STATE BANK OF HYDERABAD EMPLOYEE'S COOPERATIVE CREDIT SOCIETY LIMITED,HYDERABAD vs. INCOME TAX OFFICER, WARD-5(3), HYDERABAD

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ITA 2021/HYD/2017Status: DisposedITAT Hyderabad05 September 2019AY 2013-145 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal allowed the appeal, following a High Court decision in the assessee's own case for an earlier AY, which permitted deduction under Section 80P for interest earned on FDRs. Other grounds were rendered academic.

What were the facts?

The assessee, a co-operative credit society, paid interest on share capital and claimed deduction under Section 80P for interest received on FDRs. The Assessing Officer disallowed both, and the CIT(A) confirmed these disallowances.

What were the issues?

Whether interest paid on share capital is an allowable expenditure and whether interest earned on FDRs by a co-operative society is eligible for deduction under Section 80P.

Which sections of the Income-tax Act were involved?

Section 80P

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD

Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD

BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER

I.T.A. No. 2021/HYD/2017 Assessment Year: 2013-14 M/s.State Bank Employees’ Income Tax Officer, Co-op. Credit Society Ltd., Vs Ward-5(3), HYDERABAD HYDERABAD [PAN: AAIAS4729D] (Appellant) (Respondent) For Assessee : Shri A.V.Raghuram, AR For Revenue : Shri Mohan Kumar, DR Date of Hearing : 22-08-2019 Date of Pronouncement : 05-09-2019

O R D E R PER S. RIFAUR RAHMAN, A.M. : This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)–4, Hyderabad, dated 19-09-2017, for the AY.2013-14.

2.

Brief facts of the case are that, assessee is a co-operative society, formed for the purpose of welfare of SBH Employees and carries on the business of a credit society. For the AY.2013-14, assessee filed its return of income on 25-09-2013 admitting an income of Rs.NIL. The return was processed u/s.143(1) of the Income Tax Act [Act] and subsequently, the

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case was selected for scrutiny under CASS and notices u/s.143(2) and 142(1) of the Act were issued and served on the assessee. The AR of the assessee furnished all the details called-for.

3.

During the assessment proceedings, the AO noticed that assessee has paid interest on share capital to the extent of Rs.56,60,818/-. The same was disallowed. Further, the assessee has claimed deduction u/s.80P of the Act to the extent of Rs.4,65,18,364/-. This is the interest received by assessee on FDRs. The same was disallowed by the AO, treating the same as ‘income from other sources’ and held that assessee is not eligible to claim such receipts u/s.80P of the Act.

3.1. Aggrieved with the above order, assessee preferred an appeal before the CIT(A) and the CIT(A) has confirmed the addition made by the AO.

3.2. Aggrieved, assessee preferred an appeal before us, raising the following Grounds of Appeal:

“1. The learned CIT(Appeals) has erred in law and in facts and circumstances of the case in confirming the disallowance of an amount of Rs. 56,60,818/- being interest on share capital, without proper appreciation of the facts and circumstances of the case and the submissions of the assessee that the interest has been paid as per the bye laws of the Society and is an allowable expenditure. 2. The learned CIT(Appeals) having held that "from the same Memorandum of Articles as per bye law 16, it is clearly mentioned that shares holders are entitled for interest or dividend on their contribution of Rs.50/- every month. Therefore, there is no dispute

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that paying of the interest or dividend during this assessment year by the appellant", has completely erred in confirming the disallowance of interest of Rs.56,60,818/-. 3. The learned CIT (Appeals) has completely erred in holding that as per bye law 44, the interest or dividend is to be paid from reserve fund and not from the net profit, in as much as the said bye law 44 does not make any such provision but on the contrary provides only for transfer of certain funds to the Reserve Fund, and hence has no bearing on the issue of interest payable to members of the society. 4. Without prejudice to the above the learned CIT (Appeals) ought to have allowed deduction u/s 80P(2)(a)(ii) from the gross total income arrived at after making the addition of Rs.56,60,818/-, since the entire income of the assessee is eligible for deduction u/s 80P(2)(a)(i). 5. The learned CIT (Appeals) has completely erred in confirming the assessment of interest on FDR from bank of Rs.2,98,98,718/- as Income from Other Sources and the consequent denial of deduction u/s 80P(2)(a)(i) thereof, rejecting the submission of the assessee that the said issue is squarely covered in favour of the assessee in its own case for the earlier Assessment year 2010-11, by the order of the Honorable High Court of Andhra Pradesh in I.T.T.A. no 669 of 2016 dated 12th April, 2017. 6. The learned CIT (Appeals) ought to have noted that the issue of eligibility for deduction u/s 80P(2)(a)(i) in respect of the interest earned from Fixed Deposits with Banks, is squarely covered by the order of the Honorable High Court of Andhra Pradesh in the assesse's own case in ITTA No. 669 of 2016 dated 12th April, 2017, wherein the decision of the Honorable Supreme Court in the case of Totgar's Co-op Sale Society Ltd. (322 ITR 283) and in the case of Bangalore Club reported in 350 ITR 509 relied up by the CIT (Appeals) were also duly considered by the Honorable High Court of Andhra Pradesh”.

4.

Considered the rival submissions and material on record. In the above Grounds of Appeal, Ground Nos.4 & 5 are relating to Section 80P of the Act and other Grounds are relating to payment of interest to the shareholders. Since the assessee is claiming deduction u/s.80P of the Act, it has brought to our notice by the Ld.AR that in assessee’s own case the Hon'ble High Court of Telangana and Andhra Pradesh, allowed the

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deduction u/s.80P of the Act for the AY.2010-11. Following the above said decision in the previous assessment year, this Bench has dismissed the appeal filed by the Revenue for the AY.2012-13. Since this issue is covered in favour of assessee, respectfully following the decision of the Hon'ble High Court of Telangana and Andhra Pradesh on the issue of Section 80P of the Act, we allow the appeal filed by the assessee, accordingly.

4.1. As discussed above, Ground Nos.4 & 5 are in relation to Section 80P of the Act. Since we are allowing the above two grounds i.e., Ground Nos.4 & 5, all the remaining grounds will become academic in nature and accordingly, the same are dismissed.

5.

In the result, the appeal of assessee is treated as partly allowed.

Order pronounced in the open court on 5th September, 2019

Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 5th September, 2019 TNMM

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Copy to : 1. M/s.State Bank Employees’ Co-Op. Credit Society Ltd., C/o. A.V.Raghu Ram & P.Vinod, Advocates, 610, Babukhan Estate, Basheerbagh, Hyderabad. 2. The Income Tax Officer, Ward-5(3), Hyderabad. 3. CIT(Appeals)-4, Hyderabad. 4. Pr.CIT-4, Hyderabad. 5. D.R. ITAT, Hyderabad. 6. Guard File.

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