Appeal Details
Counselvise Citation
[2022] 103 COUNSELVISE.COM (IT) 9725 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-10-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Next Hearing Date
19-10-2022
Assessment Year
2017-2018
Appeal Filed On
30-05-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, PUNE BEFORE SHRI PARTHA SARATHI CHAUDHURY, JM आयकर अपील सं. / ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Limited Gala No.2, Vikas Theater Building, Ashok Stambh, Nashik – 422202 PAN : AABAN7006R .......अपीलार्थी / Appellant बनाम / V/s. The Income Tax Officer, Ward-1(2), Nashik ......प्रत्यर्थी / Respondent Assessee by : Shri Sanket Milind Joshi Revenue by : Shri Piyush Kumar Singh Yadav स ु नवाई की तारीख / Date of Hearing : 20-10-2022 घोषणा की तारीख / Date of Pronouncement : 26-10-2022 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the assessee emanates from the order of the National Faceless Appeal Centre (NFAC), Delhi, dated 26.03.2022 for assessment year 2017-18 as per the grounds of appeal on record. 2. At the very outset, the ld. AR submitted that there is a delay of 6 days in filing the appeal before the Tribunal. The assessee had filed condonation petition and an affidavit. I have gone through the contents of the condonation petition and affidavit and the reasons enumerated therein. I am of the considered view that such a delay of 6 days cannot be held to 2 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. be attributable to the deliberate or malafide conduct of the assessee. The delay was purely circumstantial and un-intentional. The ld. DR did not had any objection for condonation of the delay. Accordingly, I condone the delay of 6 days and the case is heard on merits. 3. The only issue for adjudication is the confirmation of addition of Rs.1,98,659/- on account of disallowance of interest received from banks other than Co-operative banks as per section 80P(2)(a)(i) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). The Assessing Officer (AO) observes in para 5 of his order that from verification of details of interest received by the society i.e. the assessee, it is ascertained that out of total interest received of Rs.54,89,421/-, an amount of interest of Rs.1,98,659/- was received from the banks other than Co-operative society and other Co- operative banks. The details are as under: “1. IDBI Bank Saving Account Rs.35,788/- 2. Kottak Mahendra Bank Saving Account Rs.88,349/- 3. Yes Bank Saving Account Rs.74,522/- ------------------- Total Rs.1,98,659/- -------------------” 4. That before the AO it was contended by the assessee that as per provisions of section 80P(2)(a)(i) of the Act, income earned from the activity which is attributable to the business of the assessee, then deduction is allowable under the said provision. In this case, it is undisputed that the assessee is a credit co-operative society and the business is to provide credit facilities to its members. It is the case of assessee that many a times when the loan is issued to its members and interest received on the basis 3 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. of such loan given, there are certain funds which are in excess with the assessee and not required for immediate consumption. These funds are invested on short term basis in various banks and interest is earned. This is very much attributable to the business of the assessee society and hence, deductible u/s 80P(2)(a)(i) of the Act. The ld. AO did not find favour with the arguments of assessee and went with the strict interpretation of the Statute where it is said that the business attributable to the assessee means only the interest amount received from its members. But in this case, it was the interest income from banks other than Co-operative banks and co-operative societies. Therefore, it cannot be held to be attributable to the business activities of the assessee. The AO disallowed the interest received from Nationalized banks on investments other than co-operative banks at Rs.1,98,659/- and added to the income of assessee as ‘Income from other sources’. The ld. CIT(A) echoed the voice of the ld. AO and held that the provisions of section 80P(2)(a)(i) of the Act are unambiguous wherein only the income from activity of financing from the members is eligible as deduction under the said provision. If there is any income arising to the co-operative society from non-members, that will not be subject to deduction u/s 80P(2)(a)(i) of the Act. In this case, therefore, the interest on investments earned from Nationalized banks by the assessee society was therefore held to be not allowed as deduction u/s 80P(2)(a)(i) of the Act and the addition was confirmed in the hands of assessee. 5. The ld. DR supported the orders of subordinate authorities. Per contra, the ld. AR submitted that the provisions of section 80P(2)(a)(i) are absolutely clear that the deduction will be allowed on the whole of the amount of profits and gains of business attributable to the business 4 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. activities of assessee and in this case, the assessee falls within section 80P(2)(a)(i) of the Act i.e. carrying on the business of banking or providing credit facilities to its members. The contention of ld. AR was that when the assessee society is having surplus funds and are not required for immediate consumption, those are invested on short term basis in the Nationalized banks and interest earned therefrom. The basic fact of the entire transaction is that the assessee is able to have that funds only through the business of providing credit facilities to the members for which it gets interest amount as chargeable from the members, meaning thereby, without this business activity the assessee society would not have got any surplus money. Therefore, this investment in nationalized banks as regards the surplus amount is an activity which is attributable to the business activity of the assessee. Thus, deduction u/s 80P(2)(a)(i) of the Act is allowable. 6. I have heard the rival contentions and analyzed the facts and circumstances and considered the judicial pronouncements placed on record. Admittedly, the assessee is a co-operative society carrying on the business of banking and providing credit facilities to its members thereby the assessee is covered within provisions of section 80P(2)(a)(i) of the Act. Further, the provision says that the whole of the amount of such profits and gains of business would be allowable as deduction under this provision if it is attributable to the activities of the assessee’s business. In the present scenario, the Revenue has denied deduction of Rs.1,98,659/- as interest earned from investments in nationalized banks since it is earned from non-members and from the banks other than the co-operative banks or societies. It is the contention of the Department that the 5 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. provision being unambiguous, it is only the income earned through the business activity from the members of the co-operative society that such deduction is allowable, if it is from outside the members, such income would not fall within purview of said provision. On the other hand, the assessee has contended that there is no dispute that the assessee is a credit co-operative society providing credit facilities to its members. So, therefore, the amount of money earned is an extension of its business activity and therefore attributable to the business of the assessee society and thus, an allowable deduction. 7. I find in a recent decision of Pune Tribunal exactly an identical issue was adjudicated in ITA No.388/PUN/2022 for A.Y. 2017-18, order dated 01.09.2022. The relevant paras are extracted as follows: “2. The assessee is aggrieved by the denial of deduction u/s.80P in respect of interest of Rs.9,46,230/- earned from deposits kept with nationalised banks. 3. I have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of assessee. However, this issue is no more res integra by virtue of series of orders passed by the Pune Tribunal. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon’ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). I, therefore, overturn the impugned order on this score and allow the deduction.” 6 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. 8. In the aforesaid decision, the Tribunal relied on the decision of Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (2015) 230 Taxman 309 (Kar) allowing deduction u/s 80P(2)(a)(i) of the Act on interest income in the identical facts and circumstances. In another decision of the Pune Bench in ITA No.1700/PUN/2017, dated 27.12.2021, it was held as follows: “9. We heard the rival submissions and perused the material on record. Admittedly, the appellant is a Cooperative society formed under the provisions of Maharashtra Cooperative Societies Act,1960 with the objective of accepting deposits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Baroda in the form of Fixed Deposit. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The AO as well as the CIT(A) were of the opinion that the interest earned from third parties or non-members does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as ‘income from other sources’ There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon’ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon’ble Delhi High Court in the case of Mantola Co-operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon’ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon’ble Telangana and Hon’ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [(2017) 396 ITR took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s.80P(2)(a)(i) of the Act. The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12-2018) has taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal No. 1 & 2 stands allowed.” 9. In the aforesaid decision also, the Tribunal relied on another decision of Co-ordinate Bench of Pune in ITA Nos.559/560/PUN/2018, 7 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. order dated 11.12.2018 which has also taken a view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (supra). 10. Therefore, these decisions clearly have extended the scope and ambit and interpretation of the word ‘profits and gains of business’ attributable to the activities of the assessee in a way that it has been considered when the assessee is in the business of providing credit facilities and earning interest from its members, the basic premise of that fund arises from the said business activity of the assessee society only. In the absence of that business, there would not have been any question of having surplus fund. Once that surplus fund is accumulated, those are given on investment for short term basis in nationalized banks and interest earned therefrom. This activity is, therefore, held as not alien or foreign to the primary business activity of the assessee society. In view thereof, I set aside the order of ld. NFAC and direct the AO to grant deduction to the assessee u/s 80P(2)(a)(i) of the Act for Rs.1,98,659/-. 11. In the result, the appeal of assessee is allowed. Order pronounced in the open court on 26 th October, 2022. Sd/- Sd/- Sd PARTHA SARATHI CHAUDHURY JUDICIAL MEMBER प ु णे / Pune; दिनाांक / Dated : 26 th October, 2022 GCVSR/Ankam आदेश की प्रतिललपप अग्रेपिि / Copy of the Order forwarded to : 8 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent 3. The concerned CIT (Appeals), Pune. 4. The concerned Pr.CIT, Pune. 5. DR, ITAT, “SMC” Bench, Pune. 6. गार्ड फ़ाइल / Guard File. //सत्यापपत प्रतत// True Copy// आिेशान ु सार / BY ORDER, वररष्ठ तनजी सचिव / Sr. Private Secretary आयकर अपीलीय अचिकरण, प ु णे / ITAT, Pune 9 ITA No.442/PUN/2022 Nirmiti Nagari Sahakari Patsanstha Ltd. Date 1 Draft dictated on 20-10-2022 Sr.PS 2 Draft placed before author 20-10-2022 Sr.PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 26-10-2022 Sr.PS/PS 7 Date of uploading of order 26-10-2022 Sr.PS/PS 8 File sent to Bench Clerk 26-10-2022 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order
