MAHALAXMI NAGARI SAHAKARI PAT SANSTHA MARYADIT,JALNA vs. INCOME-TAX OFFICER, WARD -2, JALNA

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ITA 220/PUN/2022Status: DisposedITAT Pune31 May 2022AY 2011-125 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal held that income derived from deposits in cooperative banks is eligible for deduction. It also ruled that transactions with nominal members do not disqualify the society from claiming deductions under Section 80P(2)(c).

What were the facts?

The assessee, a cooperative society, appealed against the denial of deduction under Section 80P(2)(a)(i) and 80P(2)(c) of the Income Tax Act. The denial was based on transactions with nominal members and the society's dealings being akin to a bank.

What were the issues?

Whether a cooperative society is eligible for deduction under Section 80P(2)(c) for transactions with nominal members, and if interest income from deposits in cooperative banks is deductible.

Which sections of the Income-tax Act were involved?

Section 80P(2)(a)(i),Section 80P(2)(c)

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI S.S.GODARA

For Appellant: Ms. Mayuri Kulkarni
For Respondent: Shri Arvind Desai

आदेश / ORDER PER S.S. GODARA, JM :

1.

This assessee’s appeal for AY 2011-12 arises against the National Faceless Appeal Centre, Delhi’s order dated 30-03-2022 passed in case No. ITBA/NFAC/S/250/2021- 22/1042118349(1) involving proceedings under Section 250 of the Income Tax Act, 1961 in short the Act.

Heard both the parties. Case file perused.

2.

The assessee pleads the following substantive grounds in the instant appeal :

1. The learned I-T authorities erred in law and on facts in initiating 147 proceedings for AY 2011- 12 in absence of any tangible material which can substantiate a reason to believe" escaped income.

Mahalaxmi Nagari Sahakari Pat Sanstha Maryadit

2. The learned CIT(A), National Faceless Appeal Centre (NFAC); erred in law and on facts in confirming the additions of Rs. 19,71,920/- made by the learned ITO, Ward 2, Jalna; on the analogy that appellant has transacted with public at large / nominal members having no voting right.

3.

The learned CIT(A), NFAC; erred in law and on facts in deciding the appeal without considering submission filed before the learned CIT(A)-1, Aurangabad before the case was transferred to NFAC, on following dates: 14/06/2019 a) 18/02/2020 b) 04/03/2020 c)

4. The learned I-T Authorities erred in law and on facts in disallowing deduction claimed u/s 80P(2)(a)(i) of the ITA, 1961 of Rs. 1,98,578/- on the analogy that appellant is dealing like a bank with its members. The learned I-T Authorities ought to have appreciated that in absence of any license from Reserve Bank of India, appellant cannot be treated as a 'bank'.

5. The learned I-T Authorities erred in law and on facts in disallowing deduction claimed u/s 80P(2)(a)(i) of the ITA, 1961 of Rs. 1,98,578/- on the analogy that appellant is dealing with nominal members; who are not members in real sense. The learned I-T Authorities ought to have appreciated that nominal member are also the members as per the Maharashtra Cooperative Societies Act, 1960. The learned I-T Authorities ought to have considered following decisions in which identical questions were decided in favour of appellant: a) CIT Vs. Ammapet Primary Agricultural Co-operative Bank Ltd. - & 891 of 2018 (Madras HC) b) Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit Vs. ITO - ITA No. 1431/PUN/2018 (Pune ITAT) 6. The learned I-T Authorities erred in law and on facts in not granting the enhanced deduction u/s 80P(2)(a)(i) of the ITA, 1961 on following disallowances as per CBDT Circular No. 37 of 2016: IDS debited to P&L A/c. : 28,773/- a) NPA provisions debited to P&L A/c.: Rs.17,44,572/- b)

Mahalaxmi Nagari Sahakari Pat Sanstha Maryadit

7.

The learned I-T Authorities erred in law and on facts by not allowing the proportionate deduction u/s 80P(2)(a)(i) of the ITA, 1961 to the extent of transactions with ordinary members.

8.

The learned I-T Authorities erred in law and on facts in not allowing deduction u/s 80P(2)(c)(ii) of the ITA, 1961. 9. Appellant contends that, appellant is eligible to avail benefit of deduction u/s 80P(2)(d) of the ITA, 1961 to the extent of Rs. 51,78,595/- being interest received from the various Co- Operative banks. 10. Appellant craves leave to add, alter, clarify, explain, modify, delete any of the grounds of appeal, and to seek any just and fair relief.”

3. Coming to the assessee’s main substantive ground that both the lower authorities have erred in law and on facts in denying of 80P(2)(c) deduction since involving nominal members, the issue is found to be no more res integra in light of Mavilayi Service Cooperative Bank Ltd. Vs. CIT (2021) 123 taxmann.com 161 (SC) deciding the same against the department.

4.

So far as the assessee’s very deduction claim pertaining to interest income derived from deposits in cooperative banks is concerned case law State Bank of India Vs. CIT (2016) 389 ITR 578 (Guj.) and CIT Vs. Totagars Cooperative Sale Society (2017) 392 ITR 14 (Kar.) holds that such an income also is eligible for the impugned claim. This second issue also goes against the department.

Mahalaxmi Nagari Sahakari Pat Sanstha Maryadit

5.

Next comes the assessee’s reliance on CBDT Circular No.37/2016 that TDS and NPA provisions of Rs.28,773/- and Rs.17,44,572/-; respectively deserves to be considered as eligible for deduction since enhancing the business profits only. This issue, in my considered opinion, deserves to be restored back to the Assessing officer for his fresh adjudication in light of the aforementioned CBDT Circular. Ordered accordingly.

6.

This assessee’s appeal is partly allowed in above terms.

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