Shree Kheteshwar Nagrik Sarafi Sahkari Mandali Ltd Deesa, Deesa V. The ACIT, Circle Palanpur, Palanpur

ITA 85/AHD/2023

AI Insights

The case involves Shree Kheteshwar Nagrik Sarafi, a Credit Co-operative Society, which appealed against the order of the CIT(A) at the National Faceless Appeal Centre, Delhi. The dispute centered on the denial of a deduction of Rs.19,64,727 under Section 80P(2)(d) for interest received from Co-operative Banks, which the Assessing Officer and CIT(A) had excluded based on their interpretation of Section 80P(4). The Tribunal examined whether the interest income from Co-operative Banks should be exempt under Section 80P(2)(a)(i), referencing the Supreme Court's decision in Mavilayi Service Co-operative Bank Limited vs. CIT. The Tribunal concluded that the interest income was indeed exempt, as the Co-operative Banks are members of the Co-operative Society and the income was not derived from surplus funds.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129473 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 08-02-2023
• Other Referred Cases: Totgar's Co-operative Sale Society vs. ITO 322 ITR 283, Mavilayi Service Co-operative Bank Limited & Others vs. CIT 431 ITR 1
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 142(1); 80P; 143(2)

Judgement Text

ITA No.85/Ahd/2023 Assessment Year: 2017-18 Page 1 of 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.85/Ahd/2023 Assessment Year: 2017-18 Shree Kheteshwar Nagrik Sarafi vs. The A.C.I.T., Sahkari Mandali Limited, Circle, Palanpur, 3-4, First Floor, Dist. Banaskantha. Sports Club Shopping Center, Gayatri Mandir Road, Deesa – 385 535, Dist. Banaskantha – 385 535 Gujarat. [PAN – AABAS 8815 P] (Appellant) (Respondent) Assessee by : Shri Dhinal Shah & Shri Bhadresh Gandhakwala, ARs Revenue by : Shri N.J. Vyas, Sr. DR Date of hearing : 04.05.2023 Date of pronouncement : 10.05.2023 O R D E R This appeal is filed by the Assessee against order dated 30.12.2022 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18. 2. The Assessee has raised the following grounds of appeal :- “1. The Ld. CIT(A) has erred in not granting the deduction of Rs.19,64,727/- under Section 80P(2)(d) in respect of interest received from Co-op. Society by misinterpreting the provision of Section 80P(4). 2. The learned CIT(A) has erred in following the Supreme Court decision in case of Totgar’s Co-operative Sale Society vs. ITO 322 ITR 283 in as much as the assessee has no surplus funds to invest in the Co-op. Banks and that the learned AO has not given any finding that the assessee has invested a surplus fund. 3. The learned CIT(A) has erred in not following the Supreme Court decision in case of Mavilayi Service Co-operative Bank Limited & Others vs. CIT, 431 ITR 1 in as much as the entire income including interest from Co-op. Banks is exempt under Section 80P(2)(a)(i) as held by said decision. ITA No.85/Ahd/2023 Assessment Year: 2017-18 Page 2 of 3 3. The assessee is a Credit Co-operative Society engaged mainly in the business of providing credit facilities to its members and taking deposits from its members. The assessee filed its return of income for the Assessment Year (A.Y.) 2017-18 on 14.09.2017 declaring total income of Rs. Nil after claiming deduction under Section 80P of the Income Tax Act, 1961 of Rs.19,51,227/-. The case was selected for limited scrutiny on the issue of deduction under Chapter VI-A and investments/ advances/ loans. Notice under Section 143(2) of the Act was issued and thereafter notices under Section 142(1) alongwith questionnaire were issued. The assessee submitted statement of total income, copy of Profit & Loss account, Balance Sheet and other relevant details which was verified by the Assessing Officer. The Assessing Officer observed that the assessee received interest income from Banaskantha District Co- operative Bank, The Mehsana Urban Co-operative Bank and the Sarvodaya Co- operative Bank. The Assessing Officer made addition of Rs.19,64,727/- and held that the interest income earned from entities other than co-operative societies is not eligible for deduction under Section 80P of the Act. The Assessing Officer also made addition of Rs.1,968/- as relates to interest received on Income Tax refund. 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. AR submitted that the assessee received interest from Co-operative Banks which are members of Co-operative Society. The Assessing Officer has overlooked this fact and misinterpreted the provisions of Section 80P(4) of the Act. The Ld. AR submitted that the Assessing Officer has not given any finding to the extent that the assessee has invested the surplus fund and, therefore, the decision of Hon’ble Apex Court in the case of Totgars Co-operative Sale Society Limited vs. ITO, 352 ITR 283 will not be applicable in assessee’s case. The Ld. AR relied upon the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. CIT, 431 ITR 1, as the entire income including interest from Co-operative Banks is exempt under Section 80P(2)(a)(i) of the Act. 6. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). The Ld. DR further submitted that the Hon’ble Apex Court in the case Totgars Co- operative Sale Society Limited (supra) was rightly followed by the Assessing Officer as well as by the CIT(A). ITA No.85/Ahd/2023 Assessment Year: 2017-18 Page 3 of 3 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee Co-operative Society received interest income from three Co-operative Banks which are registered under Co-operative Societies Act of the respective States. Thus, the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited (supra) is applicable in the present case as the Hon’ble Apex Court has considered the investments and the income derived from interest in respect of Co-operative Banks as well as other Banks. The Assessing Officer has totally relied upon the decision of Hon’ble Apex Court in the case Totgars Co-operative Sale Society Limited (supra) but the decision is in respect of surplus fund of the Co-operative Society and the interest income derived thereon. The decision of Hon’ble Apex Court in case of Mavilayi Service Co-operative Bank Limited (supra) was not at all considered by the Assessing Officer well as the CIT(A). Therefore, the CIT(A) was not right in confirming the addition/disallowance. Hence, appeal of the assessee is allowed. 8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on this 10 th day of May, 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 10 th day of May, 2023 PBN/* 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