The Punjab State Federation of Cooperative House Building Societies Ltd., Chandigarh v. ACIT, Chandigarh

ITA 847/CHANDI/2013 | 2010-2011
Pronouncement Date: 28-04-2015 | Result: Dismissed

Appeal Details

RSA Number 84721514 RSA 2013
Assessee PAN AAAAT0759L
Bench Chandigarh
Appeal Number ITA 847/CHANDI/2013
Duration Of Justice 1 year(s) 8 month(s) 11 day(s)
Appellant The Punjab State Federation of Cooperative House Building Societies Ltd., Chandigarh
Respondent ACIT, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 28-04-2015
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-04-2015
Date Of Final Hearing 15-04-2015
Next Hearing Date 15-04-2015
Assessment Year 2010-2011
Appeal Filed On 16-08-2013
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI. BHAVNESH SAINI JUDICIAL MEMBER AND SHRI T.R. SOOD ACCOUNTANT MEMBER ITA NO. 847/CHD/2013 ASSESSMENT YEAR: 2010-11 M/S PUNJAB STATE COOP HOUSE BUILDING VS. THE ACIT CIRCLE 4(1) FEDERATION LTD. CHANDIGARH CHANDIGARH PAN NO. AAAAT0759L & ITA NO. 810/CHD/2013 ASSESSMENT YEAR: 2010-11 THE DCIT VS. PUNJAB STATE CO-OP HOUSE BUILDING CIRCLE 4(1) FEDERATION LTD. CHANDIGARH CHANDIGARH PAN NO. AAAAT0795L (APPELLANT) (RESPONDENT) APPELLANT BY : DR. AMARVEER SINGH RESPONDENT BY : SHRI N.R. SHARMA DATE OF HEARING : 15.04.2015 DATE OF PRONOUNCEMENT : 28.04.2015 ORDER PER T.R.SOOD A.M. BOTH THE APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER DATED 22.5.2013 PASSED BY THE CIT(A) CHANDIG ARH. ITA NO. 847/CHD/2013 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- 1. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHELD B Y THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH IS BAD IN LAW AND I S BEYOND ALL THE CANNONS OF LAW AND JUSTICE. 2. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHELD B Y THE COMMISSIONER OF INCOME TAX(APPEALS) CHANDIGARH HOLDING THAT THE INC OME OF RS. 10 54 722/- OUT OF THE AMOUNT OF INTEREST RECEIVED FROM COMMERCIAL 2 BANKS AS INCOME FROM OTHER SOURCES AND THAT TOO SET TING OFF/ALLOWING EXPENSES ATTRIBUTABLE TO THE EARNING OF THE SAID IN COME @ 1% MORE PARTICULARLY WHEN THE LOANS RAISED HAVE BEEN DEPOSI TED IN THE BANKS AND HAVE EARNED INTEREST UNDER CONSIDERATION AS PER THE PROVISION OF THE LAW IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS BAD I N LAW AND NEEDS TO BE SET-ASIDE. 3. THAT THE ORDER OF THE ASSESSING OFFICER AS UPHELD B Y THE COMMISSIONER OF INCOME TAX (APPEALS) CHANDIGARH DISALLOWING CLAIM O F THE APPELLANT U/S 80P(2)(A)(I) IN RESPECT OF THE INTEREST INCOME RECE IVED FROM COMMERCIAL BANKS BEING BUSINESS INCOME CLAIMED AND HOLDING THE SAME AS INCOME FROM OTHER SOURCES IS BAD IN LAW AND NEEDS TO BE SE T-ASIDE. 3. IN THIS CASE THE ASSESSEE HAS MOVED AN APPLICATI ON IN FORM NO. 8 VIDE APPLICATION DATED 17.10.2013 MAKING A DECLARATION U /S 158A THAT ISSUE RAISED IN THIS APPEAL ARE IDENTICAL TO THE ISSUES WHICH ARE P ENDING BEFORE THE HON'BLE SUPREME COURT AND THEREFORE ASSESSING OFFICER SHO ULD BE DIRECTED TO KEEP THIS ISSUE PENDING AND DECIDE THE SAME AS PER OUTCOME OF THE DECISION OF HON'BLE SUPREME COURT. 4. THE REVENUE ON EARLIER DATE OF HEARING WAS DIREC TED TO FILE OBJECTIONS IF ANY TO THIS APPLICATION. TODAY THE REVENUE HAS FI LED A LETTER DATED 8.4.2015 WRITTEN BY DY. CIT CIRCLE 4(1) RAISING OBJECTIONS T O THE APPLICATION FILED BY THE ASSESSEE. THE OBJECTIONS READ AS UNDER:- IN THIS REGARD IT IS TO INTIMATE THAT THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN FORM NO. 8 IS DIFFERENT TH AN GROUNDS OF APPEAL TAKEN BEFORE THE SUPREME COURT I N ASSESSMENT YEAR 2006-07. ACCORDINGLY I HAVE OBJECT ION TO FILING OF FORM NO. 8 UNDER SECTION 158A OF THE INCO ME TAX ACT. 5. COPY OF THIS OBJECTION WAS CONFRONTED TO THE LD. COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THOUGH QUESTIONS ARE OF THE SIMIL AR NATURE BUT HE DID NOT SERIOUSLY PRESS THIS APPLICATION THEREFORE IN VIE W OF THE OBJECTIONS RAISED BY THE ASSESSING OFFICER WE REJECT THE APPLICATION. 3 6. THROUGH THESE GROUNDS THE ONLY ISSUE WHICH HAS B EEN RAISED I.E. WHETHER ASSESSEE IS ENTITLED TO DEDUCTION U/S 80P(2)(A)(I). DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAS RECEIV ED INTEREST FROM VARIOUS BANKS AMOUNTING TO RS. 10 65 376/-. ACCORDING TO A SSESSING OFFICER THIS INTEREST COULD NOT BE ASSESSED AS BUSINESS INCOME B ECAUSE EARNING OF INTEREST ON OTHER BANKS ON SURPLUSES FUNDS WAS NOT THE ACTIVIT Y OF THE ASSESSEE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) AND THEREFORE AFTER R EDUCING 1% EXPENSES THE NET AMOUNT OF RS. 10 54 752/- WAS ASSESSED UNDER THE HE AD INCOME FROM OTHER SOURCES. 7. ON APPEAL IT WAS MAINLY SUBMITTED THAT IN EARLIE R YEARS THIS ISSUE WAS DECIDED BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. HOWEVER LD. CIT(A) NOTICED THE LATER ON THE ISSUE WAS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE HON'B LE HIGH COURT IN ITA NO. 643 OF 2010 BY FOLLOWING THE DECISION OF HON'BLE SU PREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD V CI T 227 ITR 172 (SC). THEREFORE FOLLOWING THE ORDER OF THE HON'BLE HIGH COURT HE DECIDED THE ISSUE AGAINST THE ASSESSEE. 8. BEFORE US LD. COUNSEL FOR THE ASSESSEE FAIRLY AD MITTED THAT ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE HON'BLE HIGH CO URT. 9. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE HON'BLE HIGH COURT IN ASSESSEES OW N CASE IN ITA NO. 643 OF 2010 VIDE ORDER DATED 10.05.2011. THE RELEVANT PARA S ARE AS UNDER:- 3. WE HAVE HEARD LD. COUNSEL FOR THE REVENUE. NONE APPEARS FOR THE ASSESSEE DESPITE SERVICE. 4. PLEA ON BEHALF OF THE REVENUE IS THAT INTEREST R ECEIVED BY THE ASSESSEE FROM COMMERCIAL BANKS WAS NOT COVERED BY S ECTION 80P(2)(A)(I) IT HAS NOTHING TO DO WITH THE INTERES T INCOME ON THE LOAN ADVANCED TO THE MEMBERS. RELIANCE HAS BEEN PLACED 4 ON THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE TO TGARS COOPERATIVE SALE SOCIETY LTD VS ITO 2010 (35) DTR 2 5 HOLDING THAT INTEREST ON BANK DEPOSITS OF GOVERNMENT SECURI TIES DERIVED BY A COOPERATIVE SOCIETY COULD NOT BE ATTRI BUTED TO THE ACTIVITIES OF THE SOCIETY OF PROVIDING VARIOUS FACI LITIES TO ITS MEMBERS AND WAS TAXABLE UNDER SECTION 56 BEING INCO ME FROM OTHER SOURCES. IT APPEARS THAT SINCE THE JUDGMENT OF THE TRIBUNAL IS PRIOR TO THE JUDGEMENT OF THE HON'BLE S UPREME COURT RELIED UPON ON BEHALF OF THE REVENUE. THE TRI BUNAL DID NOT HAVE ADVANTAGE OF THE LAW LAID DOWN THEREIN. TH E MATTER IS THUS COVERED IN FAVOUR OF THE REVENUE BY THE JUDGM ENT OF HON'BLE SUPREME COURT. CONTRARY VIEW OF THE TRIBUN AL CANNOT BE SUSTAINED. FOLLOWING THE ABOVE WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 11. IN THE RESULT ASSESSEE APPEAL IS DISMISSED. ITA NO. 810/CHD/2013 REVENUES APPEAL 12. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS. 27 19 241 ARE MADE BY DISALLOWANCE OF DEDUCTION U/S 80P(2)(A)(I) ON ACCOUNT OF INTEREST RECEIVED FROM EMPLOYEES WHO ARE NOT THE MEMBER OF THE ASSESSEES SOCIETY. 13. AFTER HEARING BOTH THE PARTIES WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS EAR NED INTEREST FROM EMPLOYEES AMOUNTING TO RS. 27 19 241/- ON WHICH DEDUCTION U/S 80P(2)(A)(I) HAS BEEN CLAIMED. THE ASSESSEE WAS ASKED TO JUSTIFY THIS CLA IM. IN RESPONSE IT WAS SUBMITTED THAT BECAUSE OF THE SERVICE CONDITION LO ANS WERE GIVEN TO THE EMPLOYEES ON WHICH SOME INTEREST WAS EARNED. THE L OANS WERE GIVEN FOR THE PURPOSE OF VEHICLES OR CONSTRUCTION OF HOUSE. IT W AS SUBMITTED THAT ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSES SEE IN THE CASE OF PUNJAB 5 STATE COOPERATIVE AGRICULTURAL DEVELOPMENT BANK. TH E ASSESSING OFFICER DID NOT FIND FORCE IN THESE SUBMISSIONS AND OBSERVED TH AT TRIBUNAL HAS MADE VERY GENERAL OBSERVATION. HE FURTHER OBSERVED THAT EMPL OYEES OF THE SOCIETY COULD NOT BE TERMED AS MEMBERS OF THE SOCIETY AND THEREF ORE INCOME EARNED FROM LOANS GIVEN TO THE EMPLOYEES COULD NOT BE SAID TO B E ATTRIBUTABLE TO THE ACTIVITIES OF THE SOCIETY. 14. ON APPEAL LD. CIT(A) DECIDED THIS ISSUE IN FAV OUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF PUNJAB STATE COOPERATIVE AGRICULTURAL DEVELOPMENT BANK LTD CHANDIGARH IN I TA NO. 120/CHD/2007. 15. BEFORE US LD. DR SUBMITTED THAT WHEN THE ISSU E WAS DECIDED IN THE CASE OF PUNJAB STATE COOPERATIVE AGRICULTURAL DEVELOPMEN T BANK THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO-OP ERATIVE SALE SOCIETY LTD VS ITO [2010] 322 ITR 283 (SC) WAS NOT AVAILABLE. THE PRINCIPLES LAID DOWN IN THIS CASE ARE SQUARELY APPLICABLE EVEN IN THE CASE OF INTEREST EARNED FORM EMPLOYEES. 16. ON THE OTHER HAND LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT LOANS WERE GIVEN FOR PURCHASE OF VEHICLES AND CONSTRUCTION OF HOUSES TO THE EMPLOYEES AS PER TERMS OF EMPLOYMENT AND THE LOANS WERE NOT GIVE N OUT OF SURPLUS FUNDS THEREFORE THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF TOTGARS CO- OPERATIVE SALE SOCIETY LTD VS ITO CANNOT BE APPLIED . 17. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE HON'BLE SUPREME COURT HAS CLEARLY HELD THAT DEDUCTION U/S 80P(2)(A) (I) OF THE ACT IS AVAILABLE ONLY IN RESPECT OF CORE ACTIVITIES OF THE SOCIETY A ND INTEREST EARNED FROM OTHER BANKS CANNOT BE SAID TO BE THE CORE ACTIVITY. IN F ACT IN THIS REGARD IT HAS BEEN OBSERVED AS UNDER:- THE INTEREST INCOME ARISING TO A CO-OPERATIVE SOCI ETY CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMB ERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS ON THE SURPLUS WHICH IS NOT REQUIRED IMMEDIATELY FOR BUSINESS PURPOSES FROM IN VESTMENT IN 6 SHORT-TERM DEPOSITS AND SECURITIES HAS TO BE TAXED AS INCOME FROM OTHER SOURCES UNDER SECTION 56 OF THE INCOME-TAX AC T 1961. SUCH INTEREST CANNOT BE SAID TO BE ATTRIBUTABLE TO THE A CTIVITIES OF THE SOCIETY VIZ. CARRYING ON THE BUSINESS OF PROVIDIN G CREDIT FACILITIES TO ITS MEMBERS OR MARKETING OF AGRICULTURAL PRODUCE OF ITS MEMBERS. INTEREST INCOME OF SUCH SOCIETY FROM AMOUNTS RETAIN ED BY IT CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY M ENTIONED IN SECTION 80P(2)(A)(I) OR SECTION 80P(2)(A)(III) OF THE ACT. SECTION 80P(2)(A)(I) CANNOT BE PLACED ON A PAR WITH EXPLANATION (BAA) TO SECTION 80HHC SECTION 80HHD(3) AND SECTI ON 80HHE(5) . 18. ON THE BASIS OF ABOVE OBSERVATION IT CAN EASILY BE SAID THAT ON SAME ANALOGY EVEN THE INTEREST EARNED FROM EMPLOYEES CAN NOT BE SAID TO BE CORE ACTIVITY OF THE SOCIETY AND THEREFORE IN OUR OPIN ION INTEREST EARNED FROM EMPLOYEES IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)( A)(I) THEREFORE WE SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THAT OF ASSESSI NG OFFICER. 19. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28.04.2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28TH APRIL 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR