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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S.SUNDER SINGH
आदेश / O R D E R
PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the Order dated 25.10.2016 of Commissioner of Income Tax (Appeals)-3, Coimbatore, in for the AY 2013-14.
2.0 All the grounds of the appeal are related to the disallowance u/s.14A r.w.r.8D of Income Tax Act (in short ‘the Act’). The assessee is a co-
ITA No.3369/Mds/2016 :- 2 -: operative society filed its return of income admitting total income of Rs.NIL on 28/09/2013. The income of the assessee is eligible for deduction u/s.80P of Income Tax Act. The Assessing Officer (in short ‘AO’) disallowed a sum of Rs.55,22,189/- u/s.14A and brought to tax.
3.0 Aggrieved by the order of the AO, the assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A) deleted the addition placing reliance on the ITAT’s Order in the assessee’s own case in dated 28.09.2016 for the AY 2012-13.
4.0 Aggrieved by the Ld.CIT(A)’s Order, the Revenue is in appeal before us.
5.0 We heard the Ld.DR and perused the material placed on record and gone through the lower authority’s order.
The assessee is a cooperative society and eligible for deduction of income u/s.80P of IT Act. As per Sec.80P(2)(d), the assessee is eligible for deduction of interest derived from the investments made in the other cooperative societies. As per the details in the Assessment Order, the assessee has made the deposits with the Tamil Nadu Cooperative Housing Federation and Erode District Central Cooperative Bank. Both are the cooperative societies and the entire income derived by the assessee is entitled for deduction u/s.80P(2)(d) of the act. Sec.14A relates to the disallowance of expenditure, on income which does not form part of total
ITA No.3369/Mds/2016 :- 3 -: income. In the case of the assessee, the entire interest income is eligible for deduction u/s.80P and no part of interest income is taxable since the entire income was derived from the deposits made in the Cooperative Bank and covered by Sec.80P(2)(d). The disallowance u/s.14A is applicable in the case of the expenditure relating to exempted income claimed from the taxable income. In the assessee’s case, the entire income is eligible for deduction u/s.80P and no part of interest is taxable.
Therefore, the question of disallowance u/s.14A does not arise and the case is squarely covered by the decision of this Tribunal relied upon by the assessee in it’ own order in dated 28/09/2016 held as under:
We have heard both sides, perused the materials on record and gone through the orders of authorities below. Before the Assessing Officer, the assessee has claimed that section 14A of the Act is not applicable in the cases where the income is exempt under Chapter III only as the section starts with words no deduction shall be allowed in respect of expenditure incurred by the assessee on income which does not form part of total income under the Act. The assessee also claimed that the income on which deduction is claimed under section 80P(2)(d) of the Act is under Chapter VI and hence section 14A of the Act is not applicable. However, by invoking the provisions of section 14A of the Act, the Assessing Officer made the addition of the interest income not part of total income by applying Rule 8D. The ld. CIT(A) has confirmed the addition made by the Assessing Officer since the addition was made in accordance with the provisions of section 14 r.w.r. 8D. Before us, the ld. Counsel for the assessee has submitted that by affirming the 4 order of the Tribunal in the case of ACIT v. Kribhco [2010] 6 ITR (Trib) 686 (Delhi), the Hon’ble Delhi High Court has held that no disallowance can be made under section 14A of the Act in respect of the income on which deduction is allowed under section 80P of the Act by observing as under: “Section 14A of the Income-tax Act, 1961, states that for the purpose of computing total income under Chapter IV, no deduction shall be allowed ill respect of expenditure incurred in relation to the income which does not form part of the total income under the Act. It does not state that income which is entitled to deduction under Chapter VI-A has to be excluded for the purpose of the section. The words "do not form part of the total income under this Act" are significant and important. Before allowing deduction under Chapter VI-A income has to be computed and included in the total income. In this manner, the income which qualifies for deductions under sections 80C to 80U has to be first included in the total income of the assessee. It, therefore, becomes part of the income, which is subjected to tax. Thereafter, deduction is to be allowed in accordance with and subject to the fulfilment of the conditions of the respective provisions. This is also subject to sections 80AB and 80A(l) and (2). Chapter VI-A does not postulate or state that the incomes which qualify for deduction will be excluded and not form part of the total income. They form part of the total income but are allowed as a deduction and reduced. The assessee, a co-operative society, claimed deduction under section 80P(2)(d) on dividend received and interest on deposits. The Assessing Officer did not disturb the claim/deduction under section 80P(2)(d) but relying upon section 14A held that these incomes were not included in the total income of the assessee and, therefore, expenditure
ITA No.3369/Mds/2016 :- 4 -: under the head "interest" amounting to Rs. 1,15,45,579 and one-eighth of the employee benefits and remuneration should be disallowed. The Commissioner (Appeals) set aside the disallowance and this was upheld by the Tribunal. On appeal to the High Court: Held, that the Tribunal was correct in law in holding that no disallowance could be made against income which was not specifically exempt under the Act.” 5
The ld. DR could not controvert the above findings of the Hon’ble Delhi High Court and or filed higher Court’s decision having modified or reverted the above order. Respectively following the above decision of the Hon’ble Delhi High Court, we set aside the order of the ld. CIT(A) confirming the disallowance made under section 14A of the Act. Thus, the ground raised by the assessee is allowed.
Respectfully, following the order of this Tribunal in the assessee’s own case, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the Revenue.
6.0 In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 3rd May, 2017, at Chennai.