Kadod Vibhg Nagrik Sahakari Dhiran Mandli Limited, Surat V. ITO, Ward-1, , Bardoli

ITA 97/SRT/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1667 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 18-09-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 26-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263; 143(3); 64; 72

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT ‘SMC BENCH’ BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER आ.अ.सं./ITA Nos.97 & 98/SRT/2022 (AYs 2016-17 & 2017-18) (Hearing in Virtual Court) Shri Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd., Mota Bazar, Post. Kadod, Dist. Surat-394335 PAN : AADAS 5570 R Vs Income Tax Officer, Ward-1, 2 nd Floor, BSNL Building, Opp. Jalaram Temple, Station Road, Bardoli, Dist. Surat-394601 Deputy Commissioner of Income-tax, Circle-2(3), Room No.612, 6 th Floor, Aayakar Bhawan, Near Majura Gate, Surat-395001 अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent Ǔनधा[ǐरती कȧ ओर से /Assessee by None / Written Submission राजèव कȧ ओर से /Revenue by Shri Vinod Kumar, Sr-DR सुनवाई की तारीख/Date of hearing 19.09.2022 उɮघोषणा कȧ तारȣख/Date of pronouncement 19.09.2022 Order under section 254(1) of Income Tax Act 1. This set of two appeals by assessee are directed against separate orders of National Faceless Appeal Centre [for short to as “Ld. NFAC”]/Ld. CIT(A) both dated 12.03.2022 for the assessment years 2016-17 & 2017-18, which in turn arise out ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 2 of separate assessment order passed under section 143(3) of Income-Tax Act (Act) dated 07.12.2018 and 01.12.2019 respectively. In both the appeals the assessee has raised identical grounds of appeals. Facts in both the appeals are almost similar except figure of disallowances under section 80P(2)(d) thus, both the appeals were clubbed, heard together and are decided by common order to avoid the conflicting decisions. For appreciation of fact the fact, facts in assessment year 2016-17 in ITA No. 97/SRT/2022 is treated as “lead” case. The assessee has raised the following grounds of appeal: “1. The learned CIT(A) has erred in holding that the interest of Rs.13,91,842 received from Co.op.Bank is not eligible for deduction under Section 80P(2)(d) following the judgment of Gujarat High Court in the case of State Bank of India V/s CIT (2016) 72 Taxmann.com 64 (Gujarat) and the Hon'ble Karnataka High Court in the case of PCIT V/s. Totgar’s Co-operative Sale Society 83 taxmann.com 140 inasmuch as the learned CIT(A) should have followed Suprem Court decision in the case of Mavilayi Service Co-Operative Bank Ltd. and Others V/s CIT 431 ITR 1 (SFC) and that the entire income of a Credit Co.op.Society is eligible for deduction under Section 80P(2)(a)(i) including interest from the Surat Dist. Co.op. Bank Ltd. As per SC decision. 2. The appellant says and submits that the assessee is a Co.op.Society.” ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 3 2. Brief facts of the case are that assessee is Credit Co-operative Society, engaged in providing credit facilities to its members. The assessee filed its return of income for the year under consideration for the year 2016-17 on 28.03.2018 declaring nil income. In the computation of income, the assessee claimed deduction of interest earned from deposits with Surat District Co-Operative Bank Ltd. of Rs.13,91,842/- and dividend income of Rs.5,50,250/- respectively. The case was selected for scrutiny. The case of the assessee was selected for scrutiny. During assessment, the Assessing Officer issued show cause notice as to why the deduction claimed under section 80P(2)(d) be not disallowed as the dividend income and interest income earned from Co-operative Bank and that Co- operative Bank is different than Co-operative Society. The Assessing Officer recorded that the submission of assessee is found to be general in nature. The Assessing Officer without specifying or recording the contents of reply filed by the assessee, disallowed the deduction under section 80P(2)(d) of Rs.13,91,842/-. Aggrieved by the addition, the assessee filed ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 4 appeal before ld. CIT(A). The appeal of assessee was migrated to NFAC and was adjudicated vide order dated 12.03.2022. Before NFAC/Ld. CIT(A) the assessee filed its submission as recorded in pages 4-5 of the order of NFAC/Ld. CIT(A). In the submission, the assessee submitted that the Co-Operative Bank are primarily Co-Operative Society as per definition of Co-Operative Society under Co-Operative Society Act, 1912. The assessee also relied upon various case laws as recorded by NFAC/Ld. CIT(A) at pages 5-6 of the order. The assessee specifically relied on the decisions of division bench of Tribunal in ACIT Vs Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. in ITA No.2582/Ahd/2014/SRT. The NFAC after discussing the various case law [which are basically on disallowance under section 80P(2)(a)(i)] uphold the order of Assessing Officer. Further aggrieved the assessee has filed present appeal before the Tribunal. 3. None appeared on behalf of assessee, despite of service of notice of hearing of appeal on the assessee, by way of registered post acknowledgment due (RPAD). However, on ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 5 perusal of record, I find that assessee has filed its written submission on 12.09.2022. In the submission, the assessee submitted that assessee is a registered Co-Operative Society in as much as the name of the bank itself is Co-Operative, therefore claim of assessee is correct and the addition made by the Assessing Officer and sustained by NFAC is not proper and correct. The assessee has also relied on the decision of Hon'ble Apex Court in the case of Mavilayi Service Co- Operative Bank Ltd. and Others vs. CIT 431 ITR 1 (SC). As the assessee has filed its written submission, therefore, I have no option except to hear the submission of learned Senior Departmental Representative (Sr. DR) for the Revenue and to decide the appeals on the basis of submission of ld DR for the revenue and the material available on record. 4. The Ld. Sr-DR for the Revenue supported the order of lower authorities and submits that Bench may decide both the appeals on merits considering the order of lower authorities. 5. I have considered the written submission filed by assessee and the submission made by ld. Sr DR for the Revenue. I have ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 6 also have gone through the orders of lower authorities. I have also deliberated on the case law relied by assessee in its written submission, which is primarily on the deduction under section 80P(2)(a)(i) of the Act, however, the issue raised in the present appeal relates to deduction under section 80P(2)(d). 6. I find that the Assessing Officer made the disallowances under 80P(2)(d) by taking view that Co-Operative Banks are different than the Co-Operative Society. The assessee has earned dividend and interest from Surat Co-operative Bank of Rs.5,50,250/- and interest income of Rs.8,41,392/- and accordingly disallowed deduction under section 80P(2)(d). I find that Assessing Officer despite recording that the assessee filed its reply but not referred and discussed the contents of the reply filed by the assessee. The NFAC also confirmed the action of the Assessing Officer on the basis of various decisions of superior courts, which are basically on Section 80P(2)(a)(i) of the Act. I find that the ground of appeal raised by the assessee is in fact covered by the decision of Co- ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 7 ordinate Bench of this Tribunal in ITO Vs Bardoli Vibhag Gram Vikas Co-Operative Credit Society Ltd. (2018) 96 taxmann.com 529 (Surat-Trib), wherein on similar grounds of appeal on similar set of facts, the Co-ordinate Bench by following the decision of Hon'ble jurisdictional High Court in the case of Surat Vankar Sahkari Sangh Ltd. Vs ACIT (2016) 72 taxmann.com 169 (Gujarat)/ 421 ITR 134 (Gujarat), wherein it was held that Co-Operative Society is eligible for deduction under section 80P(2)(d) in respect of interest received from Co-Operative Bank without adjusting interest paid to said bank. The relevant part of the decision in Surat Vankar Sahkari Sangh Ltd. (supra) is extracted below: - “5. We have heard rival contentions. We have also gone through the paper book furnished by the ld. Counsel containing judicial pronouncements, written submission made before the Id. CIT(A), audit reports etc. We have noticed that the assessee has been statutorily investing its surplus fund from the year 1992 with other Co-operative Societies which include Co-operative Banks and on such investments, the appellant has been receiving interest and dividend which has been claimed as deduction u/s. 80P(2)(d) of the Act. We find that the provision of section 80P(4) are not applicable to the assessee, because section 80P(4) says that provision of this section shall not apply in relation to Co-op ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 8 Bank other than Primary Agricultural Credit Societies or a Primary Co-op agricultural and Rural Development Bank. Regarding eligibility for receiving interest received from the co- operative bank we have noticed from the judicial pronouncement in the case of Surat Vankar Sahakari Sangh Ltd. v. Asstt. CIT [2016] 72 taxmann.com 169 (Gujarat) in which the Hon'ble High Court of Gujarat held as under:— "8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co- operative society from its investment with any other co- operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co-operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co- operative society from its investment in any other co- operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income-tax Act, 1961. in respect of interest of Rs. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 9 Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee." 6.We have further noticed from the finding of the ld. CIT(A) that the assessee has claimed the gross amount of Rs. 4,05,40,653/- u/s. 80P(2)(d) which includes interest income of Rs. 3,24,40,278/- and dividend income of Rs. 81,00,375/- received from other Co-operative societies. However, in the computation of income, assessee has restricted the deduction to Rs. 1,36,41,639/- which was net income. Therefore, we considered that the Ld. CIT(A) is justified in his decision that the net income in the case of assessee of Rs. 1,36,41,639/-allowable as deduction u/s. 80P(2)(d) of the Act. In view of the above stated facts and detailed findings of the Ld. CIT(A) given in his order, we disinclined to interfere in the decision of Ld. CIT(A). 7. I further find, that division bench of this Tribunal while considering the similar ground of appeal, though, on assailing the order of Ld. Principal Commissioner of Income Tax, under section 263, in Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. vs. PCIT (2021) 127 taxmann.com 334 (Surat- Trib.) passed the following order; “11. We have considered the rival submission of both the parties. We have also deliberated on the written submission filed by learned AR of the assessee and various case laws relied by him during his submission. We have also gone through the various documentary evidences filed in the form of paper book (PB) by learned AR of the assessee. We have noted that during the assessment the Assessing Officer vide notice under section 143(2)/142(1) of the Act dated 31-8- ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 10 2015 and 13-4-2016. The assessee filed its reply through its CA (AR) and furnished required details and after examining the issue allowed the deductions under section 80P(2)(d) as discussed in para 4 of the assessment order. The Assessing Officer passed assessment order on 18-10-2016. 12. The ld. PCIT before passing under section 263 of the Act, identified the issue regarding the claim of deduction under section 80P(2)(d) in its show cause notice dated 6-3-2019. The assessee in its reply dated 7-3-2019 clearly explained that the issue was examined by Assessing Officer and that the assessment order is not erroneous. The assessee also explained that similar disallowances/issues was subject matter in the appeal filed by the revenue before Tribunal in A.Y. 2009-10, 2010-11 and 2012-13 and the assessee was allowed similar deductions. 13. The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd. v. Pr. CIT [2019] 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. (emphasis added by us). Further, Hon'ble Madras High Court in CIT v. Mepco Industries Ltd. [2007] 163 Taxman 648/294 ITR 121 (Madras) held that when two views are possible on an issue and it is not the case of the Commissioner that the view taken by Assessing Officer is not permissible in law, Commissioner cannot invoke his jurisdiction under section 263 of the Act. (emphasis added by us) 14. As we have noted above the assessing officer has made enquiries on the allowability of deduction under section 80(P)(2)(d) ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 11 and passed the assessment order, thus, the Assessing Officer has taken a reasonable and possible view which cannot be held as erroneous. 15. The Hon'ble Karnataka High Court in Totagars Cooperative Sales Society (supra) held that for the purpose of section 80P(2)(d) a Co-operative Bank should be considered by a Co-operative Society and interest earned by Co-operative Society from Cooperative Bank would necessarily be deductible under section 80P(1) of the Act. Further, the Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. (supra) held that assessee co-operative society is eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank. 16. The Co-ordinate Bench of Rajkot Tribunal in Surendarnagar District Co-operative Milk Producer Union Ltd. v. Dy. CIT [2019] 111 taxmann.com 69/179 ITD 690 (Rajkot Tribunal) also held the assessee co-operative society could not claim benefit under section 80P(2)(d) in respect of interest earned by it from deposits made with nationalized/private banks, however, the said benefit was available in respect of interest earned and on deposits made with co-operative bank. Thus, in view of the aforesaid legal discussion we are of the considered view that order passed by Assessing Officer is not erroneous, though it may be prejudicial to the interest of the Revenue. Therefore, the twin conditions that orders is erroneous and so far as prejudicial to the interest of revenue, as prescribed under section 263 is not fulfilled in the present case. 17. Moreover, we have seen that in assessee's own case for A.Y. 2009-10, 2010-11 and 2012-13, the similar disallowance under section 80P(2)(d) was made by the assessing officer while passing ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 12 assessment order under section 143(3), however, on appeal before Ld. CIT(A) , the disallowances were deleted and the order of the Ld. CIT(A) in all years were confirmed. 18. The ld. DR for the revenue relied on the case law in Totagars Co- operative Sales Society (second case)/(supra), wherein the Hon'ble Karnataka High Court held that interest earned by a Co-operative Society from surplus deposits kept with Co-operative bank, is not eligible for deduction under section 80P(2)(d). Considering the legal position that when there are conflicting decisions of non- jurisdictional High Courts, on similar issue, the decision of Jurisdictional High Court is having binding precedent. Thus, keeping in view of the decision Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd. (supra) wherein the assessee-co- operative society is held eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank, we conclude that the order passed by assessing officer is not erroneous. Hence, the grounds of appeal raised by assessee are allowed.” 8. Considering the aforesaid factual and legal discussion, and respectfully following the decision of Hon’ble Gujarat High Court in Surat Vankar Sahakari Sangh Ltd. v. Asstt. CIT [2016] 72 taxmann.com 169 (Gujarat) and decision of Hon’ble Karnataka High Court in Totagars Co-operative Sales Society [2017] 78 taxmann.com 169/392 ITR 74 (Ker.), wherein it was held that for the purpose of section 80P(2)(d) a Co-operative Bank should be considered by a Co-operative Society and ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 13 interest earned by Co-operative Society from Cooperative Bank would necessarily be deductible. Thus, on the basis of above case law, the assessee is primarily a Co-operative Society dividend income and interest income earned from Surat District Co-Operative Bank, which is also primarily a Co- Operative Society, therefore, the assessee is eligible for deduction under section 80P(2)(d). Thus, in view of the aforesaid factual and legal discussion, I direct the Assessing Officer to delete the disallowance and allowed deduction under section 80P(2)(d) of the Act. This ground of assessee’s appeal is allowed. 9. In the result, assessees appeal is allowed. 10. Considering the fact that I have already allowed assessees appeal in ITA No.97/SRT/2022 for assessment year 2016-17, the same view is also applied in assessee’s appeal in ITA No.98/SRT/2022 for assessment year 2017-2018. This ground of assessees appeal is allowed. 11. In the result, both the appeals of the assessee are allowed. A copy of the instant common order be placed in the respective case file(s). ITA Nos.97-98/SRT/2022 (A.Ys 16-17 & 17-18) Sh. Kadod Vibhag Nagrik Sahkari Dhiran Mandli Ltd. 14 Order pronounced in the open court on 19/09/2022 and the result was also placed on the Notice Board. Sd/- (PAWAN SINGH) [᭠याियक सद᭭य JUDICIAL MEMBER] स ू रत /Surat, Dated: 19/09/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat