TMI Blog2009 (3) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... lying on the decision of the Supreme Court in the case of Mehsana District Central Co-operative Bank Ltd. v. ITO [2001] 251 ITR 522 and as the appellant is engaged in other business in addition to its business of banking. 2. That the CIT (Appeals)-Asansol, has erred in law and on facts of the case by enhancing the assessment ignoring the submission and arguments made during the course of hearing of appeal and also at the time of hearing of the show-cause notice of enhancement on the direction of the Hon ble Income-tax Appellate Tribunal, Kolkata on the basis of appeal preferred before their honour against the earlier order of the predecessor of learned Commissioner of Income-tax (Appeals) - Asansol. 3. That the CIT (Appeals) - Asansol has grossly erred in law and on facts of the case by adjudicating that the entire income of the appellant is outside the purview of section 80P as the appellant had engaged in other business and also had business with non-members. 4. That both the lower authorities have failed to adjudicate upon the alternate contention raised by the appellant of allowing deduction under section 80P(2)( d ) of the Income-tax Act, 1961 as the impugned income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee invested Rs. 9,97,60,408 with M/s. B.C.C.B. Ltd. and Rs. 87,59,000 with M/s. W.B.S.C. Bank Ltd. out of voluntary reserve. 3.2 The total interest earned out of investment made with the above two parties out of voluntary reserve was as under : ( i ) From the M/s. B.C.C.B. Ltd. Rs. 86, 79,155.00 ( ii ) From the M/s. W.B.S.C.B. Ltd. Rs. 7,62,031.00 Total Rs. 94,41,186.00 3.3 The Assessing Officer, therefore, asked the assessee to show cause as to why interest earned on deposits made out of voluntary reserve being Rs. 94,41,190 [Rs. 86,79,155 + Rs. 7,62,031], should not be treated as income of the assessee, which is not entitled to exemption as per the provision of section 80P of the Act. The assessee was asked to bring on record evidence to show that such interest was utilized by the assessee for its ordinary banking business, that being the requirement for the impugned amount being entitled to deduction under section 80P(2)( a )( i ) of the Act as per the ratio laid down by the Hon ble Apex Court in Mehsana District Central Co-operative Bank Ltd. v. ITO [2001] 251 ITR 522. The assessee failed to prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA Nos. 1506 and 1507/Kol./07 had set aside the order of the ld.CIT(A) and restored the matter back to his file as there was enhancement made by the ld. CIT(A) without giving opportunity of being heard to the assessee. In pursuance of the above order of the Tribunal, the ld.CIT(A) passed the present order dated 27-3-2008, which has been challenged by the assessee in the present appeal. 7. Before the ld.CIT(A) it was submitted by the assessee that the Assessing Officer failed to understand the terminology used in Banking and thus, he had wrongly worked out the figures of voluntary reserve. The assessee worked out the voluntary reserve at Rs. 5,28,54,563. According to the assessee the above figure of voluntary reserve was worked out as per its letters dated 29-3-2006 and 31-3-2006 submitted to the Assessing Officer. The Assessing Officer totally ignored the figures and explanation given by the appellant and worked out his own figures of voluntary reserve. 8. The ld.CIT(A) went through the relevant letters and observed that in the above letters there was no clarification on the quantum of voluntary reserve. The ld.CIT(A) also observed that in reply to the query raised by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer. 12. With reference to disallowance of Rs. 1,05,000 on a/c of Income-tax fine, the ld. CIT(A) confirmed the disallowance as the assessee could not give any reason other than making a bald claim that the assessee was unware of the provisions due to which a mistake occurred. 13. With reference to enhancement made by the ld. CIT(A), the ld. CIT(A) observed as under : "As far as the other deductions are concerned, I find from the appellant s own submission that the appellant was providing services to members as well as non-members. It has even let out its warehouses to a fertilizer company while the provision of paddy and potato seeds was to members as well as non-members. The same applied to agricultural implements. As far as the ware-house business is concerned, it is clear from a reading of the Income-tax Act that the exemption would be available in case the facilities were used to provide the co-operative society members storage space to assist the marketing of their produce. However, the appellant s own submission confirms that the storage was given to local cultivators including members and that ware house facilities were given to clearly non-member la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of banking in India unless it uses as part of its name at least one of such words." 16. In the statement of fact the assessee has clearly admitted that it is a Primary Agricultural Co-operative Credit Society . As per section 5( ccv ) of the Banking Regulation Act, the assessee cannot be a Bank . Thus, we uphold the finding of the ld. CIT(A), that the assessee is not a co-operative bank and therefore, not entitled to any deduction under section 80P(2)( a )( i ) of the Act as a bank. But as it is a primary co-operative credit society, it may be entitled to some deductions on the income earned by it from its transactions with its members. 17. Section 80P of the Act reads as under : "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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld show that further deduction is admissible to a co-operative society as per section 80P(2)( d ) and ( e ). The ld. CIT(A) has not brought on record any evidence or case law in support of his finding that separate deductions in terms of sub-clauses ( d ) and ( e ) are not allowable. In this view of the matter, we are of the considered opinion that the ld. CIT(A) was not justified in holding that the assessee was not entitled to any deduction under section 80P of the Act. Thus ground No. 3 taken by the assessee is allowed to the above extent." 19. Coming to the issue, when the assessee is required to deal only with its members for getting deduction under section 80P, and it also deals with non-members whether whole of the income attributable to such activity should go out of the ambit of section 80P, we find that the Hon ble Apex Court in the case of CIT v. Bankipur Club Ltd. [1997] 226 ITR 97 with reference to a members club, has held that when there are mutual as well as non-mutual activities, only activities relating to non-members would go out of the ambit of taxation. We, therefore, are of the view that only that income, which is attributable to dealing with non-membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of appeal : "1. That the ld. CIT (Appeals) Asansol has erred in law and on facts of the case by upholding the contention of the ld. ITO Ward 2(3)/Burdwan that income of the appellant co-operative society of Rs. 73,58,338 being interest from investments with other co-operative banks/societies cannot be considered as income from its banking business or business of providing credit facilities to its members relying on the decision of the Supreme Court in the case of Mehsana District Central Co-operative Bank Ltd. v. ITO [2001] 251 ITR 522 and as the appellant is engaged in other business in addition to its business of banking. 2. That the CIT (Appeals)-Asansol, has erred in law and on facts of the case by enhancing the assessment ignoring the submission and arguments made during the course of hearing of appeal and also at the time of hearing of the show-cause notice of enhancement on the direction of the Hon ble Income-tax Appellate Tribunal, Kolkata on the basis of appeal preferred before their honour against the earlier order of the predecessor of learned Commissioner of Income-tax (Appeals)-Asansol. 3. That the CIT (Appeals)-Asansol has grossly erred in law and on fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross total income. Thus ground No. 1 is rejected and ground No. 4 is allowed." 28. Ground Nos. 2, 3 and 5 are inter-linked. As per our decision for the assessment year 2003-04, we hold that income accruing out of assessee s transactions with its members, which is includible in fts gross total income would be entitled to deduction under the relevant provisions of section 80P(2) of the Act. Thus, the orders of the authorities below on this issue are set aside and the matter remanded back to the file of the Assessing Officer with the direction that the same be decided afresh in the light of our observations after giving the assessee adequate opportunity of being heard. Thus, these grounds are allowed to the above extent. 29. Ground No. 6 - In view of our decision in the appeal for the assessment year 2003-04 we direct the Assessing Officer to determine the gross total income of the assessee and the income includible in such gross total income out of the various activities carried on by the assessee. If the assessee fulfils the conditions as laid down by us in this order, then only such amounts are to be deducted under the relevant provisions of section 80P of the Act. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
