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Facts
The assessee, a Credit Co-operative Society, filed a nil return of income for AY 2017-18. The Assessing Officer disallowed a deduction of Rs. 1,34,17,751/- claimed under Section 80P(2)(a)(i) and Section 80P(2)(d) for dividend/interest income received from various co-operative banks, and also added Rs. 7,200/- towards interest on IT refund. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal, relying on its own previous orders and jurisdictional High Court judgments, held that the interest received by the co-operative society from other co-operative banks qualifies for deduction under Section 80P(2)(d) of the Act. The main ground of appeal regarding this deduction was allowed, while Ground 3 (interest on IT refund) was dismissed as not pressed by the assessee.
Key Issues
The primary issue was the eligibility of deduction under Section 80P(2)(d) for interest and dividend income received by a co-operative society from other co-operative banks.
Sections Cited
80P(2)(d), 80P(2)(a)(i), 263
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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI MAKARAND VASANT MAHADEOKAR
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
This appeal is filed by the Assessee against order dated 30.11.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18.
The assessee has raised the following grounds of appeal:-
“(1) That the learned NFAC has grievously erred in law, and on facts, in confirming the disallowance of claim of deduction u/s.80P(2)(d) of the Act in respect of such dividend/interest received from Co-operative Banks and in making addition of Rs.1,34,17,751/-, ignoring the fact that in reality no such claim is made and deduction u/s.80P(2)(a)(i) is claimed only to the extent of Gross Total income which is allowed by AO.
Assessment Year: 2017-18 The Deesa Merchantile Co-op. Society Limited vs. DCIT Page 2 of 4 (2) That on facts, and in law, the learned NFAC has grievously erred in not appreciating that the AO has added amount more than what is claimed, and in not allowing the set off of loss of intra heads.
(3) That the learned NEAC has grievously erred in law, and on facts, in confirming the addition of Rs.7,200/- made towards interest on IT refund.”
The assessee filed original return of income on 31.10.2017 declaring total income of Rs. Nil. The case was selected for limited scrutiny on the issue of deduction under Chapter VI-A, expenditure of personal nature and investments/advances/loans. Statutory notices were issued and details were called for, for which the assessee filed the details and reply. The assessee is a Credit Co-operative Society engaged mainly in the business of providing credit facilities to its members and taking deposits from the members. The assessee received dividend and interest from Co-operative Banks which is Banaskatha District Central Co-operative Bank most specifically pointed out on page no.2 of the Assessment Order wherein the assessee Co-operative Society received dividend income on FDR interest, cash certificate interest, FDR Market Yard interest as well as interest from Mehsana Urban Co-operative Bank, FDR interest from Sarvoday Co-operative Bank. The Assessing Officer held that the interest and dividend income earned from entities other than co-operative Societies is not eligible for deduction under Section 80P of the Act and there is no nexus seen between the surplus fund invested in Co-operative Bank and expenses claimed. Thus, made addition of Rs.1,34,17,751/- under Section 80P(2)(a)((i) of the Act. The Assessing Officer also made addition of Rs.7,200/- towards interest on refunds.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that in assessee’s own case for A.Y. 2018-19 in respect of order under Section 263, the Tribunal has decided in respect of deduction claimed under Section 80P(2)(d) of the Act from the very same Co-operative Banks (ITA No.382/Ahd/2024 - order dated 05.11.2024). Ld. AR relied upon the order of the Assessment Year: 2017-18 The Deesa Merchantile Co-op. Society Limited vs. DCIT Page 3 of 4 Tribunal in case of Gandhinagar District Co-optative Milk Producers Union Limited vs. ACIT (ITA No.513/Ahd/2023 - order dated 03.10.2024).
The Ld. DR relied upon the Assessment Order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that it is not Departments case that the assessee received interest income from the Nationalised Bank or any other Financial Institution. From the perusal of the order of the Tribunal in assessee’s own case, the finding related to deduction under Section 80P(2)(d) of the Act is allowable in consonance with the Hon’ble jurisdictional High Court in the case of Surat Vankar Sahakari Sangh Limited vs. ACIT (2016) 72 taxmann.com 169 and the decision of Katlary Kariyana Merchant Sahkari Sarafi Mandali Limited (which was later amended by M.A. dated 26.04.2024) allowing deduction on the ground that the interest received from Co- operative Banks qualifies for claiming deduction under Section 80P(2)(d) of the Act. Thus, in the present case also it is not the case of the Department that the assessee received interest income from any other Bank or Financial Institution besides earning interest income from Banaskatha District Central Co-operative Bank, Mehsana Urban Co-operative Bank and Sarvoday Co-operative Bank. Hence, this ground of the assessee is allowed.
As regards ground no.3, the assessee is not pressing the same, and hence dismissed.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on this 20th February, 2025.