Shrinath Co. Op. Credit Society Ltd., Modasa V. The ACIT, S.K.Circle, Himatnagar

ITA 389/AHD/2022

AI Insights

The case involves Shrinath Co. Op. Credit Society Limited appealing against the orders of the CIT(A), National Faceless Appeal Centre, Delhi, for the Assessment Years 2015-16, 2017-18, and 2018-19. The primary issue was the disallowance of interest income deductions under Section 80P of the Income Tax Act, 1961, which the Assessing Officer initially allowed but later disallowed upon reopening the assessment. The Tribunal examined whether the reopening of the assessment was justified and whether the interest income from investments in cooperative banks was deductible under Section 80P(2)(a)(i) and 80P(2)(d). The Tribunal concluded that the reopening was justified and that the interest income was indeed deductible, referencing key Supreme Court decisions that supported the assessee's position.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129756 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-01-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 17-10-2022
• Other Referred Cases: Pr. CIT vs. Ekta Co-operative Credit Society Limited, CIT vs. Jafari Momin Vikas Co-operative Credit Society Limited, ACIT vs. Peoples Co. Op. Credit Society Limited, Mavilayi Service Co-operative Bank Limited vs. Commissioner of Income Tax, Totgars Co-op. Sale Society Limited vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Change of opinion
• Section: 147; 143(3); 80P

Judgement Text

ITA Nos.389, 390 & 391/Ahd/2022 Assessment Years: 2015-16, 2017-18 & 2018-19 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA Nos.389, 390 & 391/Ahd/2022 Assessment Years: 2015-16, 2017-18 & 2018-19 Shrinath Co. Op. Credit Society Limited, vs. The A.C.I.T., Khadayata Board, S.K. Circle, Himmatnaga. Near ST Stand, Dist. Sabarkantha. Modasa – 383 315. Dist. Sabarkantha Gujarat. [PAN – AAAAS 4774 N] (Appellant) (Respondent) Assessee by : Shri A.C. Shah, AR Revenue by : Shri Rakesh Jha, Sr. DR Date of hearing : 24.01.2023 Date of pronouncement : 08.02.2023 O R D E R These three appeals are filed by the Assessee against three different orders, all dated 30.09.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Years 2015-16, 2017-18 & 2018-19. 2. The assessee has raised identical grounds in all these appeals and hence grounds raised in ITA No.389/Ahd/2022 for A.Y. 2015-16 are being reproduced hereunder: “1. The learned CIT(A) has erred in confirming the reopening of the assessment in as much as the AO has considered the facts of the case and thereafter allowed the deduction under Section 80P(2)(a)(i), therefore it is nothing but change of opinion. 2. The learned CIT(A) has erred in confirming the disallowance of interest of Rs.24,69,373/- on FD with the SK Dist Co. Op. Bank and other Nationalized Banks under Section 80P(2)(a)(i) and under Section 80P(2)(d) in as much as the assessee is a co-operative credit Society and has received the interest from the SK Dist Co. Op. Bank and other Nationalized banks carrying on business in banking and therefore the interest is deductible under Section 80P(2)(a)(i) as per following cases: (i) Pr. CIT vs. Ekta Co-operative Credit Society Limited, 91 taxman.com 42, 402 ITR 85 (Guj.) ITA Nos.389, 390 & 391/Ahd/2022 Assessment Years: 2015-16, 2017-18 & 2018-19 Page 2 of 4 (ii) CIT vs. Jafari Momin Vikas Co-operative Credit Society Limited (2014) 49 taxmann.com 571, 362 ITR 331 (Guj). (iii) ACIT vs. Peoples Co. Op. Credit Society Limited (2019) 107 txmann.com 53 (Ahmedabad Trib)(SB) 2019 177 ITD 25 (Ahmedabad Trib) (SB). And further investment made it out of operational funds and not out of surplus funds and therefore the SC decision in case of Totgars Co- op. Sale Society Limited vs. ITO, 322 ITR 283 is not applicable on the facts of the case. 2.1 The appellant says and submits that the jurisdictional high court decision is binding and that the other high court decisions is not binding – CIT vs. Thana Electricity Supply Limited, 206 ITR 727 Bom. 3. The learned CIT(A) has erred in not following recent SC decision in case of Mavilayi Service Co-operative Bank Limited vs. Commissioner of Income Tax in 431 ITR 1 (SC) 4. The learned CIT(A) has erred in following the SC decision in case of Totgars Co-op. Sale Society Limited vs. ITO 322 ITR 283 which is not applicable on the facts of the case.” 3. We are taking up appeal for the A.Y. 2015-16 as in all these appeals the issue is identical. 4. The assessee society filed return of income on 24.09.2015 for Assessment Year (A.Y.) 2015-16 declaring total income of Rs.nil after claiming deduction under Section 80P of Rs.24,69,373/-. The assessment under Section 143(3) of the Income Tax Act, 1961 was completed on 20.06.2017 assessed total income of Rs.nil. On verification of the case records, the Assessing Officer noticed that the assessee received interest on FDRs from Co-operative Banks and Nationalised Banks amounting to Rs.34,63,999/- on which deduction under Section 80P(2)(d) of the Act is not admissible because the deduction is admissible for interest income received from Co-operative Societies and the case was reopened under Section 147 after taking prior approval of the Addl. Commissioner of Income Tax. The assessee company is a Co-operative Society of Modasa Taluka in the Aravalli District and engaged in the business of providing credit facilities to its members. The assessee society earned net income of Rs.24,18,618/- from the total receipts of Rs.95,61,841/-. The assessee made investment with Bank S.K. District Central Co-operative Bank Limited and other nationalised banks and, therefore, earned interest income of Rs.35,34,700/-. The ITA Nos.389, 390 & 391/Ahd/2022 Assessment Years: 2015-16, 2017-18 & 2018-19 Page 3 of 4 Assessing Officer after taking cognisance of the submissions of the assessee disallowed Rs.24,69,373/- in respect of deduction under Section 80P claimed by the assessee. 5. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 6. The Ld. DR submitted that reassessment itself is bad as the issue related to deduction under Section 80P of the Act has already been verified in the original assessment under Section 143(3) or\f the Act. Besides that, the Assessing Officer did not find any new material for reopening the assessment. As relates to merit of the case, the Ld. AR relied upon the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited & Others vs. CIT, 431 ITR 1 (SC). The Ld. AR submitted that the Society to be eligible must be one providing credit facilities to its members – does not necessarily mean agricultural credit alone. The Ld. AR distinguished the decision of Hon’ble Apex Court in the case of Totgar’s Co-operative Sales Society Limited vs. ITO, 352 ITR 283 (SC) and the decision of Hon’ble Gujarat High Court in the case of SBI Employees Co-operative Credit & Supply Society Limited vs. CIT (2016) 389 ITR 578 (Guj). 7. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). The Ld. DR further submitted that the Hon’ble Apex Court in the case of Totgar’s Co- operative Sales Society Limited (supra) denied the admissibility of Section 80P(2)(d) deduction to the assessee Co-operative Society with respect to interest income earned on investments made in Co-operative Banks. 8. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited (supra) has considered the investments and the income derived from the interest income in respect of Co-operative Banks as well as other Banks. As regards to reopening, the Assessing Officer, after taking proper approval has reopened the issue because the Assessing Officer has not taken the cognisance of the decisions of the Hon’ble Apex Court. Therefore, the reopening is justifiable and the contentions of the assessee is rejected. As regards the decision of ITA Nos.389, 390 & 391/Ahd/2022 Assessment Years: 2015-16, 2017-18 & 2018-19 Page 4 of 4 Mavilayi Service Co-operative Bank Limited (supra), the Hon’ble Apex Court has clearly mentioned that deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding word “agriculture” into Section 80P(2)(a)(i) of the Act when it is not there. In the present case, the assessee society has invested business income with S.K. District Central Co-operative Bank Limited which is member of Co-operative Society and such investments and interest earned thereon is coming under the purview of deduction under Section 80P of the Act in consonance with the decision of Hon’ble Apex Court in the case of Totgar’s Co-operative Sales Society Limited (supra). Thus, the Assessing Officer as well as the CIT(A) has not taken cognisance of the decisions of Hon’ble Apex Court in respect of Totgar’s Co- operative Sales Society Limited as well as Mavilayi Service Co-operative Bank Limited. Hence, ITA No.389/Ahd/2022 for A.Y. 2015-16 is allowed. 9. As regards to ITA Nos.390/Ahd/2022 & 391/Ahd/2022, the same are identical in nature and hence both the appeals are allowed. 10. In the result, all the appeals of the assessee are allowed. Order pronounced in the open Court on this 8 th day of February, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 8 th day of February, 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