RAILWAYMENS COOPERATIVE CREDIT SOCIETY,VADODARA, GUJARAT V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1), VADODARA, VADODARA, GUJARAT

ITA 1144/AHD/2025

AI Insights

The case involves Railwaymens Cooperative Credit Society appealing against the orders of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed the actions of the Assessing Officer (AO) in treating certain interest income as income from other sources and not allowing deductions under section 80P of the Income Tax Act, 1961. The Tribunal examined the issues related to the classification of interest income and the disallowance of proportionate expenses claimed by the assessee. The Tribunal's decision partly overturned the NFAC's decision, allowing some deductions while upholding others.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708463 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: Totagar's Cooperative Sale Society Ltd. vs. ITO 322 ITR 283
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURESH CHAND MEENA
• Assessee Lawyers: AMRIN PATHAN
• Keywords: Business income; Opportunity of being heard; Business expenditure
• Section: 56; 234B

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before Dr. BRR Kumar, Vice President And Ms. Suchitra Kamble, Judicial Member Railwaymens Cooperative Credit Society, Ram Nivas, R.V. Desai Road Navapura, Vadodara-390004 PAN: AACAR1582K (Appellant) Vs The Dy. CIT, Circle-2(1)(1), Vadodara (Respondent) Assessee by: Ms. Amrin Pathan, A.R. Revenue by: Shri Suresh Chand Meena, Sr. D.R. Date of hearing : 03-07-2025 Date of pronouncement : 15-07-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member: These are two appeals filed against the order dated 28- 03-2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment years 2018-19 & 2020-21. 2. The grounds of appeals are as under:- ITA No. 1143/Ahd/2025 A.Y. 2018-19 “All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. Deduction U/s. 8OP Rs. 48,09,143 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (NFAC) [the CIT(A)\"] erred in fact ITA Nos. 1143 & 1144/Ahd/2025 Assessment Year 2018-19 & 2020-21 I.T.A Nos. 1143 & 1144/Ahd/2025 Railwaymens Cooperative Credit Society, A.Y. 2018-19 & 2020-21 2 and in law in confirming the action of the learned Assessment Unit, National Faceless Assessment Centre (\"the AO\") in treating income of Rs. 48,09,143 as income from other sources taxable u/s. 56 of the Income Tax Act, 1961 (the Act) instead of business income. 2. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in not allowing deduction u/s 80P(2)(a)(1) of the Act on interest income of Rs 48,09,143. Disallowance of Proportionate Expense: 3. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in disallowing proportionate expense from interest income. 4. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in computing taxable income of the Appellant at Rs. 48,09,143 instead of Rs. 6,13,216, thereby disallowing the proportionate business expenditure earned for earning interest income. 5. The learned CIT(A) erred in fact and in law in treating the interest income from nationalised banks as income from other sources instead of business income. 6. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in disallowing the expense without appreciating the facts on record in proper perspective. 7. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in making disallowance of proportionate expense on assumptions and presumptions. 8. The learned CIT(A) erred in fact and in law in confirming the disallowance by holding that no details were filed by the Appellant for claiming the expenses. 9. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in disallowing the expense without granting proper opportunity of being heard. Other Grounds: 10. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in levying interest u/s 234B of the Act. 11. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in initiating penalty u/s 270A of the Act. I.T.A Nos. 1143 & 1144/Ahd/2025 Railwaymens Cooperative Credit Society, A.Y. 2018-19 & 2020-21 3 12. Your Appellant craves the right to add to or to alter, amend, substitute, delete or modify all or any of the above grounds of appeal.” ITA No. 1144/Ahd/2025 A.Y. 2020-21 “All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. Disallowance of Proportionate Expense - Rs.38,70,456: 1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (NFAC).[\"CIT (A)\"] erred in fact and in law in confirming the disallowance of Rs. 38,70,456 made by the Assessment Unit, National Faceless Assessment Centre (\"the AO\"). 2. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in computing taxable business income of the Appellant at Rs. 46,69,656 instead of Rs. 7,99,200, thereby disallowing the proportionate business expenditure of Rs. 38,70,456. 3. The learned CIT(A) erred in fact and in law in treating the interest income of Rs. 46,69,656 as income from other sources instead of business income. 4. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in disallowing proportionate expenditure of Rs. 38,70,456 from interest income earned from nationalised bank. 5. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in making disallowance of expense of Rs. 38,70,456 by invoking the provisions of section 80P of the Income Tax Act, 1961 (\"the Act\") despite the fact that deduction on interest income from nationalised banks was not claimed u/s 80P of the Act. 6. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in disallowing the expense without appreciating the facts on record in proper perspective. 7. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in making disallowance of proportionate expense on assumptions and presumptions. 8. The learned CIT(A) erred in fact and in law in confirming the disallowance by holding that no details were filed by the Appellant for claiming the expenses. I.T.A Nos. 1143 & 1144/Ahd/2025 Railwaymens Cooperative Credit Society, A.Y. 2018-19 & 2020-21 4 9. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in disallowing the expense without granting proper opportunity of being heard. Other Grounds: 10. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in levying interest u/s 234B of the Act. 11. The learned CIT(A) erred in fact and in law in confirming the action of the learned AO in initiating penalty u/s 270A of the Act. 12. Your Appellant craves the right to add to or to alter, amend, substitute, delete or modify all or any of the above grounds of appeal.” 3. The assessee’s case was selected for complete scrutiny relating to the issue of expenditure of personal nature, investment/advance/loans and deduction from total income under Chapter-VIA. The assessee filed its return of income on 27-07-2018 declaring total income of Rs. nil after claiming deduction u/s. 80P(2)(a)(i) of the Income Tax Act amounting to Rs. 79,17,847/-. The assessee is a co- operative society and as per the audit report of the assessee, the assessee is in the business of finance intermediation services. The assessee has shown total income interest income of Rs.6,69,44,095/-. The Assessing Officer observed that the assessee has invested the said sum and deposited in nationalized bank and received interest of Rs. 48,09,143/-. The Assessing Officer treated it as income from other sources u/s. 56 of the Act based on the decision of Hon’ble Apex Court in case of Totagar’s Co-operative Sale Society Ltd. vs. ITO 322 ITR 283. I.T.A Nos. 1143 & 1144/Ahd/2025 Railwaymens Cooperative Credit Society, A.Y. 2018-19 & 2020-21 5 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. As regards ground nos. 1 and 2, the same are against the assessee and hence dismissed as per the decision of Hon’ble Apex Court in case of Totagar’s Co-operative Sale Society Ltd. (supra). Hence, ground nos. 1 & 2 are dismissed. 6. As regards ground nos. 3 to 8 relating to disallowance of proportion expenses as regards to proportionate business for earning interest income has to be taken into consideration even if interest income is derived from national banks. Thus, to that extent, the Assessing Officer is directed to verify the calculation of proportionate expenditure given by the assessee and reproduced by the CIT(A) at page no. 20 be taken into consideration and the component which are allowable as per Income Tax Act be given to the assessee. Thus, ground nos. 3 to 8 are partly allowed for statistical purposes. Hence, ITA No. 1143/Ahd/2025 for assessment year 2018-19 is partly allowed for statistical purposes. 7. As regards ITA No 1144/Ahd/2025 for assessment year 2020-21, the same is identical to the appeal filed by the assessee for assessment year 2018-19 and hence the said appeal is also partly allowed for statistical purposes to the extent of ground nos. 1 to 8. I.T.A Nos. 1143 & 1144/Ahd/2025 Railwaymens Cooperative Credit Society, A.Y. 2018-19 & 2020-21 6 8. In the result, both the appeals of the assessee are partly allowed for statistical purpose. Order pronounced in the open court on 15-07-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 15/07/2025 आदेश क\u0006 \u0007\bत ल प अ\u000fे षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद "