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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 2765 /Ahd/2014 Assessment Year 2011-12
Patan Jilla Shikshan Samiti The ITO, Prathmik Shalaona Ward-1, Shikshakoni, Dhiran & Vs Patan-384264 Grahak Sahakari Mandali (Respondent) Ltd. S-51, Shreedev Complex, Opp. Head Post Office, At & PO. Patan PAN: AABAT0179M (Appellant)
Revenue by: Shri Saurabh Singh, Sr. D.R. Assessee by: Shri S.V. Agrawal, A.R. Date of hearing : 11-04-2018 Date of pronouncement : 16-05-2018 आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This assessee’s appeal for A.Y. 2005-06, arises from order of the CIT(A), Gandhinagar, Ahmedabad dated 19-08-2014, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”. 2. The assessee has raised following grounds of appeal:- “(1) The learned CIT(A) has erred in enhancing the assessed income by Rs. 13,01,402/- on account of interest income from Saving Bank A/c Interest and Bank Fix Deposits Interest. 1.1 A.O. had not confirmed the addition of Rs. 1,37,543/- (net taxable interest income) if appeal of assessee is allowed by CIT(A), hence this addition will nit survive. (2) Learned CIT(A) had erred in not allowing expenses incurred for earning Bank interest since it is not earned on surplus fund but it is business fund of providing credit facilities to members of the society. (3) Learned CIT(A) has erred in confirming the interest chargeable u/s. 234A, 234B arid 234C on enhanced income.
I.T.A No. 2765/Ahd/2014 A.Y. 2011-12 Page No 2 Patan Jilla Shikshan Samiti Prathmik Shalaona Shikshakoni Dhiran & Grahak Sahakari Mandali Ltd. vs. ITO
Because of common facts the ground no. 1 and 2 are adjudicated together as follows. The brief fact of the case is that return of income declaring income of Rs. 7,850 was filed on 30th Sep, 2011. Subsequently the case was selected under scrutiny by issuing of notice u/s 143(2) of the act on 25/09/2012. During the course of assessment proceedings, the assessing officer noticed that assessee has claimed deduction u/s. 80P(2)(a)(i) of the act on the interest amount earned from deposit maintained with the financial institutions to the amount of Rs. 14,38,945/-. The assessing officer observed that the aforesaid interest income was not derived by the assessee from its activity of providing credit facilities to its members. Therefore, the interest income accrued to the assessee on the funds invested with the bank was considered as income from other sources u/s. 56 of the act. However, the assessing officer has considered the claim of the assessee for allowing proportionate expenses incurred towards earning the aforesaid interest income. Consequently after allowing proportionate expenses of Rs.12,51,402/- the assessing officer has disallowed interest income of Rs.1,37,543/- u/s. 80P(2)(a)(i) of the act.
The assessee has filed appeal before the ld. CIT(A). The Ld. CIT(A) has enhanced disallowance to the amount of Rs. 14,38,945/- by stating that assessee earned total interest income of Rs. 14,38,945/- from nationalized bank which is required to be taxed u/s. 56 of the act. Therefore, the disallowance made by the assessing officer of Rs. 1,37,543/- was enhanced by Rs. 13,01,402/-. During the course of appellate proceedings before the ld. counsel has furnished paper book containing information about the submission made during the course of assessment proceedings and appellate proceedings and contended that Ld.CIT(A) has erred in disallowing the claim of the assessee. On the other hand, ld. departmental representative supported the order of CIT(A)
We have heard the rival contentions and perused the material on record carefully. We considered that the assessee is engaged in providing credit
I.T.A No. 2765/Ahd/2014 A.Y. 2011-12 Page No 3 Patan Jilla Shikshan Samiti Prathmik Shalaona Shikshakoni Dhiran & Grahak Sahakari Mandali Ltd. vs. ITO
facilities to its members, therefore, the interest income earned on providing credit facility to its members is deductible u/s. 80P(2)(a)(i) of the act excluding the interest earned on deposit maintained with the commercial bank as investing surplus funds in a bank is not part of the business of providing credit facilities to its members which is deductible under section 80P(2)(a)(i) of the act, and the interest derived by depositing surplus funds with the nationalized bank not being attributable to the business carried on by the assessee and the same cannot be deducted u/s. 80P(2)(a)(i).The Hon’ble jurisdictional high court has decided the identical issue in favour of the Revenue vide State Bank of India vs. CIT (2016) 72 taxmann.com 64 (Gujarat) that interest income on deposit placed with the commercial banks is not exempt u/s. 80P(2)(a)(i) of the act.
Regarding the other part of the ground of appeal of not allowing the deduction of interest expenditure incurred on earning interest income from commercial bank we direct the assessing officer to verify the assessee’s clam on pro rata expenses by examination on the record to be shown for verification by the assessee and accordingly netting of to be allowed by the assessing officer as decided in a member of judicial pronouncements by the C-ordinate Benches of ITAT, Ahmedabad. In the result, the appeal of the assessee is partly allowed.
The third grounds of appeal of challenging of interest u/s. 234A, 234B/234C/234D are of general nature which are to be charged mandatorily as per the law, therefore, the same stands dismissed
In the result, the ground no. 1 & 2 are partly allowed and ground no. 3 of the assessee is dismissed. Order pronounced in the open court on 16-05-2018
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER
I.T.A No. 2765/Ahd/2014 A.Y. 2011-12 Page No 4 Patan Jilla Shikshan Samiti Prathmik Shalaona Shikshakoni Dhiran & Grahak Sahakari Mandali Ltd. vs. ITO
Ahmedabad : Dated 16/05/2018 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