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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE
Appellant by : Shri S. N. Divatia, A.R. & Shri Samir Vora, A.R. Respondent by: Shri Alpesh Parmar, Sr. D.R. Date of Hearing 15.12.2022 Date of Pronouncement 16.12.2022 O R D E R
The appeal filed by the assessee is against the order passed by the Ld. CIT-(Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi on 13.07.2022 for A.Y. 2018-19.
The grounds of appeal
raised by the assessee are as under: “1. The Ld. CIT(A) NFAC, Delhi has grievously erred in disallowing the interest amount of Rs. 19,01,887/- received from bank a/cs. (Mehsana Urban Co-op. Bank Ltd.) & Bank share dividend of Rs. 12,660/-, totaling to Rs. 19,14,547/- u/s. 56 of the I. T. Act, 1961 inspite of the decision in case of ITO vs. Jafari Momin Vikas Co.op. Credit Society Ltd. It is submitted that the interest earned by the appellant is not from the scheduled bank and also not from the surplus fund but savings from the working capital and invested in Short Term Deposit and it is not in the nature of investment.
2. If your Honour is considered the interest income from other sources u/s. 56, it is submitted that kindly consider the interest is income pertaining to Somnath Nagrik Credit Co. Op. Soc. Ltd. vs. ACIT Asst.Year–2018-19 - 2 - the activity of the society and it should be allowed as a deduction u/s. 80P(2)(a)(i) of the Act.
3. The appellant therefore requests that the addition of interest income on bank a/cs. Of Rs. 19,01,887/- & bank share dividend of Rs. 12,660/- made by the Ld. A.O. u/s. 56 of the I. T. Act, 1961 should be deleted looking to the merits of the case.
4. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
3. The assessee is a Credit Co-operative Society engaged in the business of providing its credit facilities to its members and taking deposits from its members. The assessee filed its return of income for A.Y. 2018-19 on 07.07.2018 declaring total income of Rs. NIL. The case was selected for limited scrutiny assessment related to issues that of Investments / Advances / Loans and deduction from total income under Chapter VI-A. The Assessing Officer observed that in the relevant previous year i.e. F.Y. 2017-18 the assessee claimed deduction of Rs. 27,35,229/- under Section 80P(2)(a)(i) of the Act which was received in respect of bank account and bank share dividend. The Assessing Officer made addition of Rs. 19,14,547/-.
Being aggrieved by the Assessment Order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee.
The Ld. A.R. submitted that the deposits were made in Scheduled Bank and there is no indication that the deposits were made in the Cooperative Banks as per the observation of the Assessing Officer. But the figures from the audited balance sheet of the society for year
Somnath Nagrik Credit Co. Op. Soc. Ltd. vs. ACIT Asst.Year–2018-19 - 3 - 31.03.2018 clearly shows that this is not an income from other sources it is a short term deposit. The society invested Rs. 1,80,00,000/- in Fixed Deposit with Mehsana Urban Bank for a short time because it has made facility to take cash from the bank. The Ld. A.R. pointed out the balance sheet in liability side that the society had withdrawn the cash from Mehsana Urban Bank of Rs. 45,72,512/-. The Ld. A.R. further submitted that the Fixed Deposit made in Mehsana Urban Bank is for the facility for short term advances for the purpose of cash required to pay to its members and therefore, it is established that the decision of Hon’ble Supreme Court in case of Totgars Co. Op. Sales Society Ltd. vs. ITO (188 taxmann 282) will not be applicable in assessee’s case. The Ld. A.R. further submitted that for A.Y. 2013-14 the CIT(A) has deleted the addition of interest received from Cooperative Society.
The Ld. D.R. relied upon the assessment order and the order of the CIT(A).
Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has claimed deduction of Rs. 19,01,887/- being interest from Cooperative Bank i.e. The Banaskantha Dist. Central Co-op. Bank Ltd. and Mehsana Urban Cooperative Bank under Section 80P(2)(d) of the Act. From the perusal of Profit & Loss account the said receipts of dividend are shown to the extent of Rs. 12,660/- of bank share and thus the total receipt from Cooperative Banks come to Rs. 19,14,547/-. The reliance of the Hon’ble Supreme Court’s decision that of Totgars Cooperative Sale Society Ltd.
Somnath Nagrik Credit Co. Op. Soc. Ltd. vs. ACIT Asst.Year–2018-19 - 4 - is not justifiable in the present case as the interest income had on the surplus of its funds not immediately required for its business was declared as not income from business by the Hon’ble Supreme Court in the said case. But in the present case the assessee claim deduction on interest from Cooperative Banks in respect of availing facility to take cash from the said banks which is directly related to the business of the assessee society. Thus, the CIT(A) as well as the Assessing Officer was not right in disallowing the interest component claimed by the assessee under Section 80P(2)(a)(i) of the Act.
In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 16/12/2022