD NOT Q UALIFY FOR EXEMPTION U/S 80P(2)(A)(I). HE MADE AN ADDITION OF ` 10 80 636/-. 4. ON APPEAL LD. CIT(A) MADE A LUCID ENUNCIATION OF LAW AND FACTS AND DELETED THE DISALLOWANCE. THE DISCUSSION MADE B Y THE LD. CIT(A) IS WORTH TO NOTE. IT READ AS UNDER :- ITA NO. 4980/DEL/10 ASSTT. YEAR 2007-08 3 4. THE FACTS OF THE CASE AND SUBMISSIONS MADE BY TH E A.R. FOR THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT DURING THE YEAR THE APPELLANT HAD MADE INVESTMENT IN PURCHASE OF FDRS AT RS. 1 76 87 764/- OUT OF RESERVE FUND AND H AD ALSO EARNED INTEREST ON SUCH DEPOSIT AT RS. 10 80 600/- WHICH WAS CLAIMED A S EXEMPT U/S 80P(2)(A)(I). THE AO HELD THAT INTEREST DEBITED TO DISTT. COOPERATIVE BANK MANSURPUR AT RS. 6 67 832/- WHICH IS DEDUCTIBLE OUT OF INTEREST ON LOAN CREDITED TO PROFIT & LOSS ACCOUNT BY RS.12 23 760/- BEING INTEREST FROM MEMBERS FOR PROVIDING CREDIT FACILITIES TO THEM BUT INTEREST AT RS. 10 80 600/- EARNED ON FDRS WAS NOT EXEMPT U/S 80P(2)(A)(I) OF T HE ACT. THE AO THUS DISALLOWED THE CLAIM OF APPELLANT FOR EXEMPTI8ON OF INTEREST INCOME EARNED AT RS. 10 80 600/- WHICH WAS ADDED TO THE INCOME OF TH E ASSESSEE. IT WOULD BE WORTHWHILE TO GO THROUGH THE PROVISIONS OF THE ACT AND EXAMINE THE APPELLANTS CASE IN RESPECT OF THEIR APPLICABILITY AS CLAIMED B Y HIM. FOR THE DEDUCTION U/S 80P(1) THE SUMS DEDUCTIBLE ARE ENUMERATED IN SECTI ON (2) WHICH READS AS UNDER :- 80P(2) FOR THE SUM REFERRED TO IN SUB-SECTION (1) SHALL BE THE FOLLOWING NAMELY (A) IN THE CASE OF CO-OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS OR .. IT IS FURTHER OBSERVED THAT PROVIDING CREDIT FACILI TIES TO ITS MEMBERS IS ONE OF OBJECTS (POINT NO. 4 OF MAIN OBJECTIVES) OF THE SOCIETY. IT CLEARLY ESTABLISHES THAT PROVISIONS OF SECTION 8 0P(2)(A)(I) ARE DIRECTLY APPLICABLE IN APPELLANTS CASE. IT IS FURTHER OBSERVED THAT (A) THE INTEREST EARNED ON FDRS WITH COMMERCIAL BA NKS WAS INCIDENTAL TO AND HAD PROXIMATE CONNECTION WITH THE BUSINESS OF T HE ASSESSEE OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS IN VIEW OF THE EXPRESSION ATTRIBUTABLE TO IN SECTION 80P(2)(A)(I) OF THE AC T. FUNDS WERE KEPT IN THE BANK READY FOR UTILIZATION BY THE APPELLANT IN ITS BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND INTE REST ON SUCH FUNDS WAS ATTRIBUTABLE TO THE BUSINESS OF PROVIDING CREDIT FA CILITIES. THEREFORE THE INTEREST EARNED ON FIXED DEPOSITS WITH COMMERCIAL B ANKS QUALIFIED FOR EXEMPTION U/S 80P(2)(A)(I) OF THE ACT. (B) THE APPELLANT COOPERATIVE SOCIETY WAS ENGAGED N OT ONLY IN PROVIDING CREDIT FACILITIES BUT ALSO MARKETING OF AGRICULTURE PRODUCE GROWN BY ITS MEMBERS AND PROVIDING LOANS FOR PURCHASE OF AGRICUL TURAL IMPLEMENTS SEEDS FOR AGRICULTURE ETC. AND THUS COVERED UNDER S UB CLAUSES (I) (II) AND (IV) OF CLAUSE (A) OF SUB SECTION (2) WAS ENTIT LED TO DEDUCTION TO THE EXTENT OF WHOLE OF THE AMOUNT OF PROFIT AND GAINS O F BUSINESS ITA NO. 4980/DEL/10 ASSTT. YEAR 2007-08 4 ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES. HENCE IT MAKES NO DIFFERENCE WHETHER THE ASSESSEE EARNED INTEREST ON FIXED DEPOSITS AS EARNING INTEREST ON FDR ULTIMATELY IS UTILIZED FOR THE EXPRESS OBJECTIVES OF THE SOCIETY. FROM THE ABOVE IT IS CLEAR THAT THE AOS ACTION OF NOT ALLOWING EXEMPTION U/S 80P(2)(A)(I) ON INTEREST EARNED ON FDRS AT RS. 10 8 0 600/- IS NOT JUSTIFIED. ADDITION MADE AT RS. 10 80 600/- IS DIRECTED TO BE DELETED. 5. THE LD. FIRST APPELLATE AUTHORITY HAS MADE A REF ERENCE TO THE DECISION OF HONBLE UTTRAKHAND HIGH COURT RENDERED IN THE CASE OF CIT VS. IQBALPUR COOPERATIVE CANE DEVELOPMENT UNION LTD . REPORTED IN 315 ITR 441 AND ALSO OF ITAT IN THE CASE OF PUNJAB STAT E COOPERATIVE FEDERATION OF HOUSING BUILDING SOCIETIES LTD. VS. A CIT (2010) 4 ITR (TRIBUNAL) 507. WITH THE ASSISTANCE OF LD. DR WE HA VE GONE THROUGH THE DECISION OF HONBLE UTTRAKHAND HIGH COURT AND FOUND THAT THE ISSUE BEFORE THE HONBLE UTTRAKHAND HIGH COURT WAS SIMIL AR TO THE ONE IN HAND. THE QUESTION OF LAW CONSIDERED BY THE HONBLE HIGH COURT IS AS UNDER :- WHETHER THE INCOME-TAX APPELLATE TRIBUNAL HAS ERRE D IN LAW IN HOLDING THAT THE INTEREST EARNED BY THE ASSESSEE CO-OPERATIVE SO CIETY (ENGAGED IN AGRICULTURAL CREDIT FACILITY) FROM UNUTILIZED FUND S INVESTED IN THE BANKS OTHER THAN THE CO-OPERATIVE BANK AS FIXED DEPOSIT RECEIP TS AND KISAN VIKAS PATRA WITH POST OFFICES IS LIABLE TO BE DEDUCTED UNDER S ECTION 80P OF THE INCOME TAX ACT 1961? 6. ON DUE CONSIDERATION OF THE ABOVE FACTS WE ARE OF THE VIEW THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF HONBLE UTTRAKHAND HIGH COURT LD. CIT(A ) HAS MADE THE ITA NO. 4980/DEL/10 ASSTT. YEAR 2007-08 5 DISCUSSION IN THE FINDING EXTRACTED SUPRA IN THE LI NE OF HONBLE UTTRAKHAND HIGH COURTS DECISION. CONSIDERING ALL T HESE FACTS WE DO NOT SEE ANY REASON TO INTERFERE IN THE FINDING OF LD. C IT(A) THE APPEAL OF THE REVENUE IS REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY 2011. SD/- [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST JANUARY 2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT