TaxTMI 
TaxTMI 
2018 (3) TMI 1616
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....ave filed their cross appeals ITA Nos. 1090 & 1582/Ahd/2015 for assessment year 2011-12 against the CIT(A)-4, Ahmedabad's order dated 30.03.2015 in case no. CIT(A)-4/298/ACIT/B.K/14-15. Relevant proceedings in all cases are u/s. 143(3) of the Income Tax Act, 1961; in short "the Act". 2. We heard these four cases on 19.03.2018. Learned representatives appearing on behalf of these two assessees as well as the Revenue are ad idem that the tax payers' appeal herein raise a common issue of Section 80P deduction qua respective sums in the nature of interest income derived from parking of surplus funds in the payer/co-operative banks in question. We thus treat former assessee's first appeal ITA No. 1891/Ahd/2014 for assessment year 2011-12 as the "lead" case raising following substantive grounds: "1) The ld. Commissioner of Income Tax (Appeals) - XX, Ahmedabad has erred in directing the AO to verify whether any interest was received by the appellant on short term deposits and Government Securities which is not permitted u/s. 251(1) of the I.T.Act, 1961. 2) The ld. Commissioner of Income Tax (Appeals) - XX, Ahmedabad has erred in not allowing the deduction directly u/s....
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....npoint any distinction on facts or law therein. We thus find no reason to interfere with learned CIT(A)'s directions under challenge. This second substantive ground is therefore declined. 4. We now advert to the lead issue of Section 80(P)(2) disallowance of Rs. 27,97,019/- in respect of assessee's interest income derived from its deposits with the Banas Co-operative Bank. Both the lower authorities quote the legislative amendment vide Finance Act, 2006 w.e.f. 01.04.2007 inserting subsection 4 in Section 80P as well as CBDT's explanatory notes to the above Finance Act dated 28.122006 in holding that the impugned interest income derived from co-operative bank is not eligible for deduction. Learned Departmental Representative vehemently contends that hon'ble Karnataka high court's recent decision in (2017) 83 taxmann.com 140 (Karnataka) PCIT vs. Totagars Co-operative Sale Society has settled the law that such an income is not allowable as Section 80P deduction in view of the legislative amendment hereinabove. Mr. Kabra thereafter files hon'ble apex court's judgment in (2017) 397 ITR 1 (SC). The Citizen Co-operative Society Ltd. vs. ACIT settling Section 80P deduction issue in resp....
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.... income derived from the cooperative bank in question. We follow our preceding reasoning to hold that the assessee is entitled for the impugned deduction. This latter appeal ITA No. 2987/Ahd/2015 is therefore accepted. 6. We now advert to cross appeals pertaining to latter assessee M/s. Banaskantha Dist. Cooperative Milk Producers Union Ltd. Both the parties are ad idem that assessee's sole substantive grievance herein challenges the correctness of both the lower authorities' action disallowing Section 80P deduction of Rs. 7,19,41,260/- on the same reasoning that it is in the nature of interest income derived from cooperative banks. Learned counsel seeks to draw a distinction that the amount of Rs. 1,39,11,275/- is in the nature of dividend received from various cooperative societies. We observe that this issue is rendered academic since we have already decided the issue of allowability of Section 80P deduction in principle against the Revenue hereinabove. The assessee's instant appeal ITA No.1090/Ahd/2015 thus succeeds accordingly. 7. We now advert to the Revenue's cross appeal ITA No. 1582/Ahd/2015. Its sole substantive ground is that the CIT(A) has erred in law as well as ....
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....s earning dividend which is not part of total income. Thus Section 14A is squarely applicable. "During the course of assessment, the appellant has submitted the complete details regarding the interest expenses was given and also the purpose and application of such interest bearing funds was provided to the AO. The Society had been investing the surplus funds in fixed deposits and shares of cooperative societies since long and out of its own funds only. During the year under consideration AO did not found any material on the record which proves that the borrowed funds were used for the purpose of making investment in deposits and shares of Cooperative Societies. The Ld. A.O. has clearly failed to prove the nexus between the borrowed funds and use of borrowed funds for the investment in Co. Operative Society. On other side the Assessee had clearly showed the nexus of funds used in investments in deposits and shares of Co. Operative Societies by clearly showing the source of funds for investment in Deposits and shares of Cooperative societies is funds received from Federation for sale of milk bill on various dates. Though the application of Rule 8D is not applicable unless the nexu....
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....umstances of the case, we are of the considered opinion that learned CIT(A) has rightly held that the provisions of Section 14A have wrongly been invoked in this case. In the result, we hereby affirmed the finding of learned CIT(A) and dismiss this ground of the Revenue." Further the CIT (A) has also decided the matter in favor of the assessee in all earlier years including A.Y.2009-10 as well as A.Y.2010-11 and deleted the disallowance by Ld . A.O. The copies of order passed by Hon'ble IT AT in assesse's own case for A.Y.2008-09 and by Hon'ble CIT(A) in A.Y.2009-10 & 2010-11 are enclosed herewith as per Page No 64 to 71, 71 to 92 & 93 to 118 for your verification. The Appellant also relies on the decision of Hon'ble Gujarat in case of CIT Vs. Torrent Power Ltd. , wherein it is clearly held that " Where it was apparent from records that assessee had sufficient funds for making investments in shares and interest free bonds and it had not used borrowed funds for such purpose, Assessing Officer was not justified in invoking provisions of section 14A in order to disallow one per cent of interest expenses incurred for earning exempt income " The copy of decision....