JANKALYAN NAGARI SAHAKARI PATSANSTHA LTD,SATARA vs. INCOME TAX OFFICER, WARD-1, SATARA, SATARA

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ITA 569/PUN/2023Status: DisposedITAT Pune29 May 2023AY 2017-185 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that interest income earned by a cooperative society on deposits made out of surplus funds in cooperative and scheduled banks partakes the character of business income and is eligible for deduction under Section 80P(2)(a)(i) of the Act. This decision followed a coordinate bench's ruling and the view of certain High Courts.

What were the facts?

The assessee, a cooperative credit society, claimed deduction under Section 80P(2)(a)(i) for interest income earned on surplus funds invested in banks. The Assessing Officer denied this claim, stating the income was not eligible for deduction. The NFAC upheld the Assessing Officer's order.

What were the issues?

The primary issue was whether interest income earned by a cooperative society on surplus funds invested in banks is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 143(3)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(9)Show list

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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI INTURI RAMA RAO

For Respondent: Shri Piyush Kumar Singh Yadav
Hearing: 26.05.2023Pronounced: 29.05.2023

ORDER

PER INTURI RAMA RAO, AM :

1.

This is an appeal filed by the assessee directed against the order of the National Faceless Appeal Centre, Delhi [‘NFAC’] dated 29.03.2023 for the assessment year 2017-18.

2.

Briefly, the facts of the case are that the appellant is a co- operative credit society registered under Maharashtra Co-operative Societies Act, 1960. The Return of Income for the assessment year 2017-18 was filed on 31.03.2018 disclosing total income of Rs.7,41,090/- after claiming deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 (‘the Act’) of Rs.41,84,244/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1, Satara (‘the Assessing Officer’) vide order dated 12.12.2019 passed u/s 143(3) of the Act at a total income of Rs.49,25,334/-. While doing so, the Assessing Officer denied the claim for exemption of Rs.41,84,244/- u/s 80P(2)(a)(i) in respect of interest income on deposits made out of the surplus funds in cooperative bank and scheduled bank on the ground that the said income does not qualify for deduction u/s 80P(2)(a)(i) or 80P(2)(d) of the Act. 3. Being aggrieved, an appeal was filed before the NFAC, who vide impugned order confirmed the addition made by the Assessing Officer. 4. Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal. 5. When the appeal was called on, none appeared on behalf of the assessee despite due service of notice of hearing.

6.

I heard the ld. Sr. DR and perused the material on record. The only issue in the present case is as to the allowability of exemption under the provisions of section 80P(2)(a)(i) in respect of interest income earned by a cooperative society from the scheduled banks. There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon’ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon’ble Delhi High Court in the case of Mantola Co-operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon’ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon’ble Telangana and Hon’ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [(2017) 396 ITR 371 took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s 80P(2)(a)(i) of the Act. Similar view has been taken by the Hon’ble Calcutta High Court in the case of PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd., 147 taxmann.com 518 (Calcutta) and the Hon’ble Madras High Court in the case of Chennai Central Co-operative Bank Ltd. vs. ITO, 148 taxmann.com 17 (Madras). The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12-2018) taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench of the Tribunal, I am of the considered opinion

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