DCIT, Panchmahal Circle., Godhra V. The Lunawada Taluka Primary School Teachers Co-Op Credit Society Ltd., Mahisagar

ITA 1440/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3885 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-02-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 01-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80P; 143(2); 64; 72

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA.NO.1440/AHD/2018 / ASSTT.YEAR : 2015-16 DCIT, PANCHAMAHAL CIR. GODHRA. VS THE LUNAWADA TALUKA PRIMARY SCHOOL TEACHERS CO-OP CREDIT SOCIETY LTD. AT. PARAMA, LUNAWADA DIST: MAHISAGAR 389 230 PAN : AAAAT 2876 N / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI UMA SHANKAR PRASAD, SR.DR ASSESSEE BY : NONE / DATE OF HEARING : 28/02/2020 / DATE OF PRONOUNCEMENT: 3/03/2020 !'/ O R D E R PER RAJPAL YADAV, VICE-PRESIDENT REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST OR DER OF THE LD.CIT(A)-4, VADODARA DATED 16.3.2018 PASSED FOR TH E ASSTT.YEAR 2015-16. 2. SOLE GROUND TAKEN BY THE REVENUE READS ASUNDER: 1. THE CIT(A) ERRED IN FACTS AND LAW IN DIRECTING AO TO VERIFY THE ASSESSEES CLAIM OF PRO-RATA/PROPORTIONATE EXPENDIT URE FROM INTEREST INCOME SHOWN BY THE APPELLANT AND ALLOW THE SAID CL AIM OF EXPENDITURE AFTER DUE VERIFICATION, AS THE ASSESSEE HAS FAILED TO PROVE THE NEXUS BETWEEN THE EXPENSES CLAIMED TO BE INCURRED TO EARN THE INTEREST INCOME DISALLOWED OF RS.2,33,99,303/- ITA NO.1440/AHD/2018 2 3. IN RESPONSE TO THE NOTICE OF HEARING, NONE HAS C OME PRESENT ON BEHALF OF THE ASSESSEE. SINCE THE ASSESSEE DID NOT APPEAR IN RESPONSE TO THE NOTICE OF HEARING, WE ARE NOT AWARE WHETHER THE ASSESSEE IS I N APPEAL OR NOT AGAINST THE DECISION OF LD.CIT(A). CONSIDERING THE LIMITED ISS UE INVOLVED IN THE APPEAL OF THE REVENUE WE PROCEED TO DECIDE THIS APPEAL EX PARTE QUA THE ASSESSEE- RESPONDENT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ELECTRONICALLY ON 15.9.2015 DECLARING TOTAL INCOME AT NIL. THE ASSESSEE IS A COOPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF ACCE PTING DEPOSITS FROM OWN MEMBERS OF THE SOCIETY AND MAKE LOAN/ADVANCE TO ITS MEMBERS, AND INVEST SURPLUS FUND WITH OTHER BANK. IT HAS COMPUTED GROS S TOTAL INCOME OF RS.2,33,99,303/- WHICH HAS BEEN CLAIMED AS EXEMPT U NDER SECTION 80P(2) OF THE INCOME TAX ACT. THE CASE OF THE ASSESSEE WAS S ELECTED FOR SCRUTINY ASSESSMENT, AND NOTICE UNDER SECTION 143(2) WAS ISS UED ON 26.9.2016. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT THE ASSESSEE HAS INTEREST INCOME FROM SCHEDULED BANK. SUCH INTEREST INCOME H AS BEEN NOTICED BY THE AO AS UNDER: SR. NO. NAME OF BANK INTEREST RECEIVED (RS.) 01 STATE BANK OF INDIA 99,86,363/- 02 DENA BANK 75,71,187/- 03 BANK OF BARODA 29,79,285/- 04 BANK OF INDIA 4,04,455/- 05 BARODA GUJARAT GRAMIN BANK 3,88,425/- 06 CENTRAL BANK OF INDIA 1,33,272/- TOTAL 2,14,62,987/- ITA NO.1440/AHD/2018 3 5. THE AO THEREAFTER FOUND THAT THE ASSESSEE HAS EA RNED INTEREST INCOME FROM COOPERATIVE BANK AT RS.28,02,626/-. THUS, ACC ORDING TO THE AO, THE ASSESSEE HAS TOTAL INTEREST INCOME OF RS.2,42,65,61 3/-. HE ISSUED A SHOW CAUSE NOTICE VIDE LETTER DATED 20.7.2017 INVITING E XPLANATION OF THE ASSESSEE AS TO WHY DEDUCTION CLAIMED BY IT UNDER SECTION 80P(2) BE NOT DECLINED. SHOW CAUSE NOTICE WAS REPRODUCED AT PARA 4.1.2 OF THE AS SESSMENT ORDER. IT READS AS UNDER: 4.1.2 ACCORDINGLY, IT WAS SHOW CAUSED VIDE LETTER DATED 20.07.2017 AS TO WHY DEDUCTION OF INTEREST INCOME OF RS.2,42,65,613/ - ( RS. 2,14,62,987/- FROM NATIONALIZED BANKS +28,02,626/- FROM CO-OPERATIVE B ANKS) ON FIXED DEPOSIT CLAIMED U/S 80P ON ACCOUNT OF INTEREST RECEIVED FRO M NON MEMBERS SHOULD NOT BE DISALLOWED IN VIEW OF LATEST DECISION OF HON BLE JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF STATE BANK OF INDIA CO-OP SOCIETY (SBI) VS CIT[2016] 72 TAXMAN.COM 64(GUJ). THE CONTENTS OF SH OW CAUSE NOTICE ARE REPRODUCED HERE UNDER :- 'ON VERIFICATION OF BALANCE SHEET AND P&L IT IS SEE N THAT YOU HAVE PLACED FIXED DEPOSITS WITH STATE BANK OF INDIA, DEN A BANK, BANK OF BARODA, BARODA GUJARAT GRAMIN BANK, LUNAWADA PEOPLE 'S CO- OPERATIVE BANK, LUNAWADA NAGRIK SAHAKARI BANK AND P ANCHMAHAL DISTRICT CO-OPERATIVE BANK AND EARNED INTEREST INCO ME OF RS.2,42,65,613/- FROM THE FIXED DEPOSITS WITH THESE BANKS AND CLAIMED DEDUCTION OF RS.2,33,99,303/- U/S SOP OF THE IT ACT . 3. IN CONNECTION WITH THE ABOVE, IT IS BROUGHT TO Y OUR NOTICE THAT LISTED BANKS ARE NOT MEMBERS OF M/S THE LUNAWADA TALUKA PR IMARY SCHOOL TEACHERS CO OP CREDIT SOCIETY LTD AND THEREFORE YOU ARE NOT ELIGIBLE TO CLAIM DEDUCTION OF RS.2,33,99}303/- U/S 80P (2)( A)(I) AND 80P(2)(D) OF THE IT ACT. IN VIEW OF THIS, IT IS SHOW CAUSED A S TO WHY DEDUCTION CLAIMED U/S SOP SHOULD NOT BE DISALLOWED IN VIEW OF LATEST DECISION OF JURISDICTIONAL GUJARAT HIGH COURT IN THE CASE OF ST ATE BANK OF INDIA (SBI) VS CIT [2016] 72 TAXMAN.COM 64(GUJ). 6. AFTER HEARING THE ASSESSEE, THE LD.AO DID NOT GR ANT DEDUCTION UNDER SECTION 80P(2) AND DETERMINED TAXABLE INCOME OF THE ASSESSEE AT RS.2,33,99,303/-. DISSATISFIED WITH THE ASSESSMENT ORDER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD. CIT(A) AFTER PUTTING RELIANCE UPON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF STATE ITA NO.1440/AHD/2018 4 BANK OF INDIA EMPLOYEES COOPERATIVE CREDIT SOCIETY VS. ITO, REPORTED IN 72 TAXMANN.COM 64 (GUJ) HAS HELD THAT INTEREST INCOME EARNED ON DEPLOYMENT OF SURPLUS FUND WITH NATIONALIZED BANK WILL NOT QUALIF Y FOR GRANT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT. ACCORDINGLY , IN PRINCIPLE, THE LD.CIT(A) CONCURRED WITH THE AO AND UPHELD THE DISA LLOWANCE MADE BY HIM. HOWEVER, AN ALTERNATIVE ARGUMENT WAS RAISED BEFORE THE LD.CIT(A) PLEADING THEREIN THAT ONLY NET INTEREST INCOME IS TO BE CONS IDERED FOR EXCLUSION FROM THE GRANT OF DEDUCTION UNDER SECTION 80P(2)(A)(I) AND 8 0P(2)(D) OF THE ACT. THE LD.CIT(A) HAS ACCEPTED THIS ALTERNATIVE CONTENTION BY WAY OF FOLLOWING OBSERVATIONS: 3.4. THE A.R OF THE APPELLANT HAS BROUGHT TO THE N OTICE OF THE UNDERSIGNED THE LATEST JUDGMENT OF HON'BLE ITAT, AH MEDABAD VIDE ITAT NO. 2814/AHD/2016 IN THE CASE OF VADODARA MAHA NAGAR SEVA SADAN EMPLOYEES' CO-OP. CREDIT SOCIETY LTD. VS. ITO , THE HON'BLE ITAT HELD THAT 'WE DIRECT THE ASSESSING OFFICER TO VERIFY THE ASSESSEE'S CLAIMS OF PRO-RATA EXPENSES BY EXAMINATION THE RECO RD TO BE SHOWN FOR VERIFICATION BY THE ASSESSEE AND ACCORDINGLY, NETTI NG TO BE ALLOWED'. RESPECTFULLY FOLLOWING THE ABOVE SAID ORDER, I DIRE CT THE AO TO VERIFY THE ASSESSEE'S CLAIM OF PRO-RATA/PROPORTIONATE EXPE NDITURE FROM INTEREST INCOME SHOWN BY THE APPELLANT AND ALLOW THE SAID CL AIM OF EXPENSES AFTER DUE VERIFICATION. THE APPELLANT IS ALSO DIREC TED TO FURNISH NECESSARY DOCUMENTARY EVIDENCES ALONG THE WORKING O F THE EXPENSES CLAIMED BEFORE THE ASSESSING OFFICER. SUBJECT TO VE RIFICATION THE APPEAL IS ALLOWED TO THE EXTENT OF THE CLAIM OF PROPORTION ATE EXPENDITURE FROM INTEREST INCOME ONLY. 7. THE LIMITED ISSUE INVOLVED IN THE PRESENT APPEAL IS WHETHER, THE LD.CIT(A) HAS COMMITTED ANY ERROR BY ACCEPTING ALTE RNATIVE CONTENTIONS OF THE ASSESSEE I.E. WHETHER NET INTEREST INCOME FROM THE BANK DESERVES TO BE EXCLUDED FROM GRANT OF DEDUCTION UNDER SECTION 80P( 2) OR ITS GROSS INCOME IS TO BE EXCLUDED. AFTER DUE CONSIDERATION OF THE FIN DINGS OF THE LD.CIT(A), WE ARE OF THE VIEW THAT IF THE COMPONENT OF INCOME DOE S NOT QUALIFY FOR GRANT OF ITA NO.1440/AHD/2018 5 DEDUCTION UNDER SECTION 80P(2)(A)(I), THEN SUCH INC OME SHOULD BE COMPUTED ON NET BASIS; ANY EXPENDITURE RELATABLE TO EARNING OF SUCH INCOME IS TO BE ALLOWED BEFORE CALCULATING EXCLUSION OF SUCH AMOUNT FOR THE PURPOSE OF 80P(2)(A)(I) OF THE ACT. IN VIEW OF THE ABOVE D ISCUSSION, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. IT IS DISMISSE D. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 3 RD MARCH, 2020 AT AHMEDABAD. SD/- SD/- ( T.S. KAPOOR ) ACCOUNTANT MEMBER (RAJPAL YADAV) VICE-PRESIDENT