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NTI HOUSING CO-OPERATIVE SOCIETY,BENGALURU vs ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2)(1), BENGALURU | BharatTax

NTI HOUSING CO-OPERATIVE SOCIETY,BENGALURU vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2(2)(1), BENGALURU

ITA 827/BANG/2023Status: DisposedITAT Bangalore28 February 2024AY 2011-12Bench: SHRI CHANDRA POOJARI (Accountant Member), MS. MADHUMITA ROY (Judicial Member)1 pages

AI SummaryAllowed

Facts

The assessee, a co-operative society, claimed deduction under Section 80P(2)(d) on interest income. The AO reopened the assessment beyond the 4-year period, alleging escapement of income. The appeals were filed against the orders of the National Faceless Appeal Centre.

Held

The Tribunal held that the reopening of assessment under Section 148 was invalid as there was no allegation of failure to disclose material facts and it was a mere change of opinion without new material. The Tribunal also relied on High Court decisions that interest income earned by a co-operative society on its investments is eligible for deduction under Section 80P(2)(d).

Key Issues

Validity of reopening of assessment beyond 4 years without alleging non-disclosure of material facts; Eligibility of co-operative society for deduction under Section 80P(2)(d) on interest income from investments.

Sections Cited

147, 148, 154, 80P(2)(d), 57

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE

Before: SHRI CHANDRA POOJARI

For Appellant: Shri Narendra Sharma, Advocate

For Respondent: Shri V. Parithivel, JCIT

Hearing: 18/12/2023Pronounced: 28/02/2024

बनाम/ NTI Housing Assistant Commissioner Co-operative Society of Income Tax Vs. No.84, 1st Floor, Sun Circle-2(2)(1), BMTC Smile, Kumara Park West, Building, 80 Feet Road, Bengaluru – 560 020 Koramangala, Bengaluru – 560 095 PAN/GIR No. : AAAAN0134H (Appellant) .. (Respondent) Assessee by : Shri Narendra Sharma, Advocate Respondent by : Shri V. Parithivel, JCIT Date of Hearing 18/12/2023 Date of Pronouncement 28/02/2024 O R D E R

PER Ms. MADHUMITA ROY - JM:

1.

This bunch of three appeals filed at the instance of the assessee are directed against the order dated 20.09.2023, 21.09.2023 & 19.09.2023, respectively; passed by the National Faceless Appeal Centre (NFAC), Delhi, arising out of the order dated 26.12.2017 (in A.Ys. 2011-12 & 2015-16) & 02.12.2019 (in A.Y. 2017-18) passed by the ACIT, Circle-2(2)(1), Bangalore, under Section 147 / 143(3) of the Act for Assessment Year 2011- 12, 2015-16 & 2017-18 respectively.

to 829/Bang/2023 (NTI Housing Co-operative Society vs.ACIT) A.Ys.– 2011-12, 2015-16 & 2017-18 - 2 –

2.

Since all these appeals are relating to identical issues that too in respect of the same appellant, these are heard analogously and are being disposed of by this common order for the sake of convenience.

ITA No. 827/Ahd/2023 for A.Y. 2011-12

3.

The appellant has challenged the reopening of assessment under Section 148 of the Act on the ground that the same is beyond the period of 4 years on already completed assessment. Neither there was any allegation of failure on the part of the appellant to disclose fully and truly all the material facts for its assessment while recording reasons for reopening of assessment as of the basic conditions or that there is any new or fresh materials available for reopening of an already concluded assessment to be observed. In that view of the matter, the entire proceeding is invalid and void-ab-initio and liable to be quashed as the crux of the case made out by the appellant before us on the maintainability of the assessment.

"The society has claimed deduction of Rs.30,74,320/- under section 80P(2)(d) being interest earned from deposits made with Karnataka State Cooperative Apex Bank Ltd. As per the provisions of section 80P(2)(d) of the I.T.Act the society is not entitled for deduction and relevant clause to section 80P(2)(d) is reproduced as under; "in respect of any income by way of Interest or dividends derived from the Co-operative Society from the investments with any other Co- operative Society, the whole of such income" Further, the decision of the Hon'ble Supreme Court in the case of Totagar's Co-operative Sales Society Ltd. Vs ITO (322 ITR 283 (SC)) is also applicable to the facts of the case. In view of the above facts and circumstances there is an escapement of income within the meaning and purview of section 147 of the 1.T.Act, 1961. Therefore, I have reasons to believe that the income of Rs.30,74,320/- is chargeable to tax has escaped assessment within the meaning of section 147 of the income Tax Act, 1961 for the A.Y. 2011-12". to 829/Bang/2023 (NTI Housing Co-operative Society vs.ACIT) A.Ys.– 2011-12, 2015-16 & 2017-18 - 5 – However, bare perusal of the reason recorded for reopening of assessment under Section 148 of the Act by the ITO, Ward- 6(3)(2), Bangalore does not suggest of recording any such allegation of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment which is sine qua non to justify the initiation of proceeding under Section 148 of the Act in the case of the completed assessment as in the case in hand. We have also considered this particular fact of notice issued by the Ld. AO under Section 154 of the Act proposing rectification of the original assessment on the plea that deduction claimed under Section 80P(2)(d) of the Act amounting to Rs.30,74,320/- restricted to Rs.6,97,671/- was wrongly allowed as the assessee is not found to be eligible for deduction under the said Section and the further fact that the said proceeding was ultimately finalized by passing no order making any addition / alteration in the original assessment. In fact, the submission made by the assessee against such notice issued by the ITO under Section 154 of the Act was ultimately accepted and then only the Ld. AO found it fit and proper not to alter the addition made in the original assessment.

“9. We have perused the submissions advanced by both the sides in the light of the records placed. When we look at the decision of Hon’ble Supreme Court in case of Totgars Co-operative Sale Society's case reported in (2010) 188 Taxman 282, relied by the Ld.DR. Hon’ble Supreme Court was dealing with a case where the assessee therein, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such amount retained by the assessee therein was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. On these facts Hon’ble Supreme Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Hon’ble Supreme Court, also clarified that, they are confining the said judgment to the facts of that case. 9.1 In the instant case, the amount which was invested in banks to earn interest was not any amount due to its members. Further the claim of the assessee in u/s 80P(2)(d) was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to its members, as there were no takers. Therefore they had to 829/Bang/2023 (NTI Housing Co-operative Society vs.ACIT) A.Ys.– 2011-12, 2015-16 & 2017-18 - 8 – deposited the money in a co-operative bank again which interest/dividend was earned. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State Co-operative Bank Ltd. [2011] 336 ITR 516/200 Taxman 220/12 taxmann.com 66. 9.2 Therefore, reliance was placed by the Ld.DR on the decision of Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO reported in (2010) 188 Taxman 282 is distinguishable on facts. The adjudication by the Hon’ble Supreme Court in case of Totgars Co-operative Sale Society Ltd. vs. ITO(supra) was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec.80P(2)(d) on the interest income on the investments/deposits parked with a cooperative bank. 9.3 At this juncture, we refer to subsequent decision of Hon'ble Karnataka High Court in the case of PCIT Vs. Totagars cooperative Sale Society reported in (2017) 395 ITR 611, wherein Hon’ble Court held that, a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). At the same time, we find, that the Hon'ble Karnataka High Court in the case of PCIT & Anr. vs. Totagars Cooperative Sale Society reported in (2017) 392 ITR 74 and Hon’ble Gujarat High Court in the case of State Bank Of India Vs. CIT reported in (2016) 389 ITR 578, held, that the interest income earned by a co-operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 9.3 At this juncture, we respectfully following the view taken by the Hon'ble Karnataka High Court in the case of PCIT & Anr. Vs. Totagars Cooperative Sale Society reported in (2017) 392 ITR 74 and Hon’ble Gujarat High Court in the case of State Bank Of India Vs. CIT reported in (2016) 389 ITR 578, hold that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 9.4 It is directed that the interest earned by the assessee from commercial banks may be considered under the head ‘income from other sources’ and relief may be granted as available to the assessee u/s 57 of the Act in accordance with law. Accordingly ground No.2 and 3 raised by the asseseee stands partly allowed for statistical purposes.”