M/S MALNAD ARECA MARKETING CO-OPERATIVE SOCIETY LIMITED,SHIVAMOGGA vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1, SHIVAMOGGA

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ITA 256/BANG/2019Status: DisposedITAT Bangalore11 December 2020AY 2013-144 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that while the assessee is eligible for deduction under Section 80P(2)(d), the quantum needs to be computed based on various judicial pronouncements. Therefore, the issue was remanded to the Assessing Officer for fresh consideration.

What were the facts?

The assessee, a cooperative society, claimed deductions under Section 80P(2)(a)(iii) and 80P(2)(d) for marketing agricultural produce and interest income, respectively. The Assessing Officer disallowed the entire interest income, but the CIT(A) allowed it.

What were the issues?

Whether the interest income earned by the cooperative society is eligible for deduction under Section 80P(2)(d) and how the quantum of such deduction should be computed.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(iii),Section 80P(2)(d)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE

Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI

For Appellant: Shri S Krishnaswamy, C.A
For Respondent: Shri Kannan Narayan, JCIT (DR)

Date of Hearing : 10-12-2020 Date of Pronouncement : 11-12-2020 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeals are filed by revenue against order dated 22/04/2016 and 25/01/2017 passes by Ld.CIT(A), Davangere for assessment years 2013-14 and 2014-15 respectively.

2.

Revenue has raised identical grounds in both these appeals. For sake of convenience, grounds pertaining to assessment year 20113-14 are reproduced herewith: “1The order of the CIT(A), Davangere is opposed to the law and not on the facts and circumstances of the case.

2. The CIT(A) has not considered the fact that in order to be eligible for deduction u/s 57, it is necessary to establish that the expenditure was Page 2 of 5 & 257/Bang/2019 incurred wholly and exclusively for the purpose of earning the corresponding income. – Rs.1,02,64,770 3. The CIT(A) has erred in not considering the fact that direct nexus between the expenditure allowed and income earned is not established.

4. For these and other grounds that may be urged upon, the order of the CIT(A) may be reversed and that assessment order be restored.

5.

The appellant craves leave to add, alter, amend or delete any other grounds on or before hearing of the appeal.” Brief facts of the case are as under: 3. It has been noted by Ld.AO that assessee is a co operative society engaged in the business of marketing agricultural produce mainly areca nuts grown by its members. Ld.AO observed that assessee claimed deduction u/s.80P(2)(a)(iii) i.e; income from marketing of agricultural produce of members and 80P(2)(d) i.e; income by way of interest or dividend derived by assessee from investments with any other cooperative society.

4.

Ld.AO disallowed he entire interest income claimed by assessee u/s.80 P(2)(d) of the Act.

5. Aggrieved by disallowance made in assessment order, assessee preferred appeal before Ld.CIT(A).

6.

Ld.CIT(A) allowed entire interest income earned by assessee. Aggrieved by order of Ld.CIT(A), revenue is in appeal before us now.

7.

Ld.Sr.DR submitted that assessee earned interest income as under: Amount in Rs. Interest income from Co operative 2,74,41,235/- banks (SDCC Bank) Interest from commercial banks 22,33,243/- Total Interest earned 2,96,74,478/-

Page 3 of 5 & 257/Bang/2019

8.

Ld.Sr.DR submitted that Ld.CIT(A) without verifying the claim in light of various decisions of this Tribunal as well as Hon’ble Karnataka High Court granted deduction to assessee. He submitted that the issue may be remanded to Ld.AO for considering the claim in accordance with the view taken by this Tribunal on this issue.

9.

Ld.AR on the contrary relied on order passed by Ld.CIT(A). 10. We have perused the submissions of both sides in light of records placed before us. 11. We note that Ld.CIT(A) has not followed the ratio of various judgments for computing allowable interest u/s.80 P(2) (d). There is no doubt that assessee is eligible to claim deduction u/s.80 P(2)(d) of the Act. However the quantum that is allowable is to be computed in accordance with the ratio laid down by following decisions. We therefore remand this issue to Ld.AO for computing the deduction as directed herein. 12. Ld.AO is directed to examine the facts in the light of decision of Hon’ble Karnataka High Court in case of Tumkur Merchants Souharda Credit Co-operative Ltd vs ITO, reported in 230 Taxmann 309, wherein decision by Hon’ble Supreme Court in case of Totgars Co-Coperative Sale Society Ltd., reported in 322 ITR 283 has been duly considered. We note that Hon’ble Karnataka High Court in case of Pr.CIT vs Totgars co-operative Sale Society reported in 392 ITR 74 confirmed the order of this Tribunal allowing deduction under section 80P(2)(d) of the Act on Page 4 of 5 & 257/Bang/2019 interest received on investments made in co-operative bank. This decision was however not followed in the subsequent judgment in case of Pr.CIT vs Totgars Co-operative Sale society reported in 395 ITR 611.

13.

We therefore restore the issue back to Ld.AO for fresh consideration in the light of above decisions after providing order quit opportunity of being heard to assessee in accordance with law. Accordingly grounds raised by assessee stands allowed for statistical purposes. In the result appeal filed by assessee is allowed for statistical purposes. Order pronounced in the open court on 11th Dec, 2020

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