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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R.S. SYAL & SHRI VIKAS AWASTHY
आदेश / ORDER PER R.S.SYAL, VP :
This appeal by the assessee is directed against the order dated 16-03-2016 passed by the Pr.CIT-2, Nashik u/s.263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2011-12.
Briefly stated, the facts of the case are that the assessee is a Co-operative Society engaged in providing credit facilities to its members. Return of income was filed declaring total income
2 ITA No. 713/PUN/2016 Sureshdada Jain Nagari Sahakari Patsanstha Maryadit
at Nil. The assessment was completed u/s.143(3) on
28-01-2014 computing total income at Rs.2,21,570/-. Such
total income was computed by reducing the interest paid to
members on the money invested in FDRs amounting to
Rs.67,36,500/- and interest paid at FDR-overdraft account
amounting to Rs.7,10,762/- from the amount of interest
received from SBI on FDRs at Rs.76,93,470/-. This resulted
into positive income on account of interest at Rs.2,46,208/-.
The Assessing Officer added commission plus saving interest at
Rs.25,364/- to the above income of Rs.2,46,208/-. After
allowing deduction u/s.80P(2)(c) at Rs.50,000/- he computed
total income at Rs.2,21,570/-. The ld. CIT invoked his
revisional power and held the assessment order to be erroneous
and prejudicial to the interest of the Revenue on the ground that
interest received from SBI at Rs.76.93 lakh should have been
shown as income chargeable to tax without any reduction of
interest paid to members on the money invested in FDs and
interest paid on FD-OD account. The assessee is aggrieved by
the impugned order.
We have heard both the sides and perused the relevant
material on record. It is observed that the ld. CIT’s entire order
3 ITA No. 713/PUN/2016 Sureshdada Jain Nagari Sahakari Patsanstha Maryadit
is premised on the proposition that the assessee is not eligible
for deduction u/s.80P on the amount of interest on FDRs earned
from nationalized banks. The decision that a higher amount
ought to have been taxed by the AO is a consequence of the
above view. The ld. AR placed on record a copy of an order of
the Pune Bench dated 28-11-2018 in the case of ITO Vs.
Sureshdada Jain Nagri Sahakari Patsanstha (ITA
No.589/PN/2016) wherein the decision of ld. CIT(A) allowing
deduction u/s.80P was approved by the Pune Tribunal. It is
further noticed that the Pune Bench of the Tribunal in the case
of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit
Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction.
In the said case, the Tribunal discussed the contrary views
expressed by the Hon’ble Karnataka High Court in Tumkur
Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015)
230 taxmann 309 (Kar.) allowing the deduction u/s. 80P on
interest income and that of the Hon’ble Delhi High Court in
Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014)
110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest
income, earned from banks under similar circumstances. Both
the Hon’ble High Courts have taken into consideration the ratio
4 ITA No. 713/PUN/2016 Sureshdada Jain Nagari Sahakari Patsanstha Maryadit
laid down in the case of Totgar’s Cooperative Sale Society Ltd.
322 ITR 283 (SC). There being no direct judgment from the
Hon’ble jurisdictional High Court on the point, the Tribunal in
Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit
(supra) preferred to go with the view in favour of the assessee
by the Hon’ble Karnataka High Court in the case of Tumkur
Merchants Souharda Credit Cooperative Ltd. (supra). In the
absence of there being any change in the legal position
prevailing on this issue and respectfully following the view
taken by the Pune Bench of the Tribunal in ITO Vs. Sureshdada
Jain Nagri Sahakari Patsanstha (supra) and host of other
orders reiterating the similar view, we hold, in principle, that
interest income earned on Fixed Deposits kept with
Nationalized banks qualifies for deduction u/s.80P of the Act.
Adverting to the facts of the instant case, it is seen that the
assessee requested the AO to finalize the assessment even by
including net interest income of Rs.2,46,208/- earned from bank
FDRs after reduction of OD interest and interest paid on
members deposits, which the AO eventually did. This emerges
from page 30 of the paper book, which is a letter written by the
assessee to the AO urging to: “please accept the above
5 ITA No. 713/PUN/2016 Sureshdada Jain Nagari Sahakari Patsanstha Maryadit
calculation and co-op. for finalization of the case”. It is the
above net figure of Rs.2,46,208/- which has been considered by
the ld. CIT for treating the assessment order as erroneous and
prejudicial to the interest of the Revenue by holding that the
gross amount of interest of Rs.76,93,470/- should have been
charged to tax and not net interest of Rs.2,46,208/-. In our
considered opinion, when the interest itself is eligible for
deduction u/s.80P of the Act, the compulsion of the assessee to
offer certain amount in order to enable the completion of the
assessment, cannot be stretched so far so as to bring the entire
amount of interest received from bank to tax which is otherwise
deductible in view of various decisions discussed in the
preceding para. Once we hold that the entire amount of interest
is eligible for deduction u/s.80P of the Act, the order of the ld.
CIT directing the AO to charge to tax the full amount of interest
and not its part, becomes automatically unsustainable. We,
therefore, vacate the impugned order.
The contention of the ld. AR for imposing cost on the
Revenue, in our considered opinion and in the peculiar
circumstances of the case, cannot be accepted.
6 ITA No. 713/PUN/2016 Sureshdada Jain Nagari Sahakari Patsanstha Maryadit
In the result, the appeal is allowed on merits.
Order pronounced in the Open Court on 09th April 2019.
Sd/- Sd/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 09th April, 2019 सतीश
आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “B” / DR ‘B’, ITAT, Pune; 4. गाड� फाईल / Guard file. // True copy //
आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार
// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
ITA No. 713/PUN/2016 Sureshdada Jain Nagari Sahakari Patsanstha Maryadit
Date 1. Draft dictated on 08-04-2019 Sr.PS 2. Draft placed before author 08-04-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *