TaxTMI 
TaxTMI 
2024 (8) TMI 1564
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.... January 01, 2023 instead of correct date of order of November 01, 2023 and thus, the appeal was filed by the WBSCARDB Ltd. within 51 days from the date of issue of the order. Thus, it may kindly be noted that the appeal of the WBSCARDB Ltd. was not time barred." The Ld. AR of the assessee prayed before the Bench to treat the appeal as filed within time. Ld. CIT, DR did not raise any objection to this prayer of the assessee. Since no objection has been raised by the Ld. CIT, DR to the facts mentioned, we admit the appeal as being filed in time. 3. The Grounds of appeal raised by the assessee are as under: "1. That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in confirming the action of Ld Assessing Officer in holding that Expenses incurred against interest income of Rs. 55,08,000/- earned by the appellant co-operative society on FDR(s) with the Schedule Banks were to the tune of Rs. 8,26,000/- instead of the expenditure claimed by the Appellant at Rs. 54,50,166/-. 1.1 That on the facts and in the circumstances of the case the Ld. CIT(A), NFAC is wrong, unjust and has erred in law in Rs. 30,55,02....
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....2.2008 Assessment order passed Income assessed: Rs 1,68.54,700 by disallowing 80P(2)(a)(i) deduction for Rs. 1,28.56,964/- (break up is Interest on Short Term deposits: Rs 55,08,000, Interest on HBL to employees: Rs. 28,71,843, Training Institute Grant from NABARD: Rs. 11,50,707, Guest Room Charges, Hostel charges, Stipend & Fooding Charges on Training: Rs. 19,04,318 and Building Maintenance Charges recovered from tenants: Rs. 13,07,047 by considering this as Income from other Sources. 3 Appeal filed with Ld. CIT(A) Claim for 80P(2)(a)(i) deduction reiterated 4. The Ld. CIT(A) passes its order Decision of Ld. AO is upheld except a sum of Rs 13,07,047 being Building Maintenance Charges recovered from tenants- said amount having been already subjected to tax under the head Income from House Property. 5 Appellant files Appeal before ITAT B Bench, Kolkata 1.Claim for 80P(2)(a)(i) deduction reiterated. 2. Additional ground filed for netting of expenses corresponding to the disallowed incomes. 6 16.09.15 ITAT, B Bench, Kolkata pronounces its order 1. Claim for 80P(2)(a)(i) deduction relating to Interest Income dis....
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....sent case. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of M/s. The Totgars' Cooperative Sale Society Ltd. vs ITO in Civil Appeal No. 1622 of 2010 The Hon'ble Supreme Court has held as under "An important point needs to be mentioned. The words "the whole of the amount of profits and gains of business" emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society. In this particular case, the evidence shows that the assessee-Society earns interest on funds which are not required for business purposes at the given point of time. Therefore, on the facts and circumstances of this case, in our view, such interest income falls in the category of "other Income" which has been rightly taxed by the Department under section 56 of the Act". In view of the above the appeal of the assessee is dismissed. 10. In respect of the additional grounds raised by the assessee the ld. DR did not object to the admission of the additional ground. 11. The Id. AR has prayed before the Tribunal that in case the aforesaid incomes if treated under the....
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....rn that income. Therefore, while the claim of deduction under section 80P was rejected and decided against the assessee, however, the income was to be assessed after deducting the expenses in accordance with law. The appeal of the Department was allowed for statistical purposes as the direction issued by the ld. CIT(Appeals) to the ld. Assessing Officer was found to be correct by the ITAT as per para 12 of the order of the Tribunal. Subsequent to the order of the Tribunal the ld. Assessing Officer passed another order on 30.12.2016, in which expenses incurred for earning interest on fixed deposits and short-term investments with Banks amounting to Rs. 8,26,200/-, being corresponding expenses of interest income of Rs. 55,08,000/- as against the assessee's claim of Rs. 54,50,166/- were allowed and the claim of corresponding expenses for other heads was rejected. 9. Aggrieved with the ld. Assessing Officer's order, the assessee went in appeal before the ld. CIT(Appeals) and also submitted the additional ground of appeal. The ld. CIT(Appeals) upheld the expenses as allowed by the ld. Assessing Officer incurred for earning interest income and rejected the other claims primarily on th....
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....or tail of the approach adopted by him. It would be obvious that the said approach and the resultant figure needs to be set aside forthwith, particularly in the background of the procedure adopted by the Appellant in arriving at a figure of Rs. 54,50,166 as expense corresponding to Interest on Deposits with banks other than cooperative banks. 4. The Ld. CIT(A), NFAC alleged that no separate books of Accounts were maintained by the Appellant and the proportionate expenses incurred for earning interest on fixed deposits and short-term investments with banks as arrived at by the Ld AO at Rs. 8,26,200 have been duly allowed to the Appellant. It is submitted that the Appellant society does not have a separate business for investment of funds with Banks. It is further submitted that the society is carrying on the business of Banking and providing credit facility to its members. As part of the banking business the Society mobilises deposits from its members A portion of such deposits was invested with Banks to follow the direction issued by RCS and NABARD. As would be agreed, in the business of banking or providing credit facilities, not only accepting deposits but also ....
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.... The statutory requirement to invest in deposits with banks including cooperative Bank has been fulfilled. As would be seen from the figures in the table, the entire Investment with Schedule banks was made to fulfil statutory requirement. Thus the income received therefrom is very much business income. It is further submitted that the source of Investment with bank was the Deposits received from Members and the corresponding expenditure would be Interest paid thereon. 6. The amount claimed by the Appellant was based on detailed calculation and backed by necessary documentary evidences and would like to submit hereunder the said detail as also explanations: (Amount in Rs. ) 1 Deposits from members:- 2 Deposits received from Members through own branches 9,23,65,857/- 49,83,42,703/- 3 Deposits received from 24 PCARDBs 40,59,76,846/- 4 Required investment-(2*70%+3*15%) (Approx.) 12,55,00,000/- 5 Interest paid on Deposits (Schedule-XIII of Statement of Accounts) 6 Interest paid other than Thrift Deposit scheme 32,30,609/ ....
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.... during lending as also recovery related activities, there is inherently some liquid funds which yields an income. The rate of Interest on Deposits at any point of time is less than that of Borrowing. Thus, the Society at the most can partly compensate the cost of its Borrowing through these floating funds and rarely, if at all, earn a positive margin on such deployment. The contention as above can be substantiated by reference to the actual inflow and outflow of cash for which the Appellant encloses herewith a month- wise Cash Flow Statement together with a summary thereof covering the entire period from Apr 1, 2005 to Mar 31, 2006. It would be seen there from that on Aug 3, 2005 the Society had received Rs 1,494.67 L as Refinance from NABARD, incidentally at a cost of 6% and 6.25%. Out of this amount, the Society disbursed Rs 419.08 L in 9 tranches to the ARDBs on Aug 4 & 5 and a further Rs 138.81 L during Aug 9- 11 to 3 ARDBs. In addition, 2 remittances were made to branches of the Society during Aug 5- 8. Similarly, the Appellant receives repayments from its borrower members in hundreds of instalments. Repayment to its lenders, primarily NABARD however, takes ....
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....o interest income, which is to be assessed under the head "income from other sources", which as per Section 57, assessee be allowed only to the extent of expenditures directly relatable to the earning of such interest income, but simultaneously on other hand, it is expressing inability to directly link an outflow with a particular inflow on one-to-one basis. Therefore, it is difficult to allow any expenditure as per section 57 of the Income Tax Act. The provisions of section 57 are reproduced as under:- "57. The income chargeable under the head "Income from other sources" shall be computed after making the following deductions, namely :- (i) in the case of 17[dividends, other than dividends referred to in section-115-O], or interest on securities, any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend or interest on behalf of the assessee; (ia) in the case of income of the nature referred to in sub-clause (x) of clause (24) of section-2 which is chargeable to income-tax under the head "Income from other sources", deductions, so far as may be, in accordance with the provisions....
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....ssed under the head "income from other sources" to the ld. Assessing Officer, therefore, this argument of the assessee is no longer tenable. The assessee was required to justify the claim of expenses against the interest income out of the borrowed funds, but has expressed its inability to corelate the same. However, since the ld. Assessing Officer has also not given any specific finding for corelation, but allowed the expenditure as per the calculation done, therefore, in our considered view, this issue is once again restored to the file of ld. Assessing Officer, who would go through the chart filed before us at paras 5 and 6 of the written submission, which is reproduced in the preceding paragraph, and allow the claim of assessee as per law and as per the direction of the Tribunal vide order dated 16.09.2015. It is not the case of the assessee that only the borrowed funds were invested in short-term deposit as no such correspondence or corelation has been exhibited before us. The assessee shall be at liberty to explain the same before the ld. Assessing Officer, who will allow the claim of deduction of interest on borrowed funds utilized in making the deposits in the Scheduled Bank....
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....38,478/- 19,04,318 ^ 11,50,707/- Proportion (Based on no of Floors at ICMARD Building) 9 5 2 EXPENDITURE Rent & Taxes - XV 3,62,870/- 2,27,365/- 67,753/- 67,753/- Electric & Insurance - XV 7,70,988/- 3,60,714/- 2,05,137/- 2,05,137/- Depreciation & Repairs XVI 19,36,761/- 10,75,978/- 4,30,391/- 4,30,391/- Stationery & Printing- XVII 70,740/- 39,300/- 15,720,/- 15,720/- Other Exp XVIII 8,97,303/- 4,98,502/- 1,99,401/- 1,99,401/- Salary & Allowance XIX 24,88,328/- 4,13,038/- 8,37,645/- 12,37,645/- Total 65,26,990/- 26,14,896/- 17,56^047/- 21,56,047/- Training Institute Grant from NARBAD - Rs. 11,50,707/-:- 11. The Society received Training Grant from NABARD amounting to Rs. 11,50,707 which was alleged as Other Source Income. It is stated that the Appellant received this amount from NABARD towards part reimbursement of Expenses incurred by the Society for imparting training to the Staffs of the Cooperative Sector. The expenditure was incurred on fooding, lodging, cost of stationery as also salar....
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.... to the business of the assessee as the assessee engaged for providing loan in agriculture and rural development through its 24 member units with assistance of NABARD:- (a) Interest on House Building Loan to Employees Rs.28.71,843/- (b) Building Maintenance Rs. 13,07,047/- (c) Training Institute Grant from NABARI. Rs. 11,50,707/- (d) Receipt from Training Institute Rs.19,04,318/- (e) Commission on Insurance Solicitation Rs. 68,047/- (f) Misc. Receipt Rs. 46,632/- So, no corresponding expenses incurred for earning of the above receipts are considered. 16. The ld. Assessing Officer accordingly did not allow any corresponding expenses on the same. However, this is not justified as the direction of the Tribunal was very specific and it was directed that the net income should be brought to tax after deducting the expenses incurred to earn that income. 17. As is mentioned above, the assessee has bifurcated the expenses relating to Training Institute Grant and has also bifurcated the expenses between rental income and others. It is stated that the Guest Room Charges, Hostel Charges, Stipend and Food Charges were incurred....
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....sion of Ld. AO in Original Assessment order on the same ground. It is submitted that the nature of activity of the Appellant is different from the Income of the stated Society as brought out by us during hearing proceedings. Unlike the Totgars Society, the Appellant is engaged in business of Banking and/ or lending to its Members and during the course of carrying on Banking, the Appellant deposited some fund with Schedule Bank as short Term Deposits to comply the direction of RCS and NABARD as stated in para 5 here in above and also to set it aside to ensure timely honouring of its half-yearly repayment obligation to its refinancer i.e. to NABARD since, the NABARD extends refinance to the Appellant against the Guarantee extended by the Government of West Bengal and any default in repayment to NABARD would result in revoking of the State Government Guarantee and thus, existence of the Appellant would be in jeopardy as stated in para 6 here in above. Therefore, the aforesaid Fund is not Surplus Fund but only accumulation of fund over the 6 month period with a view to honouring its commitments to its financier. Thus the money that we deal with we parked it with a bank [and no....