M/S SRI M VISHWESHWARAIAH C-OP SOCIETY LTD,SHIVAMOGGA vs. INCOME TAX OFFICER WARD-1, SHIVAMOGGA

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ITA 2517/BANG/2017Status: DisposedITAT Bangalore04 May 2018AY 2011-123 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the matter to the CIT(A) for a fresh decision. The CIT(A) is directed to examine whether the investments were made from the society's own funds or out of liabilities, to determine the applicability of different High Court judgments.

What were the facts?

The assessee, a co-operative society, claimed deduction under Section 80P(2)(a)(i) on interest earned from investments. The CIT(A) upheld the denial of this deduction, assessing the interest under 'Other Sources'. The assessee argued that the CIT(A) erred by relying on a judgment not applicable to its facts.

What were the issues?

Whether interest earned by a co-operative society on its investments is eligible for deduction under Section 80P(2)(a)(i), and the applicability of different High Court judgments based on the source of funds for such investments.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i)

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Income Tax Appellate Tribunal, “SMC-C” BENCH : BANGALORE

For Appellant: Shri Ravishankar, Advocate
For Respondent: Shri Abdul Hakeem .M, JCIT (DR)
Hearing: 24.04.2018Pronounced: 04.05.2018

Date of hearing : 24.04.2018 Date of Pronouncement : 04.05.2018 O R D E R

Per Shri A.K. Garodia, Accountant Member

1.

This is an assessee’s appeal directed against the order of ld. CIT (A), Davangere dated 01.05.2017 for Assessment Year 2011-12.

2.

The grounds raised

by the assessee are as under. “1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

2. The learned CIT [A] is not justified in upholding the denial of the deduction claimed by the appellant u/s.80P [2] [a] [i] of the I.T.Act, in respect of a sum of Rs.20,72,352/- being the interest earned on investments made by the appellant holding that the same has to be assessed under the head "Other Sources" under the facts and in the circumstances of the appellant's case.

3. Without prejudice to the above, the learned CIT [A] ought to have appreciated that the gross interest earned by the appellant cannot be regarded as income without allowing proportionate expenses incurred by the appellant under the facts and in the circumstances of the appellant's case.

4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234B of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.

5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”

3.

It is submitted by ld. AR of assessee that ld. CIT(A) has followed the judgement of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society as reported in395 ITR 611 (Karn) but in the present case, this judgement is not applicable and another judgement of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO as reported in 230 Taxman 309 is applicable and therefore, the issue should be decided in favour of the assessee by following this judgement of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra). At this juncture, the bench pointed out that both these judgements of Hon'ble Karnataka High Court are on same line but ultimate conclusion is different because the facts are different. The bench pointed out that in the case of PCIT and Another Vs. Totagars Co-operative Sale Society(supra), it was found that the investment made in the bank was out of liability of the assessee and not out of assessee’s own funds and therefore, the issue was decided against the assessee but in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra), the investment made in the bank was assessee’s own funds and not out of liability of assessee and therefore, the issue was decided in favour of the assessee. The bench wanted to know regarding this factual aspect in the present case. In reply, it was submitted by ld. AR of assessee that the same are not readily available and therefore, the matter may be restored back to the file of AO/CIT (A) for fresh decision after examining the facts of the present case in the light of these two judgements. The ld. DR of revenue supported the order of CIT(A).

4.

I have considered the rival submissions and in the facts of the present case, I restore the matter back to the file of CIT (A) for fresh decision in the light of above discussion after providing adequate opportunity of being heard to both sides. The CIT(A) should examine the facts of the present case and if it is found that the facts of the present case are in line with the facts in the case of PCIT and Another Vs. Totagars Co-operative Sale Society(supra), then the issue should be decided against the assessee and if the facts of the present case are in line with the facts in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra), then the issue should be decided in favour of the assessee.

5.

In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.

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