Matar Taluka Local Board Teachers Co Operative Credit Society Ltd., Kheda V. The DCIT, Kheda Circle, Nadiad

ITA 431/AHD/2023

AI Insights

The appeals by Matar Taluka Local Board Teachers Co-operative Credit Society Ltd. challenge the orders of the CIT(A), National Faceless Appeal Centre, Delhi, for the Assessment Years 2018-19 & 2020-21. The primary issues revolve around the treatment of interest income from Fixed Deposits (FDRs) and the applicability of deductions under Section 80P of the Income Tax Act. The Assessing Officer had treated the interest income from investments in Scheduled Banks as 'income from other sources' and denied deductions under Section 80P. The tribunal, referencing decisions from the Gujarat High Court, allowed the deduction for interest income from Kheda District Co-operative Bank Limited but not for Bank of Baroda.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129763 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-09-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 25-05-2023
• Other Referred Cases: CIT vs. Sabarkantha District Co-operative Milk Producers Union Limited, Surat Vankar Sahakari Sangh Limited vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings
• Section: 80P; 143(2)

Judgement Text

ITA Nos.430 & 431/Ahd/2023 Assessment Years: 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.430 & 431/Ahd/2023 Assessment Years: 2018-19 & 2020-21 Matar Taluka Local Board Teachers Co-operative Credit Society Ltd., E 107-108, City Centre, Opp. Bus Stand, Matar, Kheda, Gujarat – 387 530. [PAN – AADAM 7938 F] Vs. D.C.I.T., Kheda Circle, Nadiad. (Appellant) (Respondent) Assessee by Shri Parin S. Shah, AR Revenue by Ms. Saumya Pandey Jain, Sr. DR Da te o f He a r in g 04.09.2023 Da te o f P ro n o u n ce m e n t 10.11.2023 O R D E R These two appeals are filed by the Assessee against two different orders, both dated 06.04.2023, passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Years 2018-19 & 2020-21. 2. The assessee has raised identical grounds in both the appeals and hence grounds raised in ITA No.430/Ahd/2023 for A.Y. 2018-19 are being reproduced as under:- “1. The order passed by AO and confirmed by NFAC is bad in law and required to be quashed. 2. Ld. NFAC erred in law and on facts in making addition of Rs.7,56,574/- of interest income on FDR ignoring fact that said income is eligible for deduction u/s.80P(2)(a)(i) of the Act as appellant is engaged in providing facilities to its members. 3. Ld. NFAC erred in law and on facts in treating business income as income from other sources. 4. Ld. NFAC erred in law and on facts in not granting deduction of Rs.6,10,624/- of interest earned from FDR with cooperative bank as same is eligible for deduction u/s.80P(2)(d) of the Act. ITA Nos.430 & 431/Ahd/2023 Assessment Years: 2018-19 & 2020-21 Page 2 of 4 5. Ld. NFAC ought to have allowed proportionate expenditure for earning interest income which is treated as income from other sources. 6. Ld. NFAC erred in law and on facts in not allowing deduction of Rs.5982 of dividend earned from co-operative bank. 7. Ld. NFAC ought to have considered fact that co-operative bank is cooperative society and they cannot grant loans to non-members and accordingly eligible for deduction u/s.80P(2)(a)/80P(2)(d) of the Act. 8. Initiation of penalty proceedings u/s.270A is unjustified. 9. Charging of interest u/s.234B is unjustified.” 3. Firstly we are taking Assessment Year 2018-19. The assessee filed its return of income on 18.08.2018 declaring total income at Rs.nil. The case was selected for complete scrutiny assessment on the issue of deduction from total income under Chapter VI-A. Subsequently, notice under Section 143(2) of the Income Tax Act, 1961 was issued to the assessee on 22.09.2019 under the new E-Assessment Scheme and was duly served upon the assessee. In response to the statutory notices, the assessee submitted details as called for which has been considered by the Assessing Officer and after examining the same, the Assessing Officer observed that the assessee is a Co-operative Society and engaged in the business of providing credit facility to its members. The Assessing Officer further observed that the assessee has earned interest of Rs.7,56,574/- on investment made with Scheduled Bank which is in addition to advancing loan to its members and the same falls under the head ‘income from other sources’. Thus, the investment made with Scheduled Bank is not allowed as deduction under Section 80P of the Act. The assessee submitted before the Assessing Officer that the assessee is earning the interest from Kheda District Co-operative Bank Limited of Rs.6,10,624/- and the Co-operative Banks are also Co-operative Society and, therefore, deduction under Section 80P2(d) of the Act should be allowed. The Assessing Officer after considering the same has made addition of Rs.7,56,574/- in respect of interest income received from deposit/investment in Co-operative Bank. The Assessing Officer also made addition of Rs.5,982/- as shown dividend income which was claimed as deduction under Section 80P of the Act. ITA Nos.430 & 431/Ahd/2023 Assessment Years: 2018-19 & 2020-21 Page 3 of 4 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 assessee has earned income from Kheda District Co-operative Bank Limited of Rs.6,10,624/- and in the light of various decisions including the decision of Hon’ble Gujarat High Court in the case of CIT vs. Sabarkantha District Co-operative Milk Producers Union Limited (Tax Appeal No.473 of 2014, order dated 16.06.2014, as well as the decision in the case of Surat Vankar Sahakari Sangh Limited vs. ACIT, 421 ITR 134. The Ld. AR submitted that as regards the interest income earned from Bank of Baroda, the proportionate expenses be allowed on the net profit only. 6. The Ld. DR reeled upon the Assessment Order and the order of CIT(A). 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has earned interest from Kheda District Co-operative Bank Limited to the extent of Rs.6,10,624/- and thus this being the Co-operative Bank the assessee society is eligible for deduction under Section 80P(2)(d) to that extent only. This aspect has not been taken into consideration by the CIT(A) in light of the decision of Hon’ble Gujarat High Court in the case of Sabarkantha District Co-operative Milk Producers Union Limited. Thus, deduction under Section 80P(2)(d) of the Act be allowed to the extent of Rs.6,10,624/- 8. As regards the remaining amount of interest earned by the assessee, the same is derived from Bank of Baroda and, therefore, the contention of the assessee that expenses incurred for earning interest income on the FDRs from Bank of Baroda be allowed, but deduction under Section 80P of the Act will not be applicable with the interest earned on the FDR from Bank of Baroda. Thus, ITA No.430/Ahd/2023 for A.Y. 2018-19 is partly allowed. 9. As regards ITA No.431/Ahd/2023 for A.Y. 2020-21, the assessee submitted that the assessee has earned interest income only from Kheda District ITA Nos.430 & 431/Ahd/2023 Assessment Years: 2018-19 & 2020-21 Page 4 of 4 Co-operative Bank Limited and, therefore, the issue involved is identical to that of A.Y. 2018-19 and the same directions are applicable in the present case. Hence, ITA No.431/Ahd/2023 for A.Y. 2020-21 is allowed. 10. In the result, ITA No.430/Ahd/2023 for A.Y. 2018-19 is partly allowed and ITA No.431/Ahd/2023 for A.Y. 2020-21 is allowed. Order pronounced in the open Court on this 10 th November, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 10 th November, 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