BHAGYALAXMI NAGRI SAHAKARI PATHSANTHA MERYADIT,NASHIK vs. DEPUTY CIT/CIT/ITO, NEAC, , DELHI

A.Y. 2017-18 : 2. The assessee is aggrieved by the denial of deduction u/s.80P(2)(a)(i) in respect of commission income of Rs.60,363/- received from Maharashtra State Electricity Distribution Company Limited (MSEDCL) and interest income of Rs.20,000/- earned on security deposit with MSEDCL.

Briefly stated, the facts of the case are that the assessee is a credit co-operative society engaged in the business of providing credit facilities to its members. A return of income was filed declaring income at Nil, after claiming deduction u/s.80P(2)(a)(i) of the Act. During the course of the assessment proceedings, the AO disputed the allowability of deduction u/s 80P of the Act on - interest income of Rs.1,14,652/- from Nationalized bank; Commission income of Rs.60,363/- from MSEDCL; and interest of Rs.20,000/- on security deposit with MSEDCL - on the ground that these items of income were not from the business of providing credit facilities to its members. To sum up, the assessee’s claim for deduction u/s.80P(2)(a)(i) was denied on a total income of Rs.1,95,015/-. The ld. CIT(A) accepted the assessee’s contention anent to the interest income of Rs.1,14,652/- by relying on certain Tribunal orders. He, however, disapproved the assessee’s claim of deduction u/s.80P(2)(a) on commission income of Rs.60,363/- earned from MSEDCL and interest at Rs.20,000/- from MSEDCL on security deposit. Aggrieved thereby, the assessee has come up in appeal before the Tribunal.

I have heard the ld. DR and gone through the relevant material on record. There is no appearance from the side of the assessee. However, written submissions have been filed with reference to the confirmation of denial of deduction u/s.80P on the two items, which have been taken into consideration in deciding the extant appeal.

The first item is the commission income from MSEDCL amounting to Rs.60,363/-. The assessee has contended in its written submissions that similar issue came up for consideration before the Pune Tribunal in Banganga Nagri Sah. Patsanstha Ltd. (ITA No.873/PUN/2014) and the Tribunal, vide its order dated 31- 03-2016, allowed the deduction on commission of collection of MSEDCL bills by holding that it was from the business activity carried on by the assessee. The Tribunal, for allowing such deduction in Banganga Nagri Sah. Patsanstha Ltd. (supra), in turn, relied on another order passed by the Tribunal in the case of the same assessee for the assessment years 2010-11 and 2011-12. In view of the above order passed by the Tribunal, it is clear that the activity of earning commission from collection of bills relating to MSEDCL has been held as eligible business activity and resultantly allowed granted deduction u/s.80P. The ld. DR fairly conceded the position but relied on the impugned orders on this score. In view of the fact that commission income on collection of bills from MSEDCL has been made eligible for deduction u/s.80P(2)(a) on the ground of the same being in the nature of business activity, I allow the assessee’s claim in respect of similar commission income of Rs.60,363/-.

The other point raised in this appeal is against the denial of deduction u/s.80P(2) on the interest income of Rs.20,000/- on security deposit which was parked with MSEDCL for carrying on the business of collection of MSEDCL bills. In view of the fact that the activity of collection of bills has been held by the Tribunal in Banganga Nagri Sah. Patsanstha Ltd. (supra) as a business activity, whose income is eligible for deduction u/s.80P(2), the instant interest income of Rs.20,000/- on security deposit with MSEDCL for carrying on the business of bill collection, which is a part and parcel of the overall activity of such business, cannot be accorded a different character. I, therefore, order to grant deduction on interest on security deposit with MSEDCL amounting to Rs.20,000/-.

The only issue raised in this appeal is against the denial of deduction u/s.80P(2)(a)(i) on the commission income amounting to Rs.2,36,160/- earned from collection of MSEDCL bills. The AO denied the deduction by following his own view for the earlier years, which got echoed by the ld. CIT(A).

Having regard to the facts of the case, it is seen that the issue under consideration about earning of commission from MSEDCL bill collection is identical to the one considered above for the immediately preceding assessment year 2017-18. Following the view taken for such earlier year, I order to allow deduction u/s.80P(2)(a) on the commission income earned from MSEDCL bill collection

In the result, both the appeals are allowed. Order pronounced in the Open Court on 14th March, 2022.