ITO MEHSANA WARD 5 KADI, KADI V. THE GOZARIA PEOPLES CO OPERATIVE CREDIT SOCIETY LIMITED, GOZARIA

ITA 1819/AHD/2024

AI Insights

The case involves an appeal by the Income Tax Officer, Mehsana against The Gozaria Peoples Co-operative Credit Society Limited concerning the Assessment Year 2018-19. The primary issues in the appeal were the allowance of a deduction under section 80P(2)(d) for interest income from Co-operative Banks and the deletion of an addition under section 68 related to unexplained increase in loans and advances. The Tribunal referenced several precedents, particularly from the Gujarat High Court, which supported the view that Co-operative Banks are considered Co-operative Societies for the purpose of section 80P(2)(d). The Tribunal also noted that the assessee's activities were primarily audited and regulated under the Gujarat State Cooperative Societies Act, which further substantiated the legitimacy of the entries in question.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24974 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Other Referred Cases: PCIT Vs. Ashwinkumar Arban Co-Operative Society Ltd, Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v Asstt. Commissioner of Income Tax, State Bank of India v Commissioner of Income Tax, Totgars' Cooperative Sale Society v. Income Tax Officer, Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K PATEL
• Assessee Lawyers: TRUPTI PATEL
• Keywords: Corroborative evidences; TDS; Prejudicial to interest
• Section: 263; 68; 80P

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER I.TA. No.1819/Ahd/2024 (Assessment Year: 2018-19) The Income Tax Officer, Mehsana Ward 5, Kadi. Vs. The Gozaria Peoples Co- operative Credit Society Limited, Gozaria 2, Main Bazar At Gozaria Ta. Mehsana Dist. Mehsana-383825 [PAN No.AAAJT1283G] (Appellant) .. (Respondent) Appellant by : Shri B K Patel, AR Respondent by: Smt. Trupti Patel, Sr. DR Date of Hearing 11.02.2025 Date of Pronouncement 18.02.2025 O R D E R PER: DR. BRR KUMAR, VICE PRESIDENT: The captioned appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals), Ahmedabad/National Appeal Centre, Delhi passed for the Assessment Year 2018-19. 2. The Revenue has taken the following grounds of appeal:- (a) The Ld.CIT(A) has erred in law and on facts in allowing the deduction u/s. 80P(2)(d) of IT Act of Rs42,72,004/- in respect of interest income received from various Co-operative Banks without considering that the assessee has invested surplus funds like a ordinary investor and it has to be taxed as Income from other sources. ? ITA No.1819/Ahd/2024 Asst.Year –2018-19 - 2– (b) The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs 97,45,404/-made by AO in respect of increase in loans and advance which is shown as asset in balance sheet u/s. 68 of IT Act without appreciating the fact that the assessee has not furnished supporting evidences/documents to substantiated the increase in loans and advances? (c) The Ld.CIT(A) has erred in law and on facts in admitting the additional evidences filed by assessee without remand back to AO for verification and ignoring the fact the assessee has not filed any reply during assessment proceedings despite issuing various statutory notices ? (d) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal. 3. Deduction u/s. 80P(2)(d) of IT Act: The issue before us is to determine whether the co-operative bank is also treated as co-operative societies for the purpose of allowing deduction u/s.80P(2)(d) of the Act. This issue stands settled by the order of the jurisdictional High Court in the case of PCIT Vs. Ashwinkumar Arban Co- Operative Society Ltd, [2024] 168 taxmann.com 314 (Gujarat). For the sake of ready reference, snippets of the said order is reproduced below:- “Section 80P, read with section 263 of the Income-tax Act, 1961 Deductions Income of co-operative societies (Interest from co- operative bank) Assessment year 2018-19- Principal Commissioner invoked revisional powers under section 263 on ground that Assessing Officer had allowed deduction on interest earned by assessee, a cooperative society, from investment made with a cooperative bank under section 80P(2)(d) which was erroneous and prejudicial to Interest of revenue Tribunal reversed Principal Commissioner's order holding that cooperative bank was a cooperative society registered under Gujarat State Cooperative Societies Act and, therefore, interest earned by assessee from said bank was eligible for deduction under section 80P(2)(d) - Whether deduction under section 80P(2)(d) is available to cooperative societies on income earned as interest on investment made with cooperative bank which in turn, is a cooperative society itself - Held, yes - Whether exclusion of applicability of section 80P to cooperative banks by section 80P(4) would not disentitle assessee from claiming deduction under section 80P(2)(d) in absence of any amendment in said section - Held, yes - Whether thus, provisions of section 80P(2)(d) would be applicable to instant case and Principal Commissioner was not justified in invoking revisional powers under ITA No.1819/Ahd/2024 Asst.Year –2018-19 - 3– section 263 which was rightly reversed by Tribunal - Held, yes [In favour of assessee) ***  The controversy sought to be canvassed with regard to deduction under section 80P(2)(d) is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v Asstt. Commissioner of Income Tax [2022] 140 taxmann.com 602 (Guj.) as well as in case of State Bank of India v Commissioner of Income Tax (2018) 389 ITR 578 (Guj.) wherein it was held that the deduction under section 80P(2)(d) is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. [Para 28]  Reliance placed by the revenue on decisions of the Karnataka High Court in Totgars’ Cooperative Sale Society (2017) 395 ITR 611 and Supreme Court in case of Totgars Cooperative Sale Society Ltd v. Income Tax Officer 322 ITR 283 (S.C), the Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) wherein the cooperative bank is excluded from the applicability of tax to be deducted at source. However, it appears that the interpretation made by the Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the cooperative societies by Finance Act, 2015 by amending section 194A(3)(v) is concerned, on perusal of section 194A (3), it appears that it provides for exemption from deducting Tax Deducted at Source from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to deduct TDS from the interest other than interest on securities. Therefore it cannot be said that cooperative banks are excluded from the definition of cooperative societies by such an amendment. [Para 29]  Moreover, as reliance placed on the aforesaid decision for applicability of section 80P(4) in the facts of the case is also not possible to accept as section 80P(4) would be applicable to the cooperative bank when the cooperative bank is liable to pay tax under the provisions of the Act and in such eventuality, the provision of section 80P would not be applicable as per the amendment of sub-section (4) of section 80P. Therefore, the exclusion of applicability of section 80P to cooperative banks by section 80P (4) would not disentitle the respondent-assessee from claiming deduction under section 80P(2)(d) in absence of any amendment in the said section and that would not be sufficient to deny the claim of the respondent-assessee for deduction of interest earned from investment made in a cooperative bank which is also a cooperative society from the total income. [Para 30] ITA No.1819/Ahd/2024 Asst.Year –2018-19 - 4–  The Apex Court in case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer in 458 ITR 184 while considering various provisions of the Banking Regulation Act read with provisions of the Income Tax Act has held that the provision of section 80P(4) would not be applicable to a cooperative bank which is not a bank as per the provisions of the Banking Regulation Act, 1949.[Para 31]  In view of the above the provisions of section 80P(2)(d) would be applicable in the facts of the case and the Principal Commissioner was not justified in invoking revisional powers under section 263 which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled. [Para 33]  In view of the foregoing reasons the question is answered in favour of the assessee and against the revenue. Tax Appeals being devoid of any merit are dismissed [Para 34].” Respectfully following the order of the Hon’ble jurisdictional High Court, the ground No.1 raised by the Revenue in this appeal is dismissed. 4. Addition of Rs 97,45,404/- u/s. 68 : The Assessing Officer made an addition of Rs.97,45,404/- appearing in the balance sheet under the head “loans and advances” on the ground that the assessee has not furnished supporting evidences to substantiate the increase of the amount under this head. The Ld. CIT(A) has deleted the addition on the holding that the assessee is a Co-operative Society providing credit facilities to members and accepting deposits from members, investments and making advances are the primary activities of the appellant society. Further, the Ld. CIT(A) held that the assessee is subjected to audit by the auditors appointed by the Registrar of Co-operative Societies of Gujarat ITA No.1819/Ahd/2024 Asst.Year –2018-19 - 5– Government and the amount received from depositors i.e. members are accounted in the books of accounts and therefore cannot be treated u/s 68. This ground of appeal of the Revenue is also dismissed. 5. Since the issue of deduction u/s.80P & addition u/s.68 have been righty allowed by the Ld.CIT(A), we hereby affirm the well-reasoned order of the Ld.CIT(A). 6. In the result, the appeal of the Revenue is dismissed. This Order pronounced in Open Court on 18.02.2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (DR. BRR KUMAR) JUDICIAL MEMBER VICE PRESIDENT (True Copy) Ahmedabad; Dated 18.02.2025 Manish, Sr. PS TRUE COPY आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent. 3. संबंिधत आयकर आयुᲦ / Concerned CIT 4. आयकर आयुᲦ(अपील) / The CIT(A)- 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडᭅ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad "