Chhinam Seva Sahakari Mandli Ltd., Navsari V. Assistant Commissioner of Income Tax, Navsari Circle, Navsari

ITA 145/SRT/2023

AI Insights

The case involves Chhinam Seva Sahakari Mandli Ltd, a primary Agriculture Cooperative Society, which appealed against the disallowance of deductions claimed under Section 80P(2) for interest and dividend income received from cooperative banks. The Assessing Officer initially disallowed these claims based on the decision of the Hon'ble Karnataka High Court in Totagar Co-operative Sales Society, which held that interest income from investments in cooperative banks is not eligible for deduction under Section 80P(2)(d). The society contested this decision, arguing that the Karnataka High Court's jurisdiction did not apply to them and that the matter was under contest before the Supreme Court. However, the JCIT directed the Assessing Officer to consider the facts and applicable judicial authorities, leading to the upheld disallowance by the CIT(A).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129016 (ITAT-SURAT)
• Duration Of Justice: 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 26-02-2023
• Other Referred Cases: Totagar Co-operative Sales Society in Income Tax Appeal No. 100066/2016
• Laws Referred To: Section 80P(2)(d) of the Act
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

ITA No. 145/Srt/2023 Chhinam Seva Sahakari Mandli Ltd Vs ACIT 3 7. Interest income 28,774 Interest Subvention from Valsad District Central Co-operative Bank Limited Total Interest income 17,25,135 Recovery by SBI (reverse entry) (-)707 Net Interest income 17,24,428 8. Dividend Income 9,65,526 From Co-operative Societies 9. Dividend income 36,000 From Valsad Dist. Co-op bank ltd. 3. The Assessing Officer noted that in a decision dated 16/06/2017, the Hon’ble Karnataka High Court in Totagar Co-operative Sales Society in Income Tax Appeal No. 100066/2016 held that the income by way of interest earned by the assessee cooperative society on the investment made in the cooperative bank is not eligible for deduction under Section 80P(2)(d) of the Act. The Assessing Officer after referring various other decisions, issued show cause notice as to why various deductions claimed under Section 80P(2) in respect of dividend and interest received from banks should not be disallowed. The assessee filed is reply dated 17/10/2017, 09/11/2017 and 21/11/2017. In the reply, the assessee stated that they are primary Agriculture Cooperative Society, engaged in the activity of providing credit facility to its members supplying agricultural inputs and marketing of their agricultural produce. The interest and dividend earned from other cooperative societies is exempt under Section 80P(2)(d) of the Act. 4. The assessee also made an application under Section 144A before Joint Commissioner of Income Tax (JCIT), Navsari for appropriate direction. ITA No. 145/Srt/2023 Chhinam Seva Sahakari Mandli Ltd Vs ACIT 4 The assessee in their application stated that the decision of Hon’ble Karnataka High Court is not having jurisdiction in case of assessee. Decision of Hon’ble Karnataka High Court is contested before the Hon’ble Supreme Court. The JCIT vide its direction dated 22/12/2017, directed the Assessing Officer to pursue the fact available on record and the ratio of various judicial authorities which are applicable on the facts of the case. The Assessing Officer after considering the direction of JCIT, concluded that a cooperative bank is an urban commercial bank and does not fall under the purview of cooperative society referred in Section 80P(2)(d) of the Act. The assessee earned interest and dividend from various cooperative banks. The Assessing Officer disallowed the claim of interest and dividend income mentioned at serial No. 3,4,6,7 & 9 as mentioned in para-2 (supra), aggregating of Rs. 8,86,827/- under section 80P(2)(d). 5. Aggrieved by the additions/disallowances, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submissions. The submission of assessee are mentioned in para 5 of order of ld. CIT(A)/NFAC. In the submission, the assessee reiterated its earlier submission and also relied on certain case laws wherein the cooperative banks were considered as primary cooperative society. The ld. CIT(A) after considering the submissions of assessee upheld the order of Assessing Officer in a single sentence “6.1.2 Considering the above ,