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Income Tax Appellate Tribunal, “SMC-B” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA
O R D E R Per Shri A.K. Garodia, Accountant Member These two appeals are filed by the assessee which are directed against two separate orders of ld. CIT(A)-5, Bangalore both dated 12.01.2018 for Assessment Years 2013-14 and 2014-15. Both these appeals were heard together and are being disposed of by way of this common order for the sake of convenience.
The grounds raised
by the assessee for Assessment Year 2013-14 in are as under. “1. The order of the learned Commissioner of Income-tax [Appeals] - 5, Bengaluru in so far it is against the appellant is opposed to law, weight of evidence, facts and circumstances of the Appellant's case.
2. The appellant denies itself liable to be assessed on total income of Rs.3,60,550/-as against the returned income by the appellant of Rs.NIL/- after claiming eligible deduction under section 80 P [2][d] of the Act, on the facts and circumstances of the case.
3. The learned Commissioner of Income-tax [Appeals] is not justified in law in confirming the disallowance made by the learned assessing officer of Rs. 3,60,550/- being the interest received by the appellant from investments made and claimed deduction under the provisions of section 80 P [2][d] of the Act on the facts and circumstances of the case.
The learned CIT(A) was not justified in not appreciating that the interest earned from deposits maintained in Co-operative Banks was attributable to the business of the appellant and was to be considered as business income and eligible for deduction under section 80P of the Act, on the facts and circumstances of the case.
Without prejudice, the learned authorities below ought to have allowed the corresponding expenditures proportionately on income earned by the appellant from investments which was claimed as deduction under section 80 P [2][d] of the Act, on the facts and circumstances of the case.
6. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the appellant is not a Co-Operative Bank within the meaning of Part - V of the Banking Regulation Act, 1949, to which the Explanation to section 80 P [4] of the Act draws reference and consequently, the provisions of section 80 P [4] of the Act are not applicable to the case of the appellant.
The learned Commissioner of Income-tax [Appeals] is not justified in holding that the Appellant has violated the bye-laws and the Karnataka Societies Registrations Act, 1959 without even properly verifying the facts of the case of the appellant and erroneously denied the eligible claim of deduction by the appellant under section 80 P [2] [a] [i] of the Act, on the facts and circumstances of the case.
Without prejudice, the learned CIT [A] failed to appreciate that the decision of the Hon'ble Apex Court in the case of Citizens Co- Operative Society is not applicable to the instant case so far as the income attributable to the Members under the facts and circumstances of the case.
Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies herself liable to be charged to interest under section 234B and 234C of the Income Tax Act under the facts and circumstances of the case. Further the levy of interest under section 234B & 234C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted on which interest is levied are all not discernible and are wrong on the facts of the case.
The appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal urged above.
11. For the above and other grounds to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.”
3. The grounds raised
by the assessee for Assessment Year 2014-15 in are as under. “1. The order of the learned Commissioner of Income-tax [Appeals] - 5, Bengaluru in so far it is against the appellant is opposed to law, weight of evidence, facts and circumstances of the Appellant's case.
2. The appellant denies itself liable to be assessed on total income of Rs.4,78,953/-as against the returned income by the appellant of Rs.NIL/- after claiming eligible deduction under section 80 P [2][d] of the Act, on the facts and circumstances of the case.
3. The learned Commissioner of Income-tax [Appeals] is not justified in law in confirming the disallowance made by the learned assessing officer of Rs. 4,78,953/- being the interest received by the appellant from investments made and claimed deduction under the provisions of section 80 P [2][d] of the Act on the facts and circumstances of the case.
4. The learned CIT(A) was not justified in not appreciating that the interest earned from deposits maintained in Co-operative Banks was attributable to the business of the appellant and was to be considered as business income and eligible for deduction under section 80P of the Act, on the facts and circumstances of the case.
5. Without prejudice, the learned authorities below ought to have allowed the corresponding expenditures proportionately on income earned by the appellant from investments which was claimed as deduction under section 80 P [2][d] of the Act, on the facts and circumstances of the case.
6. The learned Commissioner of Income-tax [Appeals] failed to appreciate that the appellant is not a Co-Operative Bank within the meaning of Part - V of the Banking Regulation Act, 1949, to which the Explanation to section 80 P [4] of the Act draws reference and consequently, the provisions of section 80 P [4] of the Act are not applicable to the case of the appellant.
7. The learned Commissioner of Income-tax [Appeals] is not justified in holding that the Appellant has violated the bye-laws and the Karnataka Societies Registrations Act, 1959 without even properly verifying the facts of the case of the appellant and erroneously denied the eligible claim of deduction by the appellant under section 80 P [2] [a] [i] of the Act, on the facts and circumstances of the case.
8. Without prejudice, the learned CIT [A] failed to appreciate that the decision of the Hon'ble Apex Court in the case of Citizens Co-Operative Society is not applicable to the instant case so far as the income attributable to the Members under the facts and circumstances of the case.
9. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies herself liable to be charged to interest under section 234B and 234C of the Income Tax Act under the facts and circumstances of the case. Further the levy of interest under section 234B & 234C of the Act is also bad in law as the period; rate, quantum and method of calculation adopted on which interest is levied are all not discernible and are wrong on the facts of the case. 10. The appellant craves leave to add, alter, substitute and delete any or all of the grounds of appeal
urged above.
11. For the above and other grounds to be urged during the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.”
4. At the very outset, it was submitted by ld. AR of assessee that as per assessment order, the AO followed the judgment of Hon’ble Apex Court rendered in the case of Totgar’s Co-op Sale Society Ltd. as reported in 322 ITR 283 (SC) and decided the issue against the assessee by holding that the assessee is not eligible for deduction u/. 80P(2)(d) of IT Act. He further submitted that CIT(A) has followed the judgment of Hon’ble Apex Court rendered in the case of The Citizen Co-operative Society Ltd. Vs. ACIT as reported in 397 ITR 1. But that judgment of Hon’ble Apex Court is not applicable in the facts of the present case. Regarding the judgment of Hon’ble Apex Court in the case of Totgar’s Co-op Sale Society Ltd. (supra), it was submitted that on this issue, there are two judgments 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) and Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO as reported in 230 Taxman 309. He submitted that the judgment of Hon’ble apex court rendered in the case of Totgar’s Co-op Sale Society Ltd (Supra) and the judgment 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) are under similar facts. He further submitted that both these judgments 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 same line but the ultimate conclusion is different because the facts are different. He submitted that in the case of PCIT and Another Vs. Totagars Co-operative Sale Society (supra), the issue was decided against the assessee because it was found that the money deposited in bank was assessee’s liability and not assessee’s own funds but in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra), the issue was decided in favour of the assessee because in that case, it was found that the money deposited in bank was out of assessee’s own funds and not out of liability of the assessee. He submitted that under these facts, the issue should be restored back to the file of CIT (A) for fresh decision in the light of these judgments of Hon'ble Karnataka High Court. The ld. DR of revenue supported the order of CIT(A).
5. I have considered the rival submissions. In my considered opinion, this issue should go 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 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). Accordingly, I set aside the order of CIT (A) in both years and restore the matter back to his file for fresh decision after examining the facts of the present case in the light of these two judgments 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). If it is found that the facts 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 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 ld. CIT(A) should provide adequate opportunity of being heard to both sides.
In the result, both the appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.