Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘D’
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
PER RAJPAL YADAV, JUDICIAL MEMBER : Present appeal is directed at the instance of the assessee against order of ld.CIT(A)-3, Baroda dated 31.5.2017 passed for the Asstt.Year 2014-15. 2. In the appeal, assessee is aggrieved by the action of the ld.CIT(A) in confirming disallowance of interest income of Rs.15,56,555/- earned on fixed deposits with nationalised banks and Rs.12,995/- received from Income tax Department under section 244A of the Income Tax Act.
Brief facts of the case are that the assessee is a cooperative society engaged in providing credit facilities to its members. It filed its return of
ITA No.1897/Ahd/2017
income declaring NIL income on 26.8.2014. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Act was issued and served upon the assessee. During the assessment proceedings, it was noticed by the AO that the assessee has earned interest income to the tune of Rs.15,56,555/- on fixed deposits with nationalized bank. The assessee claimed the same as a deduction allowable under section 80P(2) of the Act. Since this income of the assessee was not derived from the activities of the assessee-society, the ld.AO show caused the assessee as to why the interest income should not be added back to the total income of the assessee. Assessee, inter alia, submitted that parking surplus money not immediately required for the day-to-day activities of the assessee is an integral part of its business activity, and therefore, eligible for exemption under section 80P(2) of the Act, and therefore, interest earned on such deposits was attributable to the business of the society. This submission of the assessee was not found acceptable to the AO by holding that the interest income earned by the assessee was not from its main activity of providing credit facilities to its members, rather such income was generated out funds invested with nationalized bank. He accordingly made addition to this effect. Appeal to the CIT(A) did not bring any relief to the assessee.
Having heard both the parties and gone through the record, we find that Assessee is a cooperative society engaged in providing credit facilities to its members. The assessee has filed its return of income on 26.8.2014 declaring total income at Rs.NIL by claiming entire net income deductible under section 80P(2)(a)(i) of the Income Tax Act. This claim was denied by the AO on the ground that assessee being a cooperative
ITA No.1897/Ahd/2017
credit society engaged in providing credit facilities to its members deposits its surplus fund in FDRs accounts with nationalized bank and earn interest out of such deposits, then such interest income would not qualify for deduction under the relevant provisions appended to section 80P(2) of the Act. The AO accordingly rejected the claim of the assessee. The ld.CIT(A) upheld the order of the AO by taking support from the decision of the Hon’ble jurisdictional High Court in the case of CIT Vs. State Bank of India, 389 ITR 578. We find that Hon’ble jurisdictional High Court has held that interest earned from investment made in nationalized bank by a cooperative society engaged in providing credit facilities to its members, is not deductible under section 80P(2)(a)(i). In recent past the Tribunal in number of decisions has taken a consistent view on this issue by following above judgment of the Hon’ble jurisdictional High Court. In this view of the matter, we do not incline to disturb the orders of the Revenue on this issue, which we uphold. However, any expenditure incurred by the assessee for earning such income could be allowed to it. In other words, the ld.AO has to determine the net interest income earned by the assessee on such investment with bank, and only thereafter that income has to be excluded from the admissibility of deduction under section 80P(2) of the Act.
So far as earning of interest income of Rs.12,995/- under section 244A of the Act is concerned, since this income is not attributable to the activities of the assessee-society, the same is not an eligible income for exemption. The ld.AO has rightly made this addition. As regards
ITA No.1897/Ahd/2017
charging of interest under section 234A and 234B are concerned, they being mandatory provisions, levy of interest is consequential.
In the result, appeal of the assessee is dismissed.
Pronounced in the Open Court on 16th January, 2019.
Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER