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Income Tax Appellate Tribunal, “SMC” BENCH, PUNE
Before: SHRI MANISH BORAD & MS. ASTHA CHANDRA
ORDER \nPER ASTHA CHANDRA, JM :\nThe appeal filed by the assessee is directed against the order dated\n03.01.2025 of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi\n[“CIT(A)"] pertaining to Assessment Year (“AY”) 2016-17.\n2. Briefly stated, the facts of the case are that the assessee is a Co-\noperative Society engaged in the business providing credit facilities to its\nmembers, sale of LPG gas cylinders to its members and other activities\nsuch as renting hall, zerox and lamination. For AY 2016-17, the assessee\nfiled its original return of income on 20.02.2018 declaring total income at\nRs.Nil after availing deduction of Rs.21,15,324/- under chapter VI-A of the\nIncome Tax Act, 1961 (the \"Act\"). The return was subsequently revised\non 16.03.2018 declaring gross total income of Rs.21,39,229/- and after\nclaiming deduction under chapter VI-A of the Act of Rs.21,14,557/- in\nrespect of income from co-operative society, the assessee declared taxable\nincome at Rs.24,670/-. The case of the assessee was selected for scrutiny\nunder CASS on the issue “large deduction claimed under chapter VI-A from\ntotal income”. Accordingly, statutory notice(s) u/s 143(2) and 142(1) of the\nAct along with questionnaire were issued and served upon the assessee\nseeking certain information/details contained therein. In response thereto,\nthe assessee filed its reply stating that adjusted net profit of\nRs.20,64,557/- i.e. net profit of Rs.20,40,652/- plus adjusted depreciation\nof Rs.23,905/- from providing credit facilities to its members is claimed as\n100% deduction u/s 80P(2)(a)(i) of the Act. Out of net profit of Rs.74,672/-\narising from other activities viz. sale of gas cylinders, hall rent, xerox\ncharges, deduction of Rs.50,000/- u/s 80P(2)(c)(ii) has been claimed and\non the balance amount of Rs.24,672/-, tax (inclusive of interest) of\nRs.5,433/- has been paid. The reply of the assessee was not acceptable by\nthe Ld. Assessing Officer (\"AO\") and he rejected the assessee's claim of\ndeduction u/s 80P of the Act amounting to Rs.21,14,557/- for the reason\nthat the activities carried out by the assessee i.e. purchase of auto\nrickshaws and selling them to members under hire purchase agreement is\nnot eligible for deduction under section 80P(2)(a)(i) of the Act and income\nderived from LPG gas cylinder sale, house rent and locker rent received are\nnot eligible for deduction u/s 80P(2)(i) of the Act. He also disallowed an\namount of Rs.90,000/- (provision for expense) debited to P&L account as\n\"Sanugrah Anudan” treating the same to be a kind of donation. The Ld.\nAO, therefore, completed the assessment at the assessed income of\nRs.22,29,230/- u/s 143(3) of the Act vide order dated 10.12.2018 by\nmaking the addition of - (i) Rs.21,14,557/- on account of disallowance of\ndeduction u/s 80P and (ii) Rs.90,000/- on account of disallowance of\nprovision of expense debited to P&L account, to the return income of\nRs.24,670/-.\n3. Aggrieved, the assessee filed an appeal before the Ld. CIT(A)\nchallenging the above additions/disallowances made by the Ld. AO. Before\nthe Ld. CIT(A), relying on various favorable decisions on the impugned\nissue, the assessee submitted that it has rightly claimed deduction of – (i)\nRs.18,43,446/- u/s 80P(2)(a)(i) of the Act comprising of Rs.18,24,574/- in\nrespect of profits from carrying on business of providing credit facilities to\nits members and (ii) Rs.18,872/- in respect of interest earned from balance\nin savings bank account maintained with State Bank of India (SBI) for\nbusiness purposes. Further claim of deduction amounting to\nRs.2,21,111/- has been made by the assessee u/s 80P(2)(d) in respect of\ninterest earned from balance in savings bank account maintained with\nRaigad District Central Co-operative Bank Ltd. Also, Rs.50,000/- has been\nclaimed as deduction u/s 80P(2)(c)(ii) of the Act on account of profit from\nother activities viz. resale of refilled gas cylinders to the members of the\nsociety and hall rent, xerox and lamination charges. Thus, the total claim\nof deduction under section 80P of the Act amounts to Rs.21,14,557/-\nAnother issue raised before the CIT(A) pertained to addition made by the\nLd. AO of Rs.90,000/- towards disallowance of provision for expense\nnamely \"Sanugraha Anudan” treating the same as kind of a donation. The\nassessee submitted before the Ld. CIT(A) that the said amount of\nRs.90,000/- is the provision for bonus payable to the employees which\nwere actually paid on 04.10.2016 and hence the said amount of\nRs.50,000/- has been wrongly added to the income of the assessee. On\nsupport thereof, the assessee relied upon various judicial precedents and\nsubmitted the relevant documents before the Ld. CIT(A) forming part of the\nappeal memo in Form No.
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.
2. (along with its sub-grounds (a), (b) & (c)) and ground No. 3\nraised by the assessee are accordingly allowed. Ground No. 1 is general in\nnature.\n9. In the result, the appeal of the assessee is allowed.\nOrder pronounced in the open court on 16th July, 2025.\nSd/-\n(Manish Borad)\nACCOUNTANT MEMBER\nSd/-\n(Astha Chandra)\nJUDICIAL MEMBER\nपुणे / Pune; दिनांक / Dated : 16th July, 2025.\nरवि\nआदेश की प्रतिलिपि अग्रेषित /