CAPITAL CO-OPERATIVE THRIFT AND CREDIT SOCIETY,NEW DELHI V. INCOME TAX WARD 40(4), DELHI, NEW DELHI

ITA 3609/DEL/2024

AI Insights

The case involves Capital Co-operative Thrift and Credit Society appealing against the orders of the CIT(Appeals) which denied them deductions under section 80P(2)(d) of the Income Tax Act on certain interest incomes for the assessment years 2016-17, 2017-18, and 2018-19. The primary contention was whether interest income from cooperative banks qualifies for deduction under section 80P(2)(d). The Tribunal considered various precedents, including decisions from the Gujarat and Karnataka High Courts, which supported the assessee's position. The Tribunal also addressed issues related to the deductibility of expenses under section 57 for income assessed under section 56 as 'income from other sources'.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470406 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Other Referred Cases: PCIT Vs. Ashwin Kumar Urban Cooperative Society Ltd., Totagars Cooperative Sale Society Vs. ITO, Mantola Cooperative Thrift & Credit Society Ltd. Vs. CIT, Janta Adarsh Cooperative Thrift & Credit Society Ltd. Vs. ITO, M/s Veer Cooperative Group Housing Society vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: ANANYA KAPOOR
• Section: 56; 80P

Judgement Text

"ITA Nos.3609, 3721 & 3722/Del/2024 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER आ.अ.सं/.I.T.A No.3609/Del/2024 िनधा\tरणवष\t/Assessment Year:2016-17 Capital Co-operative Thrift and Credit Society, CSC GD Block, Pitam Pura, New Delhi. PAN No.AAALC0139N बनाम Vs. ITO, Ward 40(4), Civic Centre, Minto Road, Delhi. अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent आ.अ.सं/.I.T.A No.3721/Del/2024 िनधा\tरणवष\t/Assessment Year:2018-19 Capital Co-operative Thrift and Credit Society, CSC GD Block, Pitam Pura, New Delhi. PAN No.AAALC0139N बनाम Vs. National E-Assessment Centre, (JAO Income Tax Officer Ward 43(6), Delhi), Civic Centre, Minto Road, New Delhi. अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent & आ.अ.सं/.I.T.A No.3722/Del/2024 िनधा\tरणवष\t/Assessment Year:2017-18 Capital Co-operative Thrift and Credit Society, CSC GD Block, Pitam Pura, New Delhi. PAN No.AAALC0139N बनाम Vs. ITO, Ward 43(6), Civic Centre, Minto Road, Delhi. अपीलाथ\u0014 Appellant \u0016\u0017यथ\u0014/Respondent ITA Nos.3609, 3721 & 3722/Del/2024 2 Assessee by Ms. Ananya Kapoor, Adv. Sh. Shivam Yadav, Adv. & Sh. Utkarsa Kumar Gupta, Adv. Revenue by Shri Rajesh Kumar Dhanesta, Sr. DR सुनवाईक\bतारीख/ Date of hearing: 19.12.2024 उ\u000eोषणाक\bतारीख/Pronouncement on 22.01.2025 आदेश /O R D E R PER C.N. PRASAD, J.M. These three appeals are filed by the Assessee against different orders of the Ld. CIT(Appeals)-NFAC, Delhi dated 12.06.2024 and 18.06.2024 for the assessment years 2016-17, 2017-18 and 2018-19 in denying deduction u/s 80P(2)(d) of the Act on certain interest incomes derived by the assessee. 2. Ld. Counsel for the assessee, at the outset, referring to page 2 of the assessment order for the AY 2016-17 submitted that the Assessing Officer denied deduction u/s 80P in respect of interest income of Rs.47,93,807/- received on FDs with banks, interest from cooperative bank and interest on savings accounts from banks. Ld. Counsel for the assessee submits that the Assessing Officer denied deduction u/s 80P(2)(a)(i) of the Act and assessed the entire interest income under the head “income from other sources”. However, the Assessing Officer did not allow expenses incurred for earning such interest income as deduction u/s 57 of the Act. Ld. ITA Nos.3609, 3721 & 3722/Del/2024 3 Counsel for the assessee also submitted that the Assessing Officer even denied deduction u/s 80P(2)(d) on the interest income received from cooperative banks. 3. It is submitted that in all these appeals the contention of the Assessee is that interest received from cooperative banks is eligible for deduction u/s 80P(2)(d) and reliance was placed on the decision of the Hon’ble Gujarat High Court in the case of PCIT Vs. Ashwin Kumar Urban Cooperative Society Ltd. (168 taxmann.com 314). Referring to the said decision Ld. Counsel submits that the Hon’ble Gujarat High Court held that deduction u/s 80P(2)(d) is allowable to cooperative societies on income earned as interest on investments made with cooperative bank which in turn is a cooperative society itself. The Ld. Counsel submits that the Hon’ble Gujarat High Court while holding so also considered the decision of the Hon’ble Supreme Court in the case of Totagars Cooperative Sale Society Vs. ITO (322 ITR 283). Ld. Counsel also placed reliance on the decision of the Karnataka High Court in the case of PCIT Vs. Totagars Cooperative Sale Society (392 ITR 74), wherein the Hon’ble Karnataka High Court has held that for the purpose of section 80P(2)(d) a cooperative bank should be considered as a cooperative society and the deduction is allowable u/s 80P(2)(d). ITA Nos.3609, 3721 & 3722/Del/2024 4 4. The Ld. Counsel further referring to the said decision submits that the Hon’ble Karnataka High Court noted the issue before the Hon’ble Supreme Court in the case of Totagars Cooperative Sale Society Ltd. Vs. ITO (322 ITR 283) by observing that the issue before the Hon’ble Supreme Court was the allowability of interest as deduction was u/s 80P(2)(a)(i) and not under 80P(2)(d) of the Income Tax Act, 1961 and, therefore, the interest earned by assessee cooperative society on the investments made with cooperative bank is eligible for deduction u/s 80P(2)(d) of the Act. Therefore, the contention of the Ld. Counsel for the assessee is that the deduction u/s 80P(2)(d) is to be allowed on the income from cooperative banks and cooperative societies. It is further submitted that if the income is being treated as income from other sources u/s 56 then in view of section 57 proportionate expense should be allowed to the assessee and finally deduction u/s 80P should be allowed on interest from savings bank account since this interest is not earned from out of surplus funds kept in the banks but is arising from regular deposits in the bank for the purpose of business. 5. The Ld. Counsel for the assessee further submits that in the appeal for the AY 2018-19, the assessee has raised two more issues in its grounds of appeal: i) disallowance on account of late deposit ITA Nos.3609, 3721 & 3722/Del/2024 5 of PF/ESI and a ground was raised on the computation of income by way of additional ground. In so far as the disallowance made towards late deposit of PF & ESI is concerned it is the submission of the Ld. Counsel that the assessee had already added back the late payment of PF & ESI in its computation of income and therefore it is a double disallowance. In so far as the additional ground is concerned its plea of the assessee that the assessed income even after denial of section 80P deduction, the income should not exceed the profit as per profit and loss account. 6. On the other hand, the Ld. DR strongly supported the orders of the authorities below. 7. Heard rival submissions, perused the orders of the authorities below and the case laws relied on. On perusal of the assessment orders it is noticed that the Assessing Officer denied deduction u/s 80P in respect of (a) interest on FDs with scheduled banks; (b)interest from cooperative banks and (c) interest on savings bank account used by the assessee in scheduled banks for day to day business operations. 8. In so far as the interest from fixed deposits with scheduled banks is concerned the issue came up for adjudication before the ITA Nos.3609, 3721 & 3722/Del/2024 6 Tribunal in assessee’s own case in ITA No.3034/Del/2019 for the AY 2013-14 and the Tribunal by order dated 11.09.2023 following the decision of the jurisdictional High Court in the case of Mantola Cooperative Thrift & Credit Society Ltd. Vs. CIT (2014) (90 CCH 0075) held that the deduction u/s 80P on interest income earned from deposits placed with scheduled banks other than the banks in the nature of cooperative societies is not allowable. However, following the very same judgment of Delhi High Court the Tribunal restored the contention of the assessee that if the interest income from banks is not allowable as deduction u/s 80P and is assessed u/s 56 under the head “income from other sources” in that situation proportionate allowance of expenditure should be considered u/s 57 of the Act and this aspect of the matter has been restored to the file of the Assessing Officer for giving appropriate allowances towards expenditure. While holding so the Tribunal observed as under: - “7. We have heard the rival submissions on the issue. The deduction u/s 80P of the Act on interest income earned from deposits placed with the Banks, other than Banks in the nature of Co-op. Society is under question. We notice that the issue is squarely covered against the assessee by the judgment of the Hon’ble Delhi High Court in the case of Mantola Co-operative Thrift & Credit Society Ltd. vs. CIT (2014) 90 CCH 0075 Delhi High Court. The Hon’ble Delhi High Court observed that Section 80P of the Act provides partial exemption, restricted to the ITA Nos.3609, 3721 & 3722/Del/2024 7 specified “earning” or “incomes” in sub-section (2), and not the entire income. A reference was made to Totgars Cooperative Sale Society (supra) and observed that the interest income earned from surplus fund kept with Banks, would not qualify for deduction as it was assessable under the head “income from other sources”. It was further observed that interest earned from investing surplus funds with Banks would fall u/s 56 of the Act and would be taxable under the head income from other sources and thus would be taxable u/s 2(24) of the Act. 8. In the light of the judgment of Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift & Credit Society Ltd. (supra), we do not see any merit in the plea of the assessee for claim of deduction. However, we notice that there is no discussion or finding on allowability of expenditure u/s 57 of the Act incurred in relation to earning of interest taxable income u/s 56 of the Act. Hence, we consider it expedient to remit the matter back to the file of the AO for re-determination of taxable income for giving appropriate allowances towards expenditure connected to the earning of interest income in accordance with law.” 9. Respectfully following the said decision, we hold that the assessee cooperative society is not eligible for deduction u/s 80P(2)(a) in respect of interest earned from fixed deposits with scheduled banks. However, the contention of the assessee that if the income is assessed u/s 57 proportionate deduction towards expenditure u/s 57 is to be allowed was neither examined by the Assessing Officer nor by the Ld. CIT(Appeals). Thus, we consider it appropriate to restore this aspect of the matter back to the Assessing Officer for redetermination of taxable income for ITA Nos.3609, 3721 & 3722/Del/2024 8 considering the appropriate deductions u/s 57 of the Act in the light of the decision of the Hon’ble Jurisdictional High Court in the case of Mantola Cooperative Thrift & Credit Society Ltd. (supra). 10. In so far as interest earned by the assessee from cooperative banks is concerned, we observe that recently the Hon’ble Gujarat High Court in the case of PCIT Vs. Ashwin Kumar Urban Cooperative Society Ltd. (2024) (168 taxmann.com 314) held that deduction u/s 80P(2)(d) is allowable to cooperative societies on income earned on investments made with cooperative banks. Delhi Bench of the Tribunal is consistently took the same view in the cases of Mantola Cooperative Thrift & Credit Society Ltd. Vs. ITO (ITA Nos. 483 to 487 of 2013 dated 30.06.2016, ITA No. 4078 of 2019 dated 27.7.2020), the Janta Adarsh Cooperative Thrift & Credit Society Ltd. Vs. ITO (ITA Nos. 3612 & 3613/Del/2023 dated 28.6.2024). We also find that in the case of M/s Veer Cooperative Group Housing Society vs. ITO in ITA No.2787 & 2788/Del/2018 dated 4.9.2018 the cooperative bench of the Delhi Tribunal held that the interest earned by the assessee a cooperative society from its investment with other cooperative societies would be entitled for deduction u/s 80P(2)(d) of the Act. Thus, respectfully following the above said decisions, we hold that the assessee is entitled for deduction u/s 80P(2)(d) in ITA Nos.3609, 3721 & 3722/Del/2024 9 respect of interest income earned by the assessee from cooperative bank/societies other than scheduled and nationalized banks. 11. In so far as the interest income earned by the assessee on the savings bank accounts which were operated for day to day operations of the assessee is concerned in one view Assessee is entitled for deduction u/s80P since such interest income was earned by the assessee from out of day to day operations of its business activities and not from any fixed deposits out of surplus funds. Thus, we direct the Assessing Officer to allow deduction u/s 80P on the interest income earned by the assessee on its regular savings bank accounts which were used for day to day business activities. 12. Coming to the appeal for the AY 2018-19 the assessee has raised the one additional issue in ground no.9 of the appeal with respect to disallowance made towards ESI and PF. It is the submission of the Ld. Counsel that the assessee itself had added back this PF & ESI contribution of Rs.2,71,803/- which was paid beyond the due date. In view of the above submission, we direct the Assessing Officer to examine the contention of the assessee and make appropriate correction while passing consequential orders. ITA Nos.3609, 3721 & 3722/Del/2024 10 13. The assessee also filed following additional ground for the AY 2018-19: 1. “That, without prejudice to our other grounds, the AO has wrongly assessed the income at Rs.75,05,223/- as against the correct assessable of Rs.19,84,618/-. 2. That, the AO has erred on facts and in law in wrongly calculating the assessed income as even after denial of Section 80P deduction, the income assessed should be Rs.19,84,618/- which is the net profit as computation of income/Profit and loss account. The income assessed is wrongly worked out by the AO and wrongly upheld by the CIT(A).” Ld. Counsel for the assessee submits that even after denial of deduction u/s 80P on the interest income earned on fixed deposits the taxable income according to the assessee should not exceed Rs.19,84,618/- as against Rs.75,05,223/-. On hearing both the sides, we observe that this ground raised by the assessee appears to be consequential in nature. However, these grounds are restored to the file of the Assessing Officer to examine the contentions of the assessee in accordance with law while passing the consequential orders. 14. Since the issues in appeal for AY 2017-18 and 2018-19 which are common are similar to the issues in appeal for AY 2016-17 the ITA Nos.3609, 3721 & 3722/Del/2024 11 decision taken therein for AY 2016-17 shall apply mutatis mutandis for the appeals for AY 2017-18 and 2018-19. We order accordingly. 15. In the result, all the three appeals of the assessee are partly allowed as indicated above. Order pronounced in the open court on 22.01.2025 Sd/- Sd/- (BRAJESH KUMR SINGH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 22.01.2025 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi "