AlthanBhatar Co Operative Credit Society Ltd, Surat V. The Asst. Commissioner of Income Tax, Circle- 1(3), Surat, Surat

ITA 143/SRT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6831 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 14-05-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 08-02-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Source of fund; Co-operative Credit Society
• Section: 80P; 72

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.143/SRT/2024 Assessment Year: (2017-18) (Physical Hearing) Althan Bhatar Co-operative Credit Society Ltd., Anand Apartment, Bhatar, Surat- 395007, Gujarat Vs. The ACIT,Circle -1(3), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: AAAAA7721R (Appellant) (Respondent) Appellant by Shri Bipin Jariwala, AR Respondent by Shri J. K. Chandnani, Sr. DR Date of Hearing 15/05/2024 Date of Pronouncement 30/05/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: 1. This appeal by the appellant emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 12.12.2023 by the Learned Commissioner of Income-tax (Appeals), [in short, ‘Ld. CIT(A)’] National Faceless Appeal Centre, Delhi, for the assessment year (AY) 2017- 18. 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in indirectly restoring the case to the AO with direction. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in directing to the AO that to ensure that no deduction u/s 80P(2)(d) is allowed on interest/dividend income earned from a Schedule bank. 2 143/SRT/2023/AY.2017-18 Althan Bhatar Co-op. Credit Soc. Ltd. 3. On the facts and in the circumstances of the case as well as the law on the subject, the Ld. AO has erred in making addition of Rs.25,97,540/- on account of alleged non-granting the deduction of interest income claim of deduction u/s 80P(2)(d) of the Act, whereas the interest income received from the co- operative bank. 4. The Ld. AO has erred by treating the income of interest on deposits kept with Co-operative bank as income from other sources. It is submitted that interest income received from savings or deposit account with co-operative banks which is kept and in tune to be used for the object of the society is clearly an income from business and eligible for deduction u/s 80P(2)(a)(i). 5. On the facts and in the circumstances of the case as well as the law on the subject, it ought to have been held that the deduction u/s 80P(2)(d) be allowed to the Co-operative Society in respect of interest income received from Co- operative banks, irrespective of facts whether it is held as income from other sources or under any other sources of income. 6. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. The facts of the case in brief are that the assessee is a co-operative credit society, engaged in banking business and providing credit facilities to its members. The assessee filed its return of income on 17.10.2017, declaring total income of Rs. Nil. The case was selected for limited scrutiny to examine the issue of deduction under Chapter VI-A. The assessee in its computation of income claimed deduction of Rs.29,86,311/- on account of interest earned on fixed deposit and Rs.15/- from dividend income received from Surat District Co-operative Bank Ltd. The assessee also claimed deduction of income of Rs.25,97,535/- earned on account of business of banking by providing credit facilities to its member, under section 80P(2)(a)(i) of the Act. A show-cause notice was issued on 16.09.2019 to the assessee for seeking 3 143/SRT/2023/AY.2017-18 Althan Bhatar Co-op. Credit Soc. Ltd. explanation to substantiate such deduction. In response to the show-cause notice, the assessee filed its reply. The contents of reply filed by the assessee are recorded in para-4 of assessment order. The Assessing Officer has considered the submission of the assessee and allowed both the deductions. The Assessing Officer after disallowing the deduction under section 80P(2)(a)(i) treated the same as income from other sources (para 5-1). The disallowance of deduction under section 80P(2)(d) was added in the income of assessee by taking view that assessee is not eligible for deduction under section 80P (para-6). 4. Aggrieved by the action of AO in treating the business income earned from its member in treating the same as income from other sources and disallowance of deduction under section 80P(2)(d) before the Ld. CIT(A). The Ld. CIT(A) has directed to the Assessing Officer to allow deduction u/s 80P(2)(a)(i) as claimed by the assessee at Rs.25,97,199/-. The Ld. CIT(A) has also allowed deduction u/s 80P(2)(d) of the Act, however issued direction to the Assessing Officer to ensure that no deduction u/s 80P(2)(d) is allowed on interest income earned from a schedule bank. Aggrieved by the order of Ld. CIT(A), the assessee is in further appeal before this Tribunal. 5. We have heard the submissions of the Learned Authorized Representative (Ld. AR) of the assessee and the learned Senior Departmental representative (Sr DR) for revenue. The ld AR for the assessee submitted that section 80P(2)(d) of the Act allows full deduction of an income by way of interest or 4 143/SRT/2023/AY.2017-18 Althan Bhatar Co-op. Credit Soc. Ltd. dividends derived by the Co-operative Society from its investment with any other Co-operative Society. The assessee is Co-operative Credit Society and funds are invested only in fixed deposit and interest income earned from the fixed deposit with Surat District Co-Operative Bank, is eligible for deduction u/ 80P(2)(d) of the Act. The assessee further submitted that as per section 80P(2)(d) of the Act interest income earned from the investment with the Co-operative Society is eligible for deduction u/s 80P(2)(d) of the Act and direction of Ld. CIT(A) is wrong and interest received from Surat District Co- operative Bank is eligible for deduction u/s 80P(2)(d) of the Act. To support his contention, the Ld. AR relied upon the following case laws: i. Surat Vankar Sahakari Sangh Ltd. vs. ACIT, (2016) 72 taxmann.com 169 (Guj. HC) ii. PCIT vs. Totagars Co-op. Sale Society, (2017) 78 taxmann.com 169 (Karnataka) iii. Vishal Co-op. Housing Services Soc. Ltd. vs. ITO, ITA No.882/Srt/2023 (Surat – Trib.) iv. ACIT vs. Shree Aradhna Urban Co-op. Credit Soc. Ltd., (2014) 159 taxmann.com 350 (Surat – Trib.) v. Shri Nehrunagar Co-op. Housing Society vs. ITO, ITA No.478/SRT/2023 (Surat – Trib.) vi. Reserve Bank Staff & Officers Co. Op Credit Soceity Ltd. vs ITO, ITA No.3114/Mum/2023 (Mum – Trib.) vii. Kolhapur Dist Co-op. Bank Kanista Sevak Sahakari Pat Sanstha Ltd. vs ITO, IT Appeal No.1365/Pun/2023 (Pune – Trib.) viii. Surendranagar Dist. Co-op. Milk Producers Union Ltd. vs DCIT, (2019) 111 taxmann.com 69 (Rajkot – Trib.) 6. The Learned Senior Departmental Representative (Ld. Sr. DR) for the Revenue vehemently submits that interest received from Co-operative Bank 5 143/SRT/2023/AY.2017-18 Althan Bhatar Co-op. Credit Soc. Ltd. does not qualify for deduction under section 80P(2)(d) of the Act. The Ld. Sr. DR for the Revenue supported the findings of the Ld. CIT(A). 7. We have considered the rival submissions of both the parties and perused the orders of the lower authorities carefully. The dispute relates to deduction claimed under section 80P(2)(d) of the Act with regard to interest earned on fixed deposit with Surat District Co-operative Bank. We find that issue related with the deduction under section 80(P)(2)(d) is squarely covered by the series of decisions of jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. vs. ACIT ( supra) as well as by decisions of this Tribunal in favour of assessee including in the case of Vishal Co-operative Housing Services Society Limited vs. ITO, in ITA No.886/SRT/2023, dated 22.02.2024 (Surat – Trib.), wherein it was held that Co-operative Banks are primarily the Co- operative Society and the interest earned on deposit with Co-operative banks are eligible for deduction under section 80P(2)(d) of the Act. Similar, view was taken in assesses own case for AY 2014-15 in ITA No.151/SRT/2019, dated 31.03.2022. Having gone through the order of Co-ordinate Bench (supra), we see no reason to take a different view from the view taken by the Co-ordinate Bench (supra). 8. So far as direction of ld CIT(A) in para 3.8.1 is concerned that AO to ensure that no deduction under section 80P(2)(d) is allowed on interest earned from scheduled bank. We find that such direction is in defiance of decision of Jurisdictional High Court in case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT 6 143/SRT/2023/AY.2017-18 Althan Bhatar Co-op. Credit Soc. Ltd. (supra). In the result, ground No. 1,2,3 & 5 are allowed. So far as ground No. 4 is concerned, we find that the ld CIT(A) has already allowed relief to the assessee on the deduction under section 80P(2)(a)(i) in para 3.7 of his order. Thus, ground No. 4 is treated as infructuous and dismissed as such. Ground No. 6 & 7 are general and needs no adjudication. 9. In the result, appeal of the assesse is partly allowed. Order is pronounced on 30/05/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 30/05/2024 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat