Dy, Commissioner Of Income Tax, Circle-8, Pune, Pune V. Bhimashakar Sahakari Sakhar karkhana Ltd, Pune, Pune

ITA 500/PUN/2022

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax against Bhimashankar Sahakari Sakhar Karkhana Ltd., concerning the assessment year 2017-18. The appeal challenged the order of the National Faceless Appeal Centre (NFAC), which had provided relief to the assessee on two main issues: the deduction under section 80P(2)(d) for interest income from cooperative banks, and the allowance of ceremonial expenses as business expenses. The Tribunal examined precedents and statutory provisions, particularly focusing on the interpretation of section 80P(2)(d) and the relevance of ceremonial expenses to business operations. The Tribunal's decision was influenced by previous judgments and the specific facts of the case, leading to the dismissal of the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137300 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 28-06-2022
• Other Referred Cases: The Totgars Co-operative Sale Society, Rena Sahakari Sakhar Karkhana ltd vs. Pr.CIT, Aurangabad
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HANMANT D DHAWLE
• Keywords: Business expenditure
• Section: 263; 143(3); 80P; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA No.500/PUN/2022 Assessment Year : 2017-18 The Deputy Commissioner of Income Tax, Circle 8, Pune ... Appellant Vs. Bhimashankar Sahakari Sakhar Karkhana Ltd., At Post Pargaon Avsari, Tal Ambegaon, Dist. Pune – 412406 PAN: AAAAB0949G ... Respondent Assessee by : Shri Hanmant D Dhawle Respondent by : Shri Ramnath P Murkunde Date of Hearing : 21-02-2023 Date of Pronouncement : 21-02-2023 ORDER PER PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the Revenue emanates from the order of the National Faceless Appeal Centre (NFAC), Delhi dated 06-06-2022 for the Assessment Year 2017-18 as per the grounds of appeal appearing hereinafter. The grounds of appeal are as follows: 1. Whether on facts and circumstances of the case and in law, the Id. CIT(A) has erred in giving relief to assessee on the issue of deduction u/s 80P(2)(d) of the Act without appreciating the fact that Hon. Kamataka High Court decided the issue in favour of Revenue vide its judgment in the case of The Totgars Co-operative Sale Society and that the SLP on the issue is pending before the Hon. Supreme Court? 2. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred in giving relief to the assessee on the issue of disallowance of ceremony expenses wherein assessee failed to substantiate that the expenses were incurred 'wholly and exclusively for the purpose of business? 3. For these and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be resorted. ITA No.500/PUN/2022 Bhimashankar SSK Ltd. 2 4. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal.” 2. In the first ground, the Revenue is aggrieved with the relief given to the assessee by the CIT(A) on the issue of deduction u/s 80P(2)(d) of the Income- tax Act, 1961 (hereinafter referred to as „the Act‟). 3. We find that this issue is covered by the decision of Pune Tribunal in ITA No.1249/PUN/2018 for assessment year 2013-14, order dated 07.01.2022 wherein on the same issue on identical facts, it was held as follows: “7. We have heard the ld. authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether or not the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co- operative banks is in order. In our considered view, the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub- section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with the co-operative bank, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not cooperative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 8. After necessary deliberations, we are unable to persuade ourselves to concur with the view taken by the Pr. CIT. Before proceeding any further, we may herein cull out the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. “80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely :- (a)............................................................................................ (b)............................................................................................ ITA No.500/PUN/2022 Bhimashankar SSK Ltd. 3 (c)............................................................................................ (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income;” On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co- operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) to Sec. 80P of the Act, vide the Finance Act, 2006 with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardize the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, as long as it is proved that the interest income is being derived by a co- operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term „co-operative society‟ had been defined under Sec. 2(19) of the Act, as under:- “(19) “Co-operative society” means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;” We are of the considered view, that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.” 4. This order of the Tribunal was followed by the learned CIT(A) while providing relief to the assessee holding as follows: “4.3.2. Assessee also furnished copy of order of Hon’ble Jurisdictional ITAT, Pune, in the case of Rena Sahakari Sakhar Karkhana ltd vs. Pr.CIT, Aurangabad [ITA No.1249/Pun/2018 decided on 7.1.2022]. In that case, the Ld. Pr.CIT set aside the order u/s 143(3) on the reasoning that the AO had allowed deduction u/s 80P(2)(d) on interest received by assessee from Co- operative Banks which was stated to be against provision of section 80P(4) of the Act. In the judgment, the Hon’ble Jurisdictional Tribunal took the view that interest received by Co-operative Society from Co-operative Bank is eligible for deduction u/s 80P(2)(d). Appellant in that case is also a sugar co-operative like that of present assessee. The above decision of Hon’ble ITAT is squarely binding on me. Therefore, it is held that interest and dividend income earned by assessee from Co-operative bank is treated as eligible for deduction u/s 80P(2)(d) of the Act.” ITA No.500/PUN/2022 Bhimashankar SSK Ltd. 4 5. In the above stated order of the Tribunal (supra), the view taken was that the interest received by the co-operative society from co-operative bank is eligible for deduction u/s 80P(2)(d) of the Act. The assessee in that case was also a sugar co-operative society like that of the present assessee. The learned DR before us could not bring any evidences/documents supporting Revenue contrary to the facts existing on record. Therefore, on the same parity of reasoning, the relief granted already to the assessee on this issue is sustained. Ground No.1 of Revenue is dismissed. 6. In ground No.2 it is the contention of Revenue that the learned CIT(A) had erred in giving relief to the assessee on the issue of disallowance of ceremony expenses. The Assessing Officer had disallowed ceremonial expenditure on the ground that it is not related to the business purpose of the assessee or exclusively for commercial expediency in functioning of the assessee‟s business. However, at the first appellate stage it was submitted by the assessee that these ceremonial expenses are intrinsically linked to the assessee‟s business and it is customary for all the sugar factories to observe and celebrate certain functions for the welfare of the workers of the factory. These functions give a moral boost to the working efficiency of the employees. At the same time, they cannot be expected to contribute for these functions. Therefore, the expenses for the ceremony and functions are borne by the assessee and in so much as they are intrinsically weaved within the basic functioning of the assessee‟s business, hence should be allowable as business expenses. The learned CIT(A) at para 8.3 of his order while providing relief on this issue to the assessee directed the Assessing Officer to delete the addition stating that such kind of functions create harmony amongst the workers and management. These ceremonies are required to be performed on account of ITA No.500/PUN/2022 Bhimashankar SSK Ltd. 5 tradition and to certain extent as compulsion since these functions are followed in every sugar factory. The expenses have to come from the account of assessee only. It cannot be expected to be collected from the employees. These expenses take the colour and character of business expenses. We are in conformity with the finding of learned CIT(A) and the same is upheld. Ground No.2 of Revenue is dismissed. 7. Ground Nos.3 and 4 are general in nature. 8. In the result, the appeal of Revenue is dismissed. Order pronounced in the open Court on this 21 st day of February, 2023. Sd/- Sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Pune; Dated, the 21 st February, 2023 GCVSR Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The concerned CIT, Pune 4. D.R. ITAT „A‟ Bench 5. Guard File BY ORDER, //True Copy// Sr. Private Secretary ITAT, Pune. ITA No.500/PUN/2022 Bhimashankar SSK Ltd. 6 1 Draft dictated on 21-02-2023 Sr.PS/PS 2 Draft placed before author 21-02-2023 Sr.PS/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 Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk 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