THE MES EMPLOYEES CO-OP CREDIT SOCIETY LTD.,PUNE V. ITO WARD 6(1), PUNE

ITA 2531/PUN/2024

AI Insights

The case involves The MES Employees Co-op Credit Society Ltd., which appealed against the order of the Ld. CIT(A) / NFAC, Delhi, concerning the assessment year 2022-23. The primary issue was the denial of deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961, for interest income of Rs.1,26,61,665 earned from fixed deposits with nationalized banks. The Assessing Officer and the Ld. CIT(A) had treated this interest income as 'Income from other sources', not eligible for deduction under section 80P. However, the Tribunal, referencing a previous decision and similar cases, ruled in favor of the assessee, allowing the deduction.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 24544 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2022-2023
• Other Referred Cases: Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 188 Taxman 282 (SC), Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit vs. ITO, Sureshdada Jain Nagri Sahakari Patsanstha vs. ITO, Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit vs. ITO, Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (2015) 230 taxmann 309 (Kar.), Mantola Cooperative Thrift Credit Society Ltd. vs. CIT (2014) 110 DTR 89 (Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMNATH P MURKUNDE
• Assessee Lawyers: BHAGWAT
• Keywords: Set aside; TDS
• Section: 142(1); 143(2); 139(1); 80P

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No.2531/PUN/2024 Assessment year : 2022-23 The MES Employees Co-op Credit Society Ltd. 194, Rasta Peth, Pune – 411011 Vs. ITO, Ward 6(1), Pune PAN: AAAAT0748D (Appellant) (Respondent) Assessee by : Shri M R Bhagwat Department by : Shri Ramnath P Murkunde Date of hearing : 10-03-2025 Date of pronouncement : 20-03-2025 O R D E R PER R. K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 06.11.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2022-23. 2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. CIT(A) / NFAC in sustaining the addition of Rs.1,26,61,665/- made by the Assessing Officer being interest earned on fixed deposits with nationalized banks by rejecting the claim of deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2 ITA No.2531/PUN/2024 3. Facts of the case, in brief, are that the assessee is a Co-operative society and filed its return of income u/s 139(1) of the Act on 23.09.2022 declaring Nil income. The case was selected for scrutiny for the following issues / reasons: 1. High Liabilities as compared to low income/receipts. 2. High Interest expenditure and huge advances. 3. Taxable receipts from other sources shown in schedule TDS 2 is higher than the receipts shown in ITR 4. Claim of deduction u/s 80P by entities that have received large amount of interest from a banking company. 4. Accordingly, statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the assessee filed the requisite details. The Assessing Officer during the course of assessment proceedings noted that a sum of Rs.1,26,61,665/- was offered as interest on investment in fixed deposits, the details of which are as under: Sr. No. Name of the Bank Interest Received TDS 1. State Bank of India Rs.43,45,590/- Rs 4,34,588/- 2. The Sarswat Coop Bank Rs. 19,40,428/- Rs 1,94,044/- 3. Canara Bank Rs. 62,27,214/- Rs.6,22,728/- 5. The Assessing Officer further noted that the assessee society has claimed deduction u/s 80P(2)(a)(i) of the Act for sum of Rs.3,88,30,135/- which includes the interest received on fixed deposits of Rs.1,26,61,665/-. After considering the submissions made by the assessee, the Assessing Officer held that the interest income on investment of FDs has to be assessed under the head ‘Income from other sources’ and is not eligible for deduction u/s 80P of the Act. Relying on 3 ITA No.2531/PUN/2024 various decisions including the decision of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 188 Taxman 282 (SC), the Assessing Officer disallowed the claim of deduction u/s 80P(2)(a)(i) of Rs.1,26,61,665/- being interest earned from SBI, Canara Bank and The Saraswat Co-operative Bank. 6. The assessee filed an appeal before the Ld. CIT(A) / NFAC who upheld the action of the Assessing Officer by observing as under: “9. This submission is also, not relevant to the facts and circumstances of this case. In order to appreciate the facts further, the TDS schedule filled up by the appellant in their ITR contains the true and correct particulars. It is evident from their own ITR that, the interest income earned from those nationalised banks were duly declared as income from other sources only. The surplus amount invested with nationalized Banks in the form of fixed deposits and the interest earned on those fixed deposits has to be assessed under the head Income from Other Sources and it cannot be treated as income from the head Business or Profession. If the appellant intended to claim any benefit of interest income, they ought to have invested the surplus with other cooperative societies and they could have claimed deduction of such interest income derived by the appellant on the investment with any other cooperative society u/s 80P(2)(d) of the IT Act. In the present case, they have invested their surplus with State Bank of India, Canara Bank and Saraswat Cooperative Bank and earned the interest income. Hence, the claim of the appellant that this interest income is eligible for deduction u/s 80P(2)(a)(i) of the IT Act is not maintainable and the relevant grounds raised by the appellant are dismissed.” 7. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal. 8. The Ld. Counsel for the assessee at the outset filed the decision of the Co- ordinate Bench of the Tribunal in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit vs. ITO vide ITA No.2476/PUN/2016, order dated 4 ITA No.2531/PUN/2024 25.01.2019 and submitted that the Tribunal in the said decision has allowed the claim of deduction u/s 80P of the Act on account of interest received from the nationalized banks. Therefore, the issue being a covered matter, the appeal filed by the assessee should be allowed. 9. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. 10. We have heard the rival arguments made by both the sides and perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC. The only dispute before the Tribunal is regarding the allowability of deduction u/s 80P(2)(a)(i) on account of interest earned on fixed deposits made with nationalized banks. We find an identical issue had come up before the Tribunal in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit (supra). We find the Tribunal vide ITA No.2476/PUN/2016 for assessment year 2008-09 order dated 25.01.2019 has decided the issue in favour of the assessee by observing as under: “4. With regard to ground No.1, it relates to denial of deduction u/s.80[2][a][i] of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) to the assessee in respect of interest income of Rs.71,56,584.00 earned from fixed deposits kept by it with nationalized banks. The facts in this case are that the assessee is co-operative society engaged in the business of providing credit facilities to its members. It is claimed that the necessary registration and license has been obtained by the assessee from the concerned Government authorities. The assessee has e-filed return of income on 24.08.2010 declaring total income of Rs. Nil and the total income was assessed u/s.143(3) of the Act to Rs.54,12,970/- by the Assessing Officer. 5. With regard to this issue, the Ld. AR of the assessee at the time of hearing submitted that ground No.1 is already decided in favour of the assessee by the 5 ITA No.2531/PUN/2024 decision of the Co-ordinate Bench of the Tribunal, Pune in ITA No.589/PUN/2016 for the assessment year 2012-13 in the case of ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha, therein, in Para 2 of the order, the issue is as under: “2. The only grievance projected by the Revenue in its appeal is against the allowing of deduction u/s.80P of the Income Tax Act, 1961 (hereinafter also called as „the Act‟) in respect of interest earned by the assessee society from State Bank of India which was denied by the Assessing Officer.” Thereafter, the Tribunal has held as follows: “4.We have heard both the sides and perused the relevant material on record. It is observed that the ld. CIT(A) allowed the claim of deduction u/s.80P by following the order passed by the Tribunal in the case of Shivneri Nagari Sahakari Patsanstha Ltd. (supra). The ld. AR placed on record a copy of the another order of the Pune Bench dated 19-08-2015 in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) (to which one of us, namely, the ld. JM is party) in which similar deduction has been allowed. The Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) has discussed the contrary views expressed by the Hon‟ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) allowing the deduction u/s. 80P on interest income and the Hon‟ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income, earned from banks under similar circumstances. Both the Hon‟ble High Courts have taken into consideration the ratio laid down in the case of Totgar‟s Cooperative Sale Society Ltd. 322 ITR 283 (SC). There being no direct judgment from the Hon‟ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view taken in favour of the assessee by the Hon‟ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). In the absence of their being any change in the legal position prevailing on this issue after the passing of the order by the Pune Bench of the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) and host of other orders reiterating the similar view, respectfully following the precedent, we uphold the impugned order in allowing deduction u/s.80P on the interest income” Respectfully, following the aforesaid decision of the Co-ordinate Bench of the Tribunal, Pune, we set aside the order of the Ld. CIT(Appeals) and allow ground No.1 of the grounds of appeal of the assessee. 6. In the combined result, appeal of the assessee is partly allowed.” 6 ITA No.2531/PUN/2024 11. Respectfully following the decision of the Co-ordinate Bench of the Tribunal and in absence of any contradictory decision brought to our notice by the Ld. DR, we hold that the assessee is entitled to claim deduction u/s 80P(2)(a)(i) on interest from fixed deposits with nationalized banks. The grounds raised by the assessee are according allowed. 12. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 20th March, 2025. Sd/- Sd/- (ASTHA CHANDRA) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 20th March, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune 7 ITA No.2531/PUN/2024 S.No. Details Date Initials Designation 1 Draft dictated on 10.03.2025 Sr. PS/PS 2 Draft placed before author 19.03.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "