SHREE PARSHWANATH NAGARI SAHAKARI PAT SANSTHA LTD,VITA V. INCOME TAX OFFICER WARD 2, SANGLI

ITA 1574/PUN/2024

AI Insights

The case involves Shree Parshwanath Nagari Sahakari Pat Sanstha Ltd., a cooperative society, which appealed against the order of the CIT(A)/NFAC for the assessment year 2020-21. The primary contention was regarding the deduction claimed under section 80P of the Income Tax Act, which was initially disallowed by the Assessing Officer. The Tribunal examined the eligibility of interest income from various banks for deductions under sections 80P(2)(a)(i), 80P(2)(d), and 80P(2)(c)(ii). The Tribunal's decision was influenced by similar cases and precedents, leading to the allowance of the deductions claimed by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47245 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: Chandraprabhu Gramin Bigarsheti Sahakari Pat Sanstha vs. ITO, Sharad Nagari Sahakari Patsanstha Maryadit vs. ITO, Yogiraj Nagari Sahakari Patsanstha Maryadit vs. ITO, The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND DESAI
• Assessee Lawyers: AMIT SHINTRE VIRTUAL
• Keywords: Set aside; Business income; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 142(1); 143(2); 80P

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1574/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2020-21 Shree Parshwanath Nagari Sahakari Pat Sanstha Ltd., Mahaveer Nagar, Khanpur Vita- 415311. PAN : AAAAS1864P Vs. ITO, Ward-2, Sangli. Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the assessee is directed against the order dated 31.05.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2020-21. 2. The appellant has raised the following grounds of appeal :- “1) On facts and circumstances of the case Ld. CIT(A) though justified in principally allowing the interest income received from co-operative banks under section 80P(2)(d) of Rs.85,74,976 instead of Rs. 1,19,74,102 due to mere typographical mistake in ground No. 4 submitted with CIT(A). The actual interest income from Co-Operative Banks was Assessee by : Shri Amit Shintre (Virtual) Revenue by : Shri Arvind Desai Date of hearing : 16.01.2025 Date of pronouncement : 08.04.2025 ITA No.1574/PUN/2024 2 Rs.1,74,31,818, but the claim under section 80P(2)(d) was restricted to the gross total income of Rs. 1,19,74,102 while filing the return of income. 2) Without prejudice to Ground No. 1, on facts and circumstances of the case Ld. CIT(A) was not justified in disallowing the interest income received from ICICI Bank and Axis Bank amounting to Rs. 2,79,834 where the fixed deposits are kept on account of business necessity since the assessee society is availing the NEFT, RTGS and Mobile Banking facility from above banks. Considering the direct nexus with the business of the assessee the interest received above from above banks should be considered as business income and eligible for deduction u/s 80P(2)(a)(i). 3) Without prejudice to Ground No. 1, on facts and circumstances of the case Ld. CIT(A) was not justified in disallowing the interest income received on income tax refund amounting to Rs.34951 without giving the deduction under section 80P(2)(c)(ii) of the Act. 4) Without prejudice to Ground No. 1, on facts and circumstances of the case Ld. Assessing Officer was not justified in not providing fair opportunity of being heard by closing the response to Show Cause Notice dt. 15/03/2022 on 21/03/2022 for which the response was required to be submitted on or before 18th March 2022 which is against the principal of natural justice and the provisions of General Clauses Act, considering that on 18th March, 2022 which was a public holiday and the following two days namely, 19th March, 2022 and 20th March, 2022 were Saturday and Sunday. Therefore, the next working day was 21st March, 2022. 5) The assessee craves the right to add, alter, delete, and modify all or any of the grounds of appeal.” 3. Facts of the case, in brief, are that the assessee is a primary credit cooperative society engaged in accepting deposits from its members and also providing credit facilities to its members and has furnished its return of income on 13.01.2021 declaring total ITA No.1574/PUN/2024 3 income at Rs.Nil after claiming deduction u/s 80P of the Act at Rs.1,19,74,102/-. The case of the assessee was selected for scrutiny and notices u/s 143(2) and 142(1) respectively were issued to the assessee. The assessment was completed u/s 143(3) by determining total income of Rs.1,19,74,102/- as against the income returned by the assessee at Rs.Nil. The above assessed income includes addition on account of disallowance of deduction claimed u/s 80P of Rs.1,19,74,102/-. 4. After considering the reply of the assessee, Ld. CIT(A)/NFAC partly allowed the appeal by observing as under :- “5.8 In the instant case, as per the assessment order page no. 4, the appellant has earned interest income of Rs.6,80,45,642/- out of deposits made with the various banks. The AO has considered the relevant expenditure incurred for earning the said interest receipt u/s 57 of the Act and quantified the net interest as Rs.11,97,41,02/- out of these deposits. It is further observed from the ground of appeal no.4, the appellant has stated that an amount of Rs.85,74,976/- has been received as interest from the co-operative banks. Accordingly, I am of the considerate opinion that the said receipts from the co-operative banks amounting to Rs.85,74,976/- is eligible for claim of deductions u/s 80P of the Act in view of the various decisions cited above under the ambit of section 80 P (2) (d) of the Act. Respectfully following the above judicial precedence, the claim of the deduction made by the appellant u/s 80P(2)(d) of the Act on the interest/dividend received from the Co-operative banks only to the extent of Rs.85,74,976/- is allowable. Whereas, the receipt of interest from the deposits made with the nationalized banks is not eligible as deduction u/s 80P(2)(d) of the Act as per the decision of Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited (cited supra). Accordingly, the AO is directed to quantify the net interest receipt from the nationalized banks and the same is not eligible for deduction ITA No.1574/PUN/2024 4 u/s 80P(2)(d) of the Act. Thus, the ground of appeal no. to 10 on this issue are partly allowed.” 5. It is this order against which the assesse is in appeal before this Tribunal. 6. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR further submitted that although Ld. CIT(A)/NFAC was justified in principally allowing the interest income received from cooperative banks u/s 80P(2)(d) of Rs.85,74,976/-. However, due to an inadvertent typographical error in grounds of appeal, the interest amount received from cooperative bank was mentioned as Rs.85,74,976/- instead of Rs.1,19,74,102/-. It was further submitted by Ld. AR that the interest income received from cooperative banks was in-fact Rs.1,74,31,118/- but the claim u/s 80P(2)(d) was restricted to the gross total income of Rs.1,19,74,102/-. Apart from above without prejudice to the ground no.1, it was also submitted before the Bench that the assessee cooperative society has also received interest from ICICI Bank and Axis Bank amounting to Rs.2,79,834/- and the same being business income is also deductible u/s 80P(2)(a)(i) of the IT ITA No.1574/PUN/2024 5 Act. It was also submitted by Ld. AR that the assessee is also in receipt of interest income received on income tax refund amounting to Rs.34,951/- which is also deductible u/s 80P(2)(c)(ii) of the IT Act being other income of the cooperative society. Accordingly, it was prayed by Ld. AR that the order passed by Ld. CIT(A)/NFAC may kindly be set-aside and the addition made by the Assessing Officer may kindly be deleted. In support of his contention, the assessee relied on the order passed by a Co- ordinate Bench of this Tribunal in the case of Chandraprabhu Gramin Bigarsheti Sahakari Pat Sanstha vs. ITO in ITA No.1858/PUN/2024 order dated 29.10.2024. 7. Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same. 8. We have heard Ld. Counsels from both the sides and perused the material available on record including the case laws relied on by the assessee. In this regard, we find that the assessee is a primary credit cooperative society engaged in the activities of accepting deposits from its members and also involved in providing credit facilities to its members. We further find that the ITA No.1574/PUN/2024 6 assessee has claimed deduction u/s 80P of the Act and disclosed Nil income in its return of income after claiming deduction of Rs.1,19,74,102/-. The Assessing Officer was of the view that the assessee cooperative society can only give and take advances/loans facilities to its members only & not to other banks. Accordingly, he disallowed the interest derived on its investments with other banks and disallowed the deduction claimed u/s 80P of Rs.1,19,74,102/-. In this regard, we find that the assessee has relied on the decision passed by a Co-ordinate Bench of this Tribunal in the case of Chandraprabhu Gramin Bigarsheti Sahakari Pat Sanstha (supra) wherein under identical facts and similar circumstances, the Tribunal was pleased to allow the appeal of the assessee by observing as under :- “9. We have heard the Ld. Representative of the parties and perused the records. We find that the impugned issue is no more res- integra by virtue of catena of decisions passed by the Co-ordinate Benches of the Tribunal and the Hon’ble High Courts. Admittedly, the facts are not in dispute. During the relevant AY 2018-19 it is noticed that the assessee has earned interest income amounting to Rs.45,81,847/- from investments/deposits made in Co-operative Societies/Co-operative banks/Scheduled banks/ Nationalized banks which it claimed as deduction u/s 80P(2)(a)(i)/80P(2)(d) of the Act. The Ld. CIT(A)/NFAC has allowed the claim of the assessee with respect to the interest income from investments/deposits made in Co- operative Societies and Co-operative banks amounting to Rs.7,62,162/- and disallowed the assessee’s claim of deduction with respect to the interest income from investments/deposits made in other ITA No.1574/PUN/2024 7 Scheduled / Nationalized banks. The Pune Bench of the Tribunal in the case of Sharad Nagari Sahakari Patsanstha Maryadit (supra) has decided the impugned issue in favour of the assessee under the similar set of facts by holding as under : “3. Even the latter limb of interest income of Rs.96,000/- derived from investments made in nationalized/other bank(s), the Revenue could hardly dispute that case law The Vaveru Cooperative Rural Bank Ltd., vs. CCIT [2017] 396 ITR 371 (AP) that interest income(s) derived from such nationalized/other bank(s) also qualifies for sec.80P deduction and thereby declined it’s very stand. Faced with this situation, I adopt the foregoing detailed discussion mutatis mutandis to accept the assessee’s sec.80P(2)(a)(i)/80P(2)(d) deduction claim(s) in very terms. Ordered accordingly.” 10. Identical issue was considered and decided in favour of the assessee by the Pune Bench of the Tribunal in the case of Yogiraj Nagari Sahakari Patsanstha Maryadit Vs. ITO in ITA No. 1152/PUN/2023, dated 06.06.2024 wherein the Tribunal in turn relying on the decision of the Co-ordinate Bench in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in ITA No.84/PAN/2018, dated 27.05.2022 held as under : “9. Following the decision of the Co-ordinate Bench of this Tribunal (supra), we are 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 banks qualify 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. Thus, we direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from other cooperative banks. The grounds of appeal filed by the assessee stands allowed.” 11. Respectfully following the decision(s) (supra) of the Co- ordinate Bench of the Tribunal and in the absence of any material brought on record to enable us to take a different view, we set aside the order of the Ld. CIT(A)/NFAC on the issue and allow the appeal of assessee.” 9. Respectfully following the above decision passed by the Co- ordinate Bench of this Tribunal in the case of Chandraprabhu ITA No.1574/PUN/2024 8 Gramin Bigarsheti Sahakari Pat Sanstha (supra) , we set-aside the order passed by Ld. CIT(A)/NFAC and direct the Assessing Officer to allow the deduction u/s 80P(2)(a)(i)/80P(2)(d) & 80P(2)(c)(ii) of the Act to the assessee. Thus, the grounds of appeal raised by the assessee are allowed. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 08th day of April, 2025. Sd/- Sd/- (R. K. PANDA) (VINAY BHAMORE) VICE PRESIDENT JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 08th April, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. "