Income Tax Officer, Ward 1(1), Nashik, Nashik V. Swa Ashokrao Bankar Nagari Sahakari Patsanstha Maryadit, Nashik

ITA 58/PUN/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2355 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Appeal Filed On: 09-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 56; 143(3); 142(1); 80P; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA No.58/PUN/2024 Assessment Year : 2020-21 ITO, Ward 1(1), Nashik Vs. Swa Ashokrao Bankar Nagari Sahakari Patsanstha Maryadit 1 Sanskruti, Pimpalgaon Basawant, Niphad, Nashik – 422209 PAN : AAAAA2084K (Appellant) (Respondent) Assessee by : Shri Pramod S Shingte Department by : Shri Sourabh Nayak, Addl.CIT Date of hearing : 02-05-2024 Date of pronouncement : 14-05-2024 O R D E R PER R. K. PANDA, VP : This appeal filed by the Revenue is directed against the order dated 15.11.2023 of the CIT(A) / (NFAC), Delhi relating to assessment year 2020-21. 2. The Revenue has raised the following grounds: 1. Whether on the facts and in law the CIT(A), NFAC has erred in deleting the disallowance made by AO of Rs.4,80,14,438/-. 2. Whether on the facts and circumstances of the case the CIT(A), NFAC has erred in deleting the addition without appreciating the fact that interest received from co-operative banks disallowed as per the provision of section 80(2)(d). 3. Whether on the facts and circumstances of the case the CIT(A), NFAC has erred in deleting the disallowance without appreciating the fact that the 2 ITA No.58/PUN/2024 interest earned by the assessee society is earned on surplus funds and not its operational income inserted in Co-operative Bank and is to be taxed as income from other sources. 4. Whether on the facts and circumstances of the case the CIT(A), NFAC has erred in deleting the addition and not justifying the decision of Hon'ble Supreme Court in Civil Appeal 1622 of 2010 on the case of Totgars Co- operative Sale Society Ltd. Vs ITO [2010] 188 Taxman 282 (SC), wherein the Apex Court has held that the words used in section 80P “the whole of the amount of profits & gains of business” emphasize that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society & as such interest earned on funds which are not required for business purpose falls under the category of other income taxable under the Income Tax Act. 5. The appellant requests that he may be allowed to furnish additional evidences. 3. Facts of the case, in brief, are that the assessee is a Credit Co-operative Society registered under the Maharashtra Co-operative Societies Act, 1960. It filed its return of income on 19.10.2020 declaring Nil income after claiming deduction of Rs.6,53,64,391/- u/s 80P of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The case was selected for complete scrutiny to verify: 1. Deduction from total income under Chapter VI-A 2. Investments/Loans/Advances 3. High Creditors/Liabilities 4. Accordingly, statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which, the assessee filed various details from time to time. During the course of assessment proceedings, the Assessing Officer noted that the assessee earned interest income from deposits made in various Nationalized banks amounting to Rs.9,606/-, Private banks of Rs.15,23,384/- and Co-operative banks of Rs.5,02,17,921/-, in all totaling to 3 ITA No.58/PUN/2024 Rs.5,17,50,911/- and claimed the entire interest income as deduction u/s 80P(2)(a)(i) / 80P(2)(d) of the Act. He, therefore, asked the assessee to explain as to how the assessee is eligible for claiming the deduction u/s 80P(2)(a)(i) / 80P(2)(d) of the Act. The assessee submitted that the income invested in the Co- operative banks, nationalized banks and other government securities are out of operational funds and not surplus funds. Therefore, the decision of the Hon’ble Karnataka High Court in the case of The Totagars Co-operative Sale Society Ltd. vs. ITO does not apply to the facts of the assessee. Relying on various decisions including the decision of CIT(A) in assessee’s own case for assessment year 2018- 19, it was argued that the assessee is entitled to claim deduction. 5. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and rejected the claim of deduction u/s 80P(2)(a)(i) of the Act and made addition of Rs.4,80,14,438/- by recording as under: “As seen from the above, the assessee has earned Rs.5,17,50,911/- as interest from investments held in various banks. Therefore, Rs.5,17,50,911/- is now brought to tax as income from other sources. As per Sec.57, the assessee is eligible for deduction u/s 57(iii) the calculation similar to that of old Rule 8D(2)(ii) of Income Tax Rules 1962 and allow proportionate costs more particularly the corresponding interest outgo that relates to such portion of taxable gross total income, and bring the balance to tax. From the Financials of the assessee, it is seen that for deposits of Rs.113,85,25,140/- received from its members, the interest payout is Rs.8,22,02,790/-. Considering this as proportionate cost, the expenditure to be allowed as deduction u/s 57(iii) of IT Act is arrived as under – 5,17,50,911/- x 8,22,02,790/- / 113,85,25,140/- = 37,36,473 Therefore, Rs.37,36,473/- is the expenditure attributable in earning income of Rs.5,17,50,911/- which is now classified as income u/s 56 of IT Act. Hence, the 4 ITA No.58/PUN/2024 net income of Rs.4,80,14,438/- is considered as net income from other sources and brought to tax accordingly. In view of the above, the assessee’s claim of deduction u/s 80P(2)(a)(i) with respect to interest on bank deposits of Rs.4,80,14,438/-, as derived above for it not being operational income is hereby disallowed and brought to tax accordingly.” 6. In appeal, the CIT(A) / NFAC allowed the claim of deduction made by the assessee by recording as under: “4.3 I have gone through the facts of the case. There has been a very recent Jurisdictional ITAT order, ITA No.553/PUN/2023 (Kai Fakira Jairam Patil Sahakari Patsanstha Maryadit Shahada vs ITO Ward-1, Dhule), which has thrown clarity on the issue: “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 2020-21. 2. Briefly, the facts of the case are that the appellant is a cooperative credit society registered under Maharashtra Co-operative Societies Act, 1960. The Return of Income for the assessment year 2020-21 was filed on 28.12.2020 disclosing total income of Rs.67,200/- after claiming deduction u/s 80P(2)(a)i) of the Income Tax Act, 1961 ('the Act') of Rs.37,15,640/-. Against the said return of income, the assessment was completed by the Assessing Officer vide order dated 05.09.2022 passed u/s 143(3) r.w.s. 144B of the Act at a total income of Rs.89,75,032/-. 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 us in the present appeal. 5. When the appeal was called on, none appeared on behalf of the assessee trust despite due service of notice of hearing. 6. We 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 bank. This issue is no longer res Integra as the issue was decided by the Co-ordinate Bench of this Tribunal 5 ITA No.58/PUN/2024 in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in ITA No.84/PAN/2018 for A.Y. 2012-13 order dated 27.05.2022 in favour of the appellant society. The relevant paragraphs of the said order of Co-ordinate Bench of the Tribunal (supra) is reproduced herein under:- "8. We heard the rival submissions and perused the material on record. The only issue in the present appeal is pertaining to the allowability of deduction under the provisions of section 80P(2)(d) of the Act. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. In the present case, the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) of the Act is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society. This issue was considered by the Hon'ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon'ble High Court referring to the Hon'ble Supreme Court in the case of Totgars Co- operative Sales Society Ltd. (supra) held that the ratio of decision of the Hon'ble Supreme Court in the aforesaid case (supra) not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. 9. Even the decision of Pune Bench of the Tribunal in the case of Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO, 120 taxmann.com 10 wherein the Tribunal after making reference to the decisions of the Hon'ble Supreme Court in the case of Totgars Cooperative Sales Society Ltd. (supra) and having noticed the divergent views of the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO, 55 taxmann.com 447 and the Hon'ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. vs. CIT, 50 taxmann.com 278, decision of the Hon'ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (supra) had not been preferred to view of the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. (supra). The relevant observation of the Pune Bench of the Tribunal in the case (supra) is as under:- "9. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016, dated 9-4-2019) decided the question of 6 ITA No.58/PUN/2024 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, dated 19-8-2015) 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 DTP 89 (Delhi) not allowing deduction u/s.QOP 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. (2010) 322 ITR 283 (SC). There being no direct judgment from the Hon'ble Jurisdictional High Court on the point, 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). 10. Insofar as the reliance of the Id. DR on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is concerned, we find that the issue in that case was the eligibility of deduction u/s.80P(2)(d) of the Act on interest earned by the assessee co-operative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, rice mills, live stocks, van' section, medical shops, lodging, plying and hiring of goods and carriage etc. It was in that background of the facts that the Hon'ble High Court held that the assessee could not claim deduction u/s.80P(2)(d) of the Act. When we consider the impact of this decision, it turns out that the same is not germane to case under consideration in view of the position that the claim of the instant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act and not u/s.80P(2)(d). Moreover, so many decisions relied on by the Id. AR amply go to prove that the view taken by the AO, cannot by any standard, be construed as not a possible view. We, therefore, hold that the Id. Pr. CIT was not justified in exercising the revisional power anent to interest income of Rs.22,34,270/- earned on investments made with co-operative banks. 7 ITA No.58/PUN/2024 7. Respectfully following the decision of the Co-ordinate Bench of this Tribunal (supra), we are of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Therefore, we direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative bank/scheduled bank. Thus, the ground of appeal filed by the assessee stands allowed. 8. In the result, the appeal filed by the assessee stands allowed.” 7. Aggrieved with such order of CIT(A) / NFAC, the Revenue is in appeal before the Tribunal. 8. The Ld. DR heavily relied on the order of Assessing Officer. 9. The Ld. Counsel for the assessee on the other hand submitted that the Tribunal is consistently allowing the claim of deduction made by the assessee and the appeals filed by the Revenue have been dismissed in following decisions: 1. ITO vs. Swa Ashokrao Bankar Nagari Sahakari Patsanstha Maryadit in ITA No.2006/PUN/2014, for A.Y. 2010-11, vide order dated 04.05.2017 2. ITO vs. Swa Ashokrao Bankar Nagari Sahakari Patsanstha Maryadit in ITA No.1394/PUN/2015, for A.Y. 2011-12, vide order dated 22.07.2016 3. ITO vs. Swa Ashokrao Bankar Nagari Sahakari Patsanstha Maryadit in ITA No.1395/PUN/2015, for A.Y. 2012-13, vide order dated 25.01.2018 4. ITO vs. Swa Ashokrao Bankar Nagari Sahakari Patsanstha Maryadit in ITA No.155/PUN/2017, for A.Y. 2013-14, vide order dated 23.01.2019 10. He accordingly submitted that this being covered matter in favour of the assessee, the appeal filed by the Revenue should be dismissed. 8 ITA No.58/PUN/2024 11. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the issue now stands decided in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case for assessment years 2010-11, 2011-12, 2012-13 and 2013-14, respectively, wherein identical issue has been decided in favour of the assessee and the appeal filed by the Revenue challenging the order of CIT(A) in allowing the claim of deduction u/s 80P of the Act made by the assessee has been dismissed. 12. We find the Tribunal in assessee’s own case for assessment year 2013-14 in ITA No.155/PUN/2017 vide order dated 23.01.2019 has decided the identical issue and dismissed the appeal filed by the Revenue by observing as under: “4. We have heard both the sides and perused the relevant material on record. The only issue in this appeal is whether interest income earned from FDRs with the nationalized banks is eligible for deduction u/s 80P of the Act? The Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed deduction u/s 80P of the Act in similar circumstances vide its order dated 19-08-2015. In that case, the Pune Bench discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) allowing the deduction u/s. 80P on interest income and 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 under similar circumstances. Both the Hon’ble High Courts have taken into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. 322 ITR 283 (SC). There being no direct judgment from the Hon’ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view taken in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). 9 ITA No.58/PUN/2024 In the absence of there being no change in the legal position prevailing on this issue after the passing of the order by the Pune Bench of the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) and a host of other orders reiterating the similar view, respectfully following the precedent, we approve the impugned order in allowing deduction u/s.80P on the interest income. 5. In the result, the appeal is dismissed.” 13. Since the CIT(A) / NFAC in the instant case while allowing the claim of deduction u/s 80P made by the assessee has followed the decision of the Co- ordinate Bench of the Tribunal and since the Co-ordinate Bench of the Tribunal in assessee’s own case for assessment years 2010-11 to 2013-14 has consistently dismissed the appeals filed by the Revenue on this issue, therefore, in absence of any contrary material brought to our notice against the order of CIT(A) / NFAC in allowing the claim of deduction u/s 80P of the Act, we do not find any infirmity in the order of CIT(A) / NFAC on this issue. Accordingly, the order of the Ld. CIT(A) / NFAC is upheld and the grounds raised by the Revenue are dismissed. 14. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on this day of 14 th May, 2024. Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT प ु णे Pune; दिन ांक Dated : 14 th May, 2024 GCVSR 10 ITA No.58/PUN/2024 आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘B’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 06.05.2024 Sr. PS/PS 2 Draft placed before author 08.05.2024 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 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