TMI Blog2018 (3) TMI 1616X X X X Extracts X X X X X X X X Extracts X X X X ..... on’ble apex court’s latest judgment in Maxopp Investment Ltd. vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA] settling the law that the impugned disallowance has to be made in case an assessee has derived any exempt income regardless of its purpose test. We thus accept Revenue’s instant substantive ground in principle and direct the Assessing Officer to frame consequential computation as per law after affording adequate opportunity of hearing to the assessee. - ITA No. 1891/Ahd/2014 & 2987/Ahd/2015, ITA No. 1090 & 1582/Ahd/2015 - - - Dated:- 23-3-2018 - SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER By Assessee : Shri M. K. Patel Shri S.H. Talati, A.R. By Revenue : Shri Prasoon Kabra, Sr. D.R. Smt. Aparna Agarwal, CIT.D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER This batch of four appeals pertains to two different assessees namely the Peoples Co-operative Credit Society Ltd. and M/s. Banaskantha Dist. Co-operative Milk Producers Union Ltd. Former assessee has filed its two appeals ITA Nos. 1891/Ahd/2014 ITA No.2987/Ahd/2015 for assessment years 2011-12 2012- 13 against the CIT(A)-XX CIT(A)-IV, Ahmedabad s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a co-operative society without cringing any corroborative evidence on record and failed to appreciate the fact that status of cooperative bank is co-operative society and as such deduction u/s. 80P(2)(d) is admissible in the case of the appellant. 6) It is therefore, prayed that the order of the ld. Commissioner of Income-Tax (Appeals)-XX, Ahmedabad may be set-aside and the return of income of the appellant be accepted. 3. Mr. Patel submits first of all that he is not pressing for assessee s 1st , 4th to 7th substantive grounds being general in nature. He then invites our attention to assessee s second substantive ground challenging correctness of both the lower authorities action disallowing / adding Section 80P(2)(a)(i) deduction of ₹ 6,65,683/- out of its total claim of ₹ 34,62,700/-. The CIT(A) quotes hon ble apex court s decision in Totagars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) in directing the Assessing Officer to verify as to whether the assessee has received any income from short term deposits and government securities. He makes it clear that the assessing authority shall treat the corresponding income under the head income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the investment in Cooperative Societies and Cooperative Bank. Considering Section 80(P)(2)(d) of the Act when the only requirement was that the income should be received from investment in Cooperative Societies and the Cooperative Bank which in the present case has been fulfilled, it cannot be said that the learned Tribunal has committed any error in deleting disallowance of ₹ 1,42,19,515/- under section 80(P)(2)(d) of the Act. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, proposed question B is also answered against the revenue. We therefore follow hon ble jurisdictional high court s judgment than hon ble Karnataka high court s decision. Coming to hon ble apex court s decision in the Citizen Co-operative Society Ltd. (supra), we find that there is no dispute about the category of members as it was before their lordships. We thus conclude in view of all these facts and circumstances that hon ble jurisdictional high court s judgment is binding on us. We accordingly delete the impugned disallowance of ₹ 27,97,019/- in question. This lead appeal ITA No. 1891/Ahd/2014 is partly accepted. 5. Former assessee s rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that appellant, on one hand, borrowed funds for working capital and on the other hand made investments and earned dividend which was not forming part of the total income. Accordingly, the AO calculated disallowance u/s 14A as per Rule 8D of the Income Tax Rules amounting to ₹ 3,91,35,065/-. However, no separate addition was made by the AO of this amount as it was treated as merged with the disallowance made u/s 80P(2)(d). The AO has held that if at any stage deduction u/s 80P(2)(d) is found allowable, disallowance of ₹ 3,91,35,065/- made u/s 14A would come to effect. 5.1 The relevant part of the submission furnished by the appellant is reproduced as below : The second ground of appeal is with regard to an addition of ₹ 3,91,35,067/- u/s. 14A of the Income Tax Act. However the A.O. has stated in Para 3.2 of the order but as deduction claimed u/s 80P(2) has already been disallowed, this disallowance u/s 14A will be treated as merged with the disallowance u/s 80P2(d) and will become effective only if deduction claimed u/s 80P(2)(d) is found allowable at later stage. The Ld. A.O. has made an addition invoking the provision of Section 14A of the Act rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ennai in the case of Tamil Nadu Silk Producers Federation Ltd. reported at 105 ITD 623 wherein it was held as The provisions of section 14A cannot be applied to the provisions of Chapter VI-A (sections 80A to SOU) where deductions are to be made in computing the total income and in no way that can be compared with the exempted income which does not form part of the total income as provided, in Chapter III, containing sections 10 to 13 A. The right to exemption in respect of the items listed under sections 10 to 13A is absolute. The Provisions of section 14A were introduced retrospectively with effect from 1-4-1962 by the Finance Act, 2001 for the purpose of computing the total income under Chapter IV and no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such exempted income. But the provisions of section 14A do not speak about the deductions to be made in computing the total income as per the provisions of Chapter VI-A (section 80A to 80U), even though, as a result of such deductions, the taxable income is reduced wholly and partially. In any event in the appellant's own case in the Asst. Year 2008-09 Hon'ble I.T.A.T. Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce u/s14A has been made. It has been found that the AO has taken the figure of share investment, of ₹ 8,17,57,000/- and the deposits with BDCC Bank at ₹ 1,31,00,00,000/- and the average investments were worked at ₹ 84,79,62,26 /- for working out the disallowance in the formula provided under Rule-8D of I.T. Rules. 5.2.2 The appellant submitted that no investments during the year under consideration in share have been made and the entire share investment of ₹ 8,17,57,000/- was very old as is apparent from the balance sheets and the decision of the Hon'ble ITAT, Ahmedabad in appellant's own case in ITA No.2630/Ahd/2011 and 182/Ahd/273 for A.Y. 2008-09. So, the same investment was also in A.Y. 2008-09 and thereafter no new investment till end of the year under consideration have been made. The appellant also contended that on the similar facts, the Hon'ble ITAT in A.Y. 2008-09 has observed that the appellant had the share capital of ₹ 37,05,88,000/- and the reserves and other funds at ₹ 20,43,06,246/- totaling to ₹ 57,48,94,246/- while the investments out of them were only at ₹ 8,17,57,010/-. So, the interest free funds w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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