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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA& SHRI SIDDHARTHA NAUTIYAL
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER& SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & 231/Ahd/2022 (Assessment Years: 2012-13 & 2017-18) Agriculture Development Co. Op. Vs. Income Tax Officer, Credit Society Limited, Patan, Ward-4, Unjha Zapali Pole, Dist: Patan, Income Tax Officer, Siddhpur, Gujarat-384151 Ward-1, Patan [PAN No.AAAAA1-55C] (Appellant) .. (Respondent) Appellant by : Shri H.V. Doshi, A.R. Respondent by: Ms. Saumya Pandey Jain, Sr. D.R. Date of Hearing 13.03.2024 Date of Pronouncement 21.03.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM:
These are appeals have been filed by the Assessee against the orders passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 24.05.2022 passed for the Assessment Years 2012-13 & 2017-18. Since largely common facts and issues for consideration are involved for both the years under consideration both the appeals are being taken up together.
We shall first take up the assessee’s appeal for A.Y. 2012-13
The assessee has raised the following grounds of appeal:- (A.Y. 2012-13) “1. Ld. CIT(A) has erred in law and facts in confirming the addition made by AO by disallowing deduction u/s 80P in respect of interest income received from bank deposits of Rs.42,05,501/- by considering it as income from other sources.
2. Ld. CIT(A) has erred in law and facts in not allowing the ground of the appellant for claim of proportionate expenses of rs.33,35,120/- from interest income of &231/Ahd/2022 Agriculture Development Co. Op. Credit Society Ltd. vs. ITO Asst. Years –2012-13 & 2017-18 - 2 - Rs.42,05,501/- received from nationalized banks and thus further erred by not considering income from other sources to the extent of Rs.8,67,381/- only as per original assessment order dated 30-01-2015.
3. Ld. CIT(A) has erred in law and facts in not considering the ground of the appellant for restricting the disallowance of the claim u/s 80P to the extent of Rs.11,40,970/- by computing proportion of bank interest income to gross interest income.
4. Ld. CIT(A) has erred in law and facts in not allowing the ground of the appellant against the reassessment proceedings initiated on the issue of claim u/s 80P allowed in respect of interest income received from co. op. banks.
5. Ld. CIT(A) has erred in law and facts in not considering the ground of appeal of the appellant to delete the addition made twice in respect of interest income of nationalized bank being already considered and added as per order of CIT(A) dated 12- 6-2015.”
3. The brief facts of the case are that assessee is a cooperative credit society and claimed deduction under Section 80P of the Act amounting to Rs.25,05,975/-. In the original assessment, the Assessing Officer disallowed deduction under Section 80P (by invoking the provisions of Section 80P(4) of the Act). In appeal, Ld. CIT(Appeals) give part relief to the assessee by holding that the provisions of Section 80P(4) of the Act are not applicable to the assessee, since it is not a cooperative bank. So far as the allowability of interest expenses was concerned, the CIT upheld/approved the working of the Assessing Officer of proportionate expenses which were allowed to the assessee against such interest income.
4. Subsequently, the case of the assessee was reopened under Section 147 of the Act. In the reassessment proceedings, the Assessing Officer denied the claim under Section 80P of the act and made addition of Rs.56,74,088/-. In the reassessment order, the Assessing Officer held that the interest income earned by the assessee from nationalized banks is not entitled for deduction under Section 80P of the Act, as such income qualifies as “income from other sources”. Further, the Assessing Officer held that as regards claim of deduction of proportionate expenses under &231/Ahd/2022 Agriculture Development Co. Op. Credit Society Ltd. vs. ITO Asst. Years –2012-13 & 2017-18 - 3 - Section 57 of the Act, the same cannot be allowed for the reason that interest income has been earned by the assessee from deposit of surplus funds with nationalized banks, and as such no expenditure has been incurred by the assessee for earning such interest income.
5. In appeal, Ld. CIT(Appeals) dismissed the appeal of the assessee on the ground that in absence of any direct evidence linking the interest income from nationalized banks and expenses claimed against such interest income, no deduction towards expenses can be allowed to be assessee. While passing the order, Ld. CIT(Appeals) made the following observations:-
“In Ground 4 the appellant raised the contention that the disallowance exceeds the deduction claimed by the appellant. In Ground 5-6 the appellant contested the adoption of gross income without considering the relevant expenditure. It is seen that the appellant claimed the 80P deduction which represents interest income from both cooperative Banks and National Banks. As discussed above the 80P deduction in respect of cooperative banks is allowed and the interest from national banks is to be considered as income from other sources. The AO while determining the income from other sources has not allowed expenditure. It is pertinent to note that the appellant has claimed certain expenses while claiming the 80P deduction under the business head. When the gross interest is considered under the head other sources, the expenses claimed by the appellant are not allowed by the AO. The AO has taken a stand that only gross interest is to be allowed under the head other sources (for interest from National Banks), as there is no evidence for the expenses incurred to earn such income. In the absence of any direct evidence linking the interest income from national banks and the expenses claimed, no deduction can be allowed. Accordingly, the grounds 4 to 6 are not allowed.”
The assessee is an appeal before us against the aforesaid order passed by Ld. CIT(Appeals). Before us, the Counsel for the assessee drew our attention to the original assessment order and pointed out that while framing the assessment, the Assessing Officer held that that interest earned from nationalized banks are not eligible for deduction under Section 80P, however, proportionate expenses were allowed to the assessee from the interest income earned from nationalized banks, and only the net amount of interest of Rs.8,67,381/– was held to be taxable under Section 56 of the Act as “income from other sources”. In appeal, &231/Ahd/2022 Agriculture Development Co. Op. Credit Society Ltd. vs. ITO Asst. Years –2012-13 & 2017-18 - 4 - Ld. CIT(Appeals) held that the Assessing Officer has rightly worked out that the sum of Rs.8,67,381/– which is the net interest earned by the assessee, after allowing for proportionate expenses from interest income, and the same is not eligible for deduction under Section 80P of the Act. Accordingly, the Counsel for the assessee submitted that Ld. CIT(Appeals), in the first appellate order had held that the assessee the Ld. Assessing Officer had correctly worked out the proportionate expenses and only the balance amount was to be taxed under Section 56 of the Act, whereas, in the reassessment proceedings, the Assessing Officer has taxed the entire/gross amount of interest earned from nationalized banks as “income from other sources”, without allowing claim of proportionate expenses incurred for earning such interest income.
Further, the Counsel for the assessee submitted that this issue of disallowance of deduction under Section 80P(2)(a)(i) of the Act was examined by the assessing officer in the original assessment, who had disallowed the claim of deduction, but restricted it to the net income earned from banks and computed the taxable income at Rs.8.67 lakhs, which was confirmed by Ld. CIT (Appeals) and consequently, appeal effect order was passed determining total taxable income of assessee at RS.9.33 lakhs (page 38 of paper book). The learned counsel for the assessee contended that assessee returned the same income to tax, in response to 148 notice, of Rs.9.33 lakhs, except for further claim of deduction of Rs.50,000/- under Section 80P (2)(c) of the Act, thus returning income of Rs.8.83 lakhs to tax (pages is 36–37 of paper book). The counsel for the assessee submitted that in assessment under section 147 of the Act, the assessing officer added the entire interest of Rs.56.74 &231/Ahd/2022 Agriculture Development Co. Op. Credit Society Ltd. vs. ITO Asst. Years –2012-13 & 2017-18 - 5 - lakhs earned from banks to net income so earned and returned by the assessee of Rs.8.83 lakhs, thereby resulting in double taxation.
On going through the facts of the instant case, and the original assessment order and original order passed by Ld. CIT(Appeals), we observe that while holding that the assessee is not eligible for claim of deduction on interest income received from nationalized banks, the Ld. CIT(Appeals) had allowed deduction of proportionate expenses, incurred for earning interest income. However, on going through the original computation of interest expenses allowed to the assessee against such interest income, we observe that there is lack of clarity as to on what basis such large interest expenses were allowed against interest income earned from nationalized banks. Accordingly, in the interest of justice, this matter is restored to the file of Assessing Officer, to verify the correct facts, and to ascertain the correct amount of expenses incurred for earning interest income, and allow proportionate expenses incurred for earning such interest income, in accordance with law.
Accordingly, ground number 5 of the assessee’s appeal is allowed for statistical purposes.
The Ld. Counsel for the assessee submitted before us, that he shall not be pressing for the balance grounds of appeal, and accordingly the same are being dismissed as not pressed.
Assessment year 2017-18 11. The assessee has taken the following grounds of appeal:- &231/Ahd/2022 Agriculture Development Co. Op. Credit Society Ltd. vs. ITO Asst. Years –2012-13 & 2017-18 - 6 - (A.Y. 2017-18) “1. Ld. CIT(A) has erred in law and facts in confirming the addition made by AO by disallowing deduction u/s. 80P in respect of interest income received from bank deposits of Rs.38,15,046/- by considering it as income from other sources.
2. Ld. CIT(A) has erred in law and facts in not allowing the ground of the appellant for claim of proportionate expense of Rs.27,34,595/- from interest income of Rs.38,15,046/- received from nationalized banks and thus further erred by not considering income from other sources to the extent of Rs.10,80,451/- only.
3. Ld. CIT(A) has erred in law and facts in not considering the ground of the appellant for restricting the disallowance of the claim u/s 80P to the extent of Rs.10,71,560/- by computing proportion of bank interest income to gross interest income.
4. Ld. CIT(A) has erred in law and facts in not considering the additional ground for deletion of addition made twice in respect of ATM rent income of Rs.38,500/- being shown as income in return as well as included in addition made in assessment order dated 29-06-2019 in respect of interest income of Rs.69,36,520/-.”
Before us, at the outset, Counsel, for the assessee submitted that he shall not be pressing for Grounds 1, 2, and 4 of the grounds of appeal. Accordingly, Grounds 1, 2 and 4 of the assessee’s appeal are dismissed as not pressed.
13. So far as Ground No. 3 of the appeal is concerned, the case of the assessee is that as per Para 6 in the body of the assessment order, the Assessing Officer has mentioned about entitlement of proportionate expenses incurred for earning such interest, but the Assessing Officer has not allowed deduction of the proportionate expenses in the working made in the assessment order. The Counsel for the assessee submitted that proportionate expenses incurred for earning interest income have to be allowed as per the working mentioned in the assessment order.
In response, the DR submitted that from the facts placed on record, it is not clear on what basis the proportionate interest has been allowed to the assessee, in the working mentioned in the body of assessment order. Therefore, it is a factual aspect, which needs to be ascertained. &231/Ahd/2022 Agriculture Development Co. Op. Credit Society Ltd. vs. ITO Asst. Years –2012-13 & 2017-18 - 7 -
We have heard the rival contentions and perused the material on record. Accordingly, looking into the instant facts, in absence of clarity as to the correct amount of expenses to be allowed to the assessee against interest income earned by the assessee, the matter is being restored to the file of Assessing Officer, to carry out the necessary verification, and allow the claim of the assessee, in accordance with law.
In the result, Ground No. 3 of the assessee’s appeal is allowed for statistical purpose purposes.
In the combined result, the appeal of the assessee is partly allowed for statistical purposes. This Order pronounced in Open Court on 21/03/2024
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 21/03/2024 TANMAY, Sr. PS TRUE COPY 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)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,