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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Sri.N.V.Vasudevan, JM & Sri.Waseem Ahmed AM]
For the Department : Shri S.Dasgupta, Addl.CIT Sr.DR. For the Assessee :Shri S.Bhatacharjee, FCA & Gautam Banerjee, Advocate Date of Hearing : 13.02.2018. Date of Pronouncement : 01.03.2018. ORDER Per N.V.VASUDEVAN, JM
This is an appeal by the Revenue against the order dated 30.9.2016 of CIT(A)- 9, Kolkata, relating to AY 2013-14.
The grounds of appeal
raised by the revenue reads as follows:
1. That in the facts and circumstances of the case, the Ld. CIT(A)-9, Kolkata erred in law by allowing deduction u1s.80P(2)(a)(i) and 80P(2)(d) of the Act to the assessee for which it was not entitled under the said section.
2. That in the fact and circumstances of the case the Ld. CIT(A)-9, Kolkata is not correct in allowing the deductions u/s.80P(2)(a)(i) of the Income Tax Act.
3. That in the fact and circumstances of the case the Ld. CIT(A)-9, Kolkata failed to appreciate the facts and came to the wrong conclusion that the money earned by the assessee from deposits fall within the meaning of 'Profit and gains of business' whereas the interest earned on such investment falls within the category of income from other source.
4. The Ld. CIT(Appeals) failed to fully appreciate and take full cognizance of all the material facts of the order while giving relief to the assessee in respect of section u/s.80P(2)(a)(i) of the Income Tax Act.
Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 2
Any other ground of appellant craves leave to submit on or before the hearing of the appeal.”
The issue involved in this appeal by the revenue is as to whether the CIT(A) was justified in allowing deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961 (Act) on interest income earned on Fixed Deposits. The Assessee is a Co-operative Society of the employees of Central Bank of India. It provides loan to its members and earns interest on them. In addition to the loan provided to the employees of the Central Bank of India who are its members the Assessee had also made investments in Fixed Deposits with Banks and other co-operative societies and earned interest income thereon. The Assessee claimed deduction u/s.80P(2)(a)(i) of the Act in respect of the interest so received. The relevant provisions of Sec.80P(2)(a)(i) of the Act reads thus: “Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee.”
(2) The sums referred to in sub-section (1) shall be the following, namely :— (a) in the case of a co-operative society engaged in— (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities :”
Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 3
The AO was of the view that as per the decision rendered by the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd vs ITO 322 ITR 283 (SC) interest earned on deposits had to be regarded as income under the head ‘Income from other sources’ and therefore deduction u/s 80P(2)(a)(i) of the Act cannot be allowed to the assessee as only the whole of the amount of profits and gains of business attributable to carrying on the business of banking or providing credit facilities to its members is allowed as deduction under the said provision. According to the AO the aforesaid income is not derived from the business of providing credit facility to its members. Applying the decision in the case of Totgar’s Co-operative Sale Society Ltd vs ITO (supra), the AO treated the interest income as income from other sources and accordingly denied the benefit of deduction u/s 80P(2)(a)(i) of the Act.
5. Aggrieved by the orders of AO, the Assessee preferred appeal before CIT(A). The CIT(A) held that interest income had to be assessed under the head income from business and that the the Assessee was entitled to deduction u/s.80P(2)(a)(i) of the Act on the interest income in question. In doing so, he followed his own order in Assessee’s own case in AY 2012-13 wherein he had allowed similar claim of the Assessee. 6. Aggrieved by the order of the CIT(A), the revenue is in appeal before the Tribunal. At the time of hearing it was brought to our notice that this tribunal in Assessee’s own case adjudicated identical issue in I.T.ANos.158 & 1808 to 1809/Kol/14 & ITA 1126/Kol/15 for Assessment Years : 2009-10 to 2012-13 by order dated 9.11.2016. The tribunal held on identical issue on identical facts as follows: “11. We have given a very careful consideration to the rival submissions. Since the revenue has laid much emphasis on the decision of the Hon’ble Supreme Court in the case of Totagars Co-operative Socieity 322 ITR 283 (SC), we deem it necessary to deal with this contention.
12. This tribunal had an occasion to deal with similar objections in the case of another co-operative society similar to the Assessee in the present appeals. In for Assessment Year : 2009-10 in the case of Rupnarayanpur Samabay Krishiunnayan Samity Ltd. Vs. A.C.I.T., Circle-1, Hooghly, the Assessee was an is an agricultural credit society duly registered under the West Bengal Cooperative Societies Act, 1983. In the course of proceedings before CIT(A), the CIT(A) noticed that the assessee had claimed deduction u/s 80P(2(a) (i) of the Act on interest income arising from Savings Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 4
Bank A/C. and Recurring Deposit(RD) Account which was made by the Assessee from and out of the RD Account made by its members with the Assessee. The Revenue took the view that as per the decision rendered by the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd vs ITO 322 ITR 283 (SC) interest earned on deposits had to be regarded as income under the head ‘Income from other sources’ and therefore deduction u/s 80P(2)(a)(i) of the Act ought not to have allowed to the assessee as only the whole of the amount of profits and gains of business attributable to carrying on the business of banking or providing credit facilities to its members is allowed as deduction under the said provision. On further appeal by the Assessee before the Tribunal, the Tribunal held as follows:
“6. At the time of hearing of this appeal the ld. Counsel for the assessee filed before me a copy of the decision rendered by ITAT, Kolkata Bench in the case of S.E., S.E.C. & E.Co. Railways Employees’Co-operative Credit Society ltd. Vs ACIT in order dated 30.10.2014. In the aforesaid case the identical question as to whether interest income had to be regarded as income from business or income from other sources had come up for consideration. The Assessee in the aforesaid decision accepted loans and deposits from its members and utilized the same towards providing loans and credit facilities to its members. However excess funds were utilized in making deposits in banks and investments. The Tribunal relying upon the decision rendered by the Hon’ble Calcutta High Court in the case of CIT vs South Eastern railway Employees Co-operative Credit Society in G.A.No.1838 of 2010 dated 22.07.2010 came to the conclusion that interest income has to be regarded as income from business of banking and is entitled for deduction u/s 80P(2)(a)(i) of the Act. The Tribunal had also distinguished the decision rendered by the Hon’ble Supreme Court in the case of Totgar’s Co-operative Sale Society Ltd vs ITO (supra). The following observations of the Hon’ble Tribunal read as under :- “7.1. We further find that the issue involved is covered in favour of the assesee by catena of decisions of the Tribunal in assessee’s own case. These decisions are also affirmed by the Hon’ble Jurisdictional High Court in its order for A.Yr.2005-06. In this order the Hon’ble Jurisdictional High Court has considered all the relevant orders and has decided the issue in favour of the assessee. We may gainfully reproduce the operative order of the Jurisdictional High Court which is as under :-
“We have gone through the impugned judgment and order of the Learned Tribunal. It appears that the point involved .is whether interest earned out of the investment earned by the assessee cooperative Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 5 can be treated to be the income arising out of business activity or from other sources in order to apply the provision of Section 80P(2)(a)(i) of the I.T.Act. It is an undisputed factual position that similar issue arose before the Commissioner of Income Tax (Appeal) in relation to the assessment year 1998-99 to 2002-2003 as also for the assessment year 1995-96 and 1996-97. Then again in relation to the assessment years 2003-04 and 2004-05 a similar point arose. The Learned Tribunal in relation to the assessment years 1998- 99 to 2002-2003 by order dated 10.11.2006 in to 844/Kol/2006 and again by order dated 29.12.2006 in relation to assessment years 2003-04 and 2004-05 has deleted the disallowance made in those assessment years and it was held that the interest earned by the assessee cooperative society from its short term and fixed deposits with the bans and other institutions were disallowed on the ground that this income was not business profit of the assessee society but was income from other sources. The Ld.Tribunal has also held that income from investment in banks and other financial institutions is the business income of the assessee society and it is eligible to get deduction under Section 80P(2)(a)(i). The Tribunal has overruled the decisions rendered against the assessee in relation to assessment years 1995-96 and 1996-97 on the same issue in relation to subsequent years.
It was found by the Tribunal while affirming the order of the Commissioner of Income Tax (Appeal) that there is no change in the facts and circumstances of this case and it was held that the assessee was eligible for deduction under Section 80P(2)(a)(i) on interest on investment amounting to Rs.1,18,07,645/- in this assessment year also. Since the Tribunal found that this decision of the Tribunal was followed by CIT(A) there is no reason to take a different view.
Under these circumstances, we feel that when the Commissioner of Income Tax (A) as well as the Tribunal has followed the earlier unchallenged decision no question of law is involved in this matter. Nothing has been produced before us to Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 6 show subsequent decision of the Tribunal in relation to the assessment years 1998-99 to 2002- 03 and 2003-04 have been challenged by any of the parties before this Court.
It is submitted by Mr.Bhowmick that there has been challenge of the decision in relation to assessment years 1995-96, 1996-97 and the same is pending before this Court we think that challenge of the assessee has now become redundant as the earlier view taken in both the assessment years have been reversed by the Tribunal by its subsequent decision. Hence, the pendency of that earlier matter is of no consequence in this matter. Had there been a challenge of the decision of the Tribunal in relation to the assessment years 1998- 99 to 2002-03 and also 2003-04 to 2004-05 the matter would have been different. The revenue did not take any step whatsoever. Therefore, we presume the revenue has accepted the subsequent view of the Tribunal and the same now hold the field right now.”
7.2. Considering the above we find that this issue is squarely covered in favour of the assessee by the decision of the Hon’ble Jurisdictional High Court in assessee’s own case. In this regard we would like to place reliance upon the decision of the Hon’ble Apex Court in the case of CIT vs Excel Industries 358 ITR 295 wherein the principle of consistency has been reiterated. Hence when the issue has been decided by the Jurisdictional High Court no convincing reason has been pointed to take a different view, any deviation is not permitted.
7.3. Now we come to the case laws relied upon by the ld. CIT(A). As regards the decision of the Hon’ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. (supra) we find that the said decision is not applicable in the facts of the case. We find that the Hon’ble Apex Court in the said decision in para 11 has itself mentioned that “We are confining the judgment to the facts of the present case.”. The facts of the case were that assessee’s business was to provide credit facilities to its members and to market their agricultural produce. In many cases assessee retained sale proceeds of members whose produce was marketed by it and since funds created Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 7 by such retention were not required immediately for business purposes, it invested same in specified securities and earned interest income. In these circumstances the Hon’ble Apex Court had held that interest earned would come in category of ‘Income from other sources’ taxable u/s 56 of the Act and would not qualify for deduction as business income u/s 80P(2)(a)(i). From the above it is amply evident in the present case the assessee has not retained any amount due to its members and instead of paying the same had invested the same and earned interest. Thus this case law is not applicable on the facts of the present case.
7.4. As regards the decision of Hon’ble Patna High Court in the case of Bihar Rajya Sahkari Bhoomi Bikash Co-op.Bank Ltd. (supra) the same is also not applicable to the facts of the present case. In that case the question was the treatment of interest earned on provident fund and rental income as attributable to banking business and this qualifying for deduction u/s 80P(2)(a)(i) of the Act.
7.5. In the background of the aforesaid discussion and precedent we hold that the issue is squarely covered in favour of the assessee by the decision of the Tribunal and the Jurisdictional High Court in assessee’s own case. The decision relied upon by the ld. CIT(A) are not applicable in the facts of the case. The principle of consistency as conveyed by the Hon’ble Apex Court mandates that the Revenue does not take a different stand. Accordingly we set aside the orders of the authorities below and decide the issue in faovur of the assessee.”
6.1. Respectfully following the above decision and taking down the fact that interest income in the present case is identical to the interest income received by the assessee in the decision referred to above. I hold that the assessee is entitled to deduction u/s 80P(2)(a)(i) of the Act in respect of the interest income.”
13. The aforesaid view has also been followed by the Tribunal in I.T.A.Nos.737-742/Kol/2011for Assessment Years : 1996-97 to 2001-02 in the case of A.C.I.T., Circle-56, -vs.-The West Bengal State Co-operative Bank Ltd.
The Hon’ble Karnataka High Court had also an occasion to examine the scope of Sec.80P(2)(a)(i) of the Act, in the light of the decision of the Hon’ble Supreme Court in the case of Totagar Co-operative Society (supra) in the case of Guttigedarar Credit Co-operative Society Ltd. Vs. ITO Ward 2(2), Mysore Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 8
377 ITR 464 (Karnataka). The Assessee in that case which was a co-operative Society claimed deduction in respect of interest income it earned on deposit of surplus funds as eligible for deduction u/s.80P(2)(a)(i) of the Act. The appellate authorities under the Act held that assessee is liable to income tax in view of the judgment of the Apex Court in the case of Totgars Co-operative Sale Society Ltd. v. ITO 377 ITR 283 (Karn.). On appeal by the Assessee, the Hon’ble Karnataka High Court held: “9. The word 'attributable' used in the said Section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v.CIT 113 ITR 84 (SC) (at page 93) as under:— 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of" the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor- General, it has used the expression "derived from", as, for instance, in section 80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.' 10. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Co-operative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, the society cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 9 facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act.
In this context when we look at the judgment of the Apex Court in Totgars Co-operative Sale Society's case (supra), on which reliance is placed, the Supreme Court was dealing with a case where the assessee/Co-operative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee- Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law.
In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to its members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State Co- operative Bank Ltd. 336 ITR 516(AP).
In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law…..”
In view of the aforesaid judicial pronouncements, we are of the view that the objections raised by the revenue in the grounds of appeal before us, cannot be sustained.”
Central Bank of India Employees Coop Society Ltd. A.Y.2013-14 10
It is not disputed before us by the parties that the facts and circumstances under which the appeal was decided by the Tribunal in the earlier AYs was identical to the facts and circumstances in the present AY. We are therefore of the view that the decision rendered by the tribunal will be applicable to the present AY also. Respectfully following the decision of the Tribunal in Assessee’s own case, we uphold the order of the CIT(A) and dismiss the appeal by the revenue.
In the result, appeal by the revenue is dismissed. Order pronounced in the Court on 01 .03.2018