S T CO-OPERATIVE CREDIT SOCIETY,PUNE V. ITO, WARD 5(1), PUNE

ITA 2136/PUN/2024

AI Insights

The case involves the S T Co-operative Credit Society, Swargate, which appealed against the order of the Commissioner of Income Tax (Appeals) that dismissed their appeal due to a delay of 108 days in filing. The Tribunal considered the reasons for the delay, which included the lack of awareness of e-proceedings among the society's office bearers, most of whom were not well-educated. On the merits, the dispute centered on whether the interest income of Rs. 40,68,448 earned from deposits in PDCC Bank Ltd. and S.T. Co-operative Bank Limited was eligible for deduction under section 80P(2)(a) of the Income Tax Act, 1961. The Tribunal, referencing decisions from the High Court of Andhra Pradesh and ITAT Pune, ruled in favor of the assessee, allowing the deduction.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472103 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-11-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 10-10-2024
• Other Referred Cases: Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371, CIT v. Andhra Pradesh State Co-operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283, Kolhapur District Central Co-op. Bank Kanista SevakanchiSahakar Pat Sanstha Ltd. Vs. Income-tax Officer 158 taxmann.com 322 (Pune Tribunal), Yashwant Nagari SahakariPatsansthaMaryadit Vs. ITO in ITA No.644/PUN/2024 dated 04.06.2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH L PATHADE
• Assessee Lawyers: KISHOR B PHADKE
• Keywords: Set aside; Reasonable cause; Co-operative Credit Society
• Section: 250; 80P

Judgement Text

" ।आयकर अपीलीय अिधकरण ”एस एम सी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.2136/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year: 2020-21 S T Co-operative Credit Society, Swargate S T Depo, Veer Savarkar Nagar, Swargate Bus Stand, Pune – 411037. PAN: AABAS6856L V s The Income Tax Officer, Ward-5(1), Pune. Appellant/ Assessee Respondent / Revenue Assessee by Shri Kishor B Phadke – AR Revenue by Shri Prakash L Pathade – DR Date of hearing 13/11/2024 Date of pronouncement 18/11/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], under section 250 of the Income tax Act, 1961 dated 09.08.2024 for A.Y.2020-21. The assessee has raised the following grounds of appeal : “1. The learned CIT(A) erred in dismissing the appeal of the appellant by refusing to condone the delay of 108 days in filing the ITA No.2136/PUN/2024 2 appeal without appreciating that the said delay was due to reasonable cause as explained in the application for condonation of delay filed before CIT(A) and therefore, the said delay ought to have been condoned in the interest of justice and the appeal should have been adjudicated on merits. 2. The learned CIT(A) ought to have appreciated that the deduction u/s 80P was allowable in respect of interest earned from deposits made by cooperative banks as consistently held by Honorable ITAT, Pune and the considerations of merits, should not have been altogether ignored, while adjudicating the aspect of condonation of delay in filing appeal and hence, the appeal ought to have been allowed after condoning the delay 3. The appellant craves, leave to add, alter, amend and delete any of the above grounds of appeal.” Submission of ld.Authorised Representative(ld.AR) : 2. The ld.Authorised Representative(ld.AR) for the Assessee submitted that assessee’s appeal was dismissed by the ld.CIT(A) without discussing each and every ground and merits of the case and merely dismissed for Delay. Ld.AR submitted that there was valid and sufficient reason for delay, hence, submitted that Delay may kindly be condoned. Ld.AR submitted that this is a Co- operative Credit Society of State Transport Employees, most of them are not well educated. Ld.AR submitted that the office bearers were not aware about the e-proceedings and e-working of the Income tax Department. Therefore, there has been delay of 180 days in filing appeal before the ld.CIT(A). Ld.CIT(A) has not condoned the delay. Ld.AR submitted that in the interest of ITA No.2136/PUN/2024 3 justice, delay may kindly be condoned and the case may be decided on merits. 2.1 Ld.AR further submitted on merits Assessing Officer has held that interest of Rs.40,68,448/- earned by assessee is not eligible for deduction u/sec.80P of the Act. However, ld.AR invited our attention to various decision of ITAT Pune, wherein ITAT Pune has held that interest earned from Co-operative Banks is eligible for deduction u/sec.80P of the Act. In this case, assessee has earned interest from PDCC Bank Ltd., and S.T.Co-operative Bank Limited. Ld.AR submitted that assessee is eligible for deduction u/sec.80P on the interest earned. Submission of ld.Departmental Representative(ld.DR) : 3. The ld.DR for the Revenue relied on the order of Assessing Officer(AO) and ld.CIT(A)[NFAC]. Findings & Analysis : 4. We have heard both the parties and perused the records. As per the assessment order, Assessee is a Co-operative Credit Society engaged in the business of accepting deposits from members and lending loans to its members. Assessee had filed Return of Income ITA No.2136/PUN/2024 4 showing Gross Total Income of Rs.80,17,177/- and total income at Rs.Nil; claiming deduction u/sec.80P(2)(a) of the Act. The Assessing Officer has observed that assessee has earned interest income of Rs.40,68,448/- from PDCC Bank and S.T.Co-operative Bank Limited. The Assessing Officer has held that after insertion of section 80P(4) of the Act, assessee will not be eligible for deduction on the interest. Therefore, the question before us is whether the interest of Rs.40,68,448/- earned by assessee from PDCC Bank and S.T.Co-operative Bank Limited is eligible for deduction u/sec.80P or not! 5. The Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371analysed the provisions of Section 80P, succinctly distinguished the decision of Hon’ble Supreme Court in the case of Totagar Cooperative Sale Society, and held as under : Quote,“8. Therefore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of sub- section (2) of section 80P or not. 9. While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Co- operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the ITA No.2136/PUN/2024 5 Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. …………………… 34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co-operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the society. It is also found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression \"attributable to\" and not any one of the two expressions, namely, \"derived from\" or \"directly attributable to\". 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates to treating the interest income as something not allowable as a deduction under section 80P(2)(a), is set aside.”Unquote. ITA No.2136/PUN/2024 6 5.1 Thus, the Hon’ble High Court of AP &TS held that Interest Income earned by investing Income derived from Business and Profession by a Co-Operative Society was eligible for deduction u/s.80P(2)(a) of the Act. 5.2 No contrary decision of the Hon’ble jurisdictional High Court has been brought to our notice. Therefore, as per rule of precedence, the proposition of law laid down by the Hon’ble High Court of AP & TS (supra) are binding precedents for us. 6. The Hon’ble ITAT Pune Bench in the case of Kolhapur District Central Co-op. Bank Kanista SevakanchiSahakar Pat Sanstha Ltd. Vs. Income-tax Officer 158 taxmann.com 322 (Pune Tribunal) has held as under : Quote “7………………………..I am of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Therefore, I direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative bank/scheduled bank. Thus, the ground of appeal filed by the assessee stands allowed.”Unquote ITA No.2136/PUN/2024 7 7. The Hon’ble ITAT Pune Bench in the case of Yashwant Nagari SahakariPatsansthaMaryadit Vs. ITO in ITA No.644/PUN/2024 dated 04.06.2024 held that the assessee was eligible for deduction u/sec.80P(2)(a) of the Act on the Interest earned by assessee. 8. Respectfully following the decision of the Hon’ble High Court (supra) andITAT Pune (supra), it is held that the Interest earned by the assessee is eligible for deduction u/sec.80P(2)(a) of the Act. Accordingly, Grounds of appeal raised by the assessee are allowed. 9. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 18th November, 2024. Sd/- Sd/- (VINAY BHAMORE) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 18th Nov, 2024/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “एस एम सी” बᱶच, पुणे / DR, ITAT, “SMC” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. ITA No.2136/PUN/2024 8 आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune. "