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Before: SHRI MAHAVIR PRASAD & SHRI AMARJIT SINGH
आदेश / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER :
This is an appeal by the department against the order of the Commissioner of Income Tax(Appeals)-10, Ahmedabad, dated 24/06/2016 for the Assessment Year (AY) 2010-11, on the following Ground: “That the ld. CIT(A) has erred in law and on fact in deleting the addition of Rs.43,24,490/- made by the AO on account of disallowance of claim of deduction u/s.80P(2)(a)(i) of the I.T. Act, 1961.”
ITA No.2184/Ahd/2016 ITO vs. State Bank of India Asst.Year –2010-11 - 2 - 2. The relevant facts as culled out from the materials on record are as under:- In this case, the assessee filed return of income for A.Y.2010-11 on 25/09/2010 declaring total income at Rs.NIL. The same was processed u/s.143(1) of the I.T. Act. The case was selected for scrutiny under CASS and assessment was completed u/s.143(3) on 05/11/2012 determining total income at Rs.1,09,632/-.
2.2 After considering the deduction u/s.80P(2)(a) of Rs.42,88,800/-. Subsequently it was noticed by the learned CIT, Ahmedabad-I, Ahmedabad that the assessee has claimed incorrect deduction u/s.80P(2)(a)(i) to the extent of Rs.42,14,854/- on the interest income received from SBI on fixed deposits made by the assessee, cooperative society. Therefore, the learned CIT, Ahmedabad-I, Ahmedabad has called for and examined the record of assessment proceedings for the assessment year 2010-11 and passed the order u/s.263 of the I.T. Act, on 28/11/2013 after giving opportunity to the assessee. In the said order the Ld. CIT, Ahmedabad - I, Ahmedabad held that the assessment order passed on 05/11/2012 was erroneous in so far it was prejudicial to the interest of revenue and had cancelled the assessment with a direction to make fresh assessment and determine the correct income considering the above facts, the deduction u/s.80P(2)(a)(i) is not allowable because said deduction can be allowed only to the interest income received from member of co-operative society. While passing order u/s.263 of the I.T.
ITA No.2184/Ahd/2016 ITO vs. State Bank of India Asst.Year –2010-11 - 3 - Act, the Learned CIT, Ahmedabad-1, Ahmedabad was observed following. “(ii) The assessee had earned interest income of Rs.42,14,854/- from SBI. The assessee had claimed this interest income from SBI as deductible u/s.80P of the Act. As per the provisions of section 80P(2)(d). any income by way of interest/dividend derived by a co- operative society from its investment with any other co-operative society is allowable as a deduction. In this case, the assessee had derived interest income of Rs.42.14 lacs from SBI which is not a co-operative society. Hence, the assessee was not eligible to claimed deduction u/s.80P on interest of Rs.42.14 lacs received from SBI.
(iii) As per the provisions of section 80P(2)(a)(i), when a co-operative society is engaged in carrying on the business of banking or providing credit facilities to its members, the whole of the amount of profit of such business is deductible u/s.80P. The assessee cannot treat any interest income as business income at will. Moreover, it is clearly mentioned in section 80P(1) that deduction under this section will be in accordance with and subject to the provisions of the entire section. Accordingly, the sums, specified u/s.80P(2)(a) shall be deducted in accordance with the provisions of section 80P(2)(b)/(c)/(d)/(e) and (f). As per section 80P(2)(d) when a co-operative society earns an income by way of interest from its investment with another co-operative society, only then the whole of such interest shall be deductible u/s SOP.
(iv) In this case, the assessee, which is engaged in providing credit facilities to its members, has earned two kinds of interest income namely, interest income from loans given to members and interest income from fixed deposits made with SBI. The interest income received from loans given to members will be deductible u/s.80P(2)(a)(i) as it derived from providing credit facilities to members. But the interest income from investment will be deductible subject to the fulfillment of the provisions of section 80P(2)(d). As per section 80P(2)(d), such interest is deductible only if it is derived from investment with another co-operative society. Since SBI is not a co-operative society, the interest derived from SBI will not be deductible u/s.80P as the provisions of section 80P(2)(d) are not satisfied."
ITA No.2184/Ahd/2016 ITO vs. State Bank of India Asst.Year –2010-11 - 4 - 2.3 Finally addition of Rs.42,14,854/- was made against the assessee and also penalty proceeding were initiated u/s.271(c) of the I.T. Act.
Therefore, assessee preferred appeal before the Hon’ble ITAT vide ITA No.347/Ahd/2014 for Asst. Year 2010-11, in this case, Hon’ble ITAT Bench held as under: "A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section SOP of the Act. [Para 8] 10. In the instant case, the amount which was invested in to earn interest was not an amount due to any members. It 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 the members, as there were no takers, Therefore they had deposited the money in a bank so as to earn interest. 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. (Para 10] In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction on the aforesaid amount is unsustainable in law. [Para 10]" 2.3 Nothing contrary was brought to our knowledge on behalf of the Revenue. In the present case, it is undisputed that the amount in question, which was invested in SBI to earn interest, was not an amount
ITA No.2184/Ahd/2016 ITO vs. State Bank of India Asst.Year –2010-11 - 5 - due to any members. It was not the liability. It was also not shown as liability in their account. This amount, which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, the assessee had deposited the money in SBI so as to earn interest. The said interest income was attributable to carrying on the business of banking and therefore it was liable to be deducted in terms of Section 80P(1) of the Act.
2.4 In view of above legal discussion, we are not inclined to concur with the findings of the CIT. Therefore, respectfully following the decision of Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd (supra), we set aside order of the CIT and allow this appeal of the assessee.
In the result, the appeal filed by the assessee is allowed.”
On the basis of the same learned CIT(A) passed an order as under: Aggrieved by this order, the appellant filed an appeal in the Hon'ble ITAT Ahmedabad; Hon'ble ITAT had decided the issue in favour of the appellant and set aside the order of the CIT. The relevant portion of this order is reproduced as under:
2.4 ln view of above legal discussion, we are nor inclined to concur with the findings of the CIT. Therefore, respectfully following the decision of Hon'ble Jarnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd (supra), we set aside the order of the CIT and allow this appeal of the assessee.
Since the order of the CIT passed u/s.263 has been set aside by the Hon'ble ITAT, It was argued by the authorized representative of the appellant that the proceedings in this case has become infructuous.
The contention of the appellant were perused. Since the Hon'ble ITAT has set aside the order of the CIT passed u/s.263 of the Act, the order passed by the CIT u/s.263 of the Act is no more valid. Therefore, the order passed by the AO in consequence to this order and to give effect to this order becomes infructuous. Therefore, the appeal filed by the assessee becomes infructuous and disposed off accordingly.
ITA No.2184/Ahd/2016 ITO vs. State Bank of India Asst.Year –2010-11 - 6 -
For statistical purpose, this appeal is treated as allowed.”
We have further noticed that the judicial pronouncement of Hon’ble Gujarat High Court in the case of State Bank of India vs. Commissioner of Income Tax, 389 ITR 578 was delivered on 25th April 2016, where the Co-ordinate Bench of the ITAT vide ITA No.347/Ahd/2014 on 31/03/2016 had set aside the order u/s.263 passed by the ld. CIT-Ahmedabad on the basis of which the learned CIT(A) has held that the order passed by the AO had become infructuous.
In view of the above facts and circumstances, we considered that the revenue is at liberty to take any remedial course in this case.
In the result, appeal filed by the department is dismissed. This Order pronounced in Open Court on 04/10/2017
Sd/- Sd/- vejthr flag vejthr flag vejthr flag महावीर �साद vejthr flag (लेखा सद�य) (�या�यक सद�य) ( MAHAVIR PRASAD ) ( AMARJIT SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 04/10/2017 Priti Yadav, Sr.PS
ITA No.2184/Ahd/2016 ITO vs. State Bank of India Asst.Year –2010-11 - 7 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-10, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 22/09/2017 (dictation-pad 2 pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …26/09/2017 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………