NAVODAYA NAGRI PAT SANSTHA , AMRAVATI V. INCOME TAX OFFICER WARD -3 , AMRAVATI

ITA 66/NAG/2019

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8867 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-09-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 14-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR – VIRTUAL COURT BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.66/NAG/2019 िनधाᭅरण वषᭅ / Assessment Year: 2013-14 Navodaya Nagri Pat Sanstha, C/o. M/s. Loya Bagri & Co. Chartered Accountants, Gandhibag, Nagpur- 440002. PAN : AAABN0223G Vs. ITO, Ward-3, Amravati. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)-1, Nagpur [‘the CIT(A)’] dated 24.12.2018 for the assessment year 2013-14. 2. The appellant raised the following grounds of appeal :- “(1) That the order of the Income Tax Officer, Ward-3, Amravati is bad in law and wrong on facts and the learned CIT(A) erred in confirming the same. (2) That the learned CIT(A) erred in law and on facts in confirming the addition made by the Assessing officer on account of interest income earned from deposits or saving account with Bank of Maharashtra and IDBI Bank amounting to Rs. 15,64,077/- and not Assessee by : Shri Rajesh V. Loya Revenue by : Shri G. J. Ninawe Date of hearing : 27.09.2022 Date of pronouncement : 07.11.2022 ITA No.66/NAG/2019 2 allowing the deduction claimed u/s 80P(2). On the facts and circumstances of the case, the action of learned authorities is highly unjustified and not in accordance with law. (3) That the learned Assessing Officer erred in law and on facts in treating interest income of total Rs.15,64,077/- earned on deposits and saving accounts with Bank of Maharashtra and IDBI Bank as Income from Other Sources instead of treating it as income from business of providing credit facility and the learned CIT(A) erred in confirming the order of AO. On the facts and circumstances of the case, the assessee had earned interest on deposits made from funds received from members and not from any surplus fund available. The facts of the case were not properly appreciated and the action of the learned authorities was not correct. (4) That the learned CIT(A) erred in law and on facts in assuming that the assessee has claimed deduction u/s 80P(2)(d) and the Assessing Officer disallowed the same and further confirming the action of Assessing Officer on the ground that interest income earned from investment made with the person other than co operative society is not eligible for deduction u/s 80P(2)(d). On the facts and circumstances of the case, the assessee has claimed deduction u/s 80P(2)(a)(i) and the fact that the assessee is a credit co operative society and doing banking business by providing credit facilities to its members and accepting deposits from the members is accepted by both the learned authorities. (5) That for any other ground with kind permission of your honour at the time of hearing of appeal.” 3. Briefly, the facts of the case are as under : The appellant is a cooperative society engaged in the business of providing credit facilities to its members. It is registered under Cooperative Societies Act. The return of income for the assessment year 2013-14 was filed on 21.09.2013 declaring Rs.Nil income after claiming exemption u/s 80P of the Income Tax Act, 1961 (‘the Act’). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-3, Amravati (‘the ITA No.66/NAG/2019 3 Assessing Officer’) vide order dated 14.12.2015 at a total income of Rs.15,64,080/-. The disparity between the returned income and assessed income is on account of addition of interest earned on deposits with Bank of Maharashtra and IDBI Bank and Assessing Officer had denied the claim of exemption u/s 80P of the Act. The brief facts of the case is as under : During the course of assessment proceedings, the Assessing Officer found that the appellant earned interest income on fixed deposits with Bank of Maharashtra and IDBI Bank. It is stated that the fixed deposits were made out of business income lying idle. The Assessing Officer was of the opinion that the income so earned is not eligible for exemption u/s 80P(2)(a)(i) for the reason that the interest income was earned from the non-members and principle of mutuality not applicable. 4. Being aggrieved by the above addition, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the action of the Assessing Officer. 5. Being Aggrieved, the appellant is in appeal before this Tribunal in the present appeal. ITA No.66/NAG/2019 4 6. I heard the rival submissions and perused the material on record. Admittedly, the appellant is a Cooperative society formed under the provisions of Maharashtra Cooperative Societies Act, 1960 with the objective of accepting deposits and lending money to its members. The money which is not immediately required for the purpose of lending to the members is deposited with Bank of Maharashtra and IDBI Bank in the form of Fixed Deposits. The question is whether the interest so earned qualifies for exemption u/s. 80P(2)(a)(i) of the Act. The Assessing Officer as well as the CIT(A) were of the opinion that the interest earned from third parties or non-members does not quality for exemption u/s.80P. It is an admitted position that the interest so earned should be taxed as ‘income from other sources’ 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 ITA No.66/NAG/2019 5 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 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 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. 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) has taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants ITA No.66/NAG/2019 6 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 bank partake of the business income which is eligible for deduction u/s 80P(2)(a)(i) of the Act. Accordingly, 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 07 th day of November, 2022. Sd/- (INTURI RAMA RAO) ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 07 th November, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-1, Nagpur. 4. The Pr. CIT-1, Nagpur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, नागपुर / DR, ITAT, Nagpur. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.