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Facts
The assessee, a cooperative society, claimed deduction under section 80P for interest earned on fixed deposits and rental income. The Assessing Officer disallowed the claim, and the CIT(A) upheld the disallowance. The assessee appealed to the Tribunal.
Held
The Tribunal held that the interest earned on fixed deposits with nationalized banks and rental income were not part of the society's primary activity or eligible for deduction under section 80P. Therefore, the disallowance made by the AO and upheld by the CIT(A) was affirmed.
Key Issues
Whether interest income from fixed deposits with nationalized banks and rental income are eligible for deduction under Section 80P of the Income Tax Act, 1961 for a cooperative society.
Sections Cited
80P, 143(3), 250, 234C, 80P(2)(a)(i), 80P(2)(c)(ii)
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
Assessee by : None Revenue by : Shri Sanjay Dhivare Date of hearing : 05.02.2025 Date of pronouncement : 10.03.2025 आदेश / ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal pertaining to Assessment Year 2017- 18 at the instance of assessee is directed against the order dated 16.07.2024 framed by Addl/JCIT(A)-8, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) which in turn is arising out of Assessment Order dated 20.11.2019 passed u/s.143(3) of the Act.
When the appeal is called for, none appeared on behalf of the assessee despite due service of notice. I therefore proceed to dispose of the appeal with the able assistance from the ld. Departmental Representative exparte qua the assessee.
Assessee has raised following grounds of appeal :
“1. The learned JCIT(A)-8, Delhi erred in law and on facts in sustaining the disallowance made by the learned AO, of Rs.85,973/- for deduction claimed u/s.80P of the ITA, 1961 for interest earned on fixed deposits with nationalized banks. The learned JCIT(A)-8, Delhi ought to have appreciated that fixed deposits with nationalized banks is in the normal course of business of appellant and therefore interest earned is eligible for deduction u/s.80P(2)(a)(i) or 80P(2)(d) of the ITA, 1961; as held in various decisions of the Honourable ITAT, Pune Bench.
2. The learned JCIT(A)-8, Delhi erred in law and on facts in sustaining the addition made by the learned AO of Rs.37,474/- (i.e. rent received of Rs.53,533/- less standard deduction @30% i.e. Rs. 16,059/-). The learned JCIT(A)-8, Delhi ought to have appreciated that rent received is incidental to the main activity of appellant and therefore eligible for deduction u/s.80P(2) (a) (i) of the ITA, 1961.
3. Alternatively, and without prejudice to Ground No. 1 & 2, appellant contends that appellant is eligible for deduction of Rs.50,000/- u/s. 80P(2)(c)(ii) of the ITA, 1961 on the interest earned on fixed deposits with nationalized banks and rental income.
The learned JCIT(A)-8, Delhi erred in law and on facts in sustaining the interest u/s.234C of the ITA, 1961 of Rs.32,897/- levied by the learned AO. The learned JCIT(A)-8, Delhi ought to have appreciated that provision of section 208 of the ITA, 1961 is not applicable to appellant and further interest u/s.234C of the ITA, 1961 is leviable on the returned income and not on assessed income.
Appellant craves leave to add / alter/modify/amend /delete all / any of the grounds of appeal.”
4. Apropos to the first ground regarding the claim of deduction u/s.80P of the Act at Rs.85,973/- for the interest earned on fixed deposits with Nationalised Banks that the assessee has referred to certain judicial precedents. I, however, find that the case of the assessee is squarely covered against the assessee by the judgment of Hon’ble Apex Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO reported in (2010) 188 Taxman 282 (2010) (SC) and State Bank of India(SBI) vs. CIT (2016) 72 taxmann.com 64(Guj. HC) where it has been consistently held that interest earned on the surplus funds deposited with Nationalised Banks do not quality for deduction u/s.80P of the Act as they are not part of its activity. Therefore, I am inclined to hold that CIT(A) made no error in affirming the action of the AO denying deduction u/s.80P of the Act at Rs.85,973/- earned on fixed deposits with Nationalised banks. Accordingly, Ground No.1 raised by the assessee is dismissed.
5. Apropos to Ground No.2, I note that the assessee earned rental income of Rs.53,533/- and claimed standard deduction @30% on Rs.16,059/- and the resultant amount of Rs.37,474/- has been claimed as deduction u/s.80P(2)(a)(i) of the Act. In my considered opinion, the assessee is not eligible to claim the alleged deduction of Rs.37,474/- because renting of the property is not part of its objects of the assessee society and that of the activities enumerated in section 80P(2)(a) of the Act. Therefore, I find no infirmity in the finding of ld.CIT(A). Ground No.2 raised by the assessee is thus dismissed.
6. Apropos to Ground No.3, the alternate plea of the assessee in this ground is that if it is not able to succeed in the above two grounds, then the assessee should be allowed deduction of Rs.50,000/- referred to in section 80P(2)(c)(ii) of the Act.
6.1 I observe that section 80P(2)(c)(ii) of the Act provides that in case of the Cooperative Society engaged in activities other than those specified in section 80P(2)(a) and 80P(2)(d) either independently or in addition to all or any of the activity so specified, then it shall be eligible for deduction of Rs. 1.00 lakh in case of a Cooperative Society and in the other cases at Rs.50,000/-. However, the income earned from the surplus fund deposited with Nationalised Banks is not part of its activity and it is merely a surplus fund available from the activities carried out u/s.80P(2)(a)(i) of the Act. Similarly, the rental income is also not part of any specific activity of the assessee society as it is primary society providing credit facilities to its members. Therefore, such claim of the assessee u/s. 80P(2)(c)(ii) of the Act is also not admissible. Even otherwise, the assessee has not raised this claim in its income-tax return and therefore such claim not being of legal nature cannot be raised at this stage.
Ground No.4 and 5 raised by the assessee are general in nature and need no adjudication.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced on this 10th day of March, 2025.