M/S KARKALA TALUK AGRICULTURAL PRODUCE CO-OPERATIVE MARKETING SOCIETY LTD,KARKALA vs. THE INCOME TAX OFFICER WARD-3, UDUPI

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ITA 1049/BANG/2018Status: DisposedITAT Bangalore04 May 2018AY 2014-153 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the factual distinction between two High Court judgments was crucial. Since this factual aspect was not examined by the lower authorities, the matter was restored to the CIT(A) for a fresh decision.

What were the facts?

The assessee, a cooperative marketing society, claimed deduction under Section 80P(2)(a)(i) on interest earned from banks. The CIT(A) upheld the disallowance by following a High Court judgment. The assessee argued that a different High Court judgment was applicable to its facts.

What were the issues?

Whether interest earned by a cooperative society from banks is eligible for deduction under Section 80P(2)(a)(i), and whether the eligibility depends on the source of funds deposited in the bank.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 234B

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

For Appellant: Shri G.S. Prashanth, CA
For Respondent: Shri Abdul Hakeem .M, JCIT (DR)
Hearing: 25.04.2018Pronounced: 04.05.2018

O R D E R

Per Shri A.K. Garodia, Accountant Member

1.

This appeal is filed by the assessee which is directed against the order of ld. CIT(A)-10, Bangalore dated 12.02.2018 for Assessment Year 2014-15.

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 disallowance of deduction claimed u/s.80P[2][a][i] of the Act amounting to Rs.5,67,150/- in respect of the interest earned by the appellant from Syndicate Bank and HDFC Bank under the facts and in the circumstances of the appellant's case.

3. 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 234-B of the Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled.

4. 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 was submitted by ld. AR of assessee that in the impugned order, the 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 in 395 ITR 611 (Karn) but in the facts of 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. He submitted that in the interest of justice, the matter may be restored back to the file of CIT(A) for fresh decision after examining the facts of the present case in the light of these two judgements of Hon'ble Karnataka High Court. The ld. DR of revenue supported the order of CIT(A).

4.

I have considered the rival submissions. I find that these two judgements of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society (supra) and Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra) are on the same line and there is no conflict in these two judgements but the ultimate conclusion of these two judgements is different because the facts are different. In the case of PCIT and Another Vs. Totagars Co-operative Sale Society(supra), the amount deposited in bank was out of assessee’s liability 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), it was found that the amount deposited in bank was out of assessee’s own funds and not out of liability of assessee and therefore, the issue was decided in favour of the assessee.

5.

In the present case, this factual aspect is not commended upon by any of the authorities below. Hence I feel it proper to restore the matter back to the file of CIT (A) for fresh decision after examining the facts of the present case in the light of these two judgments of Hon'ble Karnataka High Court. I order accordingly and the AO is directed that if 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 but if it is found that 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. Needless to say, the AO should pass a speaking and reasoned order after providing adequate opportunity of being heard to the assessee.

6.

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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