Kai Fakira Jairam Patil Sahakari Patsanstha Maryadit Shahada, Nandurbar V. Invcome Tax Officer Ward-1, Dhule, Dhule

ITA 551/PUN/2023

AI Insights

The case involves Kai Fakira Jairam Patil Sahakari Patsanstha Maryadit Shahada, a cooperative credit society, which appealed against the order of the National Faceless Appeal Centre (NFAC) confirming the addition made by the Assessing Officer regarding the denial of exemption under section 80P(2)(a)(i) of the Income Tax Act for interest income on deposits. The Tribunal examined various High Court decisions, which presented conflicting views on whether such interest income qualifies for exemption under section 80P(2)(a)(i). Ultimately, the Tribunal sided with the decisions that favored the assessee, allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137638 (ITAT-PUNE)
• Duration Of Justice: 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 07-05-2023
• Other Referred Cases: CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd., State Bank of India Vs. CIT, Mantola Co-operative Thrift & Credit Society Ltd. Vs. CIT, CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd., CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd., Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO, Vaveru Co-operative Rural Bank Ltd v CIT, PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd., Chennai Central Co-operative Bank Ltd. vs. ITO, M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “SMC”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.551/PUN/2023 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 Kai Fakira Jairam Patil Sahakari Patsanstha Maryadit Shahada, Plot No.5A, Vrindavan Nagar, Besides Swami Samaratha Kendra, Shahada Tal. Shahada, Dist. Nandurbar- 425409 PAN : AAAAK5870D Vs. ITO, Ward-1, Dhule. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM : This is an appeal filed by the assessee directed against the order of the National Faceless Appeal Centre, Delhi [‘NFAC’] dated 24.03.2023 for the assessment year 2017-18. Assessee by : None Revenue by : Shri Piyush Kumar Singh Yadav Date of hearing : 24.05.2023 Date of pronouncement : 26.05.2023 ITA No.551/PUN/2023 2 2. Briefly, the facts of the case are that the appellant is a co- operative credit society registered under Maharashtra Co-operative Societies Act, 1960. The Return of Income for the assessment year 2017-18 was filed on 10.10.2017 disclosing total income of Rs.Nil after claiming deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 (‘the Act’) of Rs.73,98,124/-. Against the said return of income, the assessment was completed by the Assessing Officer vide order dated 31.10.2019 passed u/s 143(3) of the Act at a total income of Rs.44,57,088/-. While doing so, the Assessing Officer denied the exemption u/s 80P(2)(a)(i) in respect of interest income on deposits made out of the surplus funds in cooperative banks and scheduled banks on the ground that the said income does not qualify for deduction u/s 80P(2)(a)(i) or 80P(2)(d) of the Act. 3. Being aggrieved, an appeal was filed before the NFAC, who vide impugned order confirmed the addition made by the Assessing Officer. 4. Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal. ITA No.551/PUN/2023 3 5. When the appeal was called on, none appeared on behalf of the assessee despite due service of notice of hearing. 6. I heard the ld. Sr. DR and perused the material on record. The only issue in the present case is as to the allowability of exemption under the provisions of section 80P(2)(d) in respect of interest income earned by a cooperative society from the cooperative banks/scheduled banks. 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 ITA No.551/PUN/2023 4 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 371 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. Similar view has been taken by the Hon’ble Calcutta High Court in the case of PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd., 147 taxmann.com 518 (Calcutta) and the Hon’ble Madras High Court in the case of Chennai Central Co- operative Bank Ltd. vs. ITO, 148 taxmann.com 17 (Madras). 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) taken view in favour of the assessee following the judgment of Hon’ble Karnataka High ITA No.551/PUN/2023 5 Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench of the Tribunal, I am of the considered opinion that the interest income earned on fixed deposits with banks partakes character of the business income, which is eligible for deduction u/s 80P(2)(a)(i) of the Act. Thus, the grounds of appeal filed by the assessee stand allowed. 7. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 26 th day of May, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 26 th May, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “SMC” बᱶच, पुणे / DR, ITAT, “SMC” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.