SHREE YOGESHWAR CO.OP.CREDIT SOCIETY LTD.,MEHSANA vs. THE INCOME TAX OFFICER, PATAN WARD-4, UNJHA

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ITA 341/AHD/2021Status: DisposedITAT Ahmedabad21 December 2022AY 2013-145 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal held that interest income from nationalized banks is not eligible for deduction under Section 80P. However, the assessee is entitled to a deduction for proportionate expenditure incurred in mobilizing the funds for these deposits.

What were the facts?

The assessee, a co-operative credit society, appealed against an order related to its assessment year 2013-14. The appeal concerned the deductibility of proportionate interest expenses while computing taxable interest income from nationalized banks.

What were the issues?

Whether proportionate interest expenses incurred by a co-operative society on deposits with nationalized banks are deductible from taxable interest income. Whether interest income from nationalized banks is eligible for deduction under Section 80P.

Which sections of the Income-tax Act were involved?

Section 56,Section 80P,Section 57

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Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

Before: Shri Waseem Ahmed & Shri T.R. Senthil Kumar

For Appellant: Shri P.F. Jain, A.R
For Respondent: Shri Rakesh Jha, Sr.D.R

Shree Yogeshwar The Income Tax Co.Op. Credit Society Officer, Patan Ward- Ltd. Vs 4, Unjha At- Kahoda, Post-Kahoda, (Respondent) TA-Unjha Dist- Mehsana-384130 Gujarat PAN No:AAAJS1127N (Appellant) Appellant by : Shri P.F. Jain, A.R. Respondent by : Shri Rakesh Jha, Sr.D.R. Date of hearing : 29-09-2022 Date of pronouncement : 21-12-2022 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the order dated 12.02.2020 passed by the Ld. Commissioner of Income Tax (Appeals), Gandhinagar as against the Assessment Order passed under section 143(3) r.w.s. 263 of the Income Tax Act, 1961 Page No 2 Shree Yogeshwar Co.Op. Credit Society Ltd. vs. ITO (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2013-14.

2.

The registry has noted that there is a delay of 513 days in filing the appeal by the assessee. This appeal is filed by the assessee on 16.12.2021 which was little after the Covid-19 period wherein Hon’ble Supreme Court in M.A. No. 665 of 2021 in SMW(C) No. 3 of 2020 dated 23.09.2021 passed the following orders: “……..

8.

Therefore, we dispose of the MA No.665 of 2021 with the following directions: - I. In computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2020 till 02.10.2021 shall stand excluded. Consequently, the balance period of limitation remaining as on 15.03.2021, if any, shall become available with effect from 03.10.2021. II. In cases where the limitation would have expired during the period between 15.03.2020 till 02.10.2021, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 03.10.2021. In the event the actual balance period of limitation remaining, with effect from 03.10.2021, is greater than 90 days, that longer period shall apply. ……….. ” 2.1. Thus there is no delay in filing the above appeal by the assessee.

3.

The Grounds of Appeal filed by the Assessee are as follows:

1.

The Ld. CIT(A) has erred in law and on facts in not allowing the ground of appeal

for deducting proportionate amount of interest expense while computing taxable interest from the nationalized banks.

2. On the facts of the assessee, proportionate amount of interest expenses ought to have been allowed as per law.

Page No 3 Shree Yogeshwar Co.Op. Credit Society Ltd. vs. ITO 3.1. At the time of hearing of this appeal, it is fairly submitted by both parties that similar issue was considered by Co-ordinate Bench for this Tribunal in assessee’s own case in for the Assessment Year 2012-13 vide order dated 18.08.2017, relevant portion of the decision is as follows:

5. So far interest income received by the appellant from Fixed Deposit of nationalized banks of Rs. 19,54,732/- under the head Income from other sources u/s.56 of the Income Tax Act, 1961 is concerned. It is stated above that the assessee deposited the amount in nationalized bank not in Co- operative bank. So far interest income is not eligible for deduction u/s.80P of the I.T, Act, Therefore, we are not inclined to given any relief to the assessee with regard to Ground No. 1.

6.

So far Ground No. 2 is concerned, Assessee incurred some expenses on the deposit for making FD and also incurred expenses with regard to interest etc. For this learned AR cited a judgment [2015] 58 taxmann.com 35 (Karnataka) in the matter of Totgars Co-operative Sale Society Ltd. vs. Income Tax Officer, in this case Hon'ble High Court held as under: "Section 57, read with section 56 and section 80P(1) of the Income- tax Act, 1961 - Income from other sources - Deductions (Administrative and other expenses) - Assessment years 1991-92 to 1999-2000 - Assessee was a co-operative society engaged in business of marketing agricultural produce and was also providing credit facilities to its members - It claimed benefit of deduction under section 8OP(2)(a)(i) in respect of interest, earned on deposits kept with scheduled banks, Indra Vikas Patra, NSC etc. - Assessing Officer rejected assessee's claim and brought said interest income to tax under section 5 'Income from other sources' - Tribunal confirmed Assessing Officer's order - Assessee filed instant appeal seeking direction to pass fresh order by giving permissible deduction under section 57 - Whether on facts, only net interest income, i.e., interest income reduced by administrative expenses and other proportionate expenses to said income had to be brought to tax under section 56 - Held, yes and assessee's appeal was partly allowed by the Hon'ble High Court" 7. Respectfully, following the judgment of Hon'ble Karnataka High Court, the appellant is entitle for deduction of proportionate expenditure or actual expenditure which the appellant may have incurred in mobilizing the funds placed in deposit with the bank and the same needs to be calculated by the Assessing Authority. We remit this matter back to the file of the Page No 4 Shree Yogeshwar Co.Op. Credit Society Ltd. vs. ITO

Assessing Officer who will examine the case of the assessee that how much expenditure he has incurred in mobilizing the funds and thereafter, Assessing Officer will pass an appropriate order. Therefore, we partly allow this appeal.

4.

Respectfully following the above Co-ordinate Bench decision, the first ground of appeal, interest income received of Rs. 32,38,779/- from Nationalized Bank is not eligible for deduction u/s. 80P of the Act. Further the Hon’ble Gujarat High Court in the Case of State Bank of India Vs CIT [2016]72 taxmann.com 64 wherein it was held that interest derived by depositing surplus funds with bank not being attributable to business carried on by society, cannot be deducted under section 80P(2(a)(i) of the Act. Hence, ground no. 1 is dismissed.

4.1. Regarding the second ground namely proportionate amount of interest expenses following Karnataka High Court judgment in the case of Totagars Co-operative Sales Society Ltd. Vs. ITO [2015] 58 taxmann.com 35, wherein it was held that net interest income that is interest income reduced by administrative expenses and other proportionate expenses to said income had to be brought to tax under section 56. Thus the assessee is entitled for deduction of proportionate expenditure which it has incurred and the same needs to be calculated by the Assessing Authority. We therefore deem it fit to remit the matter back to the file of the Assessing Officer, who will examine the case of the assessee and quantify the proportionate expenditure and pass appropriate orders by giving due opportunity to the assessee. Therefore we partly allow this ground of appeal.

Page No 5 Shree Yogeshwar Co.Op. Credit Society Ltd. vs. ITO

5.

In the result, appeal filed by the Assessee is partly allowed.

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