The Oriental Bank Emp. Co. Op.Credit society Ltd, Ahmedabad V. The ITO, Ward-5(2)(5), Ahmedabad

ITA 926/AHD/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3636 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 26-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIRMALSHRISHRIMAL
• Keywords: Gift; Business expenditure
• Section: 37; 37(1); 80P; 64; 72

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./ITA Nos.926-927/AHD/2019 िनधाᭅरण वषᭅ/Asstt. Years:2013-2014 & 2014-15 Oriental Bank Employees Co-operative Credit Society Ltd., G.F, Neelkamal, Opp. Sales India, Ashram Road, Ahmedabad-380009 Gujarat PAN: AAAAO1929K Vs. I.T.O, Ward-5(2)(5), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Nirmal Shrishrimal, A.R Revenue by : Shri R.R. Makwana, Sr.D.R सुनवाई कᳱ तारीख/Date of Hearing : 21/04/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 27/04/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned two appeals have been filed at the instance of the Assessee against the separate orders of the Learned Commissioner of Income (Appeals), Ahmedabad of even date 29/03/2019 arising in the matter of assessment order passed under s. 143 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2013-14 & 2014-15. ITA nos.926-927/AHD/2019 A.Ys. 2013-14-2014-15 2 ITA No.926/Ahd/2019 for A.Y.2013-14 2. The assessee has raised the following grounds of appeal: 1. The Ld.CIT Appeals-5 Ahmedabad has erred in law and on facts in passing appellate order dated 29/03/2019 for A.Y.. 2013-14 in the case of appellant by confirming disallowances made by the assessing officer. 2. The Ld.CIT Appeals erred in law and on facts by confirming the disallowance of gift expenses of Rs.555390/- and not increasing the corresponding deduction u/s.80P. 3. The Ld.CIT Appeals erred in law and on facts by confirming the denial of deduction u/s.80P on Interest income on FDR/SB of Rs.262814/- 4. The appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal on or before of the final hearing of appeal. 3. The 1 st issue raised by the assessee is that the learned CIT-A erred in not allowing the deduction on the amount of enhanced profit under section 80P(2)(a)(i) of the Act on account of the disallowance of gift expenses. 4. The necessary facts in brief are that the assessee in the present case is a co- operative society and engaged in the activity of providing finance facilities to its members. The AO during the assessment proceedings found that the assessee has claimed gift expenses which are of personal nature and therefore the same cannot be allowed as deduction under the provisions of section 37(1) of the Act. Thus the AO disallowed the same and added to the total income of the assessee. 5. Aggrieved assessee preferred an appeal to the learned CIT-A who confirmed the order of the AO by observing as under: In the remand report, the AO again reiterated the same finding that the assessee could not prove the business purpose and utilization of the fund, therefore, same is not qualify as deduction under the head business and profession. The appellant in the rejoinder submitted that t expenditure was incurred for giving gift to member and the payment was made through banking channels to the vendor, therefore, the same should be allowed. However, the contention of the appellant is absolutely vague and general hence not tenable. The AO has rightly mentioned that as per the provisions of Section 37 of the Act, the assessee has to prove that expenditure was wholly and exclusively incurred for business purpose however the appellant has failed to do so. Mere payment to the vendor does not explain that the gifts were utilized for business purposes only, therefore, the expenditure does not qualify as ITA nos.926-927/AHD/2019 A.Ys. 2013-14-2014-15 3 business expenditure hence the disallowance made by the AO is confirmed. The ground of appeal is dismissed. 6. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 7. The learned AR before contended that if the gift expense is disallowed and added to the total income of the assessee, then the deduction to the assessee has to be enhanced by the amount of such disallowance under the provisions of section 80P(2)(a)(i) of the Act. 8. On the contrary, the learned DR vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. There is no ambiguity to the fact that the assessee is eligible for deduction under section 80P (2)(a)(i) of the Act. Admittedly, if any expense is disallowed which was claimed by the assessee as deduction, the amount of profit will increase by the corresponding amount. The Hon’ble Kerala High Court, in such situation, in the case of Principal Commissioner of Income-tax, kottayam v. Ettumanoor Service Co-operative Bank Ltd. reported in 132 taxmann.com 33 has observed as under: INCOME TAX : Where revenue disallowed expenditure claimed by assessee-credit co- operative society towards interest paid on deposits received by it from its members, since such disallowed amount became income earned from business carried on by assessee society, same was to be allowed as deduction under section 80P(2)(i)(a). 9.1 Accordingly, we hold that the assessee is entitled for the deduction under section 80P(2)(a)(i) of the Act on the amount enhanced by way of disallowance. In view of the above, the amount disallowed by the authorities below on account of gift expense will increase the income of the assessee but the enhanced amount of income would be eligible for deduction under section 80P(2)(a)(i) of the Act. Thus the ground of appeal of the assessee is allowed. ITA nos.926-927/AHD/2019 A.Ys. 2013-14-2014-15 4 10. The 2 nd issue raised by the assessee is that the learned CIT-A erred in denying the deduction claimed by it under the provisions of section 80P(2)(a)(i) of the Act with respect to the interest income on the fixed deposits and saving bank account. 11. The AO during the assessment proceedings found that the assessee has shown income by way of interest on the fixed deposits and saving bank account aggregating to Rs. 2,62,814.00 and claimed the deduction with respect to the same under the provisions of section 80P(2)(a)(i) of the Act. According to the AO, the impugned interest income is not arising from the members and therefore he disallowed the deduction claimed by the assessee under the provisions of section 80P(2)(a)(i) of the Act with respect to such interest income. 12. Aggrieved assessee preferred an appeal to the learned CIT-A who also confirmed the order of the AO. 13. Being aggrieved by the order of the learned CIT-A the assessee is in appeal before us. 14. The learned AR before us fairly agreed that the amount of interest income on the deposits with the bank is not eligible for deduction under section 80P(2)(a)(i) of the Act. However, the learned AR requested that the assessee should be allowed the deduction of the interest expenses incurred by the assessee against such interest income. As such, the net interest income should be disallowed/considered while calculating the deduction under section 80P(2)(a)(i) of the Act. 15. On the other hand, the learned DR vehemently supported the order of the authorities below. ITA nos.926-927/AHD/2019 A.Ys. 2013-14-2014-15 5 16. We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 80P(2)(a)(i) of the Act contemplates that the co-operative society is eligible for deduction of the income arising to it from the business of banking or providing finance facility to its members. Admittedly, the interest income shown by the assessee by way of interest from the bank is not arising to it from the members. Thus the same is not eligible for deduction in view of the judgment of Hon’ble Gujarat High Court in the case of State Bank of India versus CIT reported in 72 Taxmann.com 64 wherein it was held as under: The Income Tax Appellate Tribunal was also justified in holding that interest income of Rs.16,14,579/- and Rs.32,83,410/-respectively on deposits placed with State Bank of India was not exempt under section 80P(2)(a)(i) of the Income Tax Act, 1961. 16.1 However, we find force in the argument of the learned counsel for the assessee that only the element of interest income should be considered for the purpose of making the disallowance under the provisions of section 80P(2)(a)(i) of the Act. In other words, the amount of interest expense incurred by the assessee against the earning of interest income should be considered while calculating the amount of interest income earned from the bank. Thereafter, if any surplus remains there by way of interest from the bank, the same should not be considered while calculating the deduction under section 80P(2)(a)(i) of the Act. Thus, the ground of appeal of the assessee is partly allowed. In the result the appeal filed by the assessee is partly allowed. Coming to the ITA No.927/Ahd/2019 for A.Y. 2014-15 17. The assessee has raised the following grounds of appeal: 1. The Ld.CIT Appeals-5 Ahmedabad has erred in law and on facts in passing appellate order dated 29/03/2019 for A.Y.. 2014-15 in the case of appellant by confirming disallowances made by the assessing officer. 2. The Ld.CIT Appeals erred in law and on facts by confirming the disallowance of gift expenses of Rs.520740/- and not increasing the corresponding deduction u/s.80P. ITA nos.926-927/AHD/2019 A.Ys. 2013-14-2014-15 6 3. The Ld.CIT Appeals erred in law and on facts by confirming the denial of deduction u/s.80P on Interest income on FDR/SB of Rs.222433/- 4. The appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal on or before of the final hearing of appeal. 18. The 1 st issue raised by the assessee is that the learned CIT-A erred in not allowing the deduction on the amount of enhanced profit under section 80P(2)(a)(i) of the Act on account of the disallowance of gift expenses. 19. At the outset, we note that the issue raised by the assessee in this ground of appeal is identical to the issue raised in ITA No. 926/AHD/2019 for the assessment year 2013-14. Therefore, the findings given in ITA No. 926/AHD/2019 shall also be applicable for the year under consideration i.e. AY 2014-15. The appeal of the assessee for the assessment year 2013-14 has been decided by us vide paragraph No.9 of this order in favour of the assessee. The DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied for the year under consideration i.e. AY 2014-15. Hence, the ground of appeal filed by the Assessee is allowed. 20. The 2 nd issue raised by the assessee is that the learned CIT-A erred in denying the deduction claimed by it under the provisions of section 80P(2)(a)(i) of the Act with respect to the interest income on the fixed deposits and saving bank account. 21. At the outset, we note that the issue raised by the assessee in this ground of appeal is identical to the issues raised in ITA No. 926/AHD/2019 for the assessment year 2013-14. Therefore, the findings given in ITA No. 926/AHD/2019 shall also be applicable for the year under consideration i.e. AY 2014-15. The appeal of the assessee for the assessment year 2013-14 has been decided by us vide paragraph No.16 of this order partly in favour of the assessee. The DR also agreed that whatever will be the findings for the assessment year 2013-14 shall also be applied ITA nos.926-927/AHD/2019 A.Ys. 2013-14-2014-15 7 for the year under consideration i.e. AY 2014-15. Hence, the ground of appeal filed by the Assessee is partly allowed. In the result, the appeal filed by the assessee is partly allowed. 23. In the combined results both the appeals filed by the assessee are partly allowed. Order pronounced in the Court on 27/04/2022 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 27/04/2022 Manish