SAHYOG CO. OP. CREDIT SOCIETY LTD.,MAHISAGAR vs. DCIT, PANCHMAHAL CIRCLE, GODHRA

The captioned cross appeals have been filed by the assessee and Revenue concerning AY 2014-15 against the order of the Commissioner of Income Tax (Appeals)- 4, Vadodara (‘CIT(A)’ in short), dated 14.02.2018 arising from the assessment order dated 21.11.2016 passed by the AO under s.143(3) of the Income Tax Act, 1961 (the Act).

We shall first take up assessee’s appeal in AY 2014-15.

The grounds of appeal raised by the assessee read as under:

When the matter was called for hearing, the learned AR for the assessee submitted that the assessee is concerned only with Grounds Nos. 3 & 4 noted above. Ground Nos. 1, 2 & 5 are stated to be not pressed.

Ground Nos. 1, 2 & 5 are accordingly dismissed as not pressed. & 1277/Ahd/18 [Sahyog Co.Op. Credit Society Ltd.] A.Y. 2014-15 - 3 -

As regards Ground No.3, it concerns eligibility of deduction claimed under s.80P(2)(d) of the Act on account of interest income received from investment made with co-operative banks. It was submitted on behalf of the assessee that the issue is squarely covered in favour of the assessee in the case of Banaskantha District Co-operative Milk Producers Union Ltd. vs. ACIT wherein the co-ordinate bench has held in favour of assessee by making reference to the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Sabarkantha District co- operative Milk Producers Union Ltd. Tax Appeal No. 473 of 2014. It was pointed out on behalf of the assessee that K.D.C.C. Bank is a co-operative bank registered under Co-operative Society Act and investment made in this bank and interest earned. This investment is eligible for deduction under s.80P(2)(d) of the Act.

In the given facts as noted above, the claim of the assessee under s.80P(2)(d) of the Act appears to be in consonance with the plain language of the Act. We thus find merit in the claim of the assessee for deduction under s.80P(2)(d) of the Act in respect of income earned from K.D.C.C. Bank.

Ground No.3 of the assessee’s appeal is allowed.

Ground No.4 concerns eligibility of basic deduction to the extent of Rs.50,000/- under s.80P(2)(c) of the Act on the taxable interest earned from nationalized banks and not covered for deduction under s.80P(2)(a)(i) of the Act from the gross total income. In this connection, the learned AR for the assessee submitted that the interest income earned from nationalized banks during the year has been taxed by lower authorities under the head ‘income from other sources’ following the decision of Hon’ble Gujarat High Court in the case of State Bank of India (SBI) vs. CIT (2016) 72 taxmann.com 64 (Guj.). The learned AR thus contended that income taxed under the head ‘income from other sources’ is clearly eligible for deduction under s.80P(2)(c) of the Act as it is income earned from & 1277/Ahd/18 [Sahyog Co.Op. Credit Society Ltd.] A.Y. 2014-15 - 4 - activities other than what is specified in Clause (a) and Clause (b) of sub- section (2) of Section 80P of the Act.

In the light of the decision of Hon’ble Allahabad High Court in Chief CIT (Admn.) vs. Kisan Sahkari Chini Mills Ltd. [2005] 273 ITR 42 (All.), Clause (c) of Section 80P(2) of the Act would cover entire income of a co- operative society not covered by Clause (a) and (b). The income earned by the assessee on deposits of nationalized banks was treated as taxable income of the assessee in view of its ineligibility towards deduction under s.80P(2)(a)(i) of the Act. Consequently, the assessee is entitled for basic deduction as provided under s.80P(2)(c) of the Act against such interest income.

Ground No.4 of the assessee’s appeal is allowed.

In the result, appeal of the assessee is partly allowed. - AY 2014-15 (Revenue’s Appeal)

The substantive ground of appeal raised by the Revenue reads as under:-

At the time of hearing, it was submitted by the Ld.AR for the assessee that the appeal filed by the Revenue is hit by recently issued CBDT Circular No.17 of 2019 dated 08/08/2019 revising the previous thresholds pertaining to tax effects. It is inter alia noticed that the CBDT vide Instruction No. F. No. 279/Misc/M-93/2018-ITJ dt. 20/08/2019 has observed that Circular No.17/2019 dated 08/08/2019 relating to enhancement of monetary limits is also applicable to all pending appeals. As per aforesaid Circular read with instruction, all pending appeals filed by Revenue are liable to be dismissed as a measure for reducing litigation & 1277/Ahd/18 [Sahyog Co.Op. Credit Society Ltd.] A.Y. 2014-15 - 5 - where the tax effect does not exceed the prescribed monetary limit which is now revised at Rs.50 Lakhs. In the instant case, the tax effect on the disputed issues raised by the Revenue is stated to be not exceeding Rs.50 lakhs and therefore appeal of the Revenue is required to be dismissed in limine.

The Learned DR for the Revenue fairly admitted the applicability of the CBDT Circular No. 17 of 2019. Accordingly, appeal of the Revenue is dismissed as not maintainable. However, it will be open to the Revenue to seek restoration of its appeal on showing inapplicability of the aforesaid CBDT Circular in any manner.

In the result, the appeal of the Revenue is dismissed.

In the combined result, assessee’s appeal is partly allowed whereas Revenue’s appeal is dismissed.