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Facts
The assessee, a cooperative society, filed its return of income declaring nil income. The Assessing Officer (AO) observed interest and dividend income and made an addition, disallowing deductions based on a Supreme Court judgment. The CIT(A) dismissed the appeal ex-parte without considering the merits.
Held
The Tribunal directed the AO to verify if the interest/dividend income was from investments with cooperative societies. If so, it is entitled to deduction under Section 80P(2)(d). If the interest earned from banks is treated as 'income from other sources', relief under Section 57 should be granted.
Key Issues
Whether the assessee cooperative society is entitled to deduction on interest and dividend income received from cooperative institutions, and whether the CIT(A) erred in dismissing the appeal ex-parte.
Sections Cited
80P(2)(a), 250(6), 80P(2)(d), 57
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI PRAKASH CHAND YADAV
O R D E R
PER SHRI PRAKASH CHAND YADAV, JUDICIAL MEMBER The present appeal of the assessee is arising from the order passed by the NFAC, Delhi dated 29/04/2024 in DIN No. ITBA/NFAC/S/ 250/2024-25/1064431034(1) for the assessment year 2020-21.
The assessee is cooperative society registered under the Karnataka State Co-operative Society’s Act 1959. The society is engaged in the activity of carrying of business of providing credit facilities to its members. It filed its return of income on 24/09/2020 declaring Nil income. The case of the assessee was selected for scrutiny after issuing statutory notices. During the course of assessment proceedings,
Page 2 of 4 the AO observed that the assessee has earned interest income received from cooperative institutions amounting to Rs.10,12,973/- and dividend income of Rs.1,13,240/-. The AO relying on the judgment of DCIT Vs. Totagars Co-operative Society Ltd, has held that assessee is not entitled for deduction on the amounts of interest income as well as dividend income. Accordingly, the AO assessed that income under the head ‘income from other sources’ and made an addition of Rs 11,86,369/-.
Aggrieved with the order of the AO, the assessee filed appeal before the ld. CIT (A) and interalia contended that the AO has wrongly relied upon the judgment of Hon’ble Supreme Court in the case of Totgars Society in as much as in that case, the main business activity of the society was trading in goods and in the case of the assessee primary business activity is dealing in money and assessee’s case is covered by the provisions of sec. 80P(2)(a) of the Act. However, the ld. CIT(A) dismissed the appeal of the assessee ex-parte. Though the Ld CIT(A) has mentioned that notices of hearing were issued to assessee, however he failed to pin point as to whether any notice was actually served on assessee or not. Ld CIT(A) has dismissed the appeal without considering the merits of the case in terms of the provisions of sec.250(6) of the Act.
Aggrieved with the order of the ld. CIT(A), the assessee preferred an appeal before us and raised as many as 6 grounds of appeal. However, at the time of haring, the ld. Counsel for the assessee craved that the matter may kindly be restored to the file of AO for fresh adjudication and examining the contentions of the assessee in terms of the provisions of sec. 80P(2)(d) of the Act.
The ld. DR relied upon the orders of the authorities below and prayed that the matter may be restored to the file of ld. CIT(A).
We have heard the rival submissions and perused the materials available on record. As regards the claim of deduction u/s 80P(2)(d) of the I.T. Act, we direct the A.O. to verify whether interest / dividend is received by the assessee out of investments made with Cooperative Societies. If the assessee earns interest / dividend income out of investments with co-operative society, as observed by Hon'ble Supreme Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd. in Civil Appeal No.10069 of 2016, order dated 14.09.2023, the same is entitled to deduction u/s 80P(2)(d) of the I.T. Act. 6.1 Without prejudice to the above, we make it clear that if the interest earned by assessee from the banks is considered under the head "Income from other sources", relief to be granted to the assessee u/s 57 of the Act in accordance with law. Accordingly, the issue is restored to the file of ld. AO for de-novo consideration with the above observations. Hence, the appeal of the assessee is allowed for statistical purposes.