The Sant Taluka Teachers Co.-Op. Credit Society Ltd., Mahisagar V. The ACIT, Panchmahal Circle, Godhra Present Juridiction The ACIT, Anand Circle, Anand

ITA 531/AHD/2023

AI Insights

The case involves The Sant Taluka Teachers Co-op. Credit Society Limited, which appealed against the order of the CIT(A), National Faceless Appeal Centre, Delhi, for the Assessment Year 2016-17. The primary contention was regarding the addition of Rs.25,52,171 to the assessee's income, which the assessee argued was interest earned on Fixed Deposits (FDRs) with Dena Bank, directly attributable to its business and eligible for deduction under Section 80P(2)(a) of the Income Tax Act, 1961. The Assessing Officer had added this amount as income from interest, which the CIT(A) upheld. The Tribunal, referencing decisions from the Hon'ble Apex Court and the Hon'ble Gujarat High Court, acknowledged that interest income on deposits with commercial banks could be exempt under Section 80P(2)(a)(i) but required a re-examination of the proportionate expenses claimed by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129430 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 27-08-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 29-06-2023
• Other Referred Cases: Vavveru Co-op. Rural Bank Limited vs. Chief Commissioner of Income Tax, 396 ITR 371 (AP & T), Totgars Co-operative Sale Society Limited vs. ITO (2010) 188 Taxman 282 (SC), State Bank of India vs. CIT (2016) 72 Taxmann.com 64
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 80P; 143(2); 72

Judgement Text

ITA No.531/Ahd/2023 Assessment Year: 2016-17 Page 1 of 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.531/Ahd/2023 Assessment Year: 2016-17 The Sant Taluka Teachers Co-op. Credit Society Limited, Opp. Panchayat Bhavan, Tower Road, Santrampur – 389 260, Dist. Mahisagar, Gujarat State. [PAN – AABTS 2076 F] Vs. The Assistant Commissioner of Income Tax, Panchmahal Circle, Godhra. (Appellant) (Respondent) Assessee by Shri Sakar Sharma, CA Revenue by Shri Yogesh Mishra, Sr. DR Da te o f He a r in g 28.08.2023 Da te o f P ro n o u n ce m e n t 13.10.2023 O R D E R This appeal is filed by the Assessee against order dated 04.05.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2016-17. 2. The Assessee has raised the following grounds of appeal :- “1. The Ld. CIT(A)-NFAC erred on facts and in law in upholding the assessment order passed by the Assessing Officer. 2. The Ld. CIT(A)-NFAC erred on facts and in law in confirming addition of Rs.25,52,171/- without appreciating that interest earned on Dena Bank FDRs is directly attributable to the business of Co- operative Society and is eligible to deduction u/s.80P(2)(a) as held in Vavveru Co-op. Rural Bank Limited vs. Chief Commissioner of Income Tax, 396 ITR 371 (AP & T).” 3. The assessee is a Co-operative Society registered under the Gujarat Co- operative Society Act. The assessee is involved in the business of providing credit facility to its members and activities undertaken are the same as in earlier years. Return of income was filed for the relevant Assessment Year (A.Y.) declaring total income at Rs. Nil thereby claiming deductions under Part-C of Chapter VI-A. Notice under Section 143(2) was issued on 25.09.2017 which was ITA No.531/Ahd/2023 Assessment Year: 2016-17 Page 2 of 4 served on the assessee on 27.09.2017. The assessee filed reply before the Revenue Authorities thereby stating that the Society is entitled for deduction under Section 80P of the Income Tax Act, 1961 and the same is allowable under Section 80P(2)(a)(i) of the Act. The assessee has done working for proportionate expenses claiming that the percentage of expense to total gross income was 70.67%. The Assessing Officer, after taking cognisance of the reply of the assessee, made addition of Rs.26,02,171/- which is the net income from interest from Scheduled Banks and other incomes. 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. A.R. submitted that in the earlier A.Y. for A.Y. 2012-13 and 2015- 16 in assessee’s own case the Tribunal has allowed pro rata expenses in respect of interest earned from deposits held with Nationalised Bank to the assessee for computing deduction under Section 80P of the Act after examining/verifying the same (ITA No.1313/Ahd/2018 order dated 29.08.2018 and ITA No.2914/Ahd/2016 order dated 01.03.2018). The Ld. AR submitted that the Assessing Officer ignored the fact that interest earned on Dena Bank FDRs is directly attributable to the business of Co- operative Society and is eligible to deduction under Section 80P(2)(a) as held in case of Vavveru Co-operative Rural Bank Limited vs. CCIT, 396 ITR 371 (AP&T). The Ld. AR submitted that the interest on investment with Dena Bank FDRs was of Rs.87,267/- and the Assessing Officer erred in considering Savings Bank Account interest from various Banks of Rs.1,13,459/- as Fixed Deposit interest earned on Dena Bank Fixed Deposit. The Assessing Officer added to the Fixed Deposit interest earned from Scheduled Bank and the same should be deleted. The Ld. AR further submitted that for calculation of deposit expenses it is clearly evident from the income & expenses account that overdraft interest paid on Dena Bank Fixed Deposit has to be deducted from Dena Bank Fixed Deposit interest income. The Ld. AR further submitted that the Assessing Officer has not taken into account the working of calculation of proportionate expenses without pointing out any defect and without considering the real fixed deposit interest earned from fixed deposits kept with the said Bank. ITA No.531/Ahd/2023 Assessment Year: 2016-17 Page 3 of 4 7. The Ld. DR submitted that the case laws referred by the Ld. AR are distinguishable and interest earned in respect of the Members’ Account only should be taken into account while granting 80P deduction. The interest expenses on overdraft facility cannot come under the purview of the said Section. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 8. Heard both the parties and perused all the relevant material available on record. The assessee has claimed deduction under Section 80P(2)(a)(i) of the Act on interest income earned from Fixed Deposits maintained with the Dena Bank. From the various decisions including the decision of Hon’ble Apex Court in case of Totgars Co-operative Sale Society Limited vs. ITO (2010) 188 Taxman 282 (SC) as well as the decision of Hon’ble Gujarat High Court in the case of State Bank of India vs. CIT (2016) 72 Taxmann.com 64. The interest income on the deposits placed with the Commercial Bank is exempt under Section 80P(2)((a)(i) of the Act and, therefore, though the same is not allowable, however, the Assessing Officer to look into the pro rata expenses in respect of the interest earned from deposits held with Nationalised Bank to the assessee for computing the deduction under Section 80P of the Act after examining/verifying the same. Thus, to the limited extent, the matter is remand back to the file of the Assessing Officer in respect of pro rata expenses on the interest earned from deposits held with Dena Bank. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice. 9. In the result, appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on this 13 th October, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 13 th October, 2023 PBN/* ITA No.531/Ahd/2023 Assessment Year: 2016-17 Page 4 of 4 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