M/S. HARICHANDRANPUR LAMPS,KEONJHAR vs. ITO, KEONJHAR, KEONJHAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA Nos.142 & 143/CTK/2019 Assessment Years : 2011-12 & 2012-13

M/s. Harichandanpur lamps, Vs. ITO, Keonjhar At/PO: harichandanpur, Keonjhar PAN/GIR No.AAAAH 5138 H (Appellant) .. ( Respondent)

Assessee by : Shri B.R.Panda/S.Nanda, ARs Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 20 /08/ 2019 Date of Pronouncement : 4 /09/ 2019

O R D E R Per C.M.Garg,JM These are appeals filed by the assessee against the separate orders

of the CIT(A) Cuttack for the assessment years 2011-2 & 2012-13.

of Appeal but all the grounds essentially relates to one issue i.e.

allowance of claim of deduction u/s. 80P(2)(a)(i)/80P(2)(d) of the Act.

that the assessee is a Co-operative Society registered under the Co-

operative Societies Act.. It is engaged in the activity of carrying on the

business of providing credit facilities to its members governed under the

P a g e 1 | 5 Odisha Co-operative Society Act, 1963. In both the assessment years, no

return of income was filed. On receipt of information that the assessee

society had received interest income and no tax was paid, the Assessing

officer reopened the assessment u/s.147 of the Act and notice under

section 148 of the Act was issued to the assessee. In response to notice

u/s.148 of the Act, the assessee society filed the return of income on

26.6.2015 for both the assessment years. During the course of

assessment proceedings, the Assessing Officer observed that the

assessee had shown a gross total income of Rs.10,77,991/- for the

assessment year 2011-12 and Rs.3,48,310/- for the assessment year

2012-13 after availing deduction u/s.80P, the assessee returned an

income of Nil. The Assessing officer observed that interest income to the

extent of Rs.1,14,30,713/- had accrued to the assessee in assessment

year 2011-2012 and Rs.1,29,88,378/- in the assessment year 2012-13,

which consisted of interest earned from loans and advances and interest

earned from deposits with banks/institutions. The Assessing officer held

that interest earned from deposit with banks/institutions could not be

considered as profit/gain attributable to any of the activities mentioned in

section 80P(2) but would be taxable u/s.56 of the I.T.Act, 1961 as income

from other sources. While taking this view, the Assessing officer relied on

the decision of Hon’ble Supreme Court in the case of Totgars Co-

operative Sale Society vs ITO, 188 Taxman 282(SC), wherein, the

Hon’ble Supreme Court held that interest earned on funds not required

P a g e 2 | 5 immediately for the business of providing credit facilities to members

would fall under the category of ‘income from other sources’ taxable under

section 56 of the Act and same would not qualify for deduction as

business income under section 80P of the Act. The Assessing Officer,

accordingly, disallowed the same.

activity is not in the nature of banking and consequently, it is entitled to

deduction u/s.80P(2)(a)(i) of the Act but so far as the interest is

concerned, it is liable to be taxable u/s.80P(2)(a) of the Act.

grounds of appeal and further submitted that the amount which was

invested in the bank to earn was not an amount due to any members and

not shown the liability of any members in their account. The amount is in

the nature of profit and gain was not required by the assessee

immediately for lending money to its members. Therefore, the said

interest income is attributable to carrying on the business of the assessee

which is liable to be deducted in terms of section 8pp(2)(d) of the Act.

the case of ITO vs. Presidency Co.op. Hsg. Society ltd., (2018) Taxpub

(DT) 1870 (Mum-Trib) and submitted that the issue is covered in favour of

P a g e 3 | 5 the assessee.

case as well as the decision of Mumbai Tribunal in the case of Presidency

Co-op Hsg. Society Ltd (supra). In that case, the only requirements for

claiming deduction under section 80P(2) was that the income should be

received from the investments made in co-operative society and co-

operative banks, which was complied by the assessee. Hence, the

Tribunal held that the assessee is entitled to deduction in respect of

interest received or derived by it on fixed deposits with co-operative

banks.

arising out of surplus funds, not required immediately for lending the

money to its members by the assessee society and the interest earned

out of that money. Hence, the decision of Mumbai Tribunal is covered in

favour of the present assessee. We, therefore, set aside the order of the

CIT(A) and allow the assessee the benefit of deduction u/s.80P(2)(a) of

the Act .

P a g e 4 | 5

Order pronounced on 4 /09/2019. Sd/- sd/=- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 4 /09/209 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : M/s. Harichandanpur lamps, At/PO: Harichandanpur, Keonjhar

By order

Sr.Pvt.secretary ITAT, Cuttack

P a g e 5 | 5