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Income Tax Appellate Tribunal, “SMC-C” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA
O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee which is directed against the order of ld. CIT(A)-7, Bangalore dated21.08.2017 for Assessment Year 2014-15.
The grounds raised
by the assessee are as under. “1. The Order of the Commissioner of Income Tax (Appeals) is opposed to law and facts of the case.
2. Under Section 80P(2)(a)(i) income attributable to the business of providing of credit facilities to the members is exempt in full and interest income from deposits with institutions like banks etc., consistent with the by-laws of the society is such income attributable to business and hence exempt. It is mandatory to invest in deposit to maintain statutory liquidity under the relevant provision of the law.
3. The ratio of the decision either in 322 ITR 383 or the Karnataka High Court in its order dated 16.06.2017 is not applicable to deny the benefit of exemption.
4. Without prejudice and in the alternative the income from investments made by the appellant with another co-operative society as here in Karnataka State Co-operative Apex Bank Limited, amounting to Rs.2,21,832/- is anyway exempt under 80P(2)(d), especially having regard to Section 2 (b-1) of the Karnataka Co- operative Societies Act, 1959. 5. No part of the sum of Rs.2,56,986/- is liable to tax. 6. In the alternative and without prejudice apart from Section 80P the entire income of the appellant is out of the net of taxation on grounds of mutuality. 7. The appellant craves for leave to add to, delete from or amend the grounds of appeal
.”
3. It was submitted by ld. AR of assessee that it is noted by CIT(A) in Para 5.3 of his order that assessee has earned interest on deposits with banks on its surplus funds. He submitted that in respect of this, the ld. CIT(A) has followed 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) but in the facts of the present case, another judgment 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 addition made by the AO and confirmed by CIT(A) should be deleted. As against this, the ld. DR of revenue supported the order of CIT (A).
4. I have considered the rival submissions. I have gone through the 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). I find that there is no conflict in these two judgments of Hon'ble Karnataka High Court. Both these judgments are on same line but ultimate conclusion is different because the facts are different. In the case of PCIT and Another Vs. Totagars Co-operative Sale Society(supra), it was noted that the amount which was invested was not the own money of the assessee but was liability of the assessee society and therefore, the issue was decided against the assessee whereas in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (supra), it was noticed that the money deposited in bank was not liability of the assessee and it was assessee’s own money and therefore, the issue was decided in favour of the assessee. In the present case, a categorical finding was given by CIT(A) that the amount deposited in bank was surplus money of the assessee and this is not the case of the revenue that amount was liability of the assessee. Hence in my considered opinion, the judgment of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO(supra)is applicable and not the judgment of Hon'ble Karnataka High Court rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society(supra). Respectfully following this judgment of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO(supra), I decide the issue in favour of the assessee.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on the date mentioned on the caption page.