SARDAR CO. OP. CREDIT SOCIETY LTD.,ANAND vs. THE INCOME TAX OFFICER, WARD-1(3)(1), PETLAD

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ITA 3417/AHD/2016Status: DisposedITAT Ahmedabad10 July 2018AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that interest income earned by a cooperative society on surplus funds parked with nationalized banks is not eligible for deduction under Section 80P. However, any expenditure incurred to earn such income should be allowed.

What were the facts?

The assessee, a cooperative credit society, claimed deduction under Section 80P(2)(a)(i) for interest income earned on surplus funds invested in banks. The AO denied this deduction, and the CIT(A) upheld the denial.

What were the issues?

Whether interest income earned by a cooperative credit society on its surplus funds invested in banks is eligible for deduction under Section 80P of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 80P

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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘D’

Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA

Hearing: 17/07/2018

आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘D’

BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 3417/Ahd/2016 �नधा�रण वष�/Assessment Year: 2012-13 Sardar Patel Coop. Credit Society Ltd. ITO, Ward-1(3)(1) Chora Shopping Centre Vs Petlad. Nr.Sardar Tower, Khambhat Dist. Anand 388620. PAN : AAAAS 2227 G

अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Assessee by : None Revenue by : Shir R.P. Mauriya, Sr.DR

सुनवाई क� तार�ख/Date of Hearing : 17/07/2018 घोषणा क� तार�ख /Date of Pronouncement : 17 /07/2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : Present appeal is directed at the instance of the assessee against order of ld.CIT(A)-5, Vadodara dated 22.8.2016 passed for the assessment year 2012-13 by which assessee has challenged non-allowance of deduction of Rs.2,77,819/- under section 80P(2)(a)(i) of the Income Tax Act, 1961.

2.

None appeared on behalf of the assessee. Therefore, we proceed to decide the appeal after hearing ld.DR and considering the material available on record.

ITA No.3417 /Ahd/2016 - 2 -

3.

At the outset, the ld.DR submitted that issue raised in the appeal of the assessee is covered in favour of the Revenue by the judgment of the Hon’ble jurisdictional High Court in the case of State Bank of India Co-operative Society Vs. CIT, 72 taxmann.com 64 (Guj) wherein it has been held that cooperative society engaged in the business of providing credit facilities to its members which earns interest income on the surplus funds parked with the nationalised banks, is not eligible for deduction under section 80P of the Act. Since impugned orders of Revenue authorities are in terms of judgment of the Hon’ble High Court cited supra, no interference thereof is required and the appeals of the assessee may be dismissed.

4.

Having heard the ld.DR and on perusal of the record, we find merit in the submissions of the ld.DR. that Assessee is a cooperative society registered under Gujarat Co-operative Societies Act, 1961 and engaged in providing credit facilities to its members. In the return of income, the assessee has shown interest income earned on investment in the form of short term deposits with banks and claimed the same as deduction under section 80P(2)(a)(i) of the Income Tax Act. This claim was denied by the AO on the ground that since income was not derived by the assessee from its activity of providing credit facilities to the assessee, provisions of section 80P(2) does not cover assessee-society. The ld.CIT(A) concurred with the order of the AO by relying upon the judgment of Hon’ble jurisdictional High Court in the case of State Bank of India Co-operative Society (supra). 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 eligible for deduction

ITA No.3417 /Ahd/2016 - 3 -

under section 80P. The Tribunal on earlier occasions has taken a consistent on the issue of granting deduction under section 80P(2)(a)(i) of the Act to the cooperative credit society by following above judgment of the Hon’ble jurisdictional High Court. Since order of the Revenue authorities is in accordance with the judgment of the Hon’ble jurisdictional High Court cited supra, no interfere is called for in the impugned order, which we confirm. However, any expenditure incurred by the assessee for earning such income be allowed to the assessee, if not already allowed. In other words, the ld.AO has to determine the net interest income as well as misc. income earned by the assessee, and only thereafter that income has to be excluded from the admissibility of deduction under section 80P of the Act.

5.

In the result, appeal of the assessee is partly allowed for statistical purpose. Pronounced in the Open Court on 17th July, 2018.

Sd/- Sd/- (PRADIP KUMAR KEDIA) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

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