The Bhagyalaxmi Co.Op. Credit Society Ltd., Mehsana V. The Dy.CIT, Mehsana Circle, Mehsana

ITA 442/AHD/2022

AI Insights

The case involves The Bhagyalaxmi Co.Op. Credit Society Limited, a registered Co-operative Bank, which appealed against the order of the CIT(A), National Faceless Appeal Centre, Delhi. The dispute centered on the disallowance of a deduction claimed under Section 80P(2)(d) of the Income Tax Act, 1961, for interest income received from Mehsana Urban Co-operative Bank amounting to Rs. 17,30,372. The Assessing Officer initially disallowed this deduction, stating that Urban Co-operative Banks are outside the ambit of Co-operative Societies as per the Act. However, the Tribunal, referencing the decision of the Apex Court in Mavilayi Service Co-operative Bank Limited vs. CIT, found that the provision under Section 80P should be interpreted liberally to promote the cooperative sector and concluded that the interest income was indeed deductible.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129405 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-03-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 17-11-2022
• Other Referred Cases: Mavilayi Service Co-operative Bank Limited vs. CIT, SBI vs. CIT, Totgar's Co-operative Sales Society Limited vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 80P

Judgement Text

ITA No.442/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.442/Ahd/2022 Assessment Year: 2018-19 The Bhagyalaxmi Co.Op. Credit vs. Dy. Commissioner of Income Tax Society Limited, Mehsana Circle, Mehsana. 1 st Floor, Prabhu Complex, Near Patel Automobiles, Above HDFC Bank, Highway, Mehsana – 384 002. [PAN – AAAAT 4307 L] (Appellant) (Respondent) Assessee by : Shri Dhrunal Bhatt, AR Revenue by : Shri Sanjay Jain, Sr. DR Date of hearing : 02.03.2023 Date of pronouncement : 17.03.2023 O R D E R This appeal is filed by the Assessee against order dated 20.09.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19. 2. The assessee has raised the following ground of appeal :- “1. The Ld. CIT(Appeal) National Faceless Appeal Centre Delhi has erred in law and on fact of the case and not justified in confirming disallowance made by CIT(A) of Rs.17,30,372/-, the interest received from Co- operative Banks claimed u/s 80P(2)(d) of I.T. Act, 1961.” 3. The assessee is a Co-operative Bank and is a registered Co-operative Society having primary object of Co-operative Bank. The assessee society filed return of income on 23.09.2018 declaring total income of Rs. Nil. The case was selected for limited scrutiny on the ground that the assessee disclosed substantial amount of loans/advances/investments in shares in the balance sheet as compared to capital as per the income tax return whereas the total income, including exempt income, as per the income tax return is significantly low. The limited scrutiny was also in respect of the assessee’s claim related to deduction under Chapter VI-A. After taking cognisance of the evidences and the submissions, the Assessing Officer observed that the assessee has shown fixed deposit interest income and savings bank interest ITA No.442/Ahd/2022 Assessment Year: 2018-19 Page 2 of 3 income of Rs.11,34,554 but Rs.17,30,372/- was the actual interest,. The assessee claimed deduction under Section 80P(2)(d) for Rs.17,30,372/- which was interest received from Mehsana Urban Co-operative Bank. The Assessing Officer held that the Urban Co-operative Banks are out of ambit of Co-operative Societies and hence interest earned from them is not deductible under Section 80P(2)(d) of the Act. Hence, the Assessing Officer made addition of Rs.17,30,372/- thereby disallowing the deduction claimed under Section 80P(2)(d) of the Act. 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 is entitled for deduction under Section 80P(2)(d) of the Act as the interest was received from the Co-operative Bank which is society in the aboriginal and, therefore, relying on the decision of Apex Court in the case of Mavilayi Service Co-operative Bank Limited vs. CIT (2021) 123 taxman.com 161. 6. The Ld. DR relied upon the Assessment Order and the order of the CIT(A) as well as the decision of Hon’ble Gujarat High Court in the case of SBI vs. CIT, 389 ITR 578 and Totgar’s Co-operative Sales Society Limited vs. ITO, 188 Taxman 282 decided by the Hon’ble Apex Court. 7. Heard both the parties and perused all the relevant material available on record. The decision of the Hon’ble Apex Court in the case of Mavilayi Service Co- operative Bank Limited has taken a view that Section 80P being a benevolent provision enacted by the Parliament to encourage and promote the credit of the co- operative sector in general must be read liberally and reasonably. Various decisions especially that of Apex Court in Totgar’s Co-operative Sales Society Limited vs. ITO and SBI vs. CIT will not be applicable in the present case to the contest as the assessee has derived interest from member Co-operative Society Bank i.e. Mehsana Urban Co-operative Bank. This fact was not disputed by the Revenue. Urban Co- operative Bank which is coming under the ambit of Co-operative Societies as they are registered under the Societies Act and are into benefit of all the members of the Society. Thus, the Assessing Officer as well as the CIT(A) was not right in disallowing the deduction claimed under Section 80P(2)(d) of the Act. ITA No.442/Ahd/2022 Assessment Year: 2018-19 Page 3 of 3 8. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on this 17 th day of March, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 17 th day of March, 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