THE FEROZPUR CANTT PRIMARY CO-OP AGRI DEV. BANK LIMITED,FEROZPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, RANGE (III), FEROZPUR

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. No. 524/Asr/2018 Assessment Year: 2015-16

The Ferozepur Cantt Primary Vs. DCIT, Circle-3, Co-operative Agricultural Ferozepur. Development Bank Ltd. Near Malwa Khalsa School Shaheed Udham Singh Chowk Ferozepur City. [PAN:-AAAJT2366E] (Respondent) (Appellant)

Sh. P.N. Arora, Adv. Appellant by Respondent by Sh. S. M. Surendranath, Sr.DR.

18.07.2023 Date of Hearing Date of Pronouncement 26.07.2023

ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Commissioner of Income-tax (Appeals), Bathinda, (in brevity ‘the CIT (A)’)

order passed u/s 250 (6) of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2015-16. The impugned order was emanated from the order of the ld. Dy. Commissioner of Income Tax Circle-3 Ferozepur, (in brevity the ld.

AO) order passed u/s 143(3) of the Act.

I.T.A. No. 524/Asr/2018 2 Assessment Year: 2015-16

“Grounds of appeal No.l

That the learned CIT (A), Bhatinda was not right in confirming the action of DCIT, Range-Ill, Ferozepur in which the AO has confirmed action of addition of Rs.2110786/- in the income of the assessee viz., The Ferozepur Cantt., Primary Agricultural Coop., Development Bank Ltd (PLMB) in the limited scrutiny case as per notice received from CASS, by relying upon the Judgment of Punjab State Co-operative Milk Producer Federation Ltd.,V., CIT (2011)336 ITR 495 by whereas the assessee has already distinguished this judgment on last date of hearing before the AO and the same has also been incorporated in the decision of the AO of dated 20.12.2017.

Grounds of appeal No.2

That the assessing officer cum DCIT, Bhatinda wanted to convert the case FULL scrutiny during the assessment proceedings then the Permission from Commissioner/ principal Commissioner has to be obtained as per the CBDT instructions. Since the assessing officer has not mentioned in his order the permission to convert the limited Scrutiny case into full scrutiny case hence orders of assessment passed by the Assessing Officer. Range III, Ferozepur was ab initio void and illegal. Hence it is prayed that the same may please be quashed.

Grounds of appeal No.3

That the Assessing Officer has applied the provisions of section 14A of ITACT, 1961 whereas the assessee has not claimed the

I.T.A. No. 524/Asr/2018 3 Assessment Year: 2015-16

deduction under 80P(2)(d) of the IT. Act, 1961 whereas the Assessee has claimed deduction under80P(2)(a)(i) of the Income Tax Act, 1961 as who per NAMBARD, Hence, it is prayed that whole the addition may kindly be deleted.

Ground of appeal No. 4 That the assessee craves to add or amend any grounds of appeal before the appeal is finally disposed off.”

Society and registered under the cooperative society. During the year the

assessee invested the amount and earned interest amount of Rs.9,53,46,487/-

which is debited in the profit and loss account. On one hand, the assessee is

paying interest year after year and amount taken on the other hand also

investing in shares within Apex Society SADB and is earning exempted income.

The ld. AO initiated proceeding with contravening section 14A r.w.s. 8D of the

Income Tax Rule 1962 and calculated the amount of Rs.21,10,786/- which was

added with the total income of the assessee. The aggrieved assessee filed an

appeal before the ld. CIT(A). After considering the submission of the assessee

the ld. CIT(A) had taken a view that M/s Punjab State Co-operative Milk

Producer’s Federation Ltd., vs. CIT-II, (2016) 67 taxmann.com 27, the

Jurisdictional High Court is against the assessee. So, the entire addition made by

the ld. AO was duly confirmed. Being aggrieved assessee filed an appeal before

us.

I.T.A. No. 524/Asr/2018 4 Assessment Year: 2015-16

adjudication. The prayer of the ld. AR is that the assessee has more capital than

investment amount so, assessee is liable for earning interest which is not at all

attracted the section 14A of the Act.

4.1 The ld. AR further placed that the same issue was adjudicated by the ld.

CIT(A) for A.Y. 2017-18 and accepted the assessee’s plea and allowed the appeal. The ld. AR further relied on the order of Hon’ble High Court of Bombay in the case ofCIT-2, MumbaivsHDFC Bank Ltd. 366 ITR 505 (Bom).The relevant paragraph is reproduce as below:-

“5. We find that the facts of the present case are squarely covered by the judgment in the case of Reliance Utilities & Power Ltd. (supra). The finding of fact given by the ITAT in the present case is that the Assessee's own funds and other non-interest-bearing funds were more than the investment in the tax-free securities. This factual position is not one that is disputed. In the present case, undisputedly the Assessee's capital, profit reserves, surplus and current account deposits were higher than the investment in the tax-free securities. In view of this factual position, as per the judgment of this Court in the case of Reliance Utilities & Power Ltd. (supra), it would have to be presumed that the investment made by the Assessee would be out of the interest-free funds available with the Assessee. We therefore, are unable to agree with the submission of Mr Suresh Kumar that the Tribunal had erred in dismissing the Appeal of the Revenue on this ground. We do not find that question (A) gives rise to any substantial question of law and is therefore rejected.”

I.T.A. No. 524/Asr/2018 5 Assessment Year: 2015-16

He further relied on the order of the CIT vs. Reliance Utilities 313 ITR 340

(Bom).

relevant paragraph is reproduced as below:

I.T.A. No. 524/Asr/2018 6 Assessment Year: 2015-16

I.T.A. No. 524/Asr/2018 7 Assessment Year: 2015-16

5.1 He further relied on the order of the ld. CIT(A) the relevant paragraph is

reproduced as below:

I.T.A. No. 524/Asr/2018 8 Assessment Year: 2015-16

I.T.A. No. 524/Asr/2018 9 Assessment Year: 2015-16

in the record. The asseesee claimed the interest expenses amount of Rs

I.T.A. No. 524/Asr/2018 10 Assessment Year: 2015-16

9,53,46,487/-in impugned assessment year. The assessee earned dividend from share investment in SADB. The ld. AO calculated proportionate expenses

related exempted income and calculated amount to Rs.21,10,790/- U/R 8D of

Income tax Rule, 1962 for contravening section 14A and added back the amount with total income. The revenue respectfully relied on the order of High Court of Punjab and Haryana in the case of Punjab State Cooperative Milk

Producers Federation Ltd.v.Commissioner of Income-tax-II, Chandigarh, [2016] 67 taxmann.com 27 (Punjab & Haryana). Held that.

“Section 14A, read with section 80P of the Income-tax Act, 1961 - Expenditure

incurred in relation to income not includible in total income (In case of

deduction under section 80P) - Assessment year 2011-12 - Whether provisions

of section 14A are applicable even to income claimed as deduction under

section 80P(2)(d) - Held, yes”.

With due regards on the order of the Hon’ble High Court of Punjab and Haryana

that 14A is applicable in case of claim of deduction u/s 80P. But the ld. AR has

taken view that the investment for earing dividend is allowed from excess fund

of assessee which is not interest bearable. He respectfully relied on the order of CIT-2, MumbaivsHDFC Bank Ltd(supra). The ld. AR had not made any

comment against the observation of jurisdictional high court. But the investment

of excess fund was duly agitated firsttime before the bench. As the issue is fully

factual basis the revenue should get opportunity to adjudicate the issue. We

I.T.A. No. 524/Asr/2018 11 Assessment Year: 2015-16

remit back the appeal to the file of the ld. AO to determine that the investment made by assessee in tax free income generating fund whether is covered as

assessee’s own fund which is not interest-bearing fund. Needless to say, the

assessee should get the reasonable opportunity in set aside proceeding. The

matter is disposed off with terms indicated above.

for statistical purpose.

Order pronounced in the open court on 26.07.2023 Sd/- Sd/-

(Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member AKV

Copy of the order forwarded to:

(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order