Shri Swashrai Mahila Nagrik Dhiran Sewa Co. Operative Mandali Limited, Vadodara V. Dy.CIT, Circle-1(1)(1), Vadodara

ITA 416/AHD/2022

AI Insights

The case involves Shri Swashrai Mahila Nagrik Dhiran, a Co-operative Society, appealing against the order of the CIT(A) which upheld the Assessing Officer's decision to tax the interest income earned from Co-operative Banks and belated income tax refunds. The assessee argued that the interest income from Co-operative Banks should be exempt under Section 80P(2)(d) of the Income Tax Act, 1961, and that the interest on belated tax refunds should not be taxed. The Tribunal examined the applicability of various judicial precedents and statutory provisions, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129394 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-04-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 02-11-2022
• Other Referred Cases: Mavilayi Service Co-operative Bank Limited vs. CIT, Surat Vankar Sahakari Sangh Limited vs. ACIT, Totgars Co-operative Sales Society vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANAN VAKIL
• Section: 271(1)(c); 143(2); 72

Judgement Text

ITA No.416/Ahd/2022 Assessment Year: 2018-19 Page 1 of 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.416/Ahd/2022 Assessment Year: 2018-19 Shri Swashrai Mahila Nagrik Dhiran vs. DCIT, Circle – 1(1)(1), Sewa Co-operative Mandali Ltd., Vadodara. 202, Saikruti Complex, 2 nd Floor, Harinagar Char Rasta, Vadodara – 390 025. [PAN – AAMAS 1105 R] (Appellant) (Respondent) Assessee by : Shri Manan Vakil, AR Revenue by : Ms. Chitra Soneji, Sr. DR Date of hearing : 19.04.2023 Date of pronouncement : 21.04.2023 O R D E R This appeal is filed by the Assessee against order dated 13.09.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19. 2. The Assessee has raised the following grounds of appeal :- “1. The learned AO has erred in computing the total income that of Rs.7,83,322/- as against that of income returned Rs.NIL by rejecting the claim made u/s.80P(2)(a)(i) or 80P(2)(d) of Rs.7,83,322/-. 2. In law and in fact and circumstances of the appellant’s case, the learned AO has grossly erred in charging interest under Section 234A/B/C/D of the Income Tax Act, 1961. 3. The learned AO is not justified in initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 with respect to above addition. 4. That the appellant pray to stay on demand of Rs.3,27,349/- made by learned AO for the year under consideration. 5. The appellant has preferred appeal to the CIT(A) against the order passed u/s.143(3). The learned CIT(A) dismissed the appeal. The appellant has preferred further appeal to the ITAT for the above mentioned grounds.” ITA No.416/Ahd/2022 Assessment Year: 2018-19 Page 2 of 3 3. The return of income was filed by the assessee Co-operative Society on 28.08.2018 declaring total income of Rs. Nil. The case was selected for limited scrutiny for the reason that the assessee made investment/advances/loans and claimed deduction under Chapter VI-A. Notice under Section 143(2) of the Income Tax Act, 1961 dated 23.09.2019 was issued and served upon the assessee. The assessee filed copy of Audited Balance Sheet and Profit & Loss account. During the year under consideration, the assessee has made fixed deposits in Bank of Baroda to the tune of Rs.87,03,496/- and given loans to the tune of Rs.4,26,77,679/- to its members as shown in Audited Balance Sheet. The assessee claimed various expenses and after that it calculated the total income at Rs.29,83,778/- and claimed deduction of Rs.87,34,116/- under Section 80P(2)(a)(i) of the Act. The assessee earned interest income to the tune of Rs.7,83,322/- from Baroda Central Co-operative Bank Limited and Shri Mahila Sewa Sahkari Bank Limited against project of National Skill Development Corporation for Training Programme amounting to Rs.18,489/-. The assessee also earned interest on income tax refund of Rs.1,217/-. The assessee claimed deduction under Section 80P(2)(d) of the Act which was rejected by the Assessing Officer and made addition of Rs.7,83,322/-. 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 assessee earned interest on fixed deposits held with Baroda Central Co-operative Bank Limited which is a Scheduled Bank but at the same time it is a Co-operative Bank, interest earned on income tax refund and interest earned on balance with Shri Mahila Sewa Sahkari Bank Limited which is also a Co- operative Bank. The Ld. AR relied upon the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. CIT (2021) 123 taxman.com 161 (SC). The Ld. AR also relied upon the decision of Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Limited vs. ACIT (2016) 72 Taxmann.com 169. As regards the interest earned on refund of income tax, the Ld. AR submitted that the Income Tax Department has given a refund belatedly and, therefore, the interest portion should not be denied to the assessee. 6. The Ld. DR relied upon the decision of Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society which has confirmed the decision of Hon’ble ITA No.416/Ahd/2022 Assessment Year: 2018-19 Page 3 of 3 Karnataka High Court (2017) 83 Taxmann.com 140. The Ld. DR submitted that the Hon’ble Gujarat High Court’s decision in the case of Surat Vankar Sahakari Sangh Limited (supra) is distinguishable to the assessee’s case. The Ld. DR further submitted that as relates to interest on income tax refund, the same should be taxed. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the interest earned on the fixed deposit was from Co-operative Banks which is allowable under Section 80P(2)(d) of the Act. Following the ratio of Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Limited vs. ACIT (supra), the assessee is entitled for deduction under Section 80P(2)(d) of the Act in respect of gross interest received from Co-operative Bank without adjustment of interest to the said Bank. As regards the interest earned on income tax refund, the Department/Revenue has refunded the income tax dues belatedly and the interest earned thereon cannot be once again taxed. Therefore, this element was not rightly disallowed by the Assessing Officer as well as CIT(A). The decision of Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society (supra) is on a different footing and will not be applicable in the present case. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on this 21 st day of April, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 21 st day of April, 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