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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI INTURI RAMA RAO & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 08.12.2023 passed by Ld CIT(A)/NFAC for the assessment year 2018-19.
The appellant raised the following grounds of appeal :- “1. The learned CIT(A), National Faceless Appeal Centre (NFAC); erred in law and on facts in passing an appellate order without granting an effective appropriate opportunity for hearing, thus violating the principle of natural justice. Appellant contends that, notices, of hearing sent by CIT(A) never reached to the Appellant considering various communication challenges and peculiar facts that the same were sent on the email id of erstwhile employee/consultant and mofussil area of activity.
2. The learned CIT(A) erred in law and on facts in upholding the disallowance of deduction u/s 80P(2)(a)(i)/80P(2)(d) amounting to Rs.68,24,572/-. The learned CIT(A) ought to have appreciated the fact that the appellant is eligible for claiming such deduction u/s 80P.
3. The learned CIT(A) erred in law and on facts in not appreciating that deduction u/s 80P(2)(a) and 80P(2)(d) has been allowed to appellant since past many years and thereby violating the principle of consistency/res judicata as so held by Apex Court in Radhasoami Satsang vs CIT [1992] 60 Taxman 248 (SC).
4. The learned CIT(A) erred in law and on facts in upholding the disallowance u/s 40A(ia) amounting to Rs.12,11,955/- being 30% of Rs.40,39,850/- w.r.t. rent payment made by the appellant for its branches. The learned CIT(A) ought to have appreciated the fact that the rent payment does not exceed the threshold limit as envisaged in Section 194I of the ITA, 1961.
5. Appellant craves leave to add / amend / modify / delete all / any of the grounds of appeal.”
3. The facts, in brief, are that the appellant is a cooperative society engaged in the business of providing credit facility to its members & accepting deposits from them. The return of income was filed on 30-10-2018 declaring gross total income of Rs.68,24,572/- and after claiming deduction u/s 80P of the IT Act the taxable income was declared as NIL in the return. The case of the appellant was selected for limited scrutiny under CASS and notice u/s 143(2) of the IT Act was issued to the appellant on 22.09.2019. The appellant filed his submission on 16.03.2020 before the Assessing Officer. After considering the said submission filed by the appellant, the Assessing Officer issued notice u/s 142(1) of the IT Act, on 18.03.2021 asking the assessee to furnish details regarding bifurcation of interest earned from members and non- members and also the details of interest earned from investments with co-operative societies and from other banks. The appellant failed to file any reply/submission in respect of the said notice. Accordingly, after due examination of facts and law the Assessing Officer passed order u/s 143(3) wherein the claim of deduction u/s 80P(2) of the IT Act was disallowed and additions were also made u/s 40(a)(ia) of the Act on account of failure to deduct tax at source on rent and audit fee payments.
Being aggrieved, an appeal was filed before LD CIT(A)/NFAC. Notices were issued but the assessee could not appear on the date of hearings due to the fact that the email belongs to the erstwhile employee of the society, who did not inform the society about the notices fixing the dates of hearing. LD CIT(A)/NFAC by an order dated 08-12-2023 dismissed the appeal of the assessee.
Being aggrieved by the decision of LD CIT(A)/NFAC, the appellant is in appeal before us.
LD AR submitted before us that the appellant assessee is a Credit Cooperative Society registered under Maharashtra State Cooperative Societies Act. The society is engaged in the business of accepting deposits & issuing loans to their members. It was further contended that society also made deposits with other cooperative societies & earned interest from such deposits, which is allowable u/s 80P(2)(a)(i) & also u/s 80P(2)(d) of the IT Act. In support of their contention, Ld counsel of the assessee relied on various decisions of coordinate bench of this Tribunal. Regarding disallowance u/s 40(a)(ia) on the ground of non-deduction of TDS on payment of rent & audit fees, it was submitted by the ld. counsel of the assessee that the disallowance if sustained the resultant additional income will also be entitled for deduction u/s 80P(2)(a)(i) of the IT Act being business income of the society. It was therefore prayed before the bench to delete the addition made by the AO & sustained by LD CIT(A)/NFAC. 7. LD DR on the other hand strongly relied on the order passed by LD CIT(A)/NFAC.
We have heard Learned counsels from both the sides & perused the material available on record. We find that the appellant assessee is a cooperative society registered under Maharashtra State Cooperative Societies Act & carrying on the business of providing credit facility to the members & also accepting the deposits from them. During the course of assessment proceedings the assessee could not reply to some of the queries of the AO regarding bifurcation of interest earned from members & non-members & also the details of interest earned from investment with cooperative societies & from other banks, therefore, the AO denied the deduction u/s 80P(2)(a)(i) of the IT Act. Further, disallowance u/s 40(a)(ia) for non-deduction of TDS on Audit fees payment & Rent payment was also made. We find that the definition of member as per Maharashtra State Cooperative Societies Act includes nominal members also & therefore the interest earned from nominal members also covered under business income which qualifies for deduction under section 80P(2)(a)(i) of the IT Act. It is also observed that during the course of its business the assessee society has made deposits with other banks & therefore the interest earned from such deposit also qualifies for deduction u/s 80P(2)(a)(i) of the IT Act being business income. Secondly, even if the disallowance u/s 40(a)(ia) is maintained it will simply increase the business income of the cooperative society which is already deductible u/s 80P(2)(a)(i) of the IT Act. We also find that all the issues are squarely covered in favour of the assessee by various decisions of coordinate bench of this Tribunal. Respectfully following the decisions of the coordinate bench of this Tribunal, specifically passed in the case of Nashik Road Nagri Sahkari Patsanstha Limited order dated 27-12-2021, we are of the considered opinion that the appellant assessee is entitled for deduction u/s 80P(2)(a)(i) of the IT Act. Therefore, we set-a-side the order passed by LD CIT(A)/NFAC & direct the assessing authority to allow deduction u/s 80P(2)(a)(i) of the IT Act in respect of interest income earned from members & nominal members & further directs to allow deduction u/s 80P(2)(a)(i) of the IT Act in respect of interest earned from investments/deposit made during the course of business in other cooperative society/banks. Without going into the merits of the disallowances made by the AO, it would suffice to hold that the disallowances, if any, made, shall increase the business profits of the assessee cooperative society.