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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 20.12.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2014-15.
The assessee has challenged the order of Pr. CIT exercising the revisionary jurisdiction under section 263 of the Act in respect of the claim of the assessee of interest of Rs.8,99,083/- on FDR held with SBI and commission income from MSEB Rs.8,83,348/-.
2 ITA No.738/M/2019 M/s. Navbharat Urban Co-Operative Society Ltd. 3. The Ld. A.R., at the outset, submitted before the Bench that the identical issue has been decided by the co-ordinate bench of the Tribunal in assessee’s own case in ITA No.6964/M/2017 A.Y. 2012-13 vide order dated 19.11.2013 wherein identical question has been decided in favour of the assessee. The Ld. A.R., therefore, prayed that following the decision of the coordinate bench in assessee’s own case, the order under section 263 may kindly be quashed.
The Ld. D.R., on the other hand, relied on the order of Pr. CIT.
After hearing both the parties and perusing the material on record, we observe that the identical issue has been decided by the co-ordinate bench of the Tribunal in assessee own case in ITA No.6964/M/2017 A.Y. wherein the following grounds were raised: “1. In the facts and, circumstances of the case and in law, the learned Assessing Officer erred in disallowing deduction claimed of f 4,28,872/- u/s. 80P(2)(a)(i) of the Act by disregarding the fact that the interest was received on term deposit from SBI.
In the facts and circumstances of the case and in law, the learned Assessing Officer erred in disallowing deduction claimed of f 10,34,000/- u/s. 80P(2)(a)(i) of the Act by disregarding the fact that the commission was received from MSEB.”
We observe that the identical issue was adjudicated by the Tribunal and operative part whereof as under: “5. We have heard learned DR and perused record. We noticed that an identical issue was considered by this Bench of the Tribunal in the case relied upon by Ld A.R and it was decided in favour of the assessee. For the sake of convenience, we extract below operative portion of the order :-
We noticed that the learned CIT(A) has taken support of the decision rendered by the Tribunal in the case of Shri Saidatta Cooperative Credit Society Ltd. (supra), wherein the Tribunal has decided this issue against the assessee by considering the decision rendered by Hon'ble Supreme Court in
3 ITA No.738/M/2019 M/s. Navbharat Urban Co-Operative Society Ltd. the case of Todgars Cooperative Sale Society Ltd. (supra). However, we noticed that Hon'ble Kamataka High Court has also considered the decision of Todgars Cooperative Sale Society Ltd. (supra) in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra) and held that interest income is attributable to carrying on the business of the assessee and therefore it is liable to be deducted u/s. 80P(2)(a)(i) of the Act. The "SMC" Bench of the Tribunal in the case of Jaoli Taluk Sahakari Patpedhi Maryadit (supra) has followed the decision rendered by Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). For the sake of convenience, we extract below the operative portion of the order passed by the Tribunal in the above said case :-
"9. I heard the parties and perused the record. In my view, the decision rendered by Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd (supra) squarely applies to the facts of the present case. In the case before the Hon'ble Karnataka High Court also, the assessee claimed deduction u/s 80P(2}{a)(i) on the interest income earned from deposits kept with banks on the reasoning that the same shall form part of its business income. The Hon'ble High Court upheld the said view by duly considering the decision rendered by Hon'ble Hon’ble Supreme Court Court in the case of Totgars Cooperative Sale Society Ltd (supra). For the sake of convenience, I extract below the observations made by the Hon'ble Karnataka High Court: -
"8, Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not I immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section SOP of the Act.
4 ITA No.738/M/2019 M/s. Navbharat Urban Co-Operative Society Ltd. 9. In this context when we look at the Judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee-Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i)of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was . not laying down any law.
In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of C1T v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com66. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order."
Respectfully following the decision rendered by Hon'ble Karnataka High Court, referred above, I set aside the order of Ld CIT(A) on this issue and direct the AO to allow deduction u/s SOP of the Act."
5 ITA No.738/M/2019 M/s. Navbharat Urban Co-Operative Society Ltd. 7. Accordingly, by following the decision rendered by Hon'ble Karnataka High Court (referred supra), we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to allow deduction of interest income u/s. 80P(2)(a)(i) of the Act.”
“9. We heard learned DR and perused the record. We noticed that an identical issue was considered by the Pune SMC Bench in the above cited case and the same has been decided in favour of the assessee with following observations :-
“10. After hearing both the learned Counsel for assessee and the learned Departmental Representative for the Revenue, it transpires that similar issue of Electricity Commission arose before the Tribunal in the case of Banganga Nagri Sahakari Patsanstha Ltd. Vs. ITO (ITA No. 1522 & 1522/PN/2015dated 10-03-2016), wherein it was held as under:-
"10. We have carefully considered the rival submissions, orders of the authorities below and case law cited. The short question before us is to determine eligibility of deduction under section SOP of the Act in respect of income earned from certain allied activities viz. (i) Locker Rent; (ii) Ambulance Rent; (in) Commission on Collection of MSEB bills; and (iv) Health Club by cooperative credit society carrying on banking business. The alternate ground agitated by the assesses is towards ad-hoc estimation of expenses in relation to such income @ 10% of the gross receipt as against actual and proportionate expenses attributable for the purpose of carrying on such allied activities. This has resulted in higher incidence of taxation owing to denial of deduction under section SOP on such income. We find that eligibility of the assesses for deduction under section SOP of the Act in respect of locker rent income is covered by the decision of the Hon"ble Supreme Court in the case of Mehsana District Central Co- op. Bank Ltd. (supra). Therefore, we set-aside the direction of the CIT(A) in this regard and hold that the assessee is eligible for deduction under section SOP of the Act in respect of this income. With respect to the income from running of Ambulance, while holding that the assessee is not eligible for deduction under section 80P(2)(a) or (b), we are in total agreement with the alternate plea of the assessee that the expenses attributable for the purpose operating such activity ought to have to be allowed on actual/proportionate basis. We are of the view that the action of the CJT(A) in restricting the expenses artificially @ 10% of the gross income from such activities is not sustainable in law being devoid of objectivity. The Assessing Officer is accordingly directed to allow the expenses which are attributable to the running of Ambulance and determine the income from the aforesaid activity. The surplus if any, from this activity would be entitled to relief made residuary clause of section 80P(2)(c)(ii). We also notice that the Income from MSEB commission is held to be business activity as per decision cited by the assessee in the case of Ahmednagar District Co-operative Bank Ltd. (supra) and other decisions noted above. Accordingly, we hold
6 ITA No.738/M/2019 M/s. Navbharat Urban Co-Operative Society Ltd. that the assessee is entitled to relief under section SOP as per law....." . 11. The issue of Electricity Commission arising in the present appeal is similar to the issue before the Tribunal and following the same parity of reasoning, this issue is decided in favour of assessee. Accordingly, relevant ground is allowed.”
Since both the issues were decided under identical facts by the co-ordinate bench of the Tribunal as is clear from the above , we, therefore, are of the view that revisionary jurisdiction exercised by the Pr. CIT is not correct and is quashed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 22.10.2019.
Sd/- Sd/- (Vikas Awasthy) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 22.10.2019. * Kishore, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order
Dy/Asstt. Registrar, ITAT, Mumbai.