SHRI MAHARANA PRATAP CO. OP. CREDIT SOCIETY,BARODA vs. THE INCOME TAX OFFICER, WARD-3(1)(5), BARODA

Assessee has taken seven grounds of appeal, which are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature. In brief its grievance revolves around admissibility of deduction under section 80P(2)(a)(i) and 80P(2)(d) of the Income Tax Act.

Brief facts of the case are that the assessee is a cooperative credit society providing credit facilities to its members. It has filed return of income on 24.7.2013 declaring total income at NIL. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has earned interest income at Rs.17,38,291/-. The AO has observed that interest income was not derived by the assessee from the activities of providing credits to its members. Some of the interest income was derived from deposits with the bank. Hence, he invited explanation of the assessee as to why deduction under section 80P(2)(a)(i) be not denied to it on the interest income. After hearing the assessee, the ld.AO has excluded the interest income on deposits with the bank from the deduction claimed under section 80P(2)(a)(i) and 80P(2)(d) of the Act. Appeal to the CIT(A) did not bring any relief to the assessee.

The ld.counsel for the assessee at the very outset contended that the ld.CIT(A) has put reliance upon the decision of Hon’ble jurisdictional High Court in the case of State Bank of India Vs. CIT, 72 taxmann.com 64 for denying deduction admissible under section 80P(2)(a)(i). He further contended that this total interest income contained two parts; Rs.8,26,002/- is the interest income received from the Baroda Central Co-op. Bank Ltd. This bank registered under the Cooperative Societies Act happens to be society first than a bank, hence interest income earned from this bank fall within the exemption clause of section 80P(2)(d) of the Act. As far as the remaining part of interest income is concerned, out of that only net interest income ought to be excluded from the eligible deduction admissible under section 80P(2)(a)(i) of the Act. For buttressing his contention, with regard to claim under section 80P(2)(d), he relied upon the order of the ITAT in and others, order dated 23.3.2018 rendered in the case of The Peoples Cooperative Credit Society Ltd. Vs. ACIT, Palanpur. He also relied upon order of the Tribunal passed in ITA No.04/Ahd/2017 dated 29.5.2018 in the case of The Sardar Cooperative Credit Society Ltd. Vs. ITO. On the other hand, the ld.DR relied upon the orders of the Revenue authorities.

On due consideration of the above facts, we find that in the case of the Sardar Co-op. Credit Society Ltd., (supra), the ITAT directed the AO to disallow only net interest income, so far as interest income earned from the deposits made with statutory/nationalized banks. As far as the interest income from cooperative society are concerned, it falls within section 80P(2)(d) and eligible for deduction. The ld.AO shall verify both these aspects and re- adjudicate the issue afresh. Orders of both the authorities below are set aside accordingly for fresh consideration in accordance with the discussion made above.

In the result, appeal of the assessee is allowed for statistical purpose. Pronounced in the Open Court on 25th June, 2019.