BSNL KARMACHARI SAHAKARI PAT SANSTHA MARYADIT ,KOLHAPUR vs. THE INCOME TAX OFFICER, WARD-2(1), KOLHAPUR

आदेश / ORDER

PER DR.MANISH BORAD, ACCOUNTANT MEMBER:

“The following grounds are taken without prejudice to each other –

On facts and in law,

1] The Learned ADDL/JCIT (A) erred in upholding the action of learned AO CPC-Bangalore, of restricting the deduction u/s.80P at Rs.2,20,01,139/- only instead of Rs.2,38,12,727/- and thereby erred in confirming the addition of Rs.18,11,590/- made by the learned CPC- Bangalore.

2] The Learned ADDL/JCIT (A) failed to appreciate that once the Gross Total Income has been assessed at a higher amount, the corresponding deduction u/s 80P should also be allowed at such higher amount i.e. equal to the amount of Gross Total Income so assessed.

3] The Learned ADDL/JCIT (A) erred in not following the directions issued by Hon'ble CBDT vide Circular 37/2016 which states that-

In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. (Para 3 of circular).

4] The Learned ADDL/JCIT (A) erred in not following the judgement of Hon'ble Bangalore Tribunal in case of Sharavathi Pathina Sahakara Sangha Niyamitha vs Income-tax Officer [2022] 144 taxmann.com 170 (Bangalore - Trib.), relied upon by the appellant in its submission.

5] The appellant requests for admission of additional evidences in support of its case.

6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”

3. At the outset, ld. counsel for the assessee referring to the CBDT Circular No.37/2016, dated 02.11.2016 and also placing reliance on the decision of Coordinate Bench, Bangalore in the case of Sharavathi Pathina Sahakara Sangha Niyamitha Vs. ITO (2022) 144 taxmann.com 170 (Bangalore-Trib.) and that of this Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha dated 27.12.2021, stated that the assessee is a Cooperative Society and enjoys the benefit of deduction u/s.80P of the Act and the ld. Assessing Officer (AO) allowed the claim of the assessee u/s.80P of the Act at Rs.2,20,01,139/-. He further submitted that there were certain disallowances which the Tax Auditor has indicated in the Tax Audit report u/s.44AB of the Act amounting to Rs.18,11,590/- and the CPC while processing the return u/s.143(1)(a) of the Act has added back the disallowance to the income but had not given the benefit of deduction u/s.80P of the Act. He submitted that in light of aforesaid CBDT circular and the decisions of Coordinate Benches referred (supra), after adding back the disallowances ‘business income’ of the society would increase and the enhanced business income would be entitled for deduction u/s.80P of the Act.

4. On the other hand, ld. DR submitted that the disallowances referred by the Tax Auditor are in the nature of ‘income from other sources’ and not ‘business income’ and therefore, deduction u/s.80P of the Act is not allowable.

5. I have heard the rival contentions and perused the record placed before me. The disallowance referred by the Tax Auditor in the Tax Audit report has been captured by the computer system of CPC and the same has been added back to the income of assessee but deduction u/s.80P of the Act has not been given on the said disallowance. I observe that the assessee has shown ‘business income’ of the society at Rs.2,20,01,139/- and claimed deduction under Chapter VI u/s.80P of the Act at Rs.2,20,01,139/- and the same has been allowed by CPC. Only the disallowance at Rs.18,11,590/- have been added back to the income but deduction u/s.80P has not been given. I note that the alleged disallowance are part of the profit and loss account and includes the following :

(1) Scholarship and gifts – Rs.8,65,400/- (2) Festival Advance – Rs.13,373/- (3) Funds for Members – Rs.6,00,000/- (4) Delay in PF/ESI u/s.36(1)(va) – Rs.3,32,817/-

From the perusal of section 2(24), I observe that the ‘business income’, i.e. profits and gains are specifically mentioned at 2(24)(i) and the issue before us is relating to sum received from employees towards deposit of PF/ESI as mentioned at section 2(24)(x) which indicates that such amount received by the assessee from its employees is not in the nature of any ‘business income’ and therefore, if such income is added in the hands of assessee it is to be treated as ‘income from other sources’.

where it has been held that if any disallowance made by the assessee u/s.32, section 40(a)(ia), section 40A(3) and section 43B etc., and other specific disallowances which relate to the business activity against which Chapter VIA deduction has been claimed, enhancement of the profits of the eligible business on account of any such disallowance, shall increase the ‘business income’ which inturn are eligible for deduction u/s.80P of the Act.

Order pronounced on this 12th day of November, 2024.

Sd/- (S. S. VISWANETHRA RAVI) (MANISH BORAD) JUDIC L MEMBER ACCOUNTANT MEMBER पुणे / Pune; �दनांक / Dated : 12th November, 2024. Satish