TMI Blog2014 (5) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... icial Member and Shri R.K. Panda, Accountant Member Appellant by : None (written submission filed) Respondent by : Shri P.L. Pathade ORDER PER R.K. PANDA, AM : This appeal filed by the Revenue is directed against the order dated 10-09-2012 of the CIT(A)-I, Nashik relating to Assessment Year 2009-10. 2. Despite service of notice none appeared on behalf of the assessee. However, the assessee has filed written submission stating that the same may be considered while disposing of the appeal. Therefore, this appeal is being decided on the basis of material available on record and after hearing the Ld. Departmental Representative and the written submission filed by the assessee. 3. Facts of the case, in brief, are that the assessee is a cooperative society engaged in the business of banking, i.e. accepting deposits from members and lending the same and earning interest income from members. It filed its return of income on 30-09-2009 declaring NIL income after claiming deduction of ₹ 6,67,947/- under Chapter VIA of the Income Tax Act. 3.1 During the course of assessment proceedings the Assessing Officer observed from the annual report filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. The assessee has filed the annual report containing financial statements which is not a tax audit report. The Assessing Officer, therefore, rejected the tax audit report dated 29-09-2009 filed by the assessee during the appeal proceedings. The Assessing Officer accordingly held that the deduction u/s.80P cannot be allowed since the tax audit report has been filed after the assessment. The decision of the Hon ble Punjab Haryana High Court in the case of CIT Vs. Mahalaxmi Rice Factory was relied on by the Assessing Officer for the above proposition. The Ld. CIT(A) after confronting the same and after considering the rejoinder of the assessee held that the assessee credit society is eligible for deduction u/s.80P(2)(a)(i). The Revenue is not in appeal on this issue. 4.2 So far as the disallowance of ₹ 19,13,706/- u/s.40(a)(ia) being commission paid without TDS is concerned it was submitted that the Manager of the society could not file the said challans due to communication gap between the Assessing Officer and the Manager. The assessee filed the challans of TDS in support of deduction u/s.194H in respect of the commission, the details of which are as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has deducted and paid TDS in respect of commission payment made during the year as per details mentioned in preceding para. It has also been noticed from the said challans that in respect of 4 challans paid for commission of April, May, June and July, 2008, the year mentioned is 2008-09 instead of A.Y. 2009-10, as the financial year has been inadvertently mentioned in the said challans. In view of the above facts of deduction and payment of tax by the appellant in respect of commission payment, the A.O. is not justified in disallowing commission of ₹ 19,13,706/- debited in profit and loss account of the appellant society. The appellant, however, has not filed the details of the commission in respect of which the above mentioned TDS has been deducted and paid and also details in respect of the commission paid which is below the limit of requirement of TDS U/S.194H and the commission in respect of which Form No. 13 has been filed by the agents for non deduction of TDS. In view of the above facts, it is held that the appellant is not liable to deduct TDS in respect of which it has deducted and paid TDS mentioned in preceding paragraph. Ground No.2 is accordingly pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment is banking activity eligible for deduction u/s.80P(2)(a)(i) in view of the decision of Hon ble Bombay High Court in the case of CIT, Nashik Vs. Jalgaon District Central Cooperative Society vide Income Tax Appeal No.20/2008 dated 08-07-2011. It was further argued that in any case the net income is much less than ₹ 50,000/-, i.e. deduction eligible u/s.80P(2)(c) of the I.T. Act. 7. Based on the arguments advanced by the assessee the Ld.CIT(A) also deleted the addition of ₹ 2,27,109/- by observing as under : 8.4 I have carefully considered the facts of the case and the rival contentions. In respect of the addition of ₹ 2,27,109/- the appellant has raised three contentions. Firstly, the said commission cannot be taxed at gross figure without allowing expenditure towards the same and as no separate record can be maintained in respect of the said expenditure, as the common expenditure is to be incurred for running the activity of the credit co-operative society. The appellant has, therefore, worked out net expenditure and income on pro rata basis in respect of MSEB commission at ₹ 19,531/-. The above contention of the appellant, is found to be rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed. The said disallowance was made as the assessee has not deducted Tax at source and thereby failed to pay it into the Government Account. The CIT(A)-I, Nashik has held that it will increase the Business income of the assessee society which is eligible for deduction u/s.80P(a)(a)(i). The decision of the CIT(A) on this ground is not at all acceptable. 2. The CIT(A)-I, Nashik has further relied on the proposition of law supported by the decision of Hon ble ITAt, Pune in the case of Shri Mahavir Nagari Sahakari Patsanstha Ltd. Vs. DCIT (2002) 74 TTJ 793, Pune which was delegated in respect of the addition u/s.68 of the Act. Thus, the decision quoted above is not squarely applicable in the instant case as the aforesaid addition was made u/s. 40(a)(ia) of the Act. Therefore, the addition made as above deserves to be sustained. 3. On the basis of facts and in the circumstances of the case, the second ground of appeal is that the Ld.CIT(A)-I, Nashik has erred in deleting the addition of ₹ 2,27,109/- which was made on account of MSEB commission as this business was shown to have been other business of the assessee. 4. On the basis of facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable to the amounts paid during the year under appeal and applicable only to outstanding amounts. (ii) the decisions of Hon ble ITAT, Pune in the case of Shri Mahavir Nagari Sahakari Patsanstha Ltd. Vs. DCIT (2002) 74 TTJ 793 followed by CIT(A) is on distinguishable facts as the same is in respect of addition u/s.68 and in the year under appeal the addition is u/s.40(a)(ia). ASSESSEE s CONTENTIONS i. As regards first count mentioned above the issue is covered in favour of the assessee by following recent decisions, copies of which are enclosed as Annexure-1 2. 1. ACIT Circle XV Chennai Vs. M/s. Eskay Designs, Chennai- ITA No.1951/Mds/12 A.Y. 2009-10 order dated 09-12-2013 2) ITO Ward 11(4), Madurai Vs. M/s. Theekathir Press, ITA No.2076/Mds /2012, A.Y. 2009-10, dated 18th September, 2013. ii. As regards second count mentioned above the issue is covered in favour of the assessee, by following recent decision of Hon'ble ITAT, Pune in the case of ACIT (Central) Circle, Kolhapur Vs. Laxmi Civil Engg. Services Pvt. Ltd., ITA No. 1745/PN/2012 A.Y. 2007-08 and Laxmi Civil Engg. Services Pvt. Ltd., Kolhapur Vs. Addl. CIT Range-2, Kolhapur, ITA No. 1751/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred for earning the income of the society is 91.40% and hence if the same is applied then the net income from MSEB commission after considering the expenditure at 91.40% on pro rata basis works out to ₹ 19,531/- which is eligible for deduction u/s. 80P(2)(C). 11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as the issue relating to addition of ₹ 19,13,706/- u/s.40(a)(ia) is concerned we find before the Assessing Officer the assessee did not file the details of TDS for which he made the addition. We find before the CIT(A) the assessee filed the details of challans on the basis of which the CIT(A) held that provisions of section 40(a)(ia) are not applicable to the amounts paid during the year and the same is applicable only to outstanding amounts. He further held that in view of the decision of the Pune Bench of the Tribunal in the case of Shri Mahavir Nagari Sahakari Patsanstha (Supra) even if the addition is sustained the society is entitled to deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to increase the assessee's profit from the business of developing housing project. Whatever be the ultimate profit of assessee as computed even after making disallowance under section 40(a)(ia) of the Act, would qualify for deduction as provided under the law. 23. In the present case, the only source of profits declared by the assessee during the year is from undertaking development of its housing project 'Lakshdweep'. Therefore, even if the expenditure of ₹ 5,22,600/- is found to be not allowable on account of Section 40(a)(ia) of the Act as assessee has not complied with the requirements of deducting/depositing the TDS, it cannot be denied that such disallowance ultimately increases the profits of the assessee derived from its housing project 'Lakshdweep'. According to the parity of reasoning laid down by the Hon'ble Gujarat High Court in the case of Keval Construction (supra) the aforesaid profit reflected by the disallowance under Section 40(a)(ia) of the Act, qualified for deduction under Section 80-IB(10) of the Act in the present case. Thus, on this aspect, assessee has to succeed. 11.3 Respectfully following the above decisions we hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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