LIC EMPLOYEES CO-OPERATIVE CREDIT SOCIETY ,HYDERABAD vs. INCOME TAX OFFICER, WARD-5(3), HYDERABAD

The grounds raised by the assessee are as under: 1. The learned CIT (A) erred in not considering the additional evidences during the appeal proceedings by mentioning case does not fall in the exceptions provided. 2. The CIT (A)-I is also not considered the revised return filed in response to section 148 of the I.T. Act, 1961. 3. The CIT(A)-I erred by disallowing Rs.99,95,270/- towards additional interest provision on compulsory thrift deposits which is allowable as per by Bye Law. 4. The CIT (A)-I erred by disallowing Rs.58,96,831/- towards additional interest provision on RID CTD which is allowable as per Bye-Law. Page 1 of 9

At the time of hearing, the learned Counsel for the assessee did not press grounds of appeal 1 & 2 for which the learned DR has no objection. Accordingly, the above two grounds are dismissed as not pressed. Grounds of appeal No.7 being general in nature is dismissed.

So far as grounds of appeal No.3 to 5 are concerned, these relate to the order of the learned CIT (A) in confirming the action of the Assessing Officer in making addition of Rs.99,95,270/- towards additional interest provision on compulsory thrift deposits, Rs.58,96,831/- towards additional interest provision on RID CTD and disallowance of reserve fund, education fund and common fund debited to P&L A/c.

Facts of the case, in brief, are that the assessee is a cooperative society registered under the Cooperative Societies Act and formed for the benefit of its members on 17.11.1940. It filed its return of income on 10.9.2012 admitting income of Rs.1,43,563/-. The case was selected for scrutiny through CASS and statutory notices u/s 143(2) and 142(1) of the Act were issued to the assessee. The learned AR of the assessee filed requisite details before the Assessing Officer.

During the course of assessment proceedings, the Assessing Officer noted from the annual adjustment entries for the year 2011-12 that the society has debited Rs.12,49,409/- towards interest on CTD A/c (Compulsory Thrift Deposit) being the provision of interest @5% on current year collections of Rs.2,49,88,176/- paid for the year by crediting individual members accounts.

The Assessing Officer further noted that the society has debited additional interest RIDCTD(Reinvestment Deposit of CTDs i.e., opening balances of CTDs reinvested of Rs.58,96,831/- on being the provision of additional interest on current year collection of Rs.29,48,41,551/- (which are actually opening balances) @ 2% paid for the year in addition to provisions of 8% on the opening balances of Rs.29,48,41,551/- paid for the year.

The Assessing Officer similarly noted that the assessee has also deducted provision made towards Funds i.e., Reserve fund of Rs.83,662/-, Education Fund of Rs.1,00,000/- and common good fund of Rs.10,742/-. He, therefore, asked the assessee to explain as to why the appropriation of profits towards funds should not be disallowed. In absence of any satisfactory explanation given by the assessee, the Assessing Officer disallowed the above expenses by recording the following: “1. The provision of additional interest of Rs. 99,95,270/- @40% of current year collections of Compulsory Thrift Deposits of Rs. 2,49,88,176/- is nothing but appropriation of profits. 2. It could be seen that the interest provided is not out of income derived from utilizing the Thrift deposits collected and given loans. But the provision made is out of income earned from all sources i.e., Share Capital, Reserves etc.

Thus, the Assessing Officer determined the total income of the assessee by disallowing the provision of Rs.99,95,270/- towards additional interest on CTDs and provisions made of Rs.58,96,831/- towards additional interest on RID of CTDs and brought to tax.

Before the learned CIT (A), the assessee filed certain additional evidences which were rejected by the learned CIT (A). So far as the additions on merit are concerned, the learned CIT (A) upheld the action of the Assessing Officer.

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

The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in sustaining various additions. He submitted that the lower authorities without considering the various decisions cited before him made the additions which is not justified. He accordingly submitted that the order of the learned CIT (A) be set aside and the grounds raised by the assessee be allowed.

The learned DR, on the other hand, heavily relied on the order of the learned CIT (A).

We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case completed the assessment u/s 143(3) by disallowing an amount of Rs.99,95,270/- being the provisions towards additional interest on CTDs and disallowing Rs.58,96,831/- being provision towards additional interest on RID of CTDs. We find the learned CIT (A) upheld the action of the Assessing Officer. We do not find any infirmity in the order of the learned CIT (A) on this issue. We find the Assessing Officer in the instant case completed the assessment u/s 143(3) on 16.3.2015 for the A.Y 2012-13. We find the Assessing Officer completed the assessment for the A.Y 2010-11 on 21.3.2016 and while deciding identical issues, the assessee had filed revised return of income by offering the provisions made on additional interest on CTDs and provision towards additional interest on RID of CTDs. The relevant observation of the Assessing Officer at para 2 of the assessment order reads as under:

Similarly, for the A.Y 2013-14, the Assessing Officer passed the order on 21.3.2016. The assessee was also confronted identical issues and the assessee had offered the additional income. The relevant observation of the Assessing Officer reads as under: “ During the course of assessment proceedings, the assessee was asked to explain as to why additional interest paid on CTD and RID of CTD should not be treated as dividend payout as discussed in the order passed u/s. 143(3) or the I.T.Act, for the A.Y.2012-13. In response, the assessee filed a letter stating as under. “…We are herewith filing a revised return of income and revised computation of income. We have followed the general method of accounting and filed the return without claiming the deduction u/s.80P of Income Tax Act, 1961. We are ignorant of that provision during the A. Y.2010-11. The learned A.O. added back the additional interest to the income offered. In this connection, we have taken the expert advice and offering additional interest paid as an income. Therefore, Therefore, we request your Hon'ble selves to allow deduction u/s 80P o the I.T. Act and complete the assessment.” The revised computation of income filed by the assessee is as under: Profits and gains from business &profession Rs.1,14,74,299 Page 6 of 9

Similarly for the A.Y 2014-15, we find the Assessing Officer while passing the order on 29.11.2016 has recorded as under: “During the course of assessment proceedings, the assessee was asked to explain as to why additional interest paid on CTD and RID and CTD should not be treated as dividend payout as discussed in the order passed u/s 143(3) of the I.T Act for the AY 2012-13. In response the assessee filed a letter stating as under. “With reference to the above, we are herewith filing a revised income tax return and revised computation of income. We have followed the general method of accounting and filed the return without claiming the deduction u/s. 80P of Income Tax Act 1961. We are ignorant of that provision during the AY 2013-14. The learned Assessing Officer added back the additional interest to the income offered. In this connection we have taken the and expert advice offering additional interest paid as an income. Therefore, we request your Hon'ble’ selves to allow deduction u/s. 80P of IT. Act 1961 and complete the assessment. Hence we requested your good selves to verify the same and complete the assessment accordingly. We have offered interest receivable & accrued interest on bank deposits The revised computation of income filed by tine assessee is as under: (1) Profits and Gains from Business and Profession Rs.142.85.529/- (2) Income from Other sources Rs 61.98.860- Gross Total Income Rs.2,04,84,389/- Less Deduction under chapter-VIA (80 P) Rs.142.85.529/- Taxable Income Rs. 61,98,860/-“ Subject to the above, the income of the assessee is computed as under: Income returned Rs. Nil Add: Income from other sources: Rs.61,98,860/-“ 17. Under these circumstances, we do not find any infirmity in the order of the learned CIT (A) in confirming the additions made by the Assessing Officer.

In Ground of appeal No.6, the assessee is challenging the order of the learned CIT (A) in not allowing deduction u/s 80P of the I.T. Act.

We find sufficient force in the above arguments of the learned Counsel for the assessee. The Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd reported in 349 ITR 036 held that the assessee can always make a new claim not made in return of income before the Page 8 of 9

In the result, appeal filed by the assessee is partly allowed for statistical purposes.