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Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’B” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 512, 513 & 22/JPR/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, ‘’B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oaJh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 512, 513 & 22/JPR/2019 fu/kZkj.k o"kZ@Assessment Years : 2011-12, 2012-13 & 2014-15 Cuke M/s. Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. The DCIT/ACIT Jaipur Dairy, Near Gandhi Nagar, Railway Station, Vs. Circle-6 Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAJ 0767 G vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 633, 634&187/JPR/2019 fu/kZkj.k o"kZ@Assessment Years : 2011-12, 2012-13 & 2014-15 The DCIT/ACIT cuke M/s. Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. Vs. Circle-6 Jaipur Dairy, Near Gandhi Nagar, Railway Station, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAAJ 0767 G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri P.C. Parwal, CA jktLo dh vksj ls@Revenue by: Smt. Runi Pal, Addl. CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 15/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 9/11/2022 vkns'k@ORDER PER BENCH The present bunch of six appeals are the cross appeal which were decided by the co-ordinate bench in ITA No. 633/JPR/2019 & 512/JPR/2019 for assessment year 2011-12 and 634/JPR/2019 &
2 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR 513/JPR/2019 dated 02.09.2019 and subsequent order passed by the tribunal in ITA No. 187/JPR/2019 & 22/JPR/2019 dated 30.09.2019 for assessment year 2014-15. These bunch of six appeals have been recalled vide ITAT order dated 21-01-2021 in MA No. 63,64, & 65/JP/ 2020 (arising out of ITA No. 187, 22, 633,512,634 and 513/JP/2019) for the assessment years 2014-15, 2011-12 and 2012-13. The relevant finding of these MA is recorded in para 32 &33 of the M.A. Order and the same is reiterated here in below: ‘’32. Further, we agree with the contention advanced by the ld AR that the legal issue challenging the validity of order passed u/s. 147 was earlier dismissed as infructuous for A.Y. 2011-12 and A. Y. 2012-13 as the matter was only decided on merits and the same should also be recalled and decided a fresh. 33. In the entirety of facts and circumstances of the case, we hereby recall the earlier orders so passed by the Coordinate Benches in ITA No. 633/JP/19 & 512/JP/19 for A.Y 2011-12 and 634/JP/19 & 513/JP/2019 dated 02.09.2019 and subsequent order passed by the Tribunal in ITA Nos. 187/JP/19 & 22/JP/19 dated 30.09.2019 for A.Y. 2014-15 for the limited purposes of adjudication of matter relating to quantum of deduction eligible for deduction u/s 80P(2)(d) as to whether the deduction should be allowed on gross interest or net interest income afresh taking into consideration the decision of the Hon’ble Jurisdictional High Court in case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra) as well as adjudication of following grounds of appeal afresh as raised by the assessee in its respective cross-appeals: ITA. No. 512/JP/2019 (For A.Y 2011-12) “1. The ld. CIT(A) has erred on facts and in law in upholding validity of order passed by AO u/s 147 of IT Act, 1961. 2. The ld. CIT(A) has erred on facts and in law in holding that interest expenditure to the extent of Rs. 87,91,593/- is attributable to the interest income of Rs. 1,46,40,834/- earned on FDRs maintained with Jaipur Central Cooperative Bank Ltd. (JCCB), thereby disallowing deduction u/s 80P to this extent. He has further erred in considering the amount of interest income from JCCB at Rs. 1,46,40,834/- instead of Rs. 1,49,40,834/-.
3 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR 2.1 The ld. CIT(A) has erred on facts and in law in not considering that investment in FDRs is made out of own funds and borrowed funds has been utilized for business purpose and therefore, no interest expenditure can be attributed for earning the interest income.” ITA. No. 513/JP/2019 (For A.Y 2012-13) “1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of the order passed by AO u/s 147 of IT Act, 1961. 2. The Ld. CIT(A) has erred on facts and in law in holding that interest expenditure to the extent of Rs. 95,12,659/- is attributable to the interest income of Rs. 1,59,92,544/- earned on FDRs maintained with Jaipur Central Cooperative Bank Ltd., thereby disallowing deduction u/s 80P to this extent. 2.1 The ld. CIT(A) has erred on facts and in law in not considering that investment in FDRs is made out of own funds and borrowed funds has been utilized for business purpose and therefore, no interest expenditure can be attributed for earning the interest income.” ITA. No. 22/JP/2019 (For A.Y 2014-15) “1. The Ld. CIT(A) has erred on facts and in law in holding that interest expenditure to the extent of Rs. 1,78,92,810/- is attributable to the interest income of Rs. 4,55,27,617/- earned on FDRs maintained with Jaipur Central Cooperative Bank Ltd., thereby disallowing deduction u/s 80P to this extent. 2.1 The ld. CIT(A) has erred on facts and in law in not considering that investment in FDRs is made out of own funds and borrowed funds has been utilized for business purpose and therefore, no interest expenditure can be attributed for earning the interest income.” 2. Accordingly, the present appeals were fixed for hearing to decide the limited purpose of adjudication of matter relating to quantum of deduction eligible for deduction u/s 80P(2)(d) as to whether the deduction should be allowed on gross interest or net interest income afresh after taking into consideration the decision of the Hon’ble Jurisdictional High Court in case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra) as well as adjudication of following grounds of appeal afresh as raised by the assessee in its respective cross-appeals. Thus, the issue remain before us is as under :
4 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR (i) Whether the ld. CIT(A) erred on facts and in law in upholding the validity of order passed by the AO u/s 147 of the Act (only for A.Y 2011-12- & 2012- 13). (ii) Whether the ld. CIT(A) has erred on facts and in law in allowing deduction u/s 80P (2)(d) of the Act on proportionate basis instead of on the entire interest receipt on FDR maintained with Jaipur Central Cooperative Bank Ltd.
On the first issue which relates to AY 2011-12 & 2012-13 where assessee has challenged the reopening of assessment by AO u/s 148, it is contended that the original assessment was completed u/s 143(3). The assessment for AY 2011-12 was reopened after expiry of four years but the assessment for AY 2012-13 was reopened within 4 years from the end of relevant AY. In the assessment proceedings assessee filed computation of income wherein claim of deduction u/s 80P was specifically made. The claim of deduction u/s 80P was considered and examined by the AO and after considering the same, deduction u/s 80P was allowed. Even in the reasons recorded for reopening, it is evident that notice u/s 148 has been issued not on the basis of any fresh material coming to the AO but only on the basis of perusal of the case record. Therefore, reopening of the completed assessment without any fresh material, merely on the basis of change of opinion of the AO is without jurisdiction. Reliance in this connection was placed on the following case laws:-
5 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR 1. CIT Vs. Aroni Commercial Ltd. (2017) 146 DTR 145 (Bom.) (HC) 2. State Bank of India Vs. ACIT &Ors. (2018) 172 DTR 401 (Bom.) (HC) 3. Smt. Sarla Gupta Vs. The DCIT IT(IT)A No.5/JP/18 order dt.03.07.2019 (Jaipur) (Trib.) 4. CIT Vs. Central Warehousing Corporation (2015) 371 ITR 81 (Del.) (HC) 5. CIT Vs. Hindustan Zinc Ltd. (2016) 241 Taxman 392 (Raj.) (HC) 6. AshwameghCo.Op. House Soc. Ltd., Vibhag 2 Vs. DCIT (2013) 214 Taxman 4 (Guj.)(HC)(Magz.) 7. CIT vs. Usha International Ltd.(2012) 77 DTR 396 (Del.)(HC)(FB) 8. ACIT Vs. Rolta India Ltd. (2011) 57 DTR 370 (Mum) (TM) 4. The Ld. A/R further contended that AO in the reasons has stated that deduction u/s 80P in respect of interest income received from Jaipur Central Cooperative Bank Limited is irregular because it is not earned by way of interest from the Cooperative Society and section 80P does not apply to a Cooperative Bank. The AO has misconstrued the provisions of section 80P and CBDT Circular No.14 of 2006 dated 28-12-2009. It is not in dispute that Jaipur Central Cooperative Bank Limited is a cooperative society who has been given license to carry the banking business under Banking Regulation Act, 1949. Therefore, assessee is entitled to deduction u/s 80P(2)(d) in respect of interest income received from its investment with Jaipur Central Cooperative Bank as it is a Cooperative Society registered under Rajasthan Cooperative Society Act, 2001. There are decisions of High Courts on this issue in favour of assessee. Even Ld. CIT(A) has held that assessee is eligible for deduction u/s 80P(2)(d) in respect of interest earned from investment made in cooperative bank. Therefore, the Ld.
6 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR CIT(A) has erred in upholding the reopening of assessment u/s 148 on the reasons recorded by AO. 5. On the other hand, the Ld. D/R relied on the order of Ld. CIT(A) and contended that while considering whether reassessment proceedings is valid or not, AO is to only see whether there was prima facie some material on the basis of which reopening can be done. Sufficiency or correctness of the material is not to be considered at the time of reopening. 6. We have considered the rival submission and perused the material available on record. The reasons for reopening the assessment is reproduced as under:- For AY 2011-12 “The assessee filed its return of income for AY 2011-12 on 29.09.2011 declaring total income of Rs.3,60,25,830/- which was assessed u/s 143(3) at Rs.4,55,67,387/- vide order dated 06.02.2014. In this case, the assessee has claimed and was allowed deduction of Rs.149,40,834/- u/s 80P on interest income derived from Jaipur Central Cooperative Bank Ltd. As the interest income received from cooperative bank and not from cooperative societies, hence deduction allowed u/s 80P was irregular because it was not earned by way of interest or dividend derived by cooperative society from its investment with any other cooperative societies and section 80P shall not apply in relation to any cooperative bank. It is also pertinent to mention here that the same was again reiterated in clause no.22.2 of the Circular No. 14 of 2006, dated 28th December,2006 on the Finance Act, 2006 explanatory notes to the provisions related to direct taxes- “The cooperative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new sub section (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any cooperative bank ….”. Therefore, it is crystal clear that deduction cannot be claimed in relation to any income received from co-operative banks. Thus income derived from its investments with
7 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR any other commercial banks is not entitled to claim deduction u/s 80P as well income from interest or dividends derived from its investments with cooperative banks is also not entitled to claim deduction u/s 80P. In view of the above facts and circumstances, I have reason to believe that income amounting to Rs.1,49,40,834/- has escaped assessment within the meaning of provisions of section 147 of the IT Act. The escapement was on account of failure on the part of the assessee to disclose all material facts” For AY 2012-13 “The assessee e-filed its return of income for AY 2012-13 on 29.09.2012 declaring total income of Rs.16,65,68,660/-, which was assessed u/s 143(3) at Rs.18,29,43,360/- vide order dated 30.12.2014. In this case, on perusal of case record, it is noted that the assessee has claimed and was allowed deduction of Rs.1,59,92,544/- under section 80P(2)(d) on interest income derived from Jaipur Central Co-operative Bank Ltd. As the interest income received from co-operative bank and not from co-operative societies, hence deduction allowed u/s 80P was irregular because it was not earned by way of interest or dividend derived by co-operative society from its investment with any other co-operative societies because provisions of section 80P shall not apply in relation to any cooperative bank. On the basis of the information available on record, I have reason to believe that income amounting to Rs.1,59,92,544/- chargeable to tax has escaped assessment within the meaning of provisions of section 147 of the IT Act.”
From the reasons recorded, we find that the reopening is made on the basis of information available on record by drawing an inference that deduction allowed u/s 80P was irregular because interest is received from cooperative bank and not cooperative society. We note that this information was already on record. Further on the issue as to whether a cooperative bank is a cooperative society or not, there are decisions of various High Courts and ITAT in favour of the assessee at the relevant point of time when notice u/s 148 was issued. Even the Coordinate Bench in case of ITO
8 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR Vs. Shree Keshorai Patan Sahakari Sugar Mill (ITA No. 418 & 419/JP/2017 order dated 31.01.2018) held that co-operative bank is to be treated as co-operative society for the purpose of interest income on investment in such co-operative bank and thus, eligible for deduction u/s 80P(2)(d) in respect of the interest income from investment made with the co-operative bank. Thus, when AO has taken one of the permissible view for allowing deduction u/s 80P(2)(d) in respect of interest earned by the assessee on investment made in FDR with Jaipur Central Cooperative Bank Limited, then on the basis of various decisions relied by Ld. A/R (supra), we have no hesitation to hold that reopening is bad in law and thus, this ground of the assessee is allowed. 8. On the second issue which relates to all the three AYs, the assessee with reference to Para 3.2 of CIT(A)’s order for AY 2011-12 & 2012-13 and Para 5.2 of CIT(A)’s order for AY 2014-15 contended that assessee has sufficient owned funds out of which investment was made in the FDR ofJaipur Central Cooperative Bank Limited, the interest receipt other than from Jaipur Central Cooperative Bank Limited is more than the interest expenditure and the expenditure on interest has been incurred on working capital loan/OD/NDDB loan/Term loan/DCS and such borrowing is much lower than the amount of loan receivable where it is utilized. Thus, it is
9 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR claimed that on the interest earned on investment made with JCCB Ltd., assessee has not incurred any expenditure on interest payment and therefore, deduction u/s 80P(2)(d) is allowable on the entire interest earned from the investment made with JCCB Ltd. even after considering the decision of Hon’ble Rajasthan High Court in case of Rajasthan Rajya Sahakari Upbhokta Sangh Ltd. (1996) 84 Taxman 33. Therefore, it was contended that deduction u/s 80P(2)(d) reduced by ld. CIT(A) by attributing part of interest expenditure against the interest received from JCCB Ltd. is factually incorrect and not as per law. 9. On the other hand, the Ld. D/R contended that the similar issue has come up for consideration before the Hon’ble ITAT in AY 2016-17. The Hon’ble ITAT in ITA No.1178/JP/2019 and 1243/JP/19 vide order dt. 04.03.2020 in Para 15 has set aside this issue to the file of Ld. CIT(A) to examine the same afresh. 10. Per contra, the A/R of assessee contended that against the direction of Hon’ble ITAT in AY 2016-17, the Ld. CIT(A) has not decided the issue till date. Otherwise also, the finding given by Hon’ble ITAT to determine that when the FDR were placed with JCCB Ltd, what is the position of availability of funds and whether at that time interest free surplus funds was available which was deployed in the form of FDR is onerous in as much as
10 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR FDR was placed with JCCB Ltd. over a period of time and when the assessee has demonstrated that interest free funds are more than interest bearing funds, in view of the decision of Hon’ble Supreme Court in case of CIT Vs. Reliance Industries Ltd. (2019) 410 ITR 466, it is to be presumed that investment has been made out of interest free funds more particularly when it is demonstrated by the assessee that even after excluding the interest received from JCCB Ltd., the remaining interest receipt is more than the interest payment. 11. We have considered the rival submission and perused the material available on record. The Hon’ble Rajasthan High Court in case of Rajasthan Rajya SahakariUpbhoktaSangh Ltd. (1996) 84 Taxman 33 has held that where assessee has maintained a composite account of expenses incurred for earning taxable as well as exempted income, deduction u/s 80P(2)(d) could be allowed on net receipt only, after deducting expenditure incurred for exempted income. Therefore, the issue for examination is whether against the interest receipt from JCCB Ltd., assessee has incurred any expenditure on payment of interest which has been attributed against such receipt by the Ld. CIT(A). From the details prepared on the basis of financial statements and recorded by CIT(A) in its
11 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR order, we find that own funds of the assessee is much more than the amount of investment in FDR with JCCB Ltd. as per the following table:- AY Own Funds Investment with JCCB 2011-12 Rs.49,97,82,213/- Rs.20,00,00,000/- 2012-13 Rs.68,88,95,705/- Rs.20,00,00,000/- 2014-15 Rs.99,34,23,097/- Rs.53,29,00,000/- Thus, in view of the decision of Hon’ble Supreme Court in case of CIT Vs. Reliance Industries Ltd. (2019) 410 ITR 466 as own funds is much more than the amount invested in FDR made with JCCB Ltd., the presumption is that own funds is used for making investment with JCCB Ltd. We further note that even the interest receipt other than the interest receipt from JCCB Ltd. is more than the interest expenditure tabulated as under:- AY Total interest Interest receipt Net interest receipt Interest receipt from JCCB Ltd. other than JCCB expenditure Ltd. 2011-12 Rs.5,86,88,487/- Rs.1,49,40,834/- Rs.4,37,47,653/- Rs.3,52,41,527/- 2012-13 Rs.8,55,83,902/- Rs.1,59,92,544/- Rs.6,95,91,358/- Rs.5,09,07,200/- 2014-15 Rs.12,69,22,168/- Rs.4,55,27,617/- Rs.8,13,94,551/- Rs.4,98,81,684/- Thus, when interest receipt excluding the interest receipt from JCCB Ltd. is more than the interest expenditure, expenditure on interest cannot be attributed against the interest receipt from JCCB Ltd. In view of above, we are of the view that the decision of ITAT in assessee’s own case for AY 2016-17 setting aside the issue to ld. CIT(A) would serve no useful purpose in as much as from the legal and factual position stated above, no interest
12 ITA NO. 512/JP/2019 JAIPUR ZIAL DUGDH UTPADAK SAHAKARI SANGH LTD VS DCIT, CIRCLE-6, JAIPUR expenditure can be allocated against the interest receipt from JCCB Ltd. for computing the deduction u/s 80P(2)(d).The AO is therefore directed to verify the above factual position and allow deduction u/s 80P(2)(d) accordingly after making verification of these factual aspects for A.Y. 2014- 15. 12. In the result, the appeals of the assessee are allowed for A. Y. 2011- 12 & 2012-13 and that of the revenue is dismissed. Whereas the cross appeal for A. Y. 2014-15 are partly allowed in terms of observations made above. Order pronounced in the open court on 09 /11/2022. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur fnukad@Dated:- 09/11/2022 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd., Jaipur 2. izR;FkhZ@ The Respondent- The DCIT / ACIT, Circle-6, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 512/JP/2019) vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेजज. त्महपेजतंत