VARANGA VYAVASAYIKA SAHAKARI SANGHA LTD., ,UDUPI V. INCOME TAX OFFICER, WARD-1 & TPS, , UDUPI

ITA 457/BANG/2024

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The case involves Varanga Vyavasayika Sahakari Sangha Ltd., the appellant, contesting the disallowance of certain provisions debited in the profit and loss account which affected their deduction under section 80P for the assessment year 2016-17. The provisions in question included audit fees, staff gratuity, leave encashment, and service tax. The Income Tax Officer and the CIT-A had disallowed these deductions, which the appellant did not challenge directly but sought an enhanced deduction under section 80P for the disallowed amounts. The Tribunal, referencing a CBDT circular and a prior ruling, found in favor of the appellant, allowing the enhanced deduction.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47214 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH R GALE; STANDING COUNSEL DEPT
• Assessee Lawyers: MAHESH R UPPIN
• Section: 80P

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA No. 457/Bang/2024 Assessment Year: 2016-17 Varanga Vyavasayika Sahakari Sangha Ltd., Varanga, Karkala Taluk, Udupi Dist. – 576 144. PAN – AABAV 1321 R Vs. The Income Tax Officer, Ward – 1 & TPS, Udupi. APPELLANT RESPONDENT Assessee by : Shri Mahesh R Uppin, CA Revenue by : Shri Ganesh R Gale, Standing Counsel for Dept. (DR) Date of hearing : 13.02.2025 Date of Pronouncement : 07.04.2025 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed by the NFAC, Delhi dated 14/11/2023 in ITA No.ITBA/NFAC/S/250/2023- 24/1057939467(1) for the assessment year 2016-17. 2. The only issue raised by the assessee is that the learned CIT-A erred in not allowing the benefit of deduction under section 80P of the Act on the enhanced amount of profit on account of disallowance/ ITA No.457/Bang/2024 Page 2 of 4 . addition made by the AO for the provisions debited in the profit and loss account. 3. Before we proceed to deal with the issue on hand, it is pertinent to take a note that the issue discussed above in the grounds of appeal was decided by the ITAT on the previous occasion in favour of the assessee vide order dated 27th May 2024. However, the ITAT in its earlier order inadvertently has also dealt with the issue which was not subject matter of dispute. As such, the ITAT has also addressed the issue with respect to the interest from the cooperative bank/nationalized bank. On account of such apparent mistake, the entire order was recalled by the ITAT vide MA No. 60/Bang/2024 order dated 20-12-2024. 4. In view of such recalled order, the present appeal is before us for adjudication whether the disallowance made by the AO on account of provisions made by the assessee will result the enhanced deduction under the provisions of section 80P of the Act. In other words, the assessee has claimed the deduction for the provisions made in the profit and loss account amounting to Rs. 7,80,650/- for the items detailed below: i. Audit fees: Rs. 74,750/-, ii. Staff gratuity: Rs. 4,05,900/-, iii. Leave encashment: Rs. 1,00,000/-, and iv. Service tax: Rs. 2,00,000/- 5. The above items of deduction claimed by the assessee were disallowed by the AO and the learned CIT-A which was also not challenged by the assessee in the appeal filed before us. It was only prayed by the assessee in the ground of appeal that whatever amount of ITA No.457/Bang/2024 Page 3 of 4 . disallowance would be made, it will enhance the amount of income of the assessee which consequentially be considered for the purpose of the deduction under section 80P of the Act in view of the CBDT circular No. 37/2016 dated 2 November 2016. At the time of hearing, the ld. AR prayed only for the higher amount of deduction under section 80P of the Act on account of disallowance of expenses. 6. On the other hand, the learned DR could not controvert the arguments advanced by the ld. AR for the assessee. However, the learned DR vehemently supported the order of the authorities below 7. We have heard the rival contentions of both the parties and perused the materials available on record. The CBDT circular No. 37/2016 dated 2 November 2016 has a bearing on the issue on hand and therefore it is pertinent to refer the impugned circular. The relevant extract of the circular is reproduced as under: 7.1 In view of the above, we hold that the assessee shall be eligible for the deduction under section 80P of the Act on the amount enhanced on account of disallowance/ addition made by the authorities below. 7.2 In addition to the above it is also pertinent to note that the ITAT in its earlier order (Supra) has already given favourable finding for the issue on hand for which there was no MA filed by the assessee. In the ITA No.457/Bang/2024 Page 4 of 4 . other words, the finding of the ITAT has already reached to is finality. In view of the above and after considering the facts in detail, we direct the AO to allow the deduction to the assessee under section 80P of the Act on the enhance amount as discussed above. Hence, the ground of appeal of the assessee is hereby allowed. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in court on 7th day of April, 2025 Sd/- (WASEEM AHMED) Accountant Member Bangalore Dated, 7th April, 2025 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore "