Shree Dashalad Co. Operative Credit Society Ltd., Vadodara V. The ACIT, Circle1(1)(1), Vadodara

ITA 278/AHD/2023

AI Insights

The appeals by Shree Dashalad Co-operative Credit Society Limited challenged the disallowance of deductions under Section 80P of the Income Tax Act, 1961, for the Assessment Years 2015-16, 2018-19, and 2020-21. The primary contention was regarding the disallowance of pro rata expenses related to earning interest income. The Income Tax Officer had initially disallowed these expenses, which was partly overturned by the CIT(A). The tribunal's decision emphasized that only those expenses which were exclusively incurred for earning interest income should be allowed as deductions. The tribunal also noted that similar issues had been addressed in the assessee's previous years, where proportionate expenses were allowed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129742 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 31-07-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 23-04-2023
• Other Referred Cases: Dashalad Co-operative Credit Society Limited vs. Laxmi Co-operative Society Limited
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 56; 143(1); 80P

Judgement Text

ITA Nos.276, 277 & 278/Ahd/2023 Assessment Years: 2015-16, 2018-19 & 2020-21 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA Nos.276, 277 & 278/Ahd/2023 Assessment Years: 2015-16, 2018-19 & 2020-21respecptively Shree Dashalad Co-operative Credit Society Limited, Near Bharat Talkies, Dist. Baroda Dabhoi Gujarat – 391 110. [PAN – AAAAS 6296 H] Vs. The Income Tax Officer, Ward-1(3)(2), Vadodara/ The ACIT, Circle - 1(1)(1), Vadodara. (Appellant) (Respondent) Assessee by Shri Samir Parikh, AR Revenue by Shri N.J. Vyas, Sr. DR Da te o f He a r in g 01.08.2023 Da te o f P ro n o u n ce m e n t 09.08.2023 O R D E R These three appeals are filed by the Assessee against three different orders, dated 09.03.2023, 06.03.2023 & 06.03.2023, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Years 2015- 16, 2018-19 & 2020-21 respectively. 2. The assessee has raised identical grounds in all the three appeals and hence grounds raised in ITA No.276/Ahd/2023 for A.Y. 2015-16 are being reproduced as under: “1. The Learned CIT (A) has erred in confirming the disallowance of deduction u/s. 80P amounting to Rs.14,24,450/-. Assessee is in the business of providing credit facilities to its members and is covered under section 80P and has rightly claimed deduction under section 80P(2)(a)(i) of the I.T. Act, 1961. 2. The assessee pray that deduction under section 80P(2)(a)(i) of the Act is eligible, hence addition of Rs.14,24,450/- made by Ld. AO is unwarranted and bad in law and therefore be deleted. 3. Without prejudice to above, Assessee prays that Pro Rata Expenses for earning interest income be allowed. The Assessee prays that total expenditure incurred for the year stood at Rs.44,01,731/-, total income for the year stood at Rs.59,00,359/- and interest income on investment stood at Rs.14,22,001/-. Hence pro rata expenses for earning interest income of Rs.14,22,001/- as against total income of ITA Nos.276, 277 & 278/Ahd/2023 Assessment Years: 2015-16, 2018-19 & 2020-21 Page 2 of 4 Rs.59,00,359/- calculated at Rs.10,60,828/- be allowed based on various judgements pronounced by Hon. ITAT, Ahmedabad.” 3. Firstly we are taking A.Y. 2015-16. The assessee is a Co-operative Credit Society carrying on the business of banking and providing credit facilities to its members. The assessee filed return of income on 30.09.2015 declaring total income at Rs.nil. The return was processed under Section 143(1) of the Income Tax Act, 1961 and statutory notices were duly issued and served to the assessee. The Assessing Officer made disallowance of claim of the assessee under Section 80P(2)(a)(i) of the Act to the extent of Rs.11,32,670/- 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that the disallowance of pro rata expenses by denying deduction of Rs.10,60,828/- under Section 80P(2)(a)(i) of the Act is not justified on the part of the Assessing Officer. In assessee’s own case for A.Y. 2013-14 and 2014-15 proportionate expenses were allowed by the Tribunal. The Ld. AR submitted that the proportionate expense was allowed while computing income under Section 56 of the Act in case of Dashalad Co-operative Credit Society Limited and Laxmi Co-operative Society Limited. The Ld. AR submitted that the assessee has not claimed entire expenditure but the expenditure which has been actually incurred should have been allowed to the assessee and, therefore, pro rata expenses should have been allowed by the Assessing Officer. 6. The Ld. DR submitted that if the expenses have been incurred, it falls in the category of “income from other sources” and the assessee is entitled for the same under Section 57 of the Act. In fact, the CIT(A) in paragraph no.4.9 has allowed pro rata expenses to the extent of Rs.50,000/-. 7. Heard both the parties and perused all the relevant material available on record. The provisions of Section 80P(2)(a)(i) provides the deduction to the Co- operative Society who are engaged in the business of banking and providing credit facilities to its members and in fact the expenses from the income which have been incurred only and exclusively for the purpose of earning income should have been allowed. The contentions of the Ld. DR that Section 57 takes care of ITA Nos.276, 277 & 278/Ahd/2023 Assessment Years: 2015-16, 2018-19 & 2020-21 Page 3 of 4 proportionate expenses appear to be not justifiable as Section 57 will not be upheld for proportionate expenses. The provisions require to deduct only those expenses which have been incurred only and exclusively for the purpose of earning such income and for applying Section 57 expenses such as electricity, rentals, audits, printing and stationery cannot be exclusively for the purpose of earning interest income especially in the present case the expenses related to advertisement cannot be held as direct expenses towards incurring interest income. Therefore, it will be appropriate to direct the Assessing Officer to work out the interest income on the deposits from the Bank after deducting the corresponding expenses incurred by the assessee in generating the interest income. Such expenses have to be brought on record by the assessee based on cogent materials, after taking cognisance of the evidences related to these expenses directly for generating interest income. The Assessing Officer will verify the same and after deriving the corresponding interest cost borne by the assessee and the same should be allowed as deduction. Thus, appeal being ITA No.276/Ahd/2023 for A.Y. 2015-16 is partly allowed for statistical purpose. 8. As relates to ITA No.277/Ahd/2023 for A.Y. 2018-19, the Ld. AR submitted that the assessee has made investment in Baroda Central Co-operative Bank which is a Co-operative Society and earned interest there upon. Therefore, the Ld. AR submitted that the Assessing Officer should have been allowed 80P(2) deduction. The same was allowed by the CIT(A) and hence this ground is not pressed. 9. As regards to proportionate expenditure, the Ld. AR submitted that the assessee has rightly claimed deduction under Section 80P2(d) and, therefore, the expenses incurred for earning interest income should have been allowed. 10. The Ld. DR relied upon the order of the CIT(A) and the Assessment Order. 11. Heard both the parties and perused all the relevant material available on record. As regards to ground nos.1& 2, the assessee has categorically mentioned that the proportionate expenses should have been allowed which is on the similar line of A.Y. 2015-16 and, therefore, similar directions are applicable in the present case as well. Thus, ITA No.277/Ahd/2023 is partly allowed for statistical purpose. ITA Nos.276, 277 & 278/Ahd/2023 Assessment Years: 2015-16, 2018-19 & 2020-21 Page 4 of 4 12. As regards ITA No.278/Ahd/2023 for A.Y. 2020-21, the same is identical to A.Y. 2018-19 and hence the same is partly allowed for statistical purpose. 13. In the result, all the three appeals filed by the assessee are partly allowed for statistical purpose. Order pronounced in the open Court on this 9 th August, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 9 th day of August, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad