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Income Tax Appellate Tribunal, A BENCH, CHENNAI
Before: SHRI MAHAVIR SINGH, HONBLE & SHRI S.R.RAGHUNATHA, HONBLE
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 01.11.2023 and pertains to assessment year 2020-21.
The assessee has raised the following grounds of appeal:
1. The order passed by the Learned CIT (A), is opposed to law and contrary to the facts and circumstances of the case and is therefore unsustainable.
:-2-: ITA. No: 1439/Chny/2024 2. Both the learned assessing officer and the learned CIT(A) erred in passing the order without appreciating the status of the appellant and its nature of business.
The Ld. Assessing officer and the Learned CIT(A) erred in denying the deduction u/s 80P of the Act.
The Ld. Assessing officer also failed to· appreciate that the purpose and object of Section BOP is to encourage and incentivize the Cooperative movement by providing special deductions under the Income Tax Act.
The Ld. Assessing officer failed to appreciate that the Co- operative bank also a co-operative society. The appellant society is eligible to claim deduction u/s 80P(2)(d) of the act and also appellant eligible to claim under section 80P(2)(a)(i) of the act.
The Ld. Assessing officer erred in relying on the case law where the facts are different from the appellant's case.
The appellant pleads for an opportunity to explain its case before your good self.
The Appellant seeks your leave to add, alter, amend or delete any grounds urged, at the time of hearing.”
At the outset, we note that there is delay of ‘137’ days in filing the appeal. Having gone through the contents of the application filed for condonation of delay and after hearing both the parties, we are satisfied that there was sufficient cause for condoning the delay and we condone the delay and proceed to adjudicate the appeals of the assessees.
Brief facts of the case are that the assessee is a co-operative society, formed by the employees of Ashok Leyland Ltd, with it
:-3-: ITA. No: 1439/Chny/2024 activities to provide credit facilities to its members, apart from earing dividend and interest income on investment in the shares of Chennai Central Cooperative bank and Tamil Nadu State apex co- operative bank Ltd. The assessee filed its return of income for the A.Y. 2020-21 on 08/12/2020 by declaring Rs.NIL total income after claiming the deduction U/s.80P of the Act. The case was selected for scrutiny under CASS and concluded the assessment by the AO and passed an order U/s.143(3) of the Act on 20/09/2022 by disallowing the interest earned on deposit made at cooperative banks claimed U/s.80P(2)(d) to the extent of Rs.1,54,35,681/- stating that the deduction would not be admissible, since the same is assessable under the head ‘Income from other sources” by concluding as under: Conclusion : In view of the above discussion interest income of Rs.1,49,066 from The Tamil Nadu State Apex Co-op Bank Ltd. and Rs. 1,52,86,615 from The Chennai Central Cooperative Bank Ltd which amounts to Rs.1,54,35,681/- is added as income from other sources of I.T. Act (Addition: 1,54,35,681/-) Penalty u/s. 270A is initiated for under reporting of income is being initiated separately 6. Final computation of taxable income: Sl.No Description Amount (in INR) 1 Income as per Return of income NIL filed 2 Income as computed u/s. 143(1)(a) NIL 3 Variation in respect of addition u/s. 1,54,35,681 56 under the head income from other sources 4 Total income/loss determined as 1,54,35,681 per the above proposal
:-4-: ITA. No: 1439/Chny/2024 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A)-NFAC. The action of the AO was confirmed by the Ld.CIT(A)-NFAC by passing an order dated 01/11/2023 by holding as under:
“5. Findings: The Grounds of appeal
, the submissions of the assessee, the facts and circumstances of the case have been carefully considered. The facts of the case are that the appellant is a credit cooperative Society which received interest income Rs.1,54,35,681/- from investments made in Cooperative banks. Assessee claimed deduction u/s 80P in respect of this amount. In assessment, AO denied deduction claimed. Aggrieved, assessee is in appeal. The Hon'ble Karnataka High Court has decided in the case of Pr. CIT vs Totagars Cooperative Sale Society (2017) 395 ITR 611 (Karnataka) that a Cooperative Society would not be entitled to claim of deduction u/s 80P in respect of interest income from deposits made in cooperative banks. Respectfully following the Hon'ble Karnataka High Court in the aforesaid case, the grounds of appeal are hereby dismissed.
6. As a result, the appeal is dismissed.”
Aggrieved by the order of the Ld.CIT(A)-NFAC, the assessee preferred an appeal before us.
The ld.AR of the assessee assailing the action of the Ld.CIT(A), stated that the impugned order has been passed by not following the judgments of Hon’ble supreme Court, High courts and the ITAT. The action of AO and that of Ld.CIT(A) is erroneous, since the :-5-: ITA. No: 1439/Chny/2024 interest income earned on deposits made at of Chennai Central Cooperative bank and Tamil Nadu State apex co-operative bank Ltd is allowable deduction to assessee both under section u/s.80P(2)(a)(i) as well as u/s.80P(2)(d).
Further, the ld. AR stated that the Chennai Central Cooperative bank was registered as a cooperative society on 10.07.1930 and the books of accounts of the bank is audited by the Auditors of the Cooperative Audit Department, Government of Tamilnadu. Therefore, it is clearly a cooperative society and the interest earned from the deposits kept in that society is eligible for deduction u/s.80P(2)(d) of the Act. In light of the above facts and details, the ld. AR pleaded for allowing the appeal of the assessee by setting aside the impugned order.
Per contra, the ld.DR stated that the interest income earned by the society is to be assessed under the head ‘Income from other sources’ and hence not eligible for deduction u/s.80P(2)(d) of the Act. Further, deposits are made in cooperative banks, and hence the interest earned by the society is not eligible to claim deduction u/s.80P(2)(d) of the Act. Hence, prayed for confirming the impugned order of the Ld.CIT(A).
:-6-: ITA. No: 1439/Chny/2024 9. We have heard the rival contention and perused the material on record and gone through the orders of the authorities. We noted that the assessee is credit co-operative society and providing credit facilities to its members. The members are employees of Ashok Leyland limited. Apart from regular income of the society, the excess funds have been invested in the Chennai Central Cooperative bank and Tamil Nadu State apex cooperative bank Ltd, has earned interest during the Assessment year. We noted that these cooperative banks have been registered under Tamilnadu State Co- operative Societies Act, 1983. Therefore, the assessee is eligible for deduction of interest earned u/s.80P(2)(d) of the Act, once these cooperative banks are registered under Tamilnadu State Co- operative Societies Act, 1983, in view of the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative bank ltd., & Ors. Vs. CIT, 123 Taxmann.com 161 (SC). Similar view has been taken by the Tribunal in the case of Tamilnadu co-operative State Agriculture and Rural Development Bank Ltd in to 33/CHNY/2021 dated 29/04/2022 following the decision of Hon’ble Supreme Court in the case of Mavilayi Service Co-operative bank ltd., & Ors. Vs. CIT (supra) and the Hon’ble Madras High Court in the case of S-1308, Ammapet Primary Agricultural Co-operative bank ltd., in TCA Nos.882 & 891 of 2018.
:-7-: ITA. No: 1439/Chny/2024
In the facts and circumstances of the case and respectfully following the decisions of the Hon’ble courts (supra), we allow the claim of interest earned by the assessee on investment made in the above said cooperative banks as eligible deduction U/s.80P(2)(d) of the Act and set aside the impugned order passed by the Ld.CIT(A). Accordingly, the appeal of the assessee is allowed.