M/S KHANYAN MULTIPURPOSE CO-OP AGRICULTURAL SERVICE SOCIETY LTD.,MANDI GOBINDGARH vs. ACIT, MANDI GOBINDGARH

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ITA 475/CHANDI/2017Status: DisposedITAT Chandigarh05 July 2018AY 2013-143 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found merit in the assessee's submission that interest expenditure should be set off against interest income if a direct nexus exists between the deposits from members and the FDRs. The matter was restored to the Assessing Officer for verification of this nexus.

What were the facts?

The assessee, a cooperative society, claimed deduction for interest paid to its members on deposits. The Assessing Officer and CIT(A) disallowed this interest income without allowing set-off of the corresponding interest expenditure incurred by the assessee on these deposits.

What were the issues?

Whether interest expenditure incurred on deposits from members can be set off against interest income earned on FDRs made from such deposits.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH

Before: SHRI SANJAY GARG, JUDICIAL MEMBE & Ms. ANNAPURNA GUPTA, ACCOUNTANTMEMBER

Hearing: 05.07.2018Pronounced: 05.07.2018

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘A’ CHANDIGARH

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBE AND Ms. ANNAPURNA GUPTA, ACCOUNTANTMEMBER ITA No. 475/CHD/2017 Assessment Year : 2013-14

M/s Khanyan Multipurpose Co-op Vs. The ACIT, Agricultural Service Society Ltd., Circle, Vill.Khanyan, Tehsil Amloh, Mandi Gobindgarh Mandi Gobindgarh

PAN No. AACAT4443M (Appellant) (Respondent)

Appellant by : Sh. Sudhir Sehgal, Advocate Respondent by : Sh. Manoj Kumar, Sr.DR Date of Hearing : 05.07.2018 Date of Pronouncement : 05.07.2018

ORDER Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against

the order dated 10.01.2017 of the Commissioner of Income Tax(A), Patiala [hereinafter referred to as ‘CIT(A)’]. The assessee has raised the following grounds:-

1.

That the Worthy Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of interest on term deposits by the members of society, amounting to Rs. 45,55,018/- claimed by the appellant u/s 80P of the Income Tax Act, 1961 as per para 6.1 of his order. 2. That the Worthy CIT (A) has erred in not considering that the impugned interest has been received on funds deposited by the members in accordance with the by-laws of the Society and no part of it was from its trading activity.

ITA No. 475/Chd/2017-M/s Khanyan Multipurpose Co-op Agricultural Service Society Ltd, Mandi Gobindgarh 2

3.

That the Worthy CIT(A) has also erred in not considering that statutory auditors in the report had also not pin-pointed any such disallowance as made by the Assessing Officer and also books of account have not been rejected.

3.

Notwithstanding above facts, it is submitted that even otherwise while upholding disallowance of interest of Rs. 45,55,018/- and assessing the income from other sources as above, the Assessing Officer as well the Ld. CIT(A) has erred in not allowing deduction of corresponding allowance for interest paid, as bank interest has been earned on account of interest bearing deposits received from its members.

4.

That the addition as above has been upheld against the facts and circumstances and detailed submissions filed during the course of hearing has not been considered properly.

2.

At the outset, Shri Sudhir Sehgal, Ld. Counsel for the assessee

has submitted that he does not press the other grounds except the

ground relating to the setting off of the interest expenditure incurred

by the assessee on deposits made by the members with the bank in

the shape of FDRs.

3.

The Ld. Counsel for the assessee has submitted that the

assessee had collected deposits from its members upon which it has

paid interest to them. The said deposits were placed in the shape of

FDRs whereupon interest income has been earned. That the Assessing

officer has treated the entire interest income from the FDRs as

taxable income of the assessee without setting off of the interest

expenditure incurred by the assessee on the deposits collected from

Members upon which FDR interest was earned.

4.

We find merit in the above submissions of the Ld. Counsel for

the assessee. If there is a direct nexus between the deposits taken

from the members and the interest income earned by the assessee on

ITA No. 475/Chd/2017-M/s Khanyan Multipurpose Co-op Agricultural Service Society Ltd, Mandi Gobindgarh 3

the FDRs on such deposits, then the assessee will be entitled to claim interest expenditure, incurred / paid to the members from whom the deposits were collected. Accordingly, we restore the matter back to the file of Assessing officer with the direction that if the assessee will be able to establish the direct nexus between the interest income earned and interest expenditure incurred on deposits, then assessee will be given set off of the expenditure against interest income of the assessee. No other ground or issue was pressed.

In the result, the appeal of the assessee is treated as allowed for statistical purposes.

Order pronounced in the Open Court

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 05.07.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR

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