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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER आदेश आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the Revenue against the order of CIT(A)-1, Kolhapur, dated 25-10-2016 for the Assessment Year 2013-14.
During the proceedings before us, there is none to represent the assessee despite service of notice. Acknowledgment is placed on record. Ld. DR for the Revenue explained the facts of the case and read out the contents of Para No.7 of the order of CIT(A) and relied on the arguments grounds raised before us. Taxability of the interest income earned from the Fixed Deposits with banks other than the Cooperative Banks/Societies with reference to the provision of section 80P of the Act, is the core issue. Considering the settled nature of the issue and hearing
ITA No.2827/PUN/2016 Shri Laxmi Narayan Nagari Sahakari Pat Sanstha
the Ld. DR for the Revenue, we proceed to adjudicate the appeal in the
succeeding paragraphs.
Grounds raised by the Revenue read as under:
“1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in holding that the assessee Society was eligible for deduction u/s.80P (2)(a)(i) of the Income Tax Act, 1961, in respect of interest income on bank deposits with banks other than co- operative banks/societies, ignoring the provisions of section 80P(2) (d) of the Income Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in distinguishing the Hon'ble Apex Court's decision in Totgars Co-op Sale Society Ltd Vs. ITO reported as 322 ITR 283 (SC), ignoring the clear provisions of section 80P(2) (d) of the Income Tax Act, 1961, wherein income by way of interest or dividend derived by Co- operative Society from its investment with any other Co-operative Society is eligible for deduction and not income by way of interest from banks other than Co-operative banks/societies? 3. The appellant craves leave to add, alter, amend, substitute or delete any of the grounds urged herein above as and when found necessary.”
Briefly stated relevant facts of the assessee are that the assessee is
a Co-operative credit society engaged in the business of providing
banking or credit facilities to its members. Assessee filed its return of
income for assessment year under appeal on 27.09.2013 declaring total
income at ‘Nil’. In the Assessment u/s.143(3) of the Act, the AO assessed
the total income of assessee at Rs.66,88,243/- by way of interest from
the bank other than from other co-operative societies or with other Co-
op. AO opined that the assessee, being a Pat Sanstha, is required to
invest its funds in specified ones to be eligible for deduction
u/s.80P(2)(a)(i) of the Act. Thus, AO disallowed the claim of deduction
u/s.80P(2)(a)(i) of the Act.
In the First Appellate Proceedings, CIT(A), after placing reliance on
the decisions of the Tribunal in assessee’s own cases for A.Y. 2010-11 as
well as another decision of the Tribunal in ITA No.257/PUN/2016 for the
ITA No.2827/PUN/2016 Shri Laxmi Narayan Nagari Sahakari Pat Sanstha
A.Y. 2012-13, allowed the claim of the assessee for the year under
consideration. Aggrieved with the order of CIT(A), the Revenue filed the
present appeal before the Tribunal raising the grounds extracted above.
Ld. DR for the Revenue Placed reliance on the order of AO. He
further submitted that while dealing with the issue, CIT(A) ignored the
provisions of section 80P(2)(d) of the Act wherein it has been held that
income by way of interest or dividend derived by Co-operative Society
from its investment with any other co-operative Society is eligible for
deduction and not income by way of interest from banks other than Co-
operative banks/societies. Ld. DR has placed reliance on the decision of
Hon’ble Apex Court in the case of Totgar’s Co-op. Sale Society Ltd. Vs.
ITO, reported as 322 ITR 283(SC).
After hearing the Ld. DR for the Revenue and perusing the orders
of the Revenue and the material available on record, we find the core
issue raised in the appeal relates to taxation of interest income earned
from the fixed deposits kept with the banks (Bank of India and HDFC
Bank) other than co-operative banks/societies. AO is of the opinion that
the said income is taxable and the exemption u/s.80P(2)(a)(i) of the Act is
not available to such receipts. CIT(A) granted relief to the assessee
relying on the decision of the Tribunal in the assessee’s own case in ITA
No.604/PUN/2014, dated 16-08-2015 read with the judgment of Hon’ble
Supreme Court in the case of CIT Vs. Vegetable Products 88 ITR 192.
Contents of Para No.7 of the order of CIT(A) are relevant. Further, we
have also perused the contents of Para No. 7 of the order of CIT(A) and
find the issue now stands covered in favour of the assessee. For the sake
of completeness, we find it relevant to extract the said operational para
and the same reads as under:
ITA No.2827/PUN/2016 Shri Laxmi Narayan Nagari Sahakari Pat Sanstha
“7. I have considered the submissions of the appellant. An identical issue was dealt with by the Hon'ble ITAT, B Bench, Pune in appellant's own case for assessment year 2010-11 in ITA No.604/PN/2014 dated 19/08/2015. While deciding the issue, the Hon'ble Tribunal relied on the judgment of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products reported in 88 ITR 192 and held that the interest income earned on short term deposits kept with banks has to be allowed as deduction under section 80P(2)(a)(i). Further, I have also perused the order of the honourable ITAT, SMC Bench, Pune in appellant's case for assessment year 2012-13 wherein the Department was in appeal against the decision of CIT(A)-I, Kolhapur allowing appellant's claim of deduction under section 80P(2)(a)(i). I find that the Hon'ble Tribunal vide its order in ITA No.257 /PN /2016 has upheld the order of the CIT(A)-I, Kolhapur following the ITAT, B Bench, Pune's order cited supra. Therefore, respectfully following the decision of the jurisdictional Tribunal, in appellant's own case for assessment years 2010-11 and 2012-13, I hold that the assessing officer was not justified in denying the appellant's claim of deduction u/s 80P(2)(a)(i) of the Act. In the result, the claim of the appellant u/s 80P(2)(a)(i) of the Act for the year under consideration is allowed.”
Considering the precedent on the same issue by the Co-ordinate
Bench of the Tribunal, we are of the opinion that the assessee is entitled
to deduction u/s.80P(2)(a)(i) in respect of the interest income earned on
fixed deposits kept with the Nationalized Banks/Scheduled Banks and
the same constitute as ‘business income’ of the assessee. We therefore
uphold the order of CIT(A) and direct the AO to allow the claim of
assessee. Accordingly, the grounds raised by the Revenue are dismissed
and in favour of the assessee.
In the result, appeal of the Revenue is dismissed.
Order pronounced on this 19th day of September, 2018.
Sd/- Sd/-
(VIKAS AWASTHY) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER
पुणे / Pune; �दनांक Dated : 19th September, 2018. Satish
ITA No.2827/PUN/2016 Shri Laxmi Narayan Nagari Sahakari Pat Sanstha
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Kolhapur. 3. आयकर आयु� / The Pr. CIT-1, Kolhapur. 4. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “बी बी बी” / DR ‘B’, बी ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार आदेशानुसार
// True Copy //
Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune.