BALLALESHWAR SAHAKARI PATPEDHI MARYADIT , MUMBAI V. ITO WARD-17(2)(1), MUMBAI

ITA 1237/MUM/2023

AI Insights

The case involves Ballaleshwar Sahakari Patpedhi Maryadit, a cooperative society, appealing against the assessment order which disallowed certain deductions claimed under Section 80P of the Income-tax Act, 1961. The society had claimed deductions for various incomes including interest and dividends from cooperative banks, and other operational incomes, arguing that these were integral to their banking business. The Assessing Officer and the CIT (A) had partly disallowed these claims, leading to the appeal. The Tribunal examined whether the incomes were derived from the business of banking or providing credit facilities to members, which would qualify them for deductions under Section 80P(2)(a)(i) and 80P(2)(d).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125146 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 12-04-2023
• Other Referred Cases: M/s Quepem Urban Co-operative Credit Society Ltd. Vs. ACIT, Mavilayi Services Co-operative Bank Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Tax effect
• Section: 56; 143(3); 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI NARENDER KUMAR CHOUDHRY, JM ITA No. 1237/Mum/2023 (Assessment Year: 2018-19) Balla lesh wa r Saha kari Patpetdhi Mar yadit 11/11A, Am nir, B ld g, Na vro j i H il l Road N o.9, Dongi ri, Mum bai-40 0 009 Vs. Income Tax Officer, Ward 17(2)(1), Mumbai-400 020 (Appellant) (Respondent) PAN No. AAATB6933F Assessee by : Shri P.S. Shingte, Authorised Representative Revenue by : Shri Ashok Kumar Ambastha, SR DR Date of hearing: 13.07.2023 Date of pronouncement : 19.07.2023 O R D E R PER PRASHANT MAHARISHI, AM: 01. ITA No. 1237/Mum/2023 for A.Y. 2018-19 is filed by Ballaleshwar Sahakari Patpetdhi Maryadit (assessee / appellant) against the appellate order passed by the National Faceless Appellate Centre, Delhi [the learned CIT (A)] dated 24 th February, 2023, wherein the appeal filed by the assessee against the assessment order passed under Section 143(3) of the Income-tax Act, 1961 (the Act) dated 7 th April, 2021, passed by National e-Assessment Centre, Delhi (the learned Assessing Officer), was partly allowed. Page | 2 ITA No.1237/Mum/2023 Ballaleshwar Sahakari Patpedhi maryadit; A.Y. 2018-19 02. Assessee is aggrieved and has preferred the appeal, raising following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law the lower authorities have erred in denying the deduction claimed under Section 80P(2)(a)(i) of IT Act, for ₹1,32,3,456/- being interest/ dividend received from Co-Op Banks, ₹1,08,45,349, Electricity bill counter income, ₹21,57,987/-, Provision ₹35000/- and Office rent and tax deposit ₹1,90,140, respectively, without realizing the fact that these receipts are interal part of business of the assessee and therefore are fully eligible for deduction, as claimed under section 80(P)(2)(a)(i) Income-tax Act, 1961 (the Act) of 1951.” 03. The facts of the case shows that assessee is a Co-Operative Society filed its return of income [ ROI] on 31 st October, 2018, declaring total income at ₹nil, after claiming deduction under Section 80P(2) amounting to ₹2,49,25,542/-. ROI of the assessee was picked up for scrutiny, wherein one of the reasons was verification of deduction from total income under Chapter VIA of the Act. The assessment was framed under Faceless Assessment Scheme. The learned Assessing Officer noted that assessee has declared a net profit of ₹76,34,545/- but declared income of ₹2,49,25,542/- and claimed the same as deduction under Section 80P(2)(a)(i) of the Act, and thus, declared the total income at ₹ Nil. Page | 3 ITA No.1237/Mum/2023 Ballaleshwar Sahakari Patpedhi maryadit; A.Y. 2018-19 The assessee was asked to substantiate the above claim of deduction. In response, assessee submitted that it is a ‘Resource Society’ registered as a Co- operative society. Therefore, it is entitled to deduction under Section 80P of the Act. The learned Assessing Officer held that the assessee has relied upon the decision of Hon'ble Bombay High Court in case of M/s Quepem Urban Co-operative Credit Society Ltd. Vs. ACIT (2015) 377 ITR 272 (Bom.), but same is not accepted by the Revenue. Even the SLP filed before the Hon'ble Supreme Court is withdrawn by Revenue because of low tax effect. The learned Assessing Officer was of the view that assessee has earned income with respect to 10 items which are not income earned by the assessee from the business of the Co-operative Society-but ‘income from other sources’ taxable under Section 56 of the Act. The sum total of such ten items were determined at ₹1,46,37,054/-. The learned Assessing Officer was of the view that other income earned by the assessee society is not eligible for deduction under Section 80(P)(2)(a)(i) of the Act as such income is not derived from the business of banking or providing credit facilities to its members. The other income under question was not the interest received from members of the assessee’s society for providing credit facilities to them. Accordingly, the assessment under Section 143(3) read with section 144B of the Act was passed on 7 th April, 2021, Page | 4 ITA No.1237/Mum/2023 Ballaleshwar Sahakari Patpedhi maryadit; A.Y. 2018-19 determining the total income of the assessee at ₹1,46,37,054/-. 04. The learned Assessing Officer has considered below mentioned income as tabulated here in as income from other source :- Sl No. Description Income Earned (Rs) 1. Bank deposit interest 10845120/- 2. Bank share dividend 61/- 3. Apna Bank saving interest 168/- 4. Loan from deposit 51775/- 5. Electricity Bill counter Income 2167987 6. Printing and Stationary Deposit 111504/- 7. Recovery and Court Charge Deposit 409185/- 8. Service Exp 826134/- 9. Provision 35000/- 10. Office Rent & Tax Deposit 190140/- Total 14637054 05. The assessee aggrieved with the assessment order preferred the appeal before the learned CIT (A). The learned CIT (A) held that (i) assessee has received bank deposit interest of ₹1,84,45,120/-, bank dividend of ₹61 and Apna Bank saving interest of ₹168 which are not eligible for deduction under Section 80(2)(p)(a)(i) of the Act. (ii) With respect to the loan from deposit of ₹51,775/-, printing and stationary deposit of ₹1,11,504/-, recovery and court charged deposit of ₹4,09,185/- and service expenses of ₹8,26,134/- The learned CIT (A) held that above sum are attributable to the business of providing credit facilities to its members and therefore, assessee is entitled to deduction under Section Page | 5 ITA No.1237/Mum/2023 Ballaleshwar Sahakari Patpedhi maryadit; A.Y. 2018-19 80(P)(2)(a)(i) of the Act. (iii) With respect to the electricity bill counter income of ₹21,67,987/-, provision for audit fee of ₹35,000/- and office rent and tax deposit of ₹1,90,140/- he held that these incomes are not attributable to or related to providing credit facilities to its members. He relied upon the decision of Hon'ble Supreme Court in case of Mavilayi Services Co-operative Bank Ltd. vs. CIT dated 12.01.2021 and held that same are not eligible for deduction under Section 80(P)(2)(i) of the Act. Accordingly, he disallowed the deduction under Section 80(P)(2)(d) on sum of ₹1,32,38,450/-. Therefore, assessee is in appeal before us. 06. The learned Authorized Representative submitted that i Assessee has received interest and dividend from Co- operative bank of ₹1,08,45,349/- and therefore, it is eligible for deduction either under Section 80(2)(a)(i) or under Section 80(P)(2)(d) of the Act. ii With respect to the electricity bill counter income, he submitted that it is also part of the banking business of the assessee. iii With respect to the provision of ₹35,000/-, he submitted that it is reversal of provision of payment of audit fees which is attributable to the banking business. iv With respect to the office rent and tax deposit of ₹1,90,140/-, he also submitted that same is part of the integral business of the assessee. Page | 6 ITA No.1237/Mum/2023 Ballaleshwar Sahakari Patpedhi maryadit; A.Y. 2018-19 07. The learned Departmental Representative vehemently supported the order of the learned lower authorities. 08. We have carefully considered the rival contentions and perused the orders of the lower authorities. 09. The fact shows that assessee is a member of credit co- operative society registered as ‘Resource Society’ under the Maharashtra Co-operative Society Act and is specially classified as credit resource society. The lower authorities have also admitted that assessee is carrying on the business of banking or providing credit facilities to its members, therefore, the activity of the assessee is classified under Section 80(P)(2)(a)(i) of the Act and it is wholly amount of profits and gains attributable to such activity is deductible under Section 80P(2)(a)(i) of the Act. i Under 80(P)(2)(d) any income by way of interest or dividend derived by the co-operative society from its investment with any other co-operative society wholly of such income is deductible under 80(P)(2)(d) of the Act. Assessee has stated it has received interest and dividend from co-operative banks amounting to ₹1,08,45,349/- and therefore, the above deduction is available to the assessee under 80P(2)(d) of the Act. The deduction is correctly denied under Section 80P(2)(d) of the Act. ii ₹35,000/- is a reversal of provision of audit fees. The deduction of the audit fee expenditure is allowable to Page | 7 ITA No.1237/Mum/2023 Ballaleshwar Sahakari Patpedhi maryadit; A.Y. 2018-19 the assessee as profits and gains of business attributable to business of co-operative banking. The reversal of fees is also part of the business income of the assessee. Therefore, ₹35,000/- should be granted to the assessee as deduction under Section 80P(2)(a)(i) of the Act. iii With respect to electricity bill counter income of ₹21,67,987/- and office rent and tax deposit of ₹1,90,140/- are not at all related to the carrying on business of banking or providing credit facilities and therefore, both of this income are correctly treated by the lower authorities not as eligible business income u/s 80 P (2) (a) (i) of the Act . The electricity bill counter income of ₹21,67,987/- is other business income of the co-operative society and office rent and tax deposit is a rental income which is required to be taxed at income from house property or other income. Accordingly, deduction under Section 80P is not allowable on both this income. Therefore, electricity bill counter income is required to be assessed as a separate business other than the business of banking to its members after granting deduction of expenditure incurred wholly and exclusively for that business. Similarly office rent and tax deposit is also required to be taxed as income from house property or income from other sources with applicable deductions allowable. However, while granting the deductions, the expenses which has already been included as profits and gains of Page | 8 ITA No.1237/Mum/2023 Ballaleshwar Sahakari Patpedhi maryadit; A.Y. 2018-19 business under Section 80(P)(2)(a) of the Act are not required to be disturbed. 010. In the result, the solitary ground of appeal filed by the assessee is partly allowed with above directions. 011. Appeal of assessee is partly allowed. Order pronounced in the open court on 19.07. 2023. Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated:19.07.2023 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai