GOVERNMENT EMPLYEES CO. OP. CREDIT SOCIETY LTD.,BHAVNAGAR vs. THE ACIT, CIRCLE-1, BHAVNAGAR

This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax, Appeal, Addl/JCIT(A), Thane, in proceeding u/s. 143(3) vide order dated 22/07/2024 passed for the assessment year 2017-18.

The grounds of appeal are as under:- “1. On the facts and in the circumstances of the case as well in law ld. Commissioner of Income Tax, Appeal

The assessee company was engaged in the business of granting various credit facilities to its members and is a registered co-operative society. The assessee society filed return of income declaring total income at Rs. Nil on 05-03-2018. Thereafter, the case was selected scrutiny under CASS. First statutory notice u/s. 143(2) of the Act was issued on 17-08- 2018. Notice u/s. 142(1) of the Act along with detailed questionnaire was also issued on 04-12-2019 thereby calling upon the assessee society related to deduction claimed under Chapter VIA. The assessee submitted the submissions and reply thereby stating that the deduction claimed u/s. 80P of the Act amounting to Rs. 58,50,778/- is in respect of the business conducted by the assessee relating to granting of various credit faculties to its members and earned interest on the same. The Assessing Officer observed that the assessee earned interest income of Rs. 7,87,374/- from fixed deposits with Bhavnagar District Co-operative Bank. The Assessing Officer observed since the said co-operative bank is not a member of the co-operative society, the same was added to the income of the assessee and thus made the addition.

The ld. A.R. submitted that the CIT(A) was not justified in upholding the addition of the disallowance of the claim of deduction u/s. 80P(2)(a)(i) and 80P(2)(d) of the Act. The ld. A.R. submitted that the deposit in the Bhavnagar District Co-operative Bank was with the co-operative society only as it is District Co-operative Bank is registered under Co-operative Societies Act. the Ld. A.R. relied upon the decision of Hon’ble Gujarat High Court in case of Gujarat District Co-operative Mill Producers Union vs. ACIT (SCA No. 5931 of 2022) as well as Kutlary Kariyana Merchant Sahakari Mandali Ltd. vs. ACIT (2022) 140 taxmann.com 602 (Guj) which was subsequently amended by MA order dated 26-04-2024. The ld. D.R. relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that in assessee’s own case for assessment year 2020-21, the said disallowance was allowed by the Tribunal being order dated 18-07-2024. Thus, the facts of the present assessment year is also identical to the facts of the earlier decision in assessee’s own case. No distinguishable facts were pointed out by the ld. D.R. Further the decision of Hon’ble Gujarat High Court in case of Kutlary Kariyana Merchant Sahakari Mandali Ltd. (amended order dated 26-04- 2024), the deduction has to be allowed on the interest income which qualifies u/s. 80P(2)(d) of the Act when the same is derived from investment in the other co-operative societies or co-operative banks as the said banks are also registered under Co-operative Societies Act. Thus, the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.