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Facts
The assessee, a Cooperative Credit Society, received interest income from cooperative and nationalized banks. The Assessing Officer disallowed this interest income under Section 80P of the Income Tax Act. The CIT(A) partly allowed the appeal.
Held
The Tribunal held that interest income received from cooperative banks is eligible for deduction under Section 80P(2)(d) as it represents income derived from investments with other cooperative societies or banks. The Tribunal relied on the Gujarat High Court ruling in Surat Vankar Sahakari Sangh Ltd. vs. ACIT.
Key Issues
Whether interest income received from cooperative and nationalized banks is eligible for deduction under Section 80P(2)(d) and whether it can be taxed under Section 56 after allowing expenditure under Section 57.
Sections Cited
80P, 80P(2)(d), 56, 57, 40A(7), 142(1), 134
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE
(Assessment Year: 2018-19) The State Transport Employees Co Vs. Deputy Commissioner of Operative Credit Thrift Society, Income Tax, S.T. Divisional Officer, Modhera Circle, Char Rasta, Gujarat-384002 Gandhinagar [PAN No.AAABT0216B] (Appellant) .. (Respondent) Appellant by : Shri Sunil Talati, A.R. Respondent by : Shri C Dharani Nath, Sr. D.R. Date of Hearing 01.01.2025 Date of Pronouncement 03.01.2025 O R D E R The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi on 16.09.2024 for A.Y. 2018-19.
The grounds of appeal raised by the assessee are as under:
“1. The Ld. CIT(A) has erred in law on facts in confirming the disallowance of Rs. 11,37,101/- claimed as a deduction u/s. 80P(2)(d) of the Act, in respect of the interest received from the Co-operative and Nationalized Banks. The interest earned from Co- operative Banks is eligible for deduction u/s 80P(2)(d) as it represents income derived from investments with other co-operative society / co-operative Banks. It is also submitted that on the facts and circumstances of the case, the appellant has rightly claimed the interest received from the Nationalized Banks u/s. 80P(2)(d) of the Act. It is submitted that the same be held now and disallowance be deleted.
2. Without prejudice to the above, Ld. CIT(A) has erred in considering the interest income received from cooperative and nationalized banks of Rs. 11,37,101/- as fully taxable u/s. 56 of the Act without allowing the pro-rata expenditure incurred u/s. 57 of the Act. It is submitted that only the net interest income, after allowing the The State Transport Employees Co Operative Credit Thrift Society vs. DCIT Asst.Year–2018-19 - 2 - pro-rata expenditure incurred, should be taxed. It is submitted that the same be allowed now.
The order passed by the Ld. CIT(A) is bad in law and contrary to the provisions of law and fats. It is submitted that the same be held so now.
4. Your appellant craves leave to add, alter, and/or to amend all or any of the grounds before the final hearing of the appeal.”
3. The assessee is a Cooperative Credit Society registered under Cooperative Societies Act, Gujarat and engaged in the business of banking / providing credit facilities to its members. The assessee’s case was selected for limited scrutiny in respect of the issues that of investment / advances / loans, disallowance under Section 40A(7) (Gratuity provision) and deduction from total income under Chapter VIA. Notice under Section 142(1) was issued on 06.01.2021 calling for the deduction under Section 80P of the Act. The Assessing Officer has not accepted the reply of the assessee and has disallowed under Section 80P amounting to Rs. 10,49,211/- interest income received from Cooperative Bank and Rs. 87,890/- interest income from Nationalized Bank.
Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
As regards, Ground No. 2 the assessee has not pressed the said ground. Hence, Ground No. 2 is dismissed. As regards, Ground No. 1 the Ld. A.R. submitted that in assessee’s own case for A.Y. 2017-18 the appeal of the assessee is allowed on the same issue of 80P(2)(d) of the Act, therefore, the interest received from Cooperative Bank are allowed.
Heard both the parties and perused all the relevant materials available on record. It is admitted position that the assessee received interest income of Rs. 10,49,211/- from Cooperative Bank which is registered under the Cooperative Societies Act, Gujarat. The Hon’ble Gujarat High Court in case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT 421 ITR 134 (Gujarat) has categorically held that the interest income received from Cooperative Bank is derived from the investment with other Cooperative Societies / Cooperative Bank and the same should be allowed. Thus, Ground No. 2 is allowed.
In the result, the appeal of the assessee is partly allowed. This Order pronounced in Open Court on 03/01/2025