SHRI VISHUT BOARD CREDIT & CONSUMER CO OPERATIVE SOCIETY LTD.,BHAVNAGAR vs. DEPUTY COMMISSIONER OF I TAX, CIRCLE 1, BHAVNAGAR

The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts and in the circumstance of case in overlooking the decision of hon. Gujarat High Court in the case of State Bank of India (SBI) vs Commissioner of Income-tax, 2016 72 taxmann.com 64 (Gujarat) and confirming the disallowance of deduction u/s 80P(2)(d) of the Act.

The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts and in the circumstance of case in wrongly interpreting the provision of the section 2 (19) of the IT Act relied upon by himself defining Cooperative society and not considering Saurashtra Gramin Bank a Regional Rural bank as Cooperative society though section 2(19) clearly provide that Regional Rural Bank (which is the status of Saurashtra Gramin Bank) is Cooperative Society. Rejection of Claim Of Rs. 13,58,206/- for deduction u/s 80P(2)(d) of the Act wrongly Confirmed.

The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts and in the circumstance of case in overlooking the circular No. 319 (F. No. 178/47/81-IT(A-I) dated 11-01-1982 confirming status of Cooperative society to Regional rural Bank and wrongly confirming disallowance of deduction u/s 80P(2)(d) for Interest earned from Saurashtra gramin Bank being Regional Rural Bank.

The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts and in the circumstance of case in confirming the addition of interest income earned from State Bank Of India of Rs. 2,42,550/- considering as not eligible for deduction u/s 80P(2)(a) of the Act overlooking various judicial pronouncement including hon Supreme court decision in the case of CIT VS. Karnataka State Cooperative Apex Bank (2001) 251 ITR 194 (SC).

The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts and in the circumstance of case in confirming addition for the interest income of Rs. 16,08,756/- earned on Deposit with SBI and Saurashtra Gramin Bank (RRB) considering the same as not eligible for deduction u/s 80P(2) of the Act.

The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts and in the circumstance of case in not allowing Interest and proportionate administrative expenses attributable to earning of interest Income of Rs. 16,08,056/-considered ineligible for deduction u/s 80P by Id. ACIT from total income so decided by him. Asst. Year : 2018-19 - 3–

The Learned Commissioner of Income Tax (Appeals) has erred in law and on facts and in the circumstance of case in rejecting our all grounds of appeal without considering the same on merit and wrongly confirming the entire addition of Rs. 16,08,056/- made by Ld. ACIT.

The appellant crave and reserve its right to add, to modify, to alter and/or to withdraw any or all grounds of appeals.

The brief facts of the case are that assessee is a credit co- operative society registered under the Co-operative Societies Act and filed its return of income declaring total income of Rs.2,84,390/- after claiming deduction under Chapter VI-A, including deduction under section 80P of the Act. The case was selected for limited scrutiny under the E-Assessment Scheme, 2019 for verification of deduction claimed under Chapter VI-A, particularly under section 80P. During the assessment proceedings, notices under sections 143(2) and 142(1) were issued. The assessee furnished details including computation of income, profit and loss account and balance sheet. On verification of the detailed filed, the AO observed that the assessee is engaged in accepting deposits from members and providing loans to members. The assessee claimed deduction of Rs.24,76,894/- under Chapter VI-A, which includes interest from Saurashtra Gramin Bank of Rs. 13,58,206/- and interest from State Bank of India of Rs.2,42,550/- The AO held that interest income earned from deposits with SBI and Saurashtra Gramin Bank does not qualify for deduction under section 80P(2)(d), as such interest was not earned from investments with a co-operative society. Relying on the judgment of the Hon'ble Supreme Court in Totgars Co- operative Sale Society Ltd. (322 ITR 283) and the decision of the Hon'ble Karnataka High Court in PCIT v. Totgars Co-operative Sale Asst. Year : 2018-19 - 4– Society (395 ITR 611), the AO treated the interest income of Rs. 16,08,756/- as income from other sources taxable under section 56. Accordingly, deduction under section 80P was restricted and the said interest income was added back to the total income of the assessee. During the appellate proceedings, the assessee filed detailed written submissions reiterating the grounds of appeal, relying upon various judicial pronouncements of the Hon'ble Supreme Court, High Courts and ITAT, and emphasizing that interest income earned on bank deposits was intrinsically linked to the credit business of the society. The issue arising for adjudication are whether the assessment order is bad in law for alleged violation of section 1448, whether interest income earned from deposits with SBI and Saurashtra Gramin Bank is eligible for deduction under section 80P(2)(a) or section 80P(2)(d), whether and such interest income is assessable as income from other sources under section 56 of the Act.

Aggrieved assessee filed an appeal before the Ld.CIT(A), who dismissed the appeal of the assessee.

At the outset, the learned counsel for the assessee submitted that Ground Nos. 1 to 5 are not pressed. Accordingly, the same are dismissed as not pressed.

As regards the remaining grounds, we have heard the rival submissions and perused the material available on record. We find that the issue involved is identical to the issue decided by the Coordinate Bench in the assessee's own case, in ITA No.1057/Ahd/2024 for AY 2017-18 dated 16.01.2025 wherein the matter was restored to the Asst. Year : 2018-19 - 5– file of the Assessing Officer for fresh adjudication with regard to the allowability of proportionate administrative expenses and consequential determination of deduction under section 80P of the Act. The relevant extract of the order is reproduced as under:

In the result, the appeal filed by the assessee is partly allowed for statistical purposes

""थ" / The Respondent. संबंिधत आयकर आयु" / Concerned CIT 3. 4. आयकर आयु"(अपील) / The CIT(A)- 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER,सहायक पंजीकार (Dy./Asstt.