THE MES EMPLOYEES CO-OP CREDIT SOCIETY LTD.,PUNE vs. ITO WARD 6(1), PUNE

High Liabilities as compared to low income/receipts.

High Interest expenditure and huge advances.

Taxable receipts from other sources shown in schedule TDS 2 is higher than the receipts shown in ITR

Claim of deduction u/s 80P by entities that have received large amount of interest from a banking company.

Accordingly, statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the assessee filed the requisite details. The Assessing Officer during the course of assessment proceedings noted that a sum of Rs.1,26,61,665/- was offered as interest on investment in fixed deposits, the details of which are as under:

The Assessing Officer further noted that the assessee society has claimed deduction u/s 80P(2)(a)(i) of the Act for sum of Rs.3,88,30,135/- which includes the interest received on fixed deposits of Rs.1,26,61,665/-. After considering the submissions made by the assessee, the Assessing Officer held that the interest income on investment of FDs has to be assessed under the head ‘Income from other sources’ and is not eligible for deduction u/s 80P of the Act. Relying on 3 various decisions including the decision of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 188 Taxman 282 (SC), the Assessing Officer disallowed the claim of deduction u/s 80P(2)(a)(i) of Rs.1,26,61,665/- being interest earned from SBI, Canara Bank and The Saraswat Co-operative Bank.

The assessee filed an appeal before the Ld. CIT(A) / NFAC who upheld the action of the Assessing Officer by observing as under: “9. This submission is also, not relevant to the facts and circumstances of this case. In order to appreciate the facts further, the TDS schedule filled up by the appellant in their ITR contains the true and correct particulars. It is evident from their own ITR that, the interest income earned from those nationalised banks were duly declared as income from other sources only. The surplus amount invested with nationalized Banks in the form of fixed deposits and the interest earned on those fixed deposits has to be assessed under the head Income from Other Sources and it cannot be treated as income from the head Business or Profession. If the appellant intended to claim any benefit of interest income, they ought to have invested the surplus with other cooperative societies and they could have claimed deduction of such interest income derived by the appellant on the investment with any other cooperative society u/s 80P(2)(d) of the IT Act. In the present case, they have invested their surplus with State Bank of India, Canara Bank and Saraswat Cooperative Bank and earned the interest income. Hence, the claim of the appellant that this interest income is eligible for deduction u/s 80P(2)(a)(i) of the IT Act is not maintainable and the relevant grounds raised by the appellant are dismissed.”

Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal.

The Ld. Counsel for the assessee at the outset filed the decision of the Co- ordinate Bench of the Tribunal in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit vs. ITO vide ITA No.2476/PUN/2016, order dated

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.

We have heard the rival arguments made by both the sides and perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC. The only dispute before the Tribunal is regarding the allowability of deduction u/s 80P(2)(a)(i) on account of interest earned on fixed deposits made with nationalized banks. We find an identical issue had come up before the Tribunal in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit (supra). We find the Tribunal vide ITA No.2476/PUN/2016 for assessment year 2008-09 order dated 25.01.2019 has decided the issue in favour of the assessee by observing as under: “4. With regard to ground No.1, it relates to denial of deduction u/s.80[2][a][i] of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) to the assessee in respect of interest income of Rs.71,56,584.00 earned from fixed deposits kept by it with nationalized banks. The facts in this case are that the assessee is co-operative society engaged in the business of providing credit facilities to its members. It is claimed that the necessary registration and license has been obtained by the assessee from the concerned Government authorities. The assessee has e-filed return of income on 24.08.2010 declaring total income of Rs. Nil and the total income was assessed u/s.143(3) of the Act to Rs.54,12,970/- by the Assessing Officer.

With regard to this issue, the Ld. AR of the assessee at the time of hearing submitted that ground No.1 is already decided in favour of the assessee by the 5 decision of the Co-ordinate Bench of the Tribunal, Pune in ITA No.589/PUN/2016 for the assessment year 2012-13 in the case of ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha, therein, in Para 2 of the order, the issue is as under:

In the combined result, appeal of the assessee is partly allowed.”

In the result, the appeal filed by the assessee is allowed.

अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent

4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file.