M/S KAPPALAGUDDI VYAVASAYA SEVA SAHAKARI NIYAMITHA,BELGAVI vs. INCOME TAX OFFICER WARD-4, BELGAVI

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ITA 469/BANG/2018Status: DisposedITAT Bangalore20 March 2018AY 2013-144 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the applicability of the deduction depended on the specific facts of the case, distinguishing between deposits made from liabilities versus own funds. The matter was restored to the CIT(A) for a fresh decision based on these facts and relevant High Court judgments.

What were the facts?

The assessee, a cooperative society, claimed deduction for interest and dividend income earned from cooperative banks. The CIT(A) disallowed this deduction, relying on a Karnataka High Court judgment. The assessee argued that the facts of their case were different and cited another Karnataka High Court judgment.

What were the issues?

Whether interest and dividend income earned by a cooperative society from cooperative banks is eligible for deduction under Section 80P, and whether the facts align with different High Court precedents.

Which sections of the Income-tax Act were involved?

Section 80P

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

Before: SHRI ARUN KUMAR GARODIA

For Appellant: Shri Sandeep .C, CA
For Respondent: Shri L.V. Bhaskar Reddy, Addl. CIT (DR)
Hearing: 20.03.2018Pronounced: 20.03.2018

Date of hearing : 20.03.2018 Date of Pronouncement : 20.03.2018 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), Gulbarga dated 29.11.2017 for Assessment Year 2013-14.

2.

The grounds raised

by the assessee are as under. “1. That the order of the learned Commissioner of Income Tax (Appeals) is prejudicial to the interests of the appellant, is bad and erroneous in law and against the facts and circumstances of the case.

2. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing the interest income of Rs. 4,83,648/- earned from co-operative banks as deduction u/s 80P(2)(a)(i) of the Act on the ground that such interest income is not attributable to the . activities of the appellant.

3. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing deduction of Rs 83,915/-. u/s 80P of the Act, being the dividend received from Cooperative banks.

4. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in not allowing interest income of Rs. 4,83,648/- and dividend income of Rs. 83,915/-on the deposits made in the co- operative banks u/s. 80P(2)(d) of the Act.

5. That the learned Commissioner of Income Tax (Appeals) erred in law and on facts in holding that the appellant is not eligible for deduction u/s. 80P(2)(a)(i) of the Act even though such issue was not raised by the assessing officer. Each of the above ground is without prejudice to one another and the appellant seeks leave of the Hon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or modify otherwise any of the above grounds either before or at the time of hearing of this appeal.”

3.

It was submitted by ld. AR of assessee that the ld. CIT(A) has followed judgment of Hon'ble Karnataka High Court dated 16.06.2017 rendered in the case of PCIT and Another Vs. Totagars Co-operative Sale Society as reported in395 ITR 611 (Karn). He submitted that the facts of this case are different and therefore, this judgment is not applicable in the present case. He submitted that in 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 matter should be restored back to AO or CIT (A) for a fresh decision by following this judgment of Hon'ble Karnataka High Court rendered in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO(supra). At this juncture, bench wanted to know regarding the facts of the present case because the decision of Hon'ble Karnataka High Court rendered in both cases i.e. 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 but the 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), the money deposited in bank was liability of the assessee and in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO(supra), the money deposited in bank was not out of liability but assessee’s own funds. Therefore this decision is in favour of the assessee. The bench pointed out that if the facts in the present case are similar to that of 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. If the facts of the assessee are similar to that of Tumkur Merchants Souharda Credit Cooperative

Ltd. Vs. ITO(supra) then the issue is to be decided in favour of the assessee. In reply, it was submitted by ld. AR of assessee that the facts are not readily available and therefore, 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 judgments of Hon'ble Karnataka High Court. The ld. DR of revenue also agreed to this proposition put forward by the ld. AR of assessee.

4.

I have considered the rival submissions and I feel it proper that the matter 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 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) and if it is found that the facts of the present case are in line with the facts of the PCIT and Another Vs. Totagars Co-operative Sale Society(supra) then the issue may be decided against the assessee and if the facts of the present case are in line with the facts of the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO(supra) then the issue may be decided in favour of the assessee. The CIT(A) should pass necessary order as per law in the light of above discussion after providing adequate opportunity of being heard to both sides.

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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