M/S ATHOULA CO-OP AGRICLUTURE MULTIPURPOSE SERVICE SOCIETY LTD,JALANDHAR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-4, JALANDHAR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

I.T.A. Nos. 132 & 133/Asr/2018 Assessment Years: 2014-15 & 2015-16

M/s Athoula Co-op. Vs. ACIT, Circle-4 Agriculture Multipurpose Jalandhar Service Society Ltd. VPO Athoula, Jalandhar City [PAN: AAKFA 9247K] (Appellant) (Respondent)

Appellant by : None Respondent by: Sh. Satbir Singh, Sr. DR

Date of Hearing: 24.02.2022 Date of Pronouncement: 02.03.2022

ORDER Per Dr. M. L. Meena, AM:

These two appeals have been filed by the Assessee against the impugned order dated 11.12.2017 passed by Ld. Commissioner of Income Tax (Appeals)-2, Jalandhar, in respect of the Assessment Years 2014-15 & 2015-16.

2 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

“1. That the order in question has been passed in an arbitrary manner and the matter has been disposed off in a mechanical manner without going into merits of the case, hence is not sustainable in law. 2. The Ld CIT(A) has erred in upholding ineligible u/s 80P(1) the interest earned of Rs. 163419 and Rs.6225 in Saving Bank Accounts with OBC Mand and UCO Bank Kohala resp. AND Rs.175564 on FDR with OBC Mand, and thus making a total ineligible amount of Rs.345208 by wrongly treating such amount as income from INVESTMENT and NOT from funds kept as working capital in the ordinary course of doing eligible business of banking i.e. when they are not immediately required to be lent to its members. 3. The Ld CIT(A) has erred in wrongly distinguishing the facts of the case of the assessee with the facts of the case of M/s Gattigedarara Credit Cooperative Society Ltd (I.T.A.No.29 of 2015) in para 4.7 of the order. 4. In spite of asessee's contention, the Ld CIT(A) has erred in keeping silent on the relevance of scope of words 'ATTRIBUTABLE' used in section 80P(2)(a), which is wide enough to include such interest earned by the assessee society in its fold as also affirmed by the Hon'ble Karnataka High Court in the judgement cited supra. 5. The Ld CIT(A) has erred in not allowing to set off, as an alternative the average cost of funds from the said interest earnings. The reasons given by AO for such disallowance are endorsed by the Ld CIT(A). Case law referred : CIT Vs Kudu Industries ITA No. 388 of 2014 (0&M)(P&H) which followed the decision of CIT Vs Abhishek Industries [2006] 286 ITR 1 (P&H). 6. The Ld CIT(A) erred in not setting aside the bifurcation of balance sheet of the assessee (duly audited by its auditors) done by the Ld AO on the basis of interest bearing funds and non interest bearing funds. Since the funds has no colour, such bifurcation is illogical. 7. The Penalty Proceedings initiated by the Ld AO u/s 271(l)(c ) are requested to be dropped in light of the fact that impugned ineligibility of such interest u/s 80P(1) is resulting from difference of opinion only. 8. That the appellant reserve the right to advance any other argument at the time of hearing of the appeal. Beside this the appellant also reserve the right to file additional grounds of appear during hearing.”

3 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

“1. That the order in question has been passed in an arbitrary manner and the matter has been disposed off in a mechanical manner without going into merits of the case, hence is not sustainable in law. 2. The Ld CIT(A) has erred in upholding ineligible u/s 80P(1) the interest earned of Rs.180226/- and Rs.6471/- in Saving Bank Accounts with OBC Mand and UCO Bank Kohala resp. AND Rs.191906/- on FDR with OBC Mand, and thus making a total ineligible amount of Rs.378603/- by wrongly treating such amount as income from INVESTMENT and NOT from funds kept as working capital in the ordinary course of doing eligible business of banking i.e. when they are not immediately required to be lent to its members. 3. The Ld CIT(A) has erred in wrongly distinguishing the facts of the case of the assessee with the facts of the case of M/s Gattigedarara Credit Cooperative Society Ltd (I.T.A.No.29 of 2015) in para 4.7 of the order. 4. In spite of asessee's contention, the Ld CIT(A) has erred in keeping silent on the relevance of scope of words 'ATTRIBUTABLE' used in section 80P(2)(a), which is wide enough to include such interest earned by the assessee society in its fold as also affirmed by the Hon'ble Karnataka,High Court in the judgement cited supra. 5. The Ld CIT(A) has erred in not allowing to set off, as an alternative the average cost of funds from the said interest earnings. The reasons given by AO for such disallowance are endorsed by the Ld CIT(A). Case law referred : CIT Vs Kudu Industries ITA No. 388 of 2014 (0&M)(P&H) which followed the decision of CIT Vs Abhishek Industries [2006] 286 ITR 1 (P&H). 6. The Ld CIT(A) erred in not setting aside the bifurcation of balance sheet of the assessee (duly audited by its auditors) done by the Ld AO on the basis of interest bearing funds and non interest bearing funds. Since the funds has no colour, such bifurcation is illogical. 7. The Penalty Proceedings initiated by the Ld AO u/s 271(l)(c ) are requested to be dropped in light of the fact that impugned ineligibility of such interest u/s 80P(1) is resulting from difference of opinion only. 8. That the appellant reserve the right to advance any other argument at the time of hearing of the appeal. Beside this the appellant also reserve the right to file additional grounds of appear during hearing.”

the appeals and hence these appeals are heard together and disposed by

this common order for the sake of brevity. The issue involved in these

4 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

appeals are ineligibility under section 80 P of the act, of interest income

earned on bank deposits deposits, FDRs and saving bank account and that

allowability of set off against the business loss.

society had earned interest earned of Rs.180226/- and Rs.6471/- from

Saving Bank Accounts with OBC, Mand and UCO Bank Kohala

respectively and Rs.191906/- on FDR with OBC Mand, and thus he

assessed a total ineligible amount of Rs.378603/- interest earned from

commercial banks as income from other sources being investment and not

from working capital as claimed by the assessee being kept in the ordinary

course of doing eligible business of banking i.e. when they are not

immediately required to be lent to its members.

the learned CIT appeal who confirmed the finding of the learned assessing

officer by holding the interest income earned from the bank deposits and

investments lying in Singh bank account as income from other sources and

rejected the claim of the assessee to allow set off business loss against the

said income from other sources.

upon and adequate opportunity of hearing has been granted. considering

5 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

the meagre amount of Quantum disputed under appeal of Rs.3,45,208/-

and amount of Rs.3,78,603/- in respect of assessment year 2014-15 and

2015-16 respectively and as the law is well-settled on the issue, these

appeals are heard. At the time of hearing, the Ld. additional CIT DR has

presented the facts and explained the issue. He stands by the impugned

order.

dispose the appeal of the assesee on merits. The appellant assessee has

raised contentions that the order in question has been passed in an

arbitrary manner and the matter has been disposed off in a mechanical

manner without going into merits of the case, is factually incorrect. The Ld.

CIT(A) has passed a speaking order wherein he has discussed the facts of

the case and the law applicable along with the judicial pronouncements

relevant. The Ld CIT(A) has rejected the assessee’s contention

regarding its eligibility u/s 80P(1) for the interest earned in Saving Bank

Accounts with OBC Mand and UCO Bank Kohala respectively and

Rs.175564 on FDR with OBC Mand, and thus he holds total ineligible

amount of Rs.345208 as income from INVESTMENT and NOT from funds

kept as working capital in the ordinary course of doing eligible business of

banking i.e. when they are not immediately required to be lent to its

6 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

members. The Ld CIT(A) has distinguishing the facts of the case of the

assessee with the facts of the case of M/s Gattigedarara Credit

Cooperative Society Ltd (I.T.A.No.29 of 2015) vide para 4.7 of the

impugned order. The asessee's contention, that the Ld CIT(A) has erred in

keeping silent on the relevance of scope of words 'ATTRIBUTABLE' used

in section 80P(2)(a), which is wide enough to include such interest earned

by the assessee society in its fold is not affirmed by the Hon'ble Karnataka

High Court in the judgement cited supra as concluded by the authorities

below. Again, the contention of the assesee that the Ld CIT(A) has erred in

not allowing to set off, as an alternative the average cost of funds from the

said interest earnings is without basis. The reasons given by AO for such

disallowance are rightly endorsed by the Ld CIT(A). The appellant ground

that the Ld CIT(A) erred in not setting aside the bifurcation of balance sheet

of the assessee (duly audited by its auditors) done by the Ld AO on the

basis of interest bearing funds and non interest bearing funds, since the

funds has no colour, is not relevant as regards to taxability of the interest

income from bank deposits.

Punjab Cooperative Societies Act and receiving interest on deposits from

commercial banks OBC and UCO Banks. The assessee, a co-op credit

7 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

society, was engaged in providing credit facilities to its members. The

assessee had surplus funds which it invested in deposits with Commercial

Banks. The question before us is whether the said interest earned on the

said deposits was “business profits” when it is not engaged in banking

business and so it is not eligible for deduction u/s 80P(2)(a)(i)?

its activity of providing credit facilities to its members was an “eligible

activity” u/s 80P(2)(a)(i) and that as the investments were made not with

the idea of investments, but for the reason that cash should be available

with the appellant as and when it was needed for the purpose of its

business. 11. The appellant assessee contention that that the interest on funds with

OBC and UCO bank is exempted u/s. 80P(2) of the Act is rejected by the

ld. CIT(A). He had confirmed the addition made by the Assessing Officer

u/s 80P(2) of the Income tax Act, 1961 by observing that the assessee was

indulging in banking business and was thus not entitled to this deduction

u/s 80P(2) allowable to a society. Accordingly, the CIT (A) has held that the

benefit of Section 80P is only admissible to the extent of business activity

with members. Thus, the assessee was not entitled to deduction under

section 80P(2)(d) in respect of investment made in OBC and UCO Bank.

8 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

Non-Agricultural Thrift & Credit Society Ltd. Vs. Pr.CIT”, in ITA No.

275/(Asr)/2018 for Assessment Year: 2013-14, we have discussed the

issue at length and decided the same in favour of department, following the

Hon’ble Jurisdictional Punjab and Haryana High Court, in the case M/s

Punjab State Co¬operative Federation of Housing Building Societies Ltd.,

wherein the Hon’ble High Court, while following the judgment of Hon’ble

Supreme Court, in the case of The Totgars Co-operative Sale Society Ltd.

Vs ITO 2010(35) DTR 25, have held that interest received by the assessee

from Commercial banks was not covered by Section 80P(2)(a)(i) of the Act

and was taxable under section 56, being income from other sources. We

held that such interest income is to be charged to Tax as income from other

sources in the context of the assessee due to the non-availability of

deduction u/s.80P(2)(d) on such amount.

order of the CIT(A)-1, jalander in holding that the interest income was

charged to Tax as income from other sources in the context of the

assessee due to the non-availability of deduction u/s.80P of the act. The

Income tax law is settled on the issue of set off off business losses of the

assessee under different heads. Considering the facts of the instant case,

9 ITA Nos.132&133/Asr/2018 Assessment Years: 2014-15 & 2015-16

we hold that assessee is not eligible for setoff of losses from the business

head from the different head, the income from other sources in particularly.

appeal of the assessee. Accordingly, both the issues of claim of deduction

u/s 80P of the Act and set off against business by the assessee are

decided in favour of department and against the assessee.

Order pronounced in the open court on 02.03.2022

Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member Doc* Date: 02.03.2022 Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T