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Income Tax Appellate Tribunal, “A”
Before: SHRI S.S.GODARA & DR. DIPAK P. RIPOTE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)-7, Pune, dated 26.04.2018 for the A.Y. 2010-11 under section 250 of the Income Tax Act, 1961(in short “the Act”). The Assessee has raised the following grounds of appeal:
1. In the facts and circumstances of the case and in law, the learned C.I.T.[A] has grossly erred in denying deduction u/s 80P[2][a][i] of the I.T. Act 1961 to the appellant in respect of interest income of Rs.1,08,53,328/- earned from fixed deposits kept by it with nationalized banks and has further erred in taxing the said income u/s 56 of the I. T. Act, 1961. The aforesaid addition being patently illegal, bad in law, arbitrary, perverse and devoid of merits the same may please be deleted and it may please be held that the aforesaid interest income is exempt u/s A.Y. 2010-11 Sumitra Gramin Bigar S.S.P.S.Maryadit Mahaveer Path (A)
80P[2]a[][i] of the I. T. Act, 1961.
2. In the facts and circumstances of the case and in law, the learned C.I.T.[A] has grossly erred in denying deduction u/s 80P[2][a][i] of the I.T. Act 1961 to the appellant in respect of Dividend income and Interest on NRF amounting to Rs.1,08,53,328/-. The aforesaid addition being patently illegal, bad in law, arbitrary, perverse and devoid of merits the same may please be deleted and it may please be held that the aforesaid interest income is exempt u/s 80P[2][i] of the I.T. Act, 1961.
3. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.”
No one has appeared on behalf of the assessee. We have heard ld.Departmental Representative(ld.DR) for the Revenue and perused the records. The only issue for consideration is whether assessee was eligible for deduction under section 80P(2)(a)(i) on the interest earned of Rs.1,08,53,328/- on investment and FDR with Bank of India.
2.1 In the assessment order, it is mentioned that the assessee is a Co-operative Society engaged in the business of providing credit facilities to its member. It is claimed that the necessary registration and license has been obtained by the assessee, from the concerned Government authorities. The Co-operative credit society derives income from providing credit facilities which includes interest on loans to members, interest on investments etc., It is further claimed that the primary object of the society is to receive the deposits and to A.Y. 2010-11 Sumitra Gramin Bigar S.S.P.S.Maryadit Mahaveer Path (A) meet all of the financial requirements of the members and to provide credit facilities to its members as per by-laws of the society.
In the assessment order, at para 6.4 the Assessing Officer(AO) has mentioned as under : "6.4 Further, the details of interest income on investment made with Nationalilzed Banks are as under : Sr.No. Particulars Amount(Rs.) 1 Interest on investment/FDRs with 1,08,53,328/- Bank of India
The AO denied assessee’s claim for deduction under section 80P(2)(a)(i) for the said income of Rs.1,08,53,328/- stating that it is not its business activity. The same is in the nature of Income from Other Sources and it is required to be taxed under section 56 of the Act. The AO also held that the deposits have been made out of surplus fund shown under the head “Reserve and Surplus”. The AO held that the interest earned by assessee by investing surplus funds in deposits with Nationalized Bank does fall within the meaning of profits and gains of business and it cannot be said to be attributable to the activities of providing credit facility to its members. Therefore, the AO denied the deduction under section 80P(2)(a)(i) for the interest earned of Rs.1,08,53,328/- and added the said income as income from other resources. The ld.CIT(A) confirmed the order of the AO.
A.Y. 2010-11 Sumitra Gramin Bigar S.S.P.S.Maryadit Mahaveer Path (A)
It has been observed that ITAT Pune Bench in the case of assessee for A.Y.2008-09 has decided the same issue in favour of assessee in ITA No.2476/PUN/2016. In that case assessee had received interest income from fixed deposits kept with Nationalized Banks. The ITAT Pune Bench in para 5 has held as under : “5. With regard to this issue, the Ld. AR of the assessee at the time of hearing submitted that ground No.1 is already decided in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal, Pune in for the assessment year 2012-13 in the case of ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha, therein, in Para 2 of the order, the issue is as under:
“2. The only grievance projected by the Revenue in its appeal is against the allowing of deduction u/s.80P of the Income Tax Act, 1961 (hereinafter also called as ‘the Act’) in respect of interest earned by the assessee society from State Bank of India which was denied by the Assessing Officer.”
Thereafter, the Tribunal has held as follows:
“4.We have heard both the sides and perused the relevant material on record. It is observed that the ld. CIT(A) allowed the claim of deduction u/s.80P by following the order passed by the Tribunal in the case of Shivneri Nagari Sahakari Patsanstha Ltd. (supra). The ld. AR placed on record a copy of the another order of the Pune Bench dated 19-08-2015 in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) (to which one of us, namely, the ld. JM is party) in which similar deduction has been allowed. The Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) has discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230
A.Y. 2010-11 Sumitra Gramin Bigar S.S.P.S.Maryadit Mahaveer Path (A) taxmann 309 (Kar.) allowing the deduction u/s. 80P on interest income and the Hon’ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income, earned from banks under similar circumstances. Both the Hon’ble High Courts have taken into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. 322 ITR 283 (SC). There being no direct judgment from the Hon’ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view taken in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). In the absence of their being any change in the legal position prevailing on this issue after the passing of the order by the Pune Bench of the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) and host of other orders reiterating the similar view, respectfully following the precedent, we uphold the impugned order in allowing deduction u/s.80P on the interest income”
Respectfully, following the aforesaid decision of the Co-ordinate Bench of the Tribunal, Pune, we set aside the order of the Ld. CIT(Appeals) and allow ground No.1 of the grounds of appeal of the assessee.”
The issue before us is identical to the issue decided by ITAT Pune Bench in assessee’s own case in for A.Y. 2008-09(supra) i.e. interest income earned on fixed deposits kept with Nationalized Banks. Therefore, respectfully following the decision of ITAT Pune Bench in assessee’s own case for Assessment Year 2008-09(supra), it is held that assessee is eligible for deduction under section 80P(2)(a)(i) in the interest earned of Rs.1,08,53,328/-
A.Y. 2010-11 Sumitra Gramin Bigar S.S.P.S.Maryadit Mahaveer Path (A) from Nationalized Bank. Accordingly, appeal of the assessee is allowed.
In the result, appeal of the Assessee is Allowed. Order pronounced in the open Court on 4th November, 2022.