BSNL EMPLOYEES CO-OPERATIVE CREDIT SOCIETY LIMITED,HUBLI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-3(1), HUBLI

Per Laxmi Prasad Sahu, Accountant Member

“1. The appellate order passed by the learned Commissioner 'of Income-tax [Appeals], NFAC, Delhi, under Section 250 of the Act dated 26/03/2024, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case, may be quashed.

4. The learned Commissioner of Income-tax [Appeals] is not justified in not allowing the appeal of the appellant since the issue that arose from the impugned order of assessment passed by the learned assessing officer was that whether the appellant is a co- operative society or co-operative bank, wherein the learned Commissioner of Income-tax [Appeals] has held that the appellant is a co-operative society and having held so the learned Commissioner of Income-tax [Appeals] ought to have allowed the appeal of the appellant and the learned Commissioner of Income-tax [Appeals] traveled beyond the issues and thereby dismissed the appeal of the appellant, which is not in accordance with law, on the facts and circumstances of the case. 5. Without prejudice, the learned Commissioner of Income- tax [Appeals] and the learned assessing officer failed to appreciate that the interest income earned from investment in Banks and Co-operative banks were attributable to the business of the appellant, since the funds belonged to the members of the appellant and eligible to claim deduction under section 80P[2] [a] [i] of the Act, and further the interest earned from Statutory Deposits kept with the banks are eligible for deduction under section 80P[2][a][i] of the Act, on the facts and circumstances of the case. 6. Without prejudice, the learned Commissioner of Income- tax [Appeals] and the learned assessing officer were not justified in not allowing the deduction on account of interest earned by the appellant from deposits in Co-Operative Banks, which is a co- operative society under the provisions of section 80P[2][d] of the Act and erroneously treated such interest income as income from other sources and brought the entire amount to tax, which is not in accordance with law, on the facts and circumstances of the case.

urged above.

10. For the above and other grounds to be urged during the course of hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice.”

2. The brief facts of the case are that the assessee is a cooperative society and filed its return declaring Nil income on 26.9.2012 and claimed deduction u/s. 80P(2)(a)(i) of the Act of Rs.67,80,387. The case was selected for scrutiny and statutory notices issued to the assessee. In response to notice, assessee filed details as called for. The AO noted that the assessee has not satisfied the primary requirement for claim of deduction u/s. 80P(2)(a)(i) and it falls within the provision of section 80P(4) r.w.s. 2(24) of the Act. The assessee was held to be a primary cooperative bank and not eligible for deduction. Accordingly the amount of Rs.67,80,387 was added back to total income of assessee. The CIT(Appeals) upheld the order of the AO. Aggrieved, the assessee is in appeal before the ITAT.

3. The ld. AR reiterated the submissions made before the lower authorities and submitted that assessee is engaged in providing credit facilities to its members. The primary object of assessee is to receive deposits from its members and meet financial requirements of its members and to provide credit facilities to its members as per byelaws of society. The members of the society are employees of BSNL. The appellant is accepting deposits from BSNL employees and extend credit to needed members of the society. The assessee is not accepting deposits from public nor extending credit facilities to public and is not connected in banking business. The appellant keeps deposits with Karnataka Central Cooperative Bank Ltd. (KCC Bank) to comply with statutory requirements laid out by State Govt. and earns interest income which is business income of the appellant. The ld. AR relied on the judgment of coordinate Bench of Tribunal in the case of Alnavar Credit Souharda Co-op Ltd. vs ITO in dated 28.6.2024.

Pronounced in the open court on this 21st day of August, 2024.