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Facts
The assessee, a Cooperative Credit Society, declared Nil income after claiming deduction under Chapter VIA. The AO disallowed a deduction of Rs.1,63,98,998/- claimed on interest income from cooperative banks, treating it as income from other sources. The CIT(A) dismissed the appeal in limine without discussing merits.
Held
The Tribunal held that interest income earned by a Cooperative Society from its investment with other Cooperative Banks is eligible for deduction under Section 80P(2)(d) of the Act. The decision of the CIT(A) was set aside, and the AO was directed to allow the claim.
Key Issues
Whether interest income earned by a Cooperative Society from investments in other cooperative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, and whether the CIT(A) was justified in dismissing the appeal without adjudicating on merits.
Sections Cited
144, 144B, 143(2), 142(1), 80P, 80P(2)(a)(d), 80P(2)(a)(i), 80P(2)(d)
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Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of assessee pertaining to A.Y. 2020-21 is directed against the order dated 29.10.2024 framed by National Faceless Appeal Centre, Delhi which inturn is arising out of the Assessment order dated 02.09.2022 passed u/s.144 r.w.s.144B of the Act.
Succinctly, the facts of the case are that the assessee is a Cooperative Credit Society engaged in the activity of providing credit facilities to Members. Return of income for the A.Y. 2020- 21 was furnished on 13.02.2021 declaring Nil income after claiming deduction under Chapter VIA at Rs.74,75,336/-. Case selected for Complete Scrutiny followed by validly serving of statutory notices u/s.143(2)/142(1) of the Act. Based on the information available, the ld. Assessing Officer (AO) noticed that the assessee has earned interest income from various cooperative banks aggregating to Rs.1,63,98,998/-, which in his opinion does not quality for deduction u/s.80P(2)(a)(d) of the Act. Thus, he brought to tax the said interest income disallowing the deduction u/s.80P(2)(d) claimed by the assessee.
Dissatisfied assessee preferred appeal before the ld.CIT(A) who vide impugned order dismissed the appeal in limine, without discussing anything on merits of the case and without admitting additional evidences by observing as under :
“4.3.1 However, in respect of new evidence under Rule 46A of the Income Tax Rules no explanation has been submitted by the appellant. 4.3.2 It is a fact that during the assessment proceedings the assessee did not participated. 4.3.3. During the course of appellate proceeding, the appellant has appellant has submitted its written submission. 4.3.4 However, since during the assessment proceedings the appellant does not participated however, during the appellate proceedings she has submitted the evidence to justify the claim. However, for submission of additional as well as new evidence the appellant failed to submit the reasons. Rule 46A of the IT Rules, prescribes the circumstances/exceptions under which the assessee can file additional evidences before the CIT (A), which are as under- (a) Where the AO has refused to admit evidence which ought to have been admitted; or (b) Where the assessee was prevented by sufficient cause from producing the evidence which he was called upon to produce by the AO; or (c) Where the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal; or (d) Where the AO has made the order appealed against without giving sufficient opportunity to the assessee to adduce evidence relevant to any ground of appeal.
5. No such circumstances exist in the case of the assessee. The order u/s 144 of the Act, dated 02.09.2022 was passed after giving sufficient opportunities to the assessee. It is pertinent to mention here that the appellant, who was much vigil to prefer the appeal but, did not bother to attend the assessment proceedings conducted by the Assessing Officer.
6. The assessee has, during the assessment proceedings before AO has not participated nor in its application has stated that it was prevented by sufficient cause from producing before the AO the details being submitted by it as "additional evidence". Since the appellant was not prevented by any sufficient reasons. Further, it would also be not out of context to mention here that the laws aid those who are vigilant, not those who sleep upon their rights. This principle is embodied in well know dictum IGILANTIBUS ET NON DORMIENTIBUS JURA SUB VENIUNT." Therefore, submission of the additional evidence at this stage is not acceptable and is rejected.
7. Since, none of the exceptions/circumstances mentioned in Rule 46A of the IT Rules is present in assessee case; I am not inclined to admit the additional evidence submitted by the assessee.
8. Therefore, addition made by the AO in assessment order holds good. Thus, the addition made by the AO is hereby confirmed. Since the additional evidence filed by the appellant have not been taken into consideration. The grounds of appeal raised in the appeal need not to be adjudicated.
Now the assessee is in appeal before the Tribunal assailing the impugned order by raising the following grounds :
“On facts and in law,
1] The learned CIT(A) erred in confirming the disallowance of deduction u/s 80P of Rs. 1,63,98,998/- without appreciating that the disallowance made was not justified at all and accordingly, the said disallowance is required to be deleted.
2] The learned CIT(A) erred in holding that the assessee had submitted additional evidence and since no exception / circumstances mentioned in Rule 46A are applicable, the additional evidences are not to be admitted and thereby dismissed the appeal of the assessee without appreciating that the assessee had not submitted any additional evidences and hence, there was no reason to dismiss the appeal filed by the assessee.
3] The learned CIT(A) failed to appreciate that the assessee had not submitted any additional evidences and therefore, there was no question of dismissing the appeal of the assessee on the ground that the assessee had filed additional evidences in the course of appellate proceedings.
4] The learned CIT(A) erred in not appreciating that the learned A.O. was not justified in disallowing the deduction of Rs. 1,63,98,998/- claimed u/s 80P in respect of the interest income earned by the assessee from investment in other co-operative banks and hence, the claim made by the assessee should have been allowed. 5] The learned CIT(A) failed to appreciate that the assessee has invested funds in the course of its business of providing credit facilities to its members and accordingly, the deduction u/s 80P(2)(a)(i) was allowable to the assessee in respect of the above referred interest income earned by it. 6] The learned CIT(A) further erred in not appreciating that the interest income of Rs. 1,63,98,998/- was earned from the deposits / investments with co-operative banks and hence, the said amount was eligible for deduction u/s 80P(2)(d) of the Act. 7] Without prejudice to the above grounds, the assessee submits that in case, the above referred interest income is held to be not eligible for deduction u/s 80P(2)(a)(i) or 80P(2)(d), in that event, the net interest income after allowing proportionate expenditure can be taxed and the learned A.O. has erred in taxing the entire gross interest income received by the assessee society. 8] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
5. Before us, Ld. Counsel for the assessee submitted that the case of the assessee was not pursued before the lower authorities for the reasons beyond control of the assessee. The ld.CIT(A) erred in arriving at conclusion that the assessee has failed to adduce any plausible explanation for admission of additional evidences, which it did not file. Further, the assessee in the instant case has earned interest income of Rs.1,63,98,998/- from the investments kept with various cooperative banks and the said interest income is eligible for deduction u/s.80P(2)(d) by virtue of catena of decisions rendered on this very issue. However, a prayer was made to remit the issues back to the file of Jurisdictional Assessing Officer for examining the deduction claimed by the assessee, in accordance with law.
Ld. Departmental Representative on the other hand relied on the orders of the authorities below.
We have heard both the sides and perused the record placed before us. In the instant case, the Assessing Officer disallowed the interest income of Rs.1,63,98,998/- earned out of the Fixed deposits/Investments made with Cooperative Banks treating the same as Income from Other Source. Ld.CIT(A) dismissed the appeal in limine without discussing anything on merits of the issues and on the ground that the assessee has not provided plausible explanation for admission of additional evidences.
Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of interest or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s.80P of the Act. we find that this issue is no more res integra as the Coordinate Benches of this Tribunal has been consistently holding that the interest income earned out of the FDs/Investments kept with Cooperative Banks is allowable u/s.80P(2)(d) of the Act. We find that this Tribunal in case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd., Vs. ITO in dated 01.01.2024 dealing with similar issue after placing reliance on another decision of this Tribunal in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in dated 27.05.2022 has held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s.80P(2)(d) of Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal the Act as Cooperative Banks are basically Cooperative Societies only but have turned into Bank on getting necessary banking license.
Respectfully following the above referred decisions taking consistent view along with considering the facts of the case, where the assessee made investment with the Cooperative Banks we hold that the assessee is eligible for deduction u/s.80P(2)(d) of the Act for the interest income earned from Cooperative Banks at Rs.1,63,98,998/-. Findings of the ld. CIT(A) is set-aside and the Assessing Officer is directed to allow the claim made by the assessee. Effective grounds of appeal raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed. Order pronounced on this 24th day of March, 2025.