THE VANGVALLEY CO-OP CREDIT SOCIETY LTD., MUMBAI V. ITO 17(3)(5), MUMBAI

ITA 940/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7087 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 04-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAVINDRA NAIK
• Keywords: Business expenditure
• Section: 144; 143(2)

Judgement Text

ITA No.940/Mum/2020 A.Y. 2014-15 The Vangvalley Co-op Credit Society Ltd. Vs. ITO, 17(3)(5) 1 IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORESHRI AMARJIT SINGH, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.940/Mum/2020 (A.Y 2014-15) The Vangvalley Co-op Credit Society Ltd. 1 st Floor, Room No. 4, 89-91, Gurunanak Niwas, Bhandari Street, Masjid Bunder, Mumbai -400 003 Vs. Income Tax Officer- 17(3)(5), 131, 1 st Floor, Kautilya Bhavan, C-41 to C-43, G Block, Bandra Kurla Complex, Bandra (E) Mumbai-400001 लेख सं./ज आइआर सं./PAN/GIR No.: AAAAT9251D Appellant .. Respondent Appellant by : Ravindra Naik Respondent by : S.N. Kabra Date of Hearing 09.03.2022 Date of Pronouncement 11.03.2022 आदेश / O R D E R PER AMARJIT SINGH, AM: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-28, Mumbai, which in turn arises from the assessment order passed by the A.O u/s 144 of the Income Tax Act, 1961, dated 20.12.2016 for A.Y. 2014-15. The assessee has assailed the impugned order on the following grounds before us: ITA No.940/Mum/2020 A.Y. 2014-15 The Vangvalley Co-op Credit Society Ltd. Vs. ITO, 17(3)(5) 2 “1. The Ld. CIT(A) has erred in affirming with the Ld. AO disallowing interest outgo on bank loans/ overdrafts as business expense amounting to Rs. Rs.49,42,618/-. 2. The Ld. CIT(A) has erred affirming with Ld. AO in not considering the additions amounting to Rs Rs.49,42,618/- as part of total income of the co- op credit society and hence allowable as deduction u/s 80P(2)(a)(i). 3. The appellant further reserves the right to add, amend or alter the aforesaid grounds of appeal as they may think fit by themselves or by their representatives.” 2. The fact in brief is that return of income declaring total income of at Rs.nil was filed on 26.11.2014. The return was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 28.08.2015. In spite of providing ample opportunities the assessee has not made any compliance to the various notices issued during the course of assessment proceedings, therefore, the assessment was finalized ex-parte u/s 144 of the Act on 20.12.2016. In absence of detail/submission the assessing officer has added the amount of interest expenditure of Rs.1,54,68,608/- to the total income of the assessee. 3. The assessee being aggrieved with the order passed by the A.O has carried the matter in appeal before the CIT(A). The ld. CIT(A) stated that assessee has claimed interest amount of RS.1,54,68,608/- comprised of two component viz. one component being an interest in relation to various scheme/deposit paid to members and the other component pertained to the interest paid to the bank/overdraft loan. The ld. CIT(A) has allowed the payment of interest made to the members to the amont of Rs.1,05,25,990/-, however, the part of interest amount which was claimed to be paid to the bank of Rs.49,42,618/- was disallowed. 4. During the course of appellate proceedings before us the ld. Counsel contended that payment of interest on bank loan/overdraft to ITA No.940/Mum/2020 A.Y. 2014-15 The Vangvalley Co-op Credit Society Ltd. Vs. ITO, 17(3)(5) 3 the amount of Rs.49,42,618/- is pertained to the business expenses of the assessee, therefore, same should be allowed. The ld. Counsel has also placed reliance on the decision of ITAT Delhi in the case of ACIT Vs. M/s Sangwari Primary Agr. Co-op Society Ltd.viz. ITA No. 40/Delh/2012, dated 14.12.2012. On the other hand, the ld. D.R supported the order of the lower authorities. 5. Heard both the side and perused the material on record. The assessee is a cooperative society having business of accepting deposit and lending money to the members of the society. The assessee filed its Income Tax return for A.Y. 2014-15 declaring total income of Rs.30,97,061/- and claimed deduction u/s 80P(2)(a)(i) of the I.T. Act, 1961. Since, the A.O passed an order u/s 144 of the Act, therefore, claim of deduction u/s 80P(2)(a)(i) of Rs.30,97,061/- was disallowed. The A.O has also added the amount of interest paid by the assessee to its members of Rs.1,05,25,990/- and amount of Rs.49,42,618/- as interest of bank loan/overdraft to the bank. The A.O has disallowed the entire expenses and also disallowed the claim of deduction u/s 80P(2)(a)(i) of the Act. However, the ld. CIT(A) has deleted the amount of addition pertaining to interest paid to the members of the assessee society by considering the same as business expenditure. It is undisputed fact that assessee had borrowed money against its own fixed deposit to advance the same to the member of the society. The assessee has categorically submitted before the ld. CIT(A) that interest paid to the bank was expenditure and not the income of the society, however, without disproving contrary the ld. CIT(A) has rejected the claim of the assessee, for payment of interest on loan to the bank which was a part of its expenditure and not income. In this regard we have also perused the ITA No.940/Mum/2020 A.Y. 2014-15 The Vangvalley Co-op Credit Society Ltd. Vs. ITO, 17(3)(5) 4 decision of coordinate bench of the ITAT, Delhi ACIT Vs. M/s Sangwari Primary Agr. Co-op Society Ltd.viz. ITA No. 40/Delh/2012, dated 14.12.2012 the relating part of the decision is reproduced as under: “8. We have considered the submission of the both the parties and have perused the record of the case. In the present case, it is not in dispute that credit facilities and seeds & urea etc. were given only to the members and only deposits were accepted from non-members. Tribunal in the case of Palhawas Primary Agriculture Co-op. vs ACIT for AYs 2008-09 & 2009-10, has observed that deposits from non-members did not generate any income to the assessee. The AO’s only contention is that the deposits received from non-members got circulated through members who in return paid interest on the advances and income had been generated to the society. Thus, the AO accepted that there was no direct income generated from the deposits but only by utilizing that money for making advances to its members. The income contemplated u/s 80P(2)(a)(i) & (iv) is the income from carrying on the business of banking or providing credit facilities to its members or income earned by the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members. The source of funds utilized for earning these incomes cannot be a basis for making disallowance under these provisions. The business of banking cannot be restricted to carrying on activities with members only because there is no such impediment imposed u/s 80P(2)(a)(i). The direct source of income is ultimately from the credit facilities provided to its members or from sale of seeds, agricultural implements to members only etc contemplated under section 80(2)(a)(iv). We, therefore, respectively following the decisions of Tribunal in the case of Palhawas Primary Agriculture Co-op. vs ACIT (supra), confirm the order of Ld. CIT(A).” In the light of the facts and following the decision of the ITAT Delhi as supra, we consider, that payment of interest to the bank is an expenditure of the assessee and not income of the society, therefore, the ld. CIT(A) is not justified in confirming the said addition made by the A.O, therefore, ground no. 1 of the assessee is allowed. Since, we have allowed ground no. 1 of the assessee, therefore, ground no. 2 of the assessee for claiming deduction u/s 80P(2)(a)(i) of the Act on the amount of addition sustained by the ld. CIT(A) is not required any adjudication. ITA No.940/Mum/2020 A.Y. 2014-15 The Vangvalley Co-op Credit Society Ltd. Vs. ITO, 17(3)(5) 5 6. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 11.03.2022 Sd/- Sd/- (AMARJIT SINGH) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 11.03.2022 PS: Rohit आदेश की े /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. संबंिधत आयकर आय / The CIT(A) 4. आयकर आय ( ) / Concerned CIT 5. िवभ ग य िति िध, आयकर य िधकरण, हमद ब द / DR, ITAT, Mumbai 6. ग $% फ ई / Guard file. आदेशानुसार/BY ORDER, स ािपत ित //True Copy// ( Asst. Registrar) ITAT, Mumbai