RIL NMD EMP CO. OP. CREDIT SOCIETY LTD. ,RAIGAD vs. ITO, WARD-1, PANVEL, PANVEL

The Ld. CIT(A), however, rejected the appeal\nof the assessee and confirmed the addition(s) made by the Ld. AO\nobserving as under :\n\"1. Grounds of appeal

s objects to disallowing adjusted net profit of Rs.\n2064557 being credit facilities provided to its members. The original return of\nincome for AY 2016-17 was filed by the assessee society on 20.02.2018\ndeclaring total income at Rs. Nil after availing deduction of Rs.21.15.324/-\nunder chapter VI-A of the Income-tax Act, 1961. Further, the assessee society\nwas filed the revised return of income on 16.03.2018 declaring taxable\nincome of Rs.24,670/- alter availing deduction of Rs.21,14,3241- under\nchapter VI-A of the income-tax Act. 1961. Whether in case of society engaged\nin providing credit facilities to its members, it is only interest derived from\ncredit provided to its members which is deductible under section 80P(2)(a)(i)\nand interest derived by depositing surplus funds with bank not being\nattributable to business carried on by society, cannot be deductible under\nsection 80P(2)(a)(i). In view of the above the claim of deduction under section\n80P of the assessee, is hereby rejected and Rs.21,14,557/- is included in\nthe income of the assessee.. During the course of assessment proceedings,\non verification of the profit and loss A/c, the assessee has made provisions\nof Rs.19,89,397/- it includes Rs.90,000/- as Sanugrah Anudan. It is a kind\nof donation. It is not admissible. Hence, the same is disallowed and included\nin the income of the assessee. The addition of Rs.2114557 and Rs.90000 are\nconfirmed.\"\n4. Dissatisfied, the assessee is in appeal before the Tribunal raising the\nfollowing grounds of appeal :\n\"On facts and in law,\n1.\nThe Ld. CIT(A) NFAC erred In confirming the addition of\nRs.22,04,557/- made by the Ld. AO.\n2. The Ld. CIT(A)-NFAC erred in confirming action of the Ld. AO in\ndisallowing the deductions, aggregating to Rs.21,14,557/-:\na) u/s 80P(2)(a)(i) at Rs.18,43,446/-, earned out of business\noperations, and\nb) u/s 80P(2)(d) at Rs.2,21,111/-, earned from co-operative credit\nsocieties / banks, and\nc) u/s 80P(2)(c)(ii) at Rs.50,000/-, as basic deduction.\n3. The Ld. CIT(A)-NFAC erred in confirming addition of expense\n'Sanugraha Anudan' i.e. 'Bonus' in Marathi at Rs.90,000/- debited to\nprofit and loss account, forming part of the business income further\neligible to deduction u/s 80P(2)(a)(i), as enhanced eligibility.\nThe appellant craves leave to add, alter, amend or delete any of the above\ngrounds of appeal.\"\n5. The Ld. AR at the outset submitted that the first issue relating to\nclaim of deduction u/s 80P(2)(a)(i) and 80P(2)(d) of the Act is covered in\nfavour of the assessee by catena of decisions of various judicial forums,\nincluding the Pune Tribunal. He submitted that the said deduction has\nbeen rightly claimed by the assessee as the income is earned out of\nbusiness operations carried out by the assessee. Further, the assessee is\nalso eligible for the deduction of Rs.50,000/- in respect of profits from\nother activities u/s 80P(2)(c)(ii) as basic deduction. As regards the addition\nof Rs.90,000/-, the Ld. AR submitted that the same is not any kind of a\ndonation but an expense. He submitted that the word “Sanugraha\nAnudan" means \"bonus\" in Marathi which was debited to the P&L account\nunder the head provision for expenses and as the same forms part of the\nbusiness income of the assessee, it is eligible for deduction u/s 80P(2)(a)(i)\nof the Act.\n6. The Ld. DR, on the other hand, supported the order of the Ld.\nAO/CIT(A).\n7. We have heard the Ld. Representatives of the parties, perused the\nmaterial available on records, paper book filed by the Ld. AR on behalf of\nthe assessee as well as judicial precedents relied upon by the Ld. AR. The\nfacts of the case are not in dispute. From the perusal of the Ld. CIT(A)'s\norder we, find that the Ld. CIT(A) has passed his order concurrence with\nthe order of the Ld. AO without considering the submissions made by the\nassessee before him. The Ld. AO/CIT(A) has disallowed the entire\ndeduction claimed by the assessee u/s 80P which was bifurcated by the\nassessee u/s 80P(2)(a), 80P(2)(c) & 80P(2)(d) of the Act. So far as issue\npertaining to the deduction claimed by the assessee u/s 80P(2)(a)(i)/\n80P(2)(d) of the Act in respect of profits from provisions of credit facility to\nthe members of the assessee society and the interest earned from deposits\nfrom Co-operative banks/scheduled banks are concerned, we find some\nforce in the submission of the Ld. Counsel for the assessee find that this\nissue is no more res-integra and has been decided in favour of the assessee\nby various decision(s) of the Co-ordinate Bench(es) of the Tribunal\nincluding the Pune Tribunal wherein it has been consistently held that the\nassessee society is eligible for deduction u/s 80P(2)(a)(i)/80P(2)(d) of the\nAct as the same is attributable to the business of the assessee society.\nSupport may be drawn from the decision of the Co-ordinate Bench of the\nPune Tribunal in the following cases:\ni. Lake Town Co-operative Housing Society Ltd. Vs. ITO, ITA No.\n88/PUN/2024, dated 07.05.2024.\nii. Vivekvardhani NagariSahakari Patsanstha Ltd. Vs. ITO, ITA\nNo.888/PUN/2024, dated 05.08.2024.\niii. Talegaon Nagari Sahakari Patsanstha Ltd. Vs. ITO, Pune, ITA No.\n743/PUN/2024, dated 03.06.2024.\niv. P. P. Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit\nvs. AU, Delhi (ITA No.854/PUN/2024, dated 26.06.2024.\nV. ITO, Pandarpur vs. Dhanshree Mahila Gramin Bigarsheti Sahakari\nPat Sanstha Ltd., dated 31.07.2024.\nvi. Shri Amardevi Nagari Sahakari Patsanstha Vs. ITO, Pune, ITA No.\n2447/PUN/2024, dated 28.02.2025.\nvii. Nashik District Primary Teachers Co-op Credit Society Ltd. Vs. ITO,\nNashik, ITA Nos.2070 & 2071/PUN/2024, dated 28.02.2025.\nviii. Haveli Taluka Veej Kamgar Sahakari Pathsanstha Maryadit Vs. ITO,\nPune, dated 15.01.2025.\n7.1 Further, it has been observed that out of the total deduction of\nRs.22,04,557/- claimed u/s 80P of the Act, sum of Rs.50,000/- has been\nclaimed as deduction u/s 80P(2)(c)(ii) of the Act. It is the submission of the\nLd. AR that out of net profits aggregating to Rs.74,672/- from other\nactivities carried out by the assessee, the assessee has claimed maximum\nof Rs.50,000/- and on the balance amount of Rs.24,672, the applicable\ntaxes have already been paid by the assessee. Even before the Ld. CIT(A),\nthe assessee has submitted that the said deduction of Rs.50,000/- has\nbeen claimed in respect of profits from resale of gas cylinders to the\nemployees of Reliance Industries Ltd. at its Nagothane township, who are\nthe members of the assessee society and hall rent, xerox and lamination\ncharges and hence it is eligible for deduction u/s 80P(2)(c)(ii) of the Act.\nHowever, the Ld. CIT(A) completely brushed off the above submissions of\nthe assessee and confirmed the addition made by the Ld. AO. In our\nconsidered view, the said claim of the assessee finds due support from the\ndecision of Co-ordinate Bench of the Pune Tribunal in the case of\nBanganga Nagri Sah. Patsanstha Ltd. Vs. ITO, ITA No. 873/PUN/2014,\ndated 31.03.2016 wherein the Tribunal under the similar set of facts as\nthat of the assessee in the present case has allowed the deduction claimed\nu/s 80P(2)(c)(ii) of the Act in respect of incomes earned from certain allied\nactivities viz. locker rent, ambulance rent, commission on collection of\nMSEB bills and health club carried out by the co-operative society.\n7.2 As regards addition of Rs.90,000/- made by the Ld. AO and\nconfirmed by the Ld. CIT(A) treating the same as a kind of donation. It has\nbeen brought to our notice by the Ld. AR that the said amount of\nRs.90,000/- pertains to ‘Sanugraha Anudan'which means bonus' in\nMarathi and therefore it is in the nature of expense debited to profit and\nloss account forming part of the business income of the assessee which is\nfurther eligible for deduction u/s 80P(2)(a)(i) of the Act as enhanced\neligibility. In this view of the factual finding, in our opinion, the Ld. CIT(A)\nhas erred in confirming the addition of Rs.90,000/- to the income of the\nassessee. The claim of the assessee also finds support from the decision of\nthe Bangalore Tribunal in the case of Sharavathi Pathina Sahakara Sangha\nNiyamitha Vs. ITO, reported in (2022) 144 taxmann.com 170 (Bangalore-\nTrib.) wherein it has been held that where disallowance for non-deduction\nof TDS liability would increase business income of assessee-society which\nwas eligible for deduction under section 80P(2)(a)(i), deduction under\nsection 80P(2)(a)(i) to be allowed on profit as enhanced by sum disallowed\nunder section 40(a)(ia) of the Act.\n8. In light of the factual matrix of the case and legal position set out\nabove and respectfully following the decisions (supra) and in the absence of\nany contrary material brought on record by the Revenue to enable us to\ntake a different view, we hereby set aside the impugned order of the Ld.\nCIT(A) and allow the deduction claimed by the assessee u/s 80P of the Act.\nGround No.