M/s. The Venus IVY Comm. Co.Op.Service Society Ltd, Ahmedabad V. The ITO, Ward-3(3)(14), Ahmedabad

ITA 1283/AHD/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 7716 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 01-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80P; 64; 72

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 1283/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Year: 2016-17 M/s The Venus IVY Co-Op. Service Society Ltd., 1101, Venus Amadeus Building, Jodhpur Char Rasta, Satellite, Ahmedabad-380051. PAN: AADAT3809J Vs. I.T.O., Ward-3(3)(14), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Vijay Govanil, A.R Revenue by : Shri Urjit Shah, Sr.D.R सुनवाई कᳱ तारीख/Date of Hearing : 09/11/2021 घोषणा कᳱ तारीख /Date of Pronouncement: 25/11/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-3, Ahmedabad, dated 30/05/2019 arising in the matter of assessment order passed under s. 143 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2016-17. ITA no.1283/AHD/2019 A.Y. 2016-17 2 2. The only interconnected issue raised by the assessee is that the learned CIT- A erred in confirming the order of the AO in part by disallowing the deduction of Rs. 17,467.00 claimed under the provisions of section 80P(2)(a)(i) of the Act. 3. The AO during the assessment proceedings found that the assessee has shown interest income amounting to ₹ 17,467.00 which was received from the non- members i.e. interest on saving bank. As per the AO the impugned income is not eligible for deduction under section 80P(2)(a)(i) of the Act which was so claimed by the assessee. Accordingly, the AO disallowed the same and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO. 5. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us 6. The learned AR before us submitted that the authorities below have not granted the basic deduction available to a cooperative society for Rs. 50,000.00 under the provisions of section 80P(2)(c) of Act. 6.1 The ld. AR also contended that the amount of interest income from non- members is eligible for deduction under section 80P(2)(a)(i) of the Act in view of the judgment of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT reported in 123 taxmann.com 161. 7. On the other hand the learned DR vehemently supported the order of the authorities below. ITA no.1283/AHD/2019 A.Y. 2016-17 3 8. We have heard the rival contentions of both the parties and perused the materials available on record including the case law cited by the learned AR for the assessee. The provisions of section 80P(2)(a)(i) of the Act provides the deduction to a co-operative society engaged in the business of banking or providing credit facilities to its members. The provisions of the section are without any ambiguity. In other words, the income from the activity of financing from the members is only eligible for deduction under section 80P(2)(a)(i) of the Act. If there is any income arising to the co-operative society from the non-members that will not be subject to deduction under section 80P(2)(a)(i) of the Act. In holding so we draw support and guidance from the judgment of the Hon’ble Gujarat High Court in the case of State Bank of India versus CIT reported in 72 Taxmann.com 64 wherein it was held as under: The Income Tax Appellate Tribunal was also justified in holding that interest income of Rs.16,14,579/- and Rs.32,83,410/-respectively on deposits placed with State Bank of India was not exempt under section 80P(2)(a)(i) of the Income Tax Act, 1961. 8.1 In view of the above, it is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India is not being attributable to the business as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i) of the Act. Thus, there remains no ambiguity that income received by the assessee on the money deposited with the bank is not eligible for deduction under section 80P(2)(a)(i) of the Act. 8.2 Now coming to the case law cited by the learned AR for the assessee, in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT 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 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 ITA no.1283/AHD/2019 A.Y. 2016-17 4 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.” 8.3 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, we do not find any merits in the argument advanced by the learned counsel for the assessee. 8.4 The provisions of section 80P(2)(c) of the Act, provides that a co-operative society engaged in activities other than those specified in clause (a) or clause (b) of section 80P(2) of the Act (either independently of or in addition to all or any of the activities so specified), following deduction shall be allowed from its profits and gains attributable to such activities: (i) Rs. 1,00,000 in case of consumers' co-operative society (ii) Rs. 50,000 in any other case 8.5 The expression 'profits and gains' in clause (c) of sub-section (2) of section 80P of the Act is not confined to 'Profits and gains of business'. The Bombay High Court in the case of CIT v. Ratanabad Co-operative Housing Society Ltd. reported in 81 Taxman 257 (Bom.) has held as under: “Letting out of the shops of the assessee-society to persons other than its members did not fall as an activity of the assessee-society either in clause (a) or clause (b) of ITA no.1283/AHD/2019 A.Y. 2016-17 5 sub-section (2) of section 80P. It was an activity of the assessee-society other than those specified in clauses (a) and (b) of sub-section (2) of section 80P and as such, the question arose whether the income derived by the assessee-society from letting out the shops to persons other than its members was exempt from tax under section 80P(2)(c).” 8.6 Thus, in case of co-operative credit society, income to which benefit of section 80P(2)(a)(i) is not allowed, e.g., rental income, interest income from surplus funds kept in FDs' of banks, etc., basic exemption of Rs. 50,000 as provided for in section 80P(2)(c)(ii) must be granted. 8.7 It also appears that, though the word 'activity' is not defined, yet the investment activity, activity of renting of immovable property, etc., and the consequent income attributable to such activities would be covered under section 80P(2)(c). Hence, we direct the AO to allow the deduction under section 80P(2)(c) of the Act. Thus the ground of appeal of the assessee is allowed. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 25/11/2021 at Ahmedabad. Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 25/11/2021 Manish