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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SMT. ASHA VIJAYARAGHAVAN & SHRI ABRAHAM P. GEORGE
Per Asha Vijayaraghavan, Judicial Member
This appeal by the Revenue is against the order dated 10.02.2015 of the CIT(Appeals)-2, Bangalore relating to assessment year 2010-11.
The assessee, a co-operative society registered under the Karnataka State Co-operative Act, renders financial services to its members. It filed its return of income for the AY 2010-11 on 12/10/2010, declaring income of Rs.2,11,114/- after claiming deduction u/s 80P(2)(a)(i) of the Act in respect of a sum of Rs.52,03,447/- earned by it from its money lending to its members. After the return was processed u/s 143(1) of the Act, it was selected for scrutiny. The AO made an addition of• Rs.1,22,783/- to the income from house property since the appellant had computed income of Rs.1,69,910/- out of Rs.3,23,447/- declared from this source as against Rs.4,98,851/- shown in the profit and loss account. In completing the assessment u/s 143(3) of the Act, the total income of the appellant was determined at Rs.55,37,344/- denying the appellant the benefit of deduction claimed by it.
Aggrieved, the assessee filed appeal before the CIT(Appeals) only against the denial of the benefit of deduction u/s 80P(2)(a)(i) in respect of the income of Rs.52,03,447/-.
It was submitted before the CIT(Appeals) that the assessee is a co- operative society extending credit facilities to its members and it was not a co-operative bank as contemplated under the Banking Regulation Act. It relied upon the decision of this Tribunal in its own case for the A.Y. 2009- 10 in dated 17.3.2014 wherein the issue was held in favour of the assessee and the appeal by the department was dismissed.
The CIT(Appeals) noted that various Benches of the ITAT have held similar claim of deduction u/s. 80P(2)(a)(i) of the Act in favour of the assessees in the following cases:-
“i) Sri Laxmi Credit Souharda Sahakari Ltd., Belgaum v. ITO, Nipani, ITA.No.200/PNJ/2013 for AY 2009-10 dated 4/7/2014 reported in 2014-TIOL-677-ITAT-PANAJI ii) ITO, Ward-9(3), Bangalore v. Yeshwanthpur Credit Cooperative Society Ltd.., Bangalore for AY 2007-08 of the Hon’ble ITAT, Bangalore Bench ‘A’ dated 11/4/2012. iii) DCIT, Central Circle, Panaji v. M/S Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd., & M/S Dwaraka Souharda Credit Sahakari Ltd., Karwar in ITA.No.O1 to 03/PNJ/2012 dated 30/3/2012. [ITAT, Panaji Bench, Panaji] iv) ITO, Ward-1(4) v. Jankalyan Nagri Sahakari Pat Sanstha Ltd. [(2012) 24 taxmann.com 127 (Pune-Trib) dated 26/6/2012].
The CIT(Appeals) observed as follows:-
“3.4 The Hon’ble ITAT, Bangalore and Panaji referred to above have held that the income earned by appellant from its act of lending money out of deposits received from the public or its members shall be eligible for exemption under section 80P(2)(a)(i) of the Act. The findings given by me regarding the facts and the view taken by me on the basis of such facts in regard to the non-assessability of income earned by M/S Balaji House Building Co-operative Society Ltd. from loans given to its members at para 3.4 and 3.5 of my order respectively in the said case for the assessment year 2009-10 vide order ITA.No.794/W- 4(2)/CIT(A)-II/11-12 dated 24/9/2012 has been upheld by the Hon’ble ITAT, Bangalore Bench ‘A’ in its order dated 7/3/2014 wherein the Hon’ble ITAT has quoted with approval my observations at para 3.5 in my aforesaid order. The relevant portions from the order of the Hon’ble ITAT are reproduced below:-
“7. We have heard both the parties and perused the orders of the revenue. We have also gone through the decisions cited by both the parties before us. On the facts of the present case, it is noticed that the CIT(A) analyzed the Income & Expenditure statements and given an undisputed finding that the assessee has earned a gross revenue of Rs.15,15,611/- from the credit facilities out of the activities of extending credit facilities to the members of the Society. Para — 3.5 is relevant in this regard. The said para is reproduced as under for ready reference: “3.5 The enclosed profit and loss account with the written submissions shows that, out of the total gross revenue declared in the Income Expenditure Account, Rs. 15,15,611/- is entirely interest on loans sanctioned plus Rs. 1,O7,OOO/- loan application processing fees. This activity clearly falls under the ambit of section 80P(2)(a)(i) of the Act and, as stipulated by the sub-section, the income derived by co-operative society engaged in carrying on the business of providing credit Facilities to its members is exempt and, therefore, this income earned by the appellant-society is allowable and exempt u/s 8OP of the I.T. Act.” 7.1 From the above, it is evident that the assessee earned the gross receipts only from the members out of the activities of providing credit facilities. None of the receipts ore earned from the members belonging to the other Co-Op.Society. On these facts, we are of the opinion, that the decisions relied upon by the learned DR are distinguishable. Therefore, in our opinion, the conclusions given by the CIT(A) in para 3.4 to 3.5 are fair and reasonably (sic) therefore, the order of the CIT(A) does not call for any interference.”
The ld. CIT(Appeals) further held as follows:-
“3.5 The facts mutatis mutandis with respect to the amount of income in the appeal under consideration are similar. It is significant to note here that the Hon’ble ITAT has distinguished the decision of the Hon’ble High Court of Madras in the case of Madras Autorickshaw Driver’s Co.Op. Society Ltd. [143 ITR 98) relied on by the Departmental Representative since, in that case, the fact was that the said Society was purchasing autorickshaws from manufacturers/dealers and reselling them to its members on terms and conditions relating to hire purchase. However, in the appellant’s case, its activities are confined to giving loans to its members and earning income therefrom. Hence, for the very same reasons as have been given in my appellate order for the assessment year 2009-10 referred to above, which has been approved by the Hon’ble ITAT, Bangalore Bench ‘A’ in its order referred to above, I hold that the appellant is entitled to claim deduction u/s 80P(2)(a)(i) of the Act in respect of the income of Rs.52,03,447/- earned by it and allow the claim accordingly. However, in view of the discrepancies in the disallowance u/s 80P(2)(a)(i) pointed out at para 1 of this order, the AO is directed to verify the correctness of the amount before giving effect to this order.”
The department is in appeal against the order of the CIT(Appeals).
The ld. DR relied on the order of the Assessing Officer. The ld. counsel for the assessee reiterated the submissions made before the CIT(Appeals) and relied upon the order of the CIT(Appeals).
We have heard both the parties. We find that the issue is covered by the decision of the coordinate Bench of the Tribunal in assessee’s own case for the AY 2009-10 in dated 17.3.2014, wherein the departmental appeal filed against the order of CIT(Appeals) allowing similar claim of assessee was dismissed. Following the aforesaid order of the Tribunal, we find no infirmity in the order of the CIT(Appeals).
However, there is some discrepancy as regards the amount of deduction u/s. 80P(2)(a)(i) viz., though at para 2 in page 3 of the assessment order the AO has mentioned that the disallowance made in this regard is Rs.52,44,651/-, but in the computation of income the disallowance made is Rs.52,03,447/-: This corresponds with the AO’s observation at page 2 of the assessment order that the claim made by the appellant u/s 80P(2)(a)(1) was Rs.52,03,447/-. In this regard, the CIT(Appeals) had directed the AO to verify the correctness of the amount before allowing the claim of deduction u/s. 80P(2)(a)(i) of the Act. Accordingly, we set aside the issue to the file of the Assessing Officer for the limited purpose of verification of the correctness of the amount of deduction u/s. 80P(2)(a)(i) of the Act to be allowed to the assessee.
In the result, the appeal by the Revenue is allowed for statistical purposes.
Pronounced in the open court on this 28th day of October, 2015.