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Facts
The assessee, an agricultural credit society, filed its return claiming deduction u/s 80P. The AO disallowed interest income from cooperative banks and added back provision for overdue interest. The CIT(A) upheld the AO's order.
Held
The Tribunal held that interest earned by a cooperative society on surplus funds deposited in banks is eligible for deduction u/s 80P(2)(a)(i). The addition of overdue interest was also deleted as it was not part of the limited scrutiny.
Key Issues
Whether interest earned by a cooperative society on surplus funds deposited with banks is eligible for deduction u/s 80P, and whether additions made outside the scope of limited scrutiny are valid.
Sections Cited
80P, 80P(2)(a)(i), 143(2), 142(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: Shri Rajesh Kumar & Shri Sonjoy Sarma
order
: April 23, 2025 ORDER
Per Sonjoy Sarma, Judicial Member:
The captioned appeals filed by the assessee are directed against the separate orders dated 22.08.2024, 11.06.2024, 06.06.2024, 06.06.2024 & 06.06.2024 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’) for the assessment years 2020-21, 2018-19, 2017-18, 2014-15 & 2013-14 respectively. Since, the issues involved in all the appeals are common and relate to the same assessee, therefore, these appeals have been heard together and are being disposed of by this consolidated order. We take up as lead case for narration of facts and adjudication for the sake of convenience. for assessment year 2020-21. – The assessee has taken the following 2. grounds of appeal:
, 1635, 1634, 1633 &1632/Kol/2024 Assessment Years: 2020-21, 2018-19, 2017-18, 2014-15 & 2013-14 Antpara Samabay Krishi Unayan Samity Ltd “1. The CIT(Appeals), NFAC erred in confirming the addition as made by AO on account of addition of interest received by the assessee from fixed deposits in the year under consideration, which are eligible for deduction u/s 80P of the Income Tax Act, 1961 but the both the AO and The CIT(Appeals) denied such deduction to the assessee and it is bad in law and therefore deserves to be deleted.
The CIT(Appeals), NFAC erred in confirming the addition as made by AO on account provision of overdue interest of Rs 3,03,486 3. The CIT(Appeals), NFAC erred in adding misc. income (Rs.2,48,383) and rental income (Rs.750) which come to Rs.2,49,133/-, when it was not added by the AO and was not an issue in the appeal before the CIT(Appeals), NFAC 4. The Appellate craves leave to supplement, substitute, add, alter, amend, cancel or modify all or any grounds at the time of hearing.”
Brief facts of the case are that the assessee is a primarily agricultural credit society registered under West Bengal Cooperative Societies Act, 1940 and engaged in providing credit facilities to its members. The assessee earns income from rental income and miscellaneous sources. The assessment order filed its return of income for the assessment year for the assessment year 2020-21 and claimed deduction u/s 80P(2)(a)(i) of the Act. The case of the assessee was selected for scrutiny assessment followed by notices issued u/s 143(2) and 142(1) of the Act. The limited scrutiny assessment was carried out in respect of following issues: a. bonus or commission to employee b. investments/advances/loans c. deduction from total income under Chapter VI-A 3.1 In response to the notices, the assessee filed various details, information, documents etc. as required. From the perusal of the financials of the assessee for the relevant assessment year, the Assessing Officer noticed that the assessee earned interest income of Rs.1,24,19,908/- from the fixed deposits, interest earned on loans and , 1635, 1634, 1633 &1632/Kol/2024 Assessment Years: 2020-21, 2018-19, 2017-18, 2014-15 & 2013-14 Antpara Samabay Krishi Unayan Samity Ltd advances to members amounting to Rs.20,73,274/-, gross profit of Rs.66,02,989/-, dividend on other investments of Rs.2,96,845/-, interest on deposits with banks/institutions of Rs.1,24,19,908/-, miscellaneous income of Rs.2,48,383/-, rental income of Rs.750/-; totalling to Rs.2,17,42,150/-. The assessee has claimed various expenses and after that it calculated total income of Rs.57,03,533/- and claimed deduction of Rs.57,03,533/- u/s 80P(2)(a)(i) of the Act. After considering the submissions of the assessee, the Assessing Officer held that interest income earned from cooperative banks amounting to Rs.1,44,93,182/- (Rs.1,24,19,908 + Rs.20,73,274/-) in its profit & loss a/c for the year under consideration, was not eligible for deduction u/s 80P of the Act. Accordingly, the Assessing Officer viewed that the total interest income earned from cooperative banks on FDs are amounting to Rs.1,53,12,419/- as against the assessee claimed expenditure under various heads to the tune of Rs.96,08,886/- and net income at Rs.57,03,533/- was disallowed u/s 80P of the Act. The Assessing Officer also added back a provision for overdue interest of Rs.3,68,395/- treating it as income of the assessee stating that such fund was not allowable as expenditure.
Dissatisfied with the above order, the assessee filed an appeal before the ld. CIT(A), wherein, the ld. CIT(A) upheld the order of the Assessing Officer by dismissing the appeal of the assessee.
Aggrieved by the order of the ld. CIT(A), the assessee filed the present appeal before this Tribunal raising various issues. The first ground and the primary issue is relating to disallowance of interest earned from surplus deposits in cooperative banks as denied by the Assessing Officer and ld. CIT(A), was not correct. The ld. AR in this context cited various judicial rulings including the decision of the Hon’ble Jurisdictional Calcutta High Court in the case of PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd. reported in [2023] 147 3 , 1635, 1634, 1633 &1632/Kol/2024 Assessment Years: 2020-21, 2018-19, 2017-18, 2014-15 & 2013-14 Antpara Samabay Krishi Unayan Samity Ltd taxmann.com 518 (Cal), wherein, it was held that interest earned by the cooperative society on surplus funds invested in deposits with bank and Govt. securities is qualified for deduction u/s 80P(2)(a)(i) of the Act. The ld. AR also relied on the decision of Coordinate Kolkata Bench of the Tribunal in the case of Haldia Port Employees Cooperative Credit Society Ltd. in & 625/Kol/2024, on similar issue, the Tribunal allowed the appeal of the assessee.
On the other hand, the ld. DR objected to the claim of the assessee and supported the findings of the Assessing Officer and views taken by the ld. CIT(A) stating that the orders of the lower authorities were passed correctly by denying the deduction u/s 80P(2)(a)(i) of the Act.
We, after considering the rival submissions and perusing the material available on record, find that the present issue is squarely covered by the various judicial precedents. In the decision of the jurisdictional Calcutta High Court in the case of PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd. (supra) held that interest earned by the cooperative society on surplus funds deposited in bank and Govt. securities is qualified for deduction u/s 80P(2)(a)(i) of the Act. Similarly, the Coordinate Visakhapatnam Bench of the Tribunal in the case of ITO vs. Yendagandhi Large Sized Co-operative Society Ltd. (supra) allowed the deduction for interest income from deposits with the cooperative society and nationalised banks. Following the judicial precedent settled by the Hon’ble High Court, we direct the Assessing Officer to delete the disallowance of Rs.57,03,533/- u/s 80P of the Act and therefore, the deduction u/s 80P claimed is allowed.
Ground No.2 is relating to the addition made by the Assessing Officer and confirmed the addition of Rs.3,03,486/- on account of overdue interest provisions made by the assessee.
, 1635, 1634, 1633 &1632/Kol/2024 Assessment Years: 2020-21, 2018-19, 2017-18, 2014-15 & 2013-14 Antpara Samabay Krishi Unayan Samity Ltd
The ld. AR in the above issue stated that while the case of the assessee was selected for limited scrutiny only in respect of three issues i.e. bonus or commission to employee, investments/advances/loans & deduction from total income under Chapter VI-A. However, the specific issue relating to overdue interest provisions was never raised for an issue in scrutiny and the Assessing Officer without converting limited scrutiny to complete scrutiny cannot go beyond the scope of limited scrutiny. Therefore, the addition made by the Assessing Officer on this issue was bad in law. The provision for overdue interest was made after applying various provisions as the amount in question had not been recovered for a continuous period of six years. Therefore, the assessee debited the amount in its profit & loss account. The ld. AR prayed that the alleged addition made by the Assessing Officer was not correct and the view taken by the ld. CIT(A) on this issue was also not correct.
We, after considering the rival submissions and perusing the material available on record, observe that the provisions for overdue interest was not an issue raised in the limited scrutiny assessment. Therefore, the ld. CIT(A) erred in confirming this addition without proper justification and the addition is hereby deleted since the limited scrutiny had done in the case of the assessee was only related to the specific issues and the Assessing Officer cannot go beyond the scope of limited scrutiny on an issue which was never for limited scrutiny assessment. Moreover, provision was made relating to overdue interest as amount in question had not been recovered for a continuous period of six years. Therefore, the assessee rightly debited the amount in its Profit & Loss A/c. Accordingly, Ground No.2 taken by the assessee is allowed.
Ground No.3 is relating to additions of Rs.2,49,133/- on miscellaneous income and rental income of Rs.750/-.
, 1635, 1634, 1633 &1632/Kol/2024 Assessment Years: 2020-21, 2018-19, 2017-18, 2014-15 & 2013-14 Antpara Samabay Krishi Unayan Samity Ltd
The contention of the ld. AR is that while framing the assessment order, the Assessing Officer had not originally added these amounts while framing the assessment order and the assessee has never raised before the ld. CIT(A) for adjudication. However, while passing the impugned order, the ld. CIT(A) has made the additions without proper notice to the assessee which is against the principles of the natural justice. Therefore, the additions need to be deleted.
We, after considering the rival submissions and perusing the material available on record, observe that the ld. CIT(A) cannot make an addition on an issue which is not raised in the original assessment order without giving the assessee an opportunity to respond. In the present issue, without giving notice to the assessee, the alleged addition was made by the ld. CIT(A) suo moto which is not in accordance with law. Consequently, the additions of Rs.2,49,133/- on miscellaneous income and rental income of Rs.750/- are hereby deleted.
In terms of the above, of the assessee is allowed. 15. Since the facts and issues involved in all the captioned appeals are identical, therefore, our findings/directions given above in will mutatis mutandis apply to the other appeals also i.e. I.T.A. Nos.1635, 1634, 1633 &1632/Kol/2024. Hence, I.T.A. Nos.1635, 1634, 1633 &1632/Kol/2024 are also allowed. 16. In the result, all the captioned appeals of the assessee are allowed. Kolkata, the 23rd April, 2025.