THE STATE TRANSPORT EMPLOYEES CO OPERATIVE CREDIT AND THRIFT SOCIETY,MEHSANA vs. DCIT, CIRCLE, GANDHINAGAR

The captioned appeal has been filed at the instance of the Assessee against the order dated 25/06/2024 passed by the Learned Commissioner of Income Tax (Appeals), Gandhinagar, arising in the matter of assessment order passed under s. 143 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18.

The assessee has raised the following grounds of appeal:

The assessee is a co-operative credit society engaged in providing credit facilities to its members. The assessee e-filed return of income declaring total income of Rs. Nil, after claiming deduction of Rs.34,32,392/- u/s.80P of the Income Tax Act 1961. The case was selected for scrutiny through CASS and subsequent notices u/s.143(2) and 143(1) of the Act, were issued and served upon the assessee along with the questionnaire. In response, the assessee filed the submission. The Assessing Officer observed that during the assessment proceedings the assessee claimed deduction u/s.80P of the Act, totalling to Rs.34,33,392/- which comprises of deduction

Being aggrieved by the assessment order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A), dismissed the appeal of the assessee.

The Ld.AR submitted that as regard to ground no.1 the interest received from the Co-operative Bank in respect of deduction claimed u/s.80P(2)(d) of the Act is derived from the investment with other Co- operative society/Co-operative bank and the same should be disallowed in the light of decision of Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. V/s ACIT 421 ITR 134. The Ld.AR further submitted that the interest received by the assessee is from Mehsana District Central Co-operative Bank Limited which is registered under Co-operative Society Act and its member are allowed u/s.80P(2)(d) of the Act.

The Ld.DR relied upon the assessment order and the order of the Ld.CIT(A).

We have heard both the parties and perused the material available on record. It is pertinent to note that there is no dispute with the interest of Rs.4,57,961/- was received by the assessee from Co-operative bank which is registered under Co-operative Societies Act. In the light of the decision of the Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. (Supra) the interest received from Co-operative bank are allowed u/s.80P(2)(d) of the Act. Thus, the ground no.1 is allowed.

As regard to ground no.2 relating to disallowance of deduction of Rs.1,73,036/- claimed u/s.80P(2)(a)(i) of the Act, in respect of interest received from the Nationalized Bank i.e State Bank of India. The assessee has rightly claimed the interest received from the SBI as per the contention of the Ld.AR.

The Ld.DR submitted that the interest received from Nationalized Bank are not allowable as per the decision of Hon’ble Gujarat High Court in the case of SBI vs CIT reported in (2016) 380 ITR 578(Guj.).

We have heard the both the parties and perused the material available on record. It is pertinent to note that the interest received from SBI which is a Nationalized Bank is not allowable as per the section 80(P) of the Act but at the same time the assessee has incurred certain expenditure earned. The said proportionate expenditure should be allowed and needs to be verified therefore the issue is set-aside to the file of the AO for proper adjudication and verification of the component of the proportionate expenditure by receiving this interest income. Needless to say, that the assessee be given an 5 opportunity of hearing by following the principle of natural justice. Hence, the ground no.2 is partly allowed for statistical purposes.

As regard to ground no.3 the same is without prejudice and has been taken into account while deciding the ground no.2.

As regard to ground no.4 the Ld.AR submitted the Ld.CIT(A) erred in non-granting deduction u/s.80P(2)(c) of the Act, of Rs.50,000/- in as much as the assessee is co-operative society and entitled to such basic deduction. This, deduction is a statutory entitlement for Co-operative societies and denial to the contrary provision of the Act.

The Ld.DR relied upon the assessment order and the order of the Ld.CIT(A).

We have heard both the parties and perused the material available on record. It is pertinent to note that as per the section 80(P)(2)(c) of the Act, basic deduction of Rs.50,000/- is allowable to the co-operative societies and therefore the same needs to be allowed. Thus, the ground no.4 is allowed.

In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the Open Court on 05th December, 2024 at Ahmedabad.