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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
These three Revenue’s appeals for A.Y. 2011-12 to 2013-14, arise from order of the CIT(A)-5, Vadodara dated 16-08-2016 & 28-09-2016, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The revenue has raised following grounds of appeal:- ITA No. 3080/Ahd/2016 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance of deduction claimed u/s 80P(2)(d) i.e. gross interest of Rs. 23,65,747/- and dividend of Rs. 34,62,601- received by the assessee from other cooperative societies, without appreciating the fact that the AO has righty justified in
I.T.A Nos. 3080, 3560 to 3561/Ahd/2016 A.Y. 2011-12 to 2013-14 Page No 2 DCIT vs. M/s. Baroda Dist. Co-op. Milk Producers Union Ltd.
disallowing the same as the assessee has ignored its expenses i.e. payment of interest to various Co.op societies and has taken only into account income from investments i.e. on its own investments with various other Co.op Societies. Therefore the deduction u/s 80(P)(2) of the Act is allowable only on the net amount and not on the gross income as held in the case of Sabarkantha Zilla Kharid V. Sangh Ltd. V. CIT [1993] 69 Taxman 619 (SC). 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in deleting the disallowance made on account of donation of Rs. 2,00,000/- made to Vadodara Jila Sahakari Sangh.
As the facts in all the three appeals of ground nos. 1 to 2 except of ground no. 2 of ITA No. 3561/Ahd/2016 are common, therefore, they are adjudicated together for the sake of convenience and ground no. 2 of 3561/Ahd/2016 is adjudicated separately.
Ground No 1. of ITA Nos. 3080, 3560 & 3561/Ahd/2016 4. In this case, return of income declaring income of Rs. 2,95,03,620/- was filed on 26th Sep, 2010. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act. During the course of appellate proceedings, the assessing officer has noticed that assessee has claimed deduction under chapter 6A u/s. 80P(2)(d) in respect of interest income of Rs. 23,65,747/- and dividend of Rs. 34,62,601/- on deposits and investments with other co-operative societies. The assessing officer has observed that assessee has also incurred interest expensest expenses of Rs. 1,12,81,322/- on deposit received from co-operative society which is required to be adjusted against the interest and dividend income earned by the assessee for the claim of deduction u/s. 80P(2)(d) of the act. Consequently, the assessing officer has disallowed the claim of deduction u/s. 80P(2)(d) of the act on the ground that after netting the corresponding expenses, there remains no income which is eligible for deduction.
Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee placing reliance on the decision of Hon’ble Gujarat High Court in the case of Surat Vankar Sahkari Sangh Ltd vs. ACIT in
I.T.A Nos. 3080, 3560 to 3561/Ahd/2016 A.Y. 2011-12 to 2013-14 Page No 3 DCIT vs. M/s. Baroda Dist. Co-op. Milk Producers Union Ltd.
ITA No. 93 to 96/Ahd wherein it is held that the assesse is eligible for deduction u/s. 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting the interest
We have heard the rival contentions and perused the material on record carefully. The assessee has claimed deduction u/s. 80P(2)(d) of chapter VI of the act in respect of income by way of interest and dividend on deposits and investments made with other co-operatives societies. The ld. CIT(A) has allowed the claim of the assesse after placing reliance on the decision of Hon’ble Gujarat High court in the case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT in ITA 93 to 96 of 2008. We have perused the above cited decision of the Hon’ble jurisdictional high court wherein it is held that section 80P(2)(d) of the act allows whole deduction of an income by way of interest or dividends derived by the cooperative society from his investment with any other cooperative society. It is immaterial where any interest paid to the co-operative society exceeds the interest received from its investment. The Hon’ble High Court has also held that provision of section 80P(2)(d) does not indicate any adjustment to be made as sought by the Revenue. In view of the decision of the Hon’ble Gujarat Court in the case of Surat Vankar Shakari Sangh Ltd. vs. ACIT in ITA No. 93 to 96 of 2008 as elaborated in the findings of the ld. CIT(A), we do not find any infirmity in the decision of the ld. CIT(A), therefore, the appeal of the revenue is dismissed on this issue.
Ground No. 2 of ITA Nos. 3080 & 3560/Ahd/2016 7. On scrutiny, the assessing officer noticed that assessee has claimed deduction of Rs. 2 lacs as donation given to M/s. Vadodara Zeela Sahkari Sangh Ltd. The assessing officer has disallowed the claim of deduction on the ground that assessee has not explained under which provision of the act it is eligible for such deduction. In the appeal, the ld. CIT(A) has allowed the claim of
I.T.A Nos. 3080, 3560 to 3561/Ahd/2016 A.Y. 2011-12 to 2013-14 Page No 4 DCIT vs. M/s. Baroda Dist. Co-op. Milk Producers Union Ltd.
deduction after placing reliance on the decision of Mehsana Dist. Co-operative Milk Producers Union Ltd. (2003) 132 taxman.com 40 (Guj).
We have heard the rival contentions and perused the material on record carefully. Second ground of appeal of the revenue is against the decision of ld. CIT(A) to allow deduction for Rs. 2 lacs of donation given by the assesse to M/s Vadodar Jila Shari Sangh. The ld. CIT(A) has stated that similar contribution was allowed by the Revenue in assessment year 2009-10. We have further noticed from the finding of the ld. CIT(A) that M/s. Vadodara Jila Sahkari Sangh Ltd is approved by the competent authority u/s. 69 of the Gujarat Co-operative Society Act for contribution to Education Fund of the Gujarat State Co-operative Union. Hon’ble Gujarat High Court has in the case of Mehsansa Dist Co- operative Milk Producers Union Ltd. (2003) 132 axman 40 (Guj) held that the contribution made to State Co-operative Federal Education Fund as per provision of section 69 of the Gujarat Rajya Co-operative Society Act, 1961 is allowable as business expenditure u/s. 37(1) of the act. Considering the above decision of the Hon’ble High Court of Gujarat as elaborated in the findings of the ld. CIT(A), we do not find any error in the decision of the ld. CIT(A). Therefore, this ground of appeal of the Revenue is rejected.
Ground No. 2 of ITA 3561/Ahd/2016
During the course of scrutiny, the assessing officer has noticed that assessee has not disallowed any expenses pertaining to exempt income as per section 14A of the act. Thereafter, assessing officer has computed disallowance of Rs. 7,98,033/- u/s. 14 r.w. Rule 8D of the act.
Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) held that assessing officer has not disproved the claim of the assessee that it has not used any interest bearing fund for making investment in tax free
I.T.A Nos. 3080, 3560 to 3561/Ahd/2016 A.Y. 2011-12 to 2013-14 Page No 5 DCIT vs. M/s. Baroda Dist. Co-op. Milk Producers Union Ltd.
investment after placing reliance on the decision of Co-ordinate Bench of ITAT in the case of Aditya Medisales Ltd. vs. ACIT (2016) 67 taxman.com 270 (Ahd. Trib) that for the purpose of computing disallowance u/s. 14A amount of net interest is to be taken into consideration and not gross interest.
We have heard the rival contentions and perused the material on record carefully. The assessing officer has computed disallowance u/s. 14A of the act as per Rule 8D of the IT Rule to the amount of Rs. 7,98,033/-. The assessee has submitted that disallowance u/s. 14A is not correct as it has used its own fund for investment. The ld. CIT(A) after placing reliance on the decision of the Co- ordinate Bench of the ITAT in the case of Aditya Medisales Ltd. vs. ACIT (2016) 67 taxmann.com 270 held that for the purpose of computing disallowance u/s. 14A amount of net interest is to be taken into consideration and not gross interest. The assessing officer did not controvert that the assessee had not used interest bearing funds to invest in tax exempt bearing investment. Therefore we uphold the decision of the ld. CIT(A) of directing the assessing officer to recompute the disallowance u/s 14 A of the act with reference to net interest expenses of the assessee. Accordingly, the appeal of the Revenue is dismissed.
In the result, all the three appeals filed by revenue are dismissed.
Order pronounced in the open court on 14-05-2018
Sd/- Sd/- (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 14/05/2018 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
I.T.A Nos. 3080, 3560 to 3561/Ahd/2016 A.Y. 2011-12 to 2013-14 Page No 6 DCIT vs. M/s. Baroda Dist. Co-op. Milk Producers Union Ltd.
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद
I.T.A Nos. 3080, 3560 to 3561/Ahd/2016 A.Y. 2011-12 to 2013-14 Page No 7 DCIT vs. M/s. Baroda Dist. Co-op. Milk Producers Union Ltd.
Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 03/05/2018 2) Date on which the typed draft is placed before 04/05/2018 the Dictating Member & Other Member 3) Date on which the approved draft comes to the 14/05/2018 Sr. P.S./P.S. 4) Date on which the fair order is placed before 14/05/2018 the Dictating Member for pronouncement 5) Date on which the fair order comes back to the 14/05/2018 Sr. P.S./P.S. 6) Date on which the file goes to the Bench Clerk 15/05/2018 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order a.k