Sri. Matha Vividodeesha Pathina Souharda , Pavagada V. Income Tax Officer,Ward-1 & TPS, , Tumkur

ITA 445/BANG/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6085 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-10-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 05-06-2023
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 80P; 250; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC - A” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT ITA No.445/Bang/2023 Assessment Year : 2018-19 M/s. Sri Matha Vividoddesha Pathina Souharda Sahakari Niyamitha, Kuvempu Road, Pavagada – 561 202. PAN : AAQAS 3205 A Vs.CIT(A), Bengaluru. APPELLANTRESPONDENT Assessee by:Shri.Balram R.Rao, Advocate Revenue by :Shri.Ganesh R Ghale, Advocate, Standing Counsel for Revenue. Date of hearing:25.10.2023 Date of Pronouncement:27.10.2023 O R D E R This appeal at the instance of the assessee is directed against CIT(A)’s order dated 20.03.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19. 2. Brief facts of the case are as follows: Assessee is a society registered under the Karnataka Souharda Societies Act, 1997. For the Assessment Year 2018-19, the return of income was filed on 27.10.2018 declaring ‘Nil’ income, after claiming deduction under section 80P of the Act, amounting to Rs.47,85,078/-. The assessment was completed under section 143(3) of the Act, vide order dated 25.05.2021, by disallowing the claim of deduction under section 80P of the Act. ITA No.445/Bang/2023 Page 2 of 5 3. Aggrieved by the order of the assessment denying the claiming of deduction under section 80P of the Act, assessee filed appeal before the First Appellate Authority. The CIT(A) partly allowed the claim of deduction under section 80P of the Act. The CIT(A) held that in assessee’s own case for Assessment Year 2017-18, Hon’ble Karnataka High Court in ITA No.35093/2019 (vide judgment dated 18.10.2021) had held that assessee society is a Co-operative Society within the meaning of section 2(19) of the Act, and is eligible for deduction under section 80P of the Act. However, the CIT(A), out of the total claim of deduction of Rs.47,85,078/- under section 80P of the Act, confirmed the disallowance to the extent of Rs.20,14,890/-. The CIT(A) denied the claim under section 80P(2)(d) of the Act (refer para 9.5.5 of the CIT(A)’s order). The CIT(A) held that assessee had received the interest income on investments made with banks and not co-operative societies, hence, was not entitled to deduction under section 80P(2)(d) of the Act. The CIT(A) relied on judgment of Hon’ble jurisdictional High Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd., reported in 395 ITR 611 (Karn.). The CIT(A) also denied the claim under section 80P(2)(a)(i) of the Act for the aforesaid amount (refer para 9.6.1 of the CIT(A)’s order) by holding that interest income is not earned by providing credit facilities to the assessee’s members and hence the claim cannot be granted. 4. Aggrieved by the order of the CIT(A) in disallowing the claim of deduction under section 80P to the extent of Rs.20,14,890/-, assessee has preferred the present appeal before the Tribunal. The assessee has raised elaborative and argumentative grounds before the Tribunal. However, during the course of arguments, the learned Counsel for the assessee submitted that the solitary contention that is raised by the assessee before the Tribunal is that it is entitled to deduction under section 80P(2)(d) of the Act with respect to interest income earned out of investments with co-operative banks. Alternatively, it was also contended that if the interest income is to be assessed as income from other ITA No.445/Bang/2023 Page 3 of 5 sources, the expenditure incurred for earning such income ought to be allowed as a deduction under section 57 of the Act. In this context, the learned AR relied on the judgment of the Hon’ble jurisdictional High Court in the case of Totagars Sale Co-operative Society Limited Vs. ITO [2015] 58 taxmann.com 35 (Karnataka). 5. The learned Standing Counsel supported the order of the CIT(A). 6. I have heard the rival submissions and perused the material on record. The admitted fact is that assessee has earned interest income amounting to Rs.20,14,890/- out of the investment made with co-operative banks. The Hon’ble jurisdictional High Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd., reported in 395 ITR 611 (Karn.) had categorically held that interest income earned by co-operative societies from investments made with a co- operative bank is not entitled to deduction under sections 80P(2)(d) or 80P(2)(a)(i) of the Act. The Bangalore Bench of the Tribunal in the case of M/s. Vasavamba Co-operative Society Ltd., Vs. The PCIT in ITA No.453/Bang/2020 had followed the above dictum of the Hon’ble jurisdictional High Court and held that the assessee is not entitled to deduction under sections 80P(2)(a)(i) nor 80P(2)(d) of the Act, with regard to interest income received from co-operative banks. The relevant finding of the Hon’ble jurisdictional High Court and the Tribunal has been extracted in the impugned order of the CIT(A). Hence, the same is the not reiterated here. Therefore, the claim of the assessee for deduction under sections 80P(2)(a)(i) or 80P(2)(d) of the Act with reference to interest income earned from investments with district co-operative bank is rejected. 7. The assessee’s alternative contention is that if the interest income amounting to Rs.20,14,890/- is assessed as income from other sources, the expenditure incurred for earning such income ought to be allowed as a deduction under section 57 of the Act. The alternative contention of assessee has also been ITA No.445/Bang/2023 Page 4 of 5 considered and disposed off by the CIT(A). The CIT(A) had allowed the alternative claim of the assessee by referring to the judgment of the Hon’ble jurisdictional High Court in the case of Totagars Sale Co-operative Society Limited Vs. ITO [2015] 58 taxmann.com 35 (Karnataka) [prefer para 9.5.4 of the CIT(A)’s order]. After considering the above said judgment, the CIT(A) has directed the AO to recompute the disallowance under section 80P(2)(d) of the Act, by carrying out the necessary netting exercise of the impugned interest income vis-à-vis corresponding interest expenditure for arriving at the disallowance. The relevant finding of the CIT(A) in this regard at para 9.5.5 reads as follows: “9.5.5 In view of the above binding judicial pronouncements, I am of the view that the Assessing Officer is justified in disallowing the deduction u/s 80P(2)(d) on the interest income earned from banks. However, the impugned disallowance has to be computed on netting basis. Therefore, the Assessing Officer is directed to recompute the disallowance u/s 80P(2)(d) by carrying out the necessary netting exercise of the impugned interest income vis-a-vis the corresponding interest expenditure for arriving at the impugned disallowance. Therefore, ground of appeal no. 4 is partly allowed.” 8. In light of the above finding, the alternative claim of the assessee has been considered by the CIT(A) and AO was directed to recompute deduction under section 80P(2)(d) of the Act, by giving deduction of the interest expenditure. Therefore, the alternative plea of the assessee raised during the course of argument before me is also rejected. 9. In the result, appeal filed by the assessee is dismissed. Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- (LAXMI PRASAD SAHU)(GEORGE GEORGE K) Accountant Member Vice President Bangalore. Dated: 27.10.2023. /NS/* ITA No.445/Bang/2023 Page 5 of 5 Copy to: 1.Appellants2.Respondent 3.DRP4.CIT 5.CIT(A)6.DR, ITAT, Bangalore. 7. Guard file By order Assistant Registrar, ITAT, Bangalore.