Raghuraj Co.Op. Credit Soc. Ltd., Mehsana V. The Income tax Officer, Ward-5, Patan

ITA 311/AHD/2022

AI Insights

The case involves Raghuraj Co. Op. Credit Society Ltd., a cooperative credit society, which appealed against the order of the CIT(A) that upheld the disallowance of interest income claimed under Section 80P(2)(d) of the Income Tax Act, 1961. The interest income of Rs.22,68,790 was received from other cooperative banks, and the primary legal contention was whether such income qualifies for deduction under the specified section. The Assessing Officer and CIT(A) had disallowed the claim based on a Supreme Court decision in Totgar's Co-operative Sale Society Limited vs. ITO, which the Tribunal found not applicable in this context, citing a relevant Gujarat High Court decision that supported the assessee's position.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129363 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 15-08-2022
• Other Referred Cases: Totgar's Co-operative Sale Society Limited vs. ITO, 322 ITR 283 (SC), State Bank of India vs. CIT (2016), 72 taxmann.com 64
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Co-operative Credit Society
• Section: 80P; 72

Judgement Text

ITA No.311/Ahd/2022 A.Y. 2017-18 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.311/Ahd/2022 Assessment Year: 2017-18 Raghuraj Co. Op. Credit Society Ltd., vs. Income Tax Officer, Opp. Market Yard, Ward – 5, Patan. Vijapur, Road, Vijapur, Mehsana – 382 870. [PAN – AAAAT 9730 D] (Appellant) (Respondent) Assessee by : Shri S.N. Divatia, AR & Shri Samir Vora, AR Respondent by : Shri Atul Pandey, Sr. DR Date of hearing : 02.01.2023 Date of pronouncement : 06.01.2023 O R D E R This appeal is filed by the Assessee against the order dated 27.06.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18. 2. The grounds of appeal raised by the assessee are as under :- “1.1 The order u/s.250 passed on 27.06.2022 by NFAC, Delhi upholding the disallowance u/s.80P(2)(d) of Rs.22,68,790/- being interest income from investment with Co. Op. Banks is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. NFAC has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned disallowance. 2.1 The Ld. NFAC has grievously erred in law and on facts in confirming disallowance u/s.80P(2)(d) of Rs.22,68,790/- being interest income from investment with Co. Op. Banks. ITA No.311/Ahd/2022 A.Y. 2017-18 Page 2 of 4 2.2 That in the facts and circumstances of the case as well as in law, the Ld. NFAC ought not to have upheld disallowance u/s. 80P(2)(d) of Rs.22,68,790/- being interest income from investment with Co. Op. Banks.” 3. The assessee is a co-operative credit society registered under Gujarat Co- operative Society Act and is Primary Co-operative Credit Society providing credit facilities and saving deposit scheme for its members. The income of the assessee is legible for deduction under Section 80P of the Income Tax Act, 1961. The return of income was filed declaring total income of Rs. nil after claiming deduction of Rs.27,17,502/- under Section 80P of the Act. The assessee received interest income from Dena Gujarat Gramin Bank, Mehsana District Central Co-operative Bank and Mehsana Urban Co-operative Bank to the extent of Rs.22,68,790/-,. The Assessing Officer made addition of Rs.22,68,719/- thereby disallowing the claim under Section 80P(2)(d) by relying on the decision of Hobble Supreme Court in the case of Totgar’s Co-operative Sale Society Limited vs. ITO, 322 ITR 283 (SC). 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The Ld. AR submitted that the decision of Hon’ble Gujarat High Court in the case of State Bank of India vs. CIT (2016), 72 taxmann.com 64, is in favour of the assessee wherein it was held that if the appellant wants to avail of the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under Section 80P(2)(d) of the Act. Ld. AR further submitted that the Hon’ble Apex court decision in the case of Totgar’s Co-operative Sale Society Limited (supra) is not applicable in the present case because the assessee is a co-operative credit society and invested/received interest income from other societies which are Dena Gujarat Gramin Bank, Mehsana District Central Co-op Bank and Mehsana Urban Co-op. Bank which are coming under the purview of Gujarat Co-operative Society Act. 6. The Ld. DR submitted that the Hon’ble Apex Court in Totgar’s Co-operative Sale Society Limited (supra) had clearly mentioned that it would not make a difference whether the interest income is earned from investments/deposits made in Scheduled ITA No.311/Ahd/2022 A.Y. 2017-18 Page 3 of 4 Bank or in a Co-operative Bank. Therefore, the Co-operative Bank is also not a member of the Society and, therefore, the addition made by the Assessing Officer was justifiable. 7. Heard both the parties and perused all the relevant material available on record. It is not disputed that the assessee is a Co-operative Society registered under Gujarat Co-operative Society Act and is Primary Co-operative Credit Society engaged in providing credit facilities to its members by accepting deposits from members. The assessee society received interest income from Dena Gujarat Gramin Bank, Mehsana District Central Co-op Bank and Mehsana Urban Co-op. Bank which are also registered under the Co-operative Society Act. Section 80P(2)(d) clearly mentions that when a Society is receiving income by way of interest from its investment with any other Co-operative Society, the whole of such income can be claimed as deduction under Section 80P(2)(d) of the Act. The Assessing Officer as well as CIT(A) has not doubted that these three Banks from whom assessee society received the interest are not coming under the purview of Societies’ Act. Therefore, the decision of the Hon’ble Supreme Court to that extent will not be applicable in the present case and the decision of Hon’ble Jurisdictional High Court in the case of State Bank of India and the observations therein is clearly applicable in the present case. Thus, appeal of the assessee is allowed. 8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on this 6 th day of January, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 6 th day of January, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File ITA No.311/Ahd/2022 A.Y. 2017-18 Page 4 of 4 By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad