SURESHDADA JAIN NAGARI SAHAKARI PATSANSTHA MARYADIT,JALGAON vs. PRINCIPAL COMMISSIONER OF INCOME-TAX : 2,

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.

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.

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.

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.

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

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. *