M/S. CKP SAHAKARI MANDLI LTD.,VADODARA vs. ITO, WARD-3(1)(3), VADODARA

The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-1, Vadodara (CIT(A)’ in short), dated 17.10.2017 arising in the assessment order dated 14.12.2015 passed by the Assessing Officer [M/s. CKP Sahakari Mandli Ltd.] A.Y. 2013-14 - 2 - (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2013-14.

As per the captioned appeal, the assessee has challenged the order of the CIT(A) for denial of deduction of 80P amounting to Rs.3,24,199/- derived by way of interest on fixed deposits with Nationalized banks.

When the matter was called for hearing, none appeared on behalf of the assessee. The matter was accordingly proceeded ex parte.

We have heard the submissions made on behalf of the Revenue as well as perused the case records. The allowability of deduction of interest derived from deposits placed with nationalized banks is in question. The assessee is a registered Sahakari Mandali and claims to be primarily established to provide credit facilities to its members. The assessee has inter alia kept certain deposits with nationalized banks and derived interest income from such deposits. It is the case of the assessee that the interest income so derived would qualify for deduction under s.80P of the Act on the ground that such deposits were kept in order to maintain liquidity of funds for re-payment of deposits as the credit society. We notice that the AO has denied the deduction under s.80P(2)(i)/80P(2)(d) of the Act placing reliance upon the decision of the Hon’ble Supreme Court in Totgars Co-operative Sale Society Ltd. Vs. ITO (2010) 322 ITR 0283 (SC). In the first appeal, the CIT(A) also observed that the issue is squarely covered in favour of the Revenue by the decision of the Hon’ble Gujarat High Court in the case of State Bank of India (SBI) vs. CIT (2016) 72 taxmann.com 64 (Guj.). Having noted the observation of the CIT(A), we find that the issue is required to be tested under s.80P(2)(a)(i) of [M/s. CKP Sahakari Mandli Ltd.] A.Y. 2013-14 - 3 - the Act. 80P(2)(d) has no applicability in the facts of the case. We see no error in the decision rendered by the CIT(A) in the facts of the case. The assessee, a co-operative society, has derived income from fixed deposits placed with Banks. The income so derived is not generated from the business of banking or providing credit facilities to its members. The issue is squarely covered in favour of the Revenue by the decision of the Hon’ble Supreme Court in Citizen Co-operative Society Limited vs. ACIT (2017) 88 taxmann.com 279(SC). Thus, we see no infirmity in the conclusion drawn by the Revenue authorities.

In the result, the appeal filed by the assessee is dismissed.