The Brahmarshi Co. Op. Credit Society Ltd, Modasa V. The DCIT, S.K Circke, Himmatnagar

ITA 1085/AHD/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7126 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 26-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD (through web-based video conferencing platform) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT ITA No. 1085/Ahd/2019 Assessment Year : 2016-17 The Brahmarshi Co. op. Credit Society Limited, 6/7, First Floor of Annapurna, Near Civil Court, Malpur Road, Modasa-383315, Dist. Aravalli PAN : AABAT 4324 L Vs. The DCIT, S.K. Circle, Himmatnagar अपीलाथ牸 अपीलाथ牸अपीलाथ牸 अपीलाथ牸/ (Appellant) 灹瀄 य 灹瀄 य灹瀄 य 灹瀄 यथ牸 थ牸थ牸 थ牸/ (Respondent) Assessee by : Shri Ashwin Shah, AR Revenue by : Shri Urjit Shah, Sr. DR सुनवाई क琉 तारीख सुनवाई क琉 तारीखसुनवाई क琉 तारीख सुनवाई क琉 तारीख/Date of Hearing : 08/11/2021 घोषणा क琉 तारीख /Date of Pronouncement: 02/12/2021 आदेश आदेशआदेश आदेश/O R D E R The assessee is in appeal before the Tribunal against the order of learned Commissioner of Income-Tax (Appeals)-2, Ahmedabad [“CIT(A)” in short] dated 16.05.2019 passed for Assessment Year 2016-17. 2. The assessee has taken 3 grounds of appeal, but its grievances revolve around a single issue viz. the learned CIT(A) has erred in confirming the addition of Rs.16,80,845/-. 3. The brief facts of the case are that the assessee is a Co-operative Society and engaged in the business of providing credit facilities to its Members. It has filed its return of income on 12.10.2016 declaring total income of Rs. Nil, after claiming deduction under Section 80P of the Act of Rs.20,76,367/-. The case of the assessee was selected for scrutiny assessment and a notice under Section 143(2) of the Act was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer that the assessee has interest income of Rs.23,48,749/-. The Assessing Officer was of the view that the SMC-ITA No.1085/Ahd/2019 The Brahmarshi CoOp Credict Soc Ltd Vs. DCIT For AY: 2016-17 2 interest income earned from deposits with the banks does not qualify for the grant of deduction under Section 80P of the Act. 4. Dissatisfied with the disallowance, the assessee carried the matter in appeal before the learned CIT(A). It has raised multiple submissions before the learned First Appellate Authority. Its emphasis was that it has not earned any interest income on surplus funds; rather, it has earned interest income for deployment of its operational funds. The learned First Appellate Authority considered all these aspects, but after putting reliance upon the judgment of Hon’ble Gujarat High Court in the case of State Bank of India vs. CIT, reported in 389 ITR 578 (Guj.), he partly confirmed the disallowance. The findings recorded by the learned CIT(A) read as under:- “I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made the disallowance of claim of exemption of interest on FD with Corporation Bank, Bank of Baroda, Bank of India, Dena Bank and S. K. District Central Co.op. Bank Ltd. of Rs.23,48,749/- stating that the appellant is a cooperative society and interest from banks is not allowable to society relying on the decision of Honorable Gujarat High Court in the case of State Bank of India Vs. CIT (Supra). 2.4. The appellant relying upon the decision of (TO Vs. Jafari Momin Vikas Co.op. Credit Society Limited, Ahmedabad has contended that interest income is exempt u/s. 80P of the I.T. Act, 1961. The appellant has also argued that decision of State Bank of India Vs. CIT is not applicable as the appellant has claimed the deduction u/s. 80P(2)(a)(i) of the I.T. Act and not u/s. 80P(2)(d) of the I.T. Act, 1961. 2.5. I do not agree with the submission made by the appellant, as appellant in the computation of income has itself stated that deduction has been claimed u/s. 80P(2)(a)(i) and 80P(2)(d) of the I.T. Act, 1961. Further, the jurisdictional High Court in the case of State Bank of India Vs. CIT after considering all the decisions including the case of CIT Vs. Jafari Momin Vikas Co.op. Credit Society relied by appellant has held that interest income earned from nationalized banks is not eligible for deduction u/s. 80P. The Honorable High Court has discussed the provision of section 80P(2)(a)(i) as well as section 80P(2)(d) and noted that 'if assessee wanted to avail the benefit of deduction of such interest income, it was always open for it to deposit the surplus fund with SMC-ITA No.1085/Ahd/2019 The Brahmarshi CoOp Credict Soc Ltd Vs. DCIT For AY: 2016-17 3 co-operative bank and avail of deduction u/s. 80P(2)(d)'. In view of the above, the claim of interest from S. K. District Central Co.op. Bank of Rs.6,67,904/- is eligible for deduction and the balance interest from nationalized banks is not eligible for deduction u/s. 80P. Accordingly, the disallowance made by the AO is restricted to Rs.16,80,845/- and relief is granted for the balance disallowance. The grounds of appeal are partly allowed.” 5. The learned First Appellate Authority has allowed the deduction of interest income earned from a Co-operative Bank; because a Co-operative Bank happens to be a society first and such deduction has been allowed under Section 80(2)(d) of the Act. So far as interest incomes earned from nationalized bank are concerned, those have been excluded from eligible amount for grant of deduction under Section 80P(2) of the Act. This finding has been recorded by the learned CIT(A) on the strength of the Hon’ble Gujarat High Court judgment in the case of State bank of India vs. CIT (supra). 6. Before me, learned Counsel for the assessee placed reliance upon the judgment of Hon’ble Supreme Court in the case of Mavilayi Service Co- operative Bank Ltd Vs. CIT, reported in 123 taxmann.com 161. He contended that, according to this decision, the assessee is entitled for deduction even on the interest income earned from the nationalized bank. 7. I have duly considered the rival contentions and gone through the record carefully. Perusal of the order of learned CIT(A) would indicate that it is in consonance with the proposition laid down by the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT (supra). Now coming to the case law cited by the learned Counsel for the assessee, in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT (123 taxmann.com 161) by the Hon'ble Supreme Court of India wherein, the primary agricultural credit societies were held to be entitled to the benefit of the deduction contained in Section 80P(2)(a)(i) of the Act, notwithstanding the fact that the society may also be giving loans to its members which are not related to agriculture. However, if it SMC-ITA No.1085/Ahd/2019 The Brahmarshi CoOp Credict Soc Ltd Vs. DCIT For AY: 2016-17 4 is found that there are instances of loans being given to the non-members, profits attributable to such loans obviously were not liable to be deducted. The essence of this decision is that absolute denial of deduction under Section 80P(2)(a)(i) of the Act to the assessee's (cooperative societies) engaged in the providing credit facilities to the non-members along with its members is not warranted under the Act and only that part of profit and gains that is attributable and/or pertains to the non-members shall not be allowed as deduction under Section 80P(2)(a)(i) of the Act. The pertinent observation of the Hon'ble Court is reproduced as under: "Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. " 8. Thus, the profits and gains attributable to non-members arising as a result of advancement of loans was held to be not an allowable deduction under Section 80P(2)(a)(i) of the Act. In view of the above, I do not find any merits in the argument advanced by the learned counsel for the assessee. Thus, I hold that there is no infirmity in the order of the learned CIT (A), requiring any interference. In view of the above, I do not find any merit in this appeal; it is dismissed. 9. In the result, the appeal of the assessee is dismissed. Order pronounced in the Court on 2 nd December, 2021 at Ahmedabad. Sd/- (RAJPAL YADAV) VICE PRESIDENT Ahmedabad; Dated 02/12/2021 *Bt SMC-ITA No.1085/Ahd/2019 The Brahmarshi CoOp Credict Soc Ltd Vs. DCIT For AY: 2016-17 5 आदेश क琉 आदेश क琉 आदेश क琉 आदेश क琉 灹ितिलिप अ灡ेिषत 灹ितिलिप अ灡ेिषत灹ितिलिप अ灡ेिषत 灹ितिलिप अ灡ेिषत/Copy of the Order forwarded to : 1. अपीलाथ牸 / The Appellant 2. 灹瀄यथ牸 / The Respondent. 3. संबंिधत आयकर आयु猴 / Concerned CIT 4. आयकर आयु猴(अपील) / The CIT(A) 5. िवभागीय 灹ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड榁 फाईल / Guard file. आ आआ आदेशानुसार देशानुसारदेशानुसार देशानुसार/BY ORDER, TRUE COPY उप उपउप उप/सहायक पंजीकार सहायक पंजीकारसहायक पंजीकार सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation- ...01.12.2021...... 2. Date on which the typed draft is placed before the Dictating Member ...01.12.2021............ Other member ...02.12.2021.................. 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...02.12.2021............... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement ...02.12.2021 5. Date on which the file goes to the Bench Clerk...02.12.2021................ 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order..................... 8. Date of Despatch of the Order..................