The Abhay Co. Op. Credit Society Ltd, Mehsana V. The ITO, Patan Ward-5, Mehsana

ITA 1551/AHD/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6826 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2021
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 148; 80P; 64; 72

Judgement Text

आयकर अपील य अ धकरण, अहमदाबाद यायपीठ ‘SMC’ अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD (Conducted through Virtual Court) BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA No.1551/Ahd/2019 नधा रण वष / Asstt.Year : 2011-12 The Abhay Co-op. Credit Society Ltd. At & Post : Magroda Ta. Visnagar Dist. Mehsana. PAN : AABTT 4171 G Vs. ITO, Patan Ward-5 Mehsana. (Applicant) (Responent) Assessee by : Shri H.V. Doshi & Co. AR Revenue by : Shri Kamlesh Makana, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 1 0 / 1 1 / 2 0 2 1 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 0 8 / 1 2 / 2 0 2 1 आदेश/O R D E R PER RAJPAL YADAV, VICE-PRESIDENT: Assessee is in appeal against order of the ld.CIT(A), Gandhinagar dated 18.9.2019 passed for the Asstt.Year 2011-12. 2. Sole grievance of the assessee in this appeal is that the ld.CIT(A) has erred in confirming order of the ld.AO in disallowing claim of the assessee under section 80P(2)(a)(i) of the Income Tax Act, 1961. 3. Brief facts of the case are that assessee is co-operative credit society engaged in providing credit facility to its members only, and earn income therefrom. It has filed return of income in response to the notice under section 148 of the Act, wherein it has declared NIL ITA No.1653 /Ahd/2019 with CO 2 income after claiming deduction under section 80P of the Act at Rs.12,05,567/-. The ld.AO during the assessment proceedings noticed that the assessee has earned interest income from Nationalised Bank viz. Dena Bank of Rs.1,69,815/-. The ld.AO was of the view that the assessee society is entitled to benefit of deduction under section 80P only from the investment made in another co-operative society and not the interest income from parking surplus funds with nationalized bank. To the show cause notice, the assessee explained that the investment so made was part of the activities of the assessee and as per its bye- laws. Further, the assessee was of the view that the expenditure relatable to earning of such interest income deserves to be set off against this income, and thereafter net interest income is to be excluded from computation of deduction admissible under section 80P(2). However, the ld.AO did not accept submissions of the assessee. He disallowed the same, however, after giving benefit of section 80P(2)(c) of the Act. On appeal, the ld.CIT(A) has allowed 5% of interest income as expenditure for earning this interest income, and thus gave a relief of Rs.8,491/- and the balance amount was confirmed. The assessee is aggrieved qua quantification of the relief, hence before the Tribunal. 4. With the assistance of the ld.representatives, we have gone through the record carefully. 5. Before us, the ld.counsel counsel for the assessee reiterated submissions made before the lower authorities. However, the ld.counsel for the assessee does not contest judgment of Hon’ble Gujarat High Court in the case of State Bank of India Employees Co- ITA No.1653 /Ahd/2019 with CO 3 op Credit Society Vs. CIT, 72 taxmann.com 64 relied on by the ld.CIT(A) in the impugned order, but submitted that in case claim of the assessee is not found to be admissible, then proportionate administrative and financial expenses incurred for earning such interest/investment income be allowed to the assessee. On the other hand, the ld.DR supported orders of the Revenue authorities below. 6. A perusal of the record would show that the ld.CIT(A) has mainly put reliance upon recent judgment of Hon’ble jurisdictional High Court in the case of State Bank of India Employees Co-op Credit Society (supra) wherein the Hon’ble Court held that in case of a society engaged in providing credit facilities to its members, income from investments made in banks not being a cooperative society does not fall within any of the categories mentioned in section 80P(2)(a). However, theld.CIT(A) has held that society would be allowed to claim expenses under section 57 to the extent of 5% of the impugned interest income. This has been worked out on an estimate basis. 7. In the present case, the assessee has earned income from the investment made with nationalized bank. Therefore, such income will not qualify for grant of deduction under section 80P(2)(a)(i) as well as under section 80P(2)(d) because it is not from cooperative society, in view of the above judgment of Hon’ble Gujarat High Court. However, we find merit in the contention of the assessee that expenditure should be allowed in respect of interest income earned from the investments. If the component of income does not qualify for grant of deduction under section 80P(2)(a)(i), then such income should be computed on net basis; any expenditure relatable to earning ITA No.1653 /Ahd/2019 with CO 4 of such income is to be allowed before calculating exclusion of such amount for the purpose of 80P(2)(a)(i) of the Act. Since interest income earned by the assessee was treated to be “income from other sources” under section 56, then, the assessee can claim deduction under section 57 of the Act. Therefore, we direct the AO to allow expenditure for earning such interest income. In other words, the ld.AO has to determine the net interest income earned by the assessee after giving set off expenditure, and only thereafter that net income has to be excluded from the admissibility of deduction under section 80P(2) of the Act. Grounds of appeal of the assessee are thus partly allowed for the statistical purpose. 8. In the result, appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the Court on 8 th December, 2021 at Ahmedabad. Sd/- (WASEEM AHMED) ACCOUNTANT MEMBER Sd/- (RAJPAL YADAV) VICE-PRESIDENT