Shree Siddeshwar Souhardhana Sahakari Niyamit, Bagalkot v. CIT, Belgaum

ITA 652/BANG/2011 | 2007-2008
Pronouncement Date: 29-11-2011 | Result: Dismissed

Appeal Details

RSA Number 65221114 RSA 2011
Assessee PAN AACAS9345R
Bench Bangalore
Appeal Number ITA 652/BANG/2011
Duration Of Justice 5 month(s) 19 day(s)
Appellant Shree Siddeshwar Souhardhana Sahakari Niyamit, Bagalkot
Respondent CIT, Belgaum
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-11-2011
Assessment Year 2007-2008
Appeal Filed On 10-06-2011
Judgment Text
PAGE 1 OF 5 ITA NO.652/BANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N BARATHVAJA SANKAR VICE PRESIDENT AND SHRI GEORGE GEORGE K J.M ITA NO.652/BANG/2011 (ASST. YEAR 2007-08) SHREE SIDDESHWAR SOUHARDHANA SAHAKARI NIYAMIT TQ. BILAGI DISTRICT: BAGALKOT-587116. - APPELLA NT PA NO.AACAS9345R VS THE INCOME TAX OFFICER WARD-1 BAGALKOT. - RESPONDENT DATE OF HEARING : 29/11/2011 DATE OF PRONOUNCEMENT : 29/11/2011 APPELLANT BY : SHRI M N TAPA SHETTY CA RESPONDENT BY : SMT. SUSAN THOMAS JOSE JCIT O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) BELGAUM DATED 29/03/2011. THE RELEVANT ASST. YEAR IS 2007-08. 2. THE SOLITARY ISSUE THAT IS RAISED IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN DEN YING DEDUCTION U/S 80P(2) ON THE INTEREST INCOME EARNED ON INVESTMENT MADE WI TH BILAGI SUGARS MILLS LTD. PAGE 2 OF 5 ITA NO.652/BANG/2011 2 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A COOPERATIVE SOCIETY. IT WAS PRO VIDING CREDIT FACILITY TO ITS MEMBERS. IT WAS NOTICED BY THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD INVEST ED FUNDS APART FROM LENDING TO ITS MEMBERS WITH THE BILAGI SUGAR MILLS LTD. BADAGANDI AND BILAGI PATTANA SAHAKARI BANK BILAGI. THE INTEREST ON TH ESE INVESTMENTS YIELDED INTEREST INCOME OF A SUM OF RS.5 82 761/- AND RS/1 47 900/- RESPECTIVELY. THE AO HELD THAT SINCE THE ASSESSEE IS NOT CARRYING ON ANY BANKING BUSINESS THE INTEREST ON INVESTMENT IS TAXABLE AS INCOME FRO M OTHER SOURCES. THE ASSESSEE HOWEVER WAS ALLOWED DEDUCTION U/S 80P(2) (D) ON THE INTEREST INCOME RECEIVED FROM BILAGI PATTANA SAHAKARI BANK BILAGI AMOUNTING TO RS.1 47 900/-. THE INTEREST OF A SUM OF RS.5 82 76 1/- RECEIVED FROM BILAGI SUGAR MILLS LTD. BADAGANDI WAS NOT GIVEN THE BENE FIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE AO RELIED ON THE DE CISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF TOTGARS CO-OP SALE SOCIET Y LTD. IN ITA NO.1568/2005 DATED 30.9.2008 (322 ITR 272). 4. AGGRIEVED BY THE DENIAL OF DEDUCTION WITH RESPEC T TO THE INTEREST INCOME EARNED FROM BILAGI SUGAR MILLS LTD. BADAGANDI THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY. 5. THE FIRST APPELLATE AUTHORITY CONFIRMED THE VIE W TAKEN BY THE AO. THE CIT(A) ALSO RELIED ON THE ORDER OF THE TRI BUNAL IN THE CASE OF SRI JADISIDDESHWAR URBAN CO-OP CREDIT SOCIETY LTD. IN IT A NO.211/PNJ/2009 DATED 31.12.2010. PAGE 3 OF 5 ITA NO.652/BANG/2011 3 6. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFOR E US RAISING THE FOLLOWING GROUNDS:- I) THE CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF AO DENYING DEDUCTION TO THE APPELLANT U/S 80P(2)(A)(I) ON INTEREST INCOME OF RS.5 82 761/- EARNED FROM WITH B ILAGI SUGARS MILLS LTD. II) THE AUTHORITIES BELOW ERRED IN TAXING INTEREST INCO ME OF RS.5 82 761/- EARNED FROM THE SAID DEPOSIT UNDER TH E HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME UN DER THE HEAD BUSINESS. III) THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRECIATIN G THAT FRUITFUL DEPLOYMENT OF SURPLUS MONEY IS A PART OF BUSINESS ACTIVITY AND INTEREST EARNED OUT OF SUCH DEPLOYMENT OF FUNDS IS A BUSINESS INCOME. IV) THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRECIATIN G THAT SECTION 80P PROVIDES DEDUCTION OF PROFITS ATTRIBUTA BLE TO BUSINESS OF PROVIDING CREDIT FACILITY TO ITS MEMBERS AND DOES NOT USE THE WORD PROFITS DERIVED FROM ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. V) WITHOUT PREJUDICE TO THE ABOVE CIT(A) ERRED IN ASSUMING THAT THE DEPOSIT MADE IN BILAGI SUGAR MILL S WAS OUT OF SHARE CAPITAL OF THE APPELLANT AND NOT FROM DEPOSIT FROM THE MEMBERS THEREBY DENYING APPROPRIATE DEDUCTION OF INTEREST PAID FROM SUCH INTEREST INCOM E TO THE APPELLANT. 7. AT THE OUTSET IT WAS POINTED OUT BY THE LEARNED DR THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGEMEN T OF THE HONBLE SUPREME COURT IN THE CASE OF TOTGARS COOPERATIVE S ALE SOCIETY LTD. V ITO 322 ITR 283 WHEREIN THE HONBLE SUPREME COURT HAD A FFIRMED THE JUDGEMENT OF THE HONBLE HIGH COURT OF KARNATAKA. PAGE 4 OF 5 ITA NO.652/BANG/2011 4 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE SUPREME COURT IN THE CASE C ITED SUPRA WAS DEALING WITH AN ASSESSEE A COOPERATIVE SOCIETY PROVIDING CR EDIT FACILITIES TO MEMBERS AND MARKETING AGRICULTURAL PRODUCE OF ITS M EMBERS. IN THAT CASE THE ASSESSEE HAD INVESTED SURPLUS FUNDS ON HAND NOT IMMEDIATELY REQUIRED IN SHORT TERM DEPOSITS AND SECURITIES. THE HONBLE SU PREME COURT HELD THAT INTEREST ON SUCH DEPOSITS WERE NOT BUSINESS INCOME BUT INCOME FROM OTHER SOURCES AND THE SOCIETY WAS NOT ENTITLED TO SPECIAL DEDUCTION U/S 80P(2). THE FINDING OF THE HONBLE SUPREME COURT READS AS F OLLOWS:- THE WORDS THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS IN SECTION 80P(2) OF THE INCOME-TAX AC T 1961 EMPHASISE THAT THE INCOME IN RESPECT OF WHICH DEDUCTION IS SOUGHT BY A COOPERATIVE SOCIETY MUST CONSTITUTE THE OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIETY. THE INTEREST INCOME ARISING TO A COOPERATIVE SOCIET Y CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILIT IES TO ITS MEMBERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS ON THE SURPLUS WHICH IS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES FROM INVESTMENT I N SHORT TERM DEPOSITS AND SECURITIES HAS TO BE TAXED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE INCOME-TAX ACT 1961. SUCH INTEREST CANNOT BE SAID TO BE ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY VI Z. CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILIT IES TO ITS MEMBERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. INTEREST INCOME OF SUCH SOCIETY FROM AMOUN TS RETAINED BY IT CANNOT BE SAID TO BE ATTRIBUTABLE TO EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OR SECTION 80P(2)(A)(II) OF THE ACT. PAGE 5 OF 5 ITA NO.652/BANG/2011 5 8.1 WE FIND THE ISSUE ON HAND IS IDENTICAL TO THE MATTER CONSIDERED BY THE HONBLE SUPREME COURT. THEREFORE RESPECTFUL LY FOLLOWING THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE CITED SUPRA WE DECIDE THE MATTER IN FAVOUR OF THE REVENUE. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DAY OF NOVEMBER 2011 SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO:- 1.THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCE RNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR ITAT BANGALORE.