CITIZENS CO. OP. CREDIT SOCIETY LTD.,VADODARA vs. THE INCOME TAX OFFICER, WARD-3(1)(1), VADODARA

The assessee has raised following grounds of appeals:- “1. On the facts and circumstances of the case of your appellant, the Ld. CIT(A) has erred in treating the bank FD interest earned by a co-operative society engaged in the business of providing credit facilities to its members as income from other sources u/s 56 of the Act and thereby disallowing deduction u/s 80P of the act on the said FD Interest. Therefore your appellant prays your goodself to consider the interest income earned on the Bank FD as the business income and allow the deduction u/s 80P of the Act.”

The brief fact of the act is that assesse has filed return of income declaring income at Rs. nil on 10th Dec, 2013. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of 2nd Sep, 2014. During the course of assessment proceedings, the assessing officer has noticed that assessee has earned interest income totaling to Rs. 28,12,358/- from nationalized bank and co- operative banks. He has further noticed that assessee has claimed deduction under chapter VIA of the act u/s. 80P(2)(a)(i) in respect of aforesaid interest income of Rs. 28,12,358/- derived from investment in fixed deposit with commercial and co-operative banks. The assessing officer observed that in the case of assessee exemption u/s. 80P(2)(a)(i) is available on income which is attributable to its business operation of the assessee co-operative society. However, the interest earned on the fund invested with the bank is not operational income of the assessee earned from providing credit facilities to its members. Therefore, he has treated the interest income of Rs. 28,12,358/- as income from other sources u/s. 56 of the act and disallowed the claim of deduction u/s. 80P on the aforesaid income.

Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has sustained the disallowance made by the assessing officer after placing reliance on the decision of Hon’ble High Court of Gujarat in the case of SBI vs. CIT (2016) 72 taxmann.com 64

We have heard the rival contentions and perused the material on record carefully. The assessee is engaged in the business of providing credit facilities to its members. The assessing officer has noticed that in addition to the interest income earned on loan and advances to its members, the assesse has claimed deduction u/s. 80P(2)(a)(i) of the act on interest income earned from the fixed deposit maintained with the commercial bank. The assessee has claimed deduction under the aforesaid provision on interest learned from surplus funds deposited with the nationalized banks in the form of fixed deposit. We are

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 18-05-2018 Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 18/05/2018 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद