CHHATTISGARH SAHAKARI SAKH SAMITI MARYADIT, BHILAI,DURG vs. INCOME TAX OFFICER, WARD-1(2), BHILAI, DURG

Chhattisgarh Sahkari Sakh Samiti V Income Tax Officer-Ward 1(2) Bhilai Maryadit, Chhattisgarh Bhawan, s Chhattisgarh Sector-1, Bhilai Durg (491001), Chhattisgarh India PAN: AAAAK1188L (अपीलाथ�/Appellant) (��यथ� / Respondent) . . िनधा�रती क� ओर से /Assessee by : Shri M.C. Oswal, Adv. राज�व क� ओर से /Revenue by : Shri Satya Prakash Sharma, Sr. DR सुनवाई क� तार�ख/ Date of Hearing : 29.11.2023 घोषणा क� तार�ख/Date of : 30.11.2023 Pronouncement आदेश / O R D E R Per Arun Khodpia, AM:

The captioned appeals are filed by the assessee against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi under section 250 of the Income Tax Act, 1961 for AY2013-04 dated 21.06.2023, AY2017-18, AY2018-19 & AY2020-21 all dated 22.06.2023, against the order of Assessing Officer under section 143(3) of the I.T. Act dated 23.03.2016, 24.12.2019, 22.06.2021, 29.09.2022, respectively.

(2) The matter has been examined in light of the judicial decisions on this issue. In the case of CIT v. Nawanshahar central co-operative bank ltd.(2007) 160 taxman 48 the apex court held that the investment made by a banking concern are part of the business of banking . therefore, the income arising from such investment is attributable to the business of banking falling under the head profit and gains of business and profession.

(3) That the assessee had many time given reply of notice from 31/08/2015 and order received in June 2023 and in appeal explain the detail of proportionate expenses as income exempted and taxable income were mixed.

(4) That the 25% of the net profit of the society is kept in reserve fund as well 5% of remaining net profit shell be kept for common interest of member hence the society kept fund in fixed deposit, recurring deposit and M.I.S.

(5) That in the appeal cases given on 80P(2)(d) The Case Law 419 /JP/2017 And 23 & 24 /JP 512,633,513 & 634 /JP/2019 of M/s Jaipur Jila Dugdh Utpadak Sahkari Sangh Ltd. Jaipur Vs. DCIT Jaipur copy of the above cited case law is enclosed here with for your ready reference. In sugar

3 & 287/RPR/2023 Chhattisgarh Sahkari Sakh Samiti Maryadit mill Bundi case judgement in para 6.4 it is clearly decided that cooperative society for the purpose of the u/s 80p(2)(d).

(6) That the Hon’ble supreme court of India in civil appeal no. 8719/2022 decided that co-operative credit society shall be title to exemption u/s 80p(2) of the income tax act 1961.

(7) E.P.F. was paid in time hence addition made u/s. 36(1)(va) is wrong and be allowed.

From, Chhattisgarh Sakh Sahkari Samiti Chhattisgarh Sadan Sec-I, Bhilai, Durg 491001 To, The member income tax appellate tribunal Raipur bench Raipur (C.G.)

4 & 287/RPR/2023 Chhattisgarh Sahkari Sakh Samiti Maryadit Sub- Submission in second appeal no.- ITA 284/RPR/2023 Assessment year 2013-14 PAN NO. - AAAAK1188L. Sir, 1) That The Assesse Is Co-Operative Society Under Registration No.- Ar/Drg2149 Dated 06/12/1976 And Books Of Accounts Maintain As Per Society Act And Audited By A.R. Audit And Tax Audit Where Complied By C.A., And WithOut Rejecting Books Of Accounts Are Giving Any Subsptencial Material Addittion Made Is Not Justified case law in annexure- A a That In Appeal Main Question Is Deduction U/S 80p(2)(a)(i) And 80P(2)(d) For Claim Following Case Law and there main content is given here.

A. Kerala State Co-Operative Agricultural & Rural Devlopment Bank Ltd. Vs. Assessing Officer On 14 September 2023 (S.C. Case) please see page no.- 17 pr. 24.1 — That section 80-P of the IT act is a benevolent provision, which was enacted by parliament in order to encourage and prmote the growth of the co-operative sector generally in the economic life of the country and must, therefore be read liberally and in favour of assesse.

Pr. 24.2 - That once the assesse is entitled to avail of deduction, the entire amount of profit and gains of business that are attributable to any one or more activities maintioned in sub-section (2) of section 80-P must be given by way of deduction.

B. Commissioner Of Income Tax 17, Mumbai Appelant(S) Vs. M/S Anna Saheb Patil Mathadi Kamgar Sahkari Pathpedi Limited (S.C. Case) also decide of claim of s 80P(2).

C. Shree Keshorai Patan Sahakari ..... Vs. I.T.O. Bundi On 31 January 2018 please see page no.- 3 pr. 6.1 As regards the claim u/s 80P(2)(d), we find that the only condition for availing the deduction under this provision is any income by way of interest or dividend derived by the Cooperative society from its investment with any other cooperative society, the whole of such income is allowable for deduction u/s 80P(1). Therefore, there is no condition for the assessee society toengaged in the activity of provide credits to the Members or banking business for availing the deduction u/s 80P(2)(d) read with Section 80P(1) of the Act. As regards the cooperative bank shall be treated as cooperative societies for the purpose of the interest income on investment in such cooperative bank u/s 80P(2)(d) the Mumbai Bench of this Tribunal in case of Lands End Co-operative Housing Society Ltd. vs. ITO (Supra), after considering the decision of the Hon'ble Supreme Court in case of Totagar's Co-operative Sale Society Ltd. Vs. ITO (Supra) has considered and decided this issue in. D. m/s the totgar's co-operative sale...Vs. income tax officer Karnataka on 08 feburary 2010 (S.C. Case) in which section 80P(2)(d) is not discussed and it is a case of 08 feburary 2010

(3) that before 01/04/2007 co-operative bank where also assessed as co-operative society and deduction u/s 80P(2) is claimed and 5 & 287/RPR/2023 Chhattisgarh Sahkari Sakh Samiti Maryadit allowed after amendment in section 80P sub-section 4 says as nder — the provision of this section shall not apply in relation to any co-operative bank other than a "primary agricultural credit society" or a primary co-operative agricultural and rural devlopement bank hence this was withdrawn hence intrest recived from co-operative bank claimed u/s 80P(2)(d) is justified, as before 01/04/2007 co-operative bank where also assessed as co-operative society and claimed deduction u/s 80P(2) of the I.T. act hence claim of intrest of co-operative bank is correctly claimed u/s 80P(2)(d). Yours Date- 03/11/2023 Milapchand Oswal Advocate

8 & 287/RPR/2023 Chhattisgarh Sahkari Sakh Samiti Maryadit 7. The word 'attributable used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT, Gujarat-II reported in ITR Vol.113 (1978) Page 842 at Page 93 as under: As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of" the specified industry (here generation and distribution of electricity) on which the learned Solicitor General relied, it will be pertinent to observe that the Legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General it has used the expression "derived from", as for instance in s. 80J. In our view since the expression of wider import, namely, "attributable to" has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.

8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A cooperative society which is carrying on the business providing credit facilities to its members, earns profit 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 80P of the Act.

10. In the instant case, the amount which was invested in banks 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 to 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. In fact similar view is taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME TAX III HYDERABAD v. ANDHRA PRADESH STATE COOPERATIVE BANK LTD. Reported in (2011) 200 TAXMAN 220/12. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly, it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order: Appeal is allowed. The impugned order is hereby set aside. Parties to bear their own cost.' In the backdrop of the aforesaid observations of the Hon'ble High Court, we are of a considered view, that as in the case of the assessee before us the surplus funds parked by way of short-term deposit with the co-operative bank, viz. Jila Sahakari Kendriya Bank are inextricably interlinked, or in fact interwoven with its business of providing credit facilities to its members, therefore, the same as claimed by the Ld. AR, and rightly so, would duly be eligible for deduction u/s. 80P(2)(a)(i) of the Act. We, thus, in terms of our aforesaid observations, direct the Assessing Officer to allow deduction of Rs. 7,98,705/- u/s. 80P(2)(a)(i) of the Act on the interest income earned by the assessee society on its deposits with the co-operative bank. Thus, the Ground of appeal No. 1 raised before us is allowed in terms of our aforesaid observations.

9. In terms of aforesaid observations of the tribunal following the various judgments of the Hon’ble High courts (supra), specifically as observed by Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Cooperative Ltd. (supra) following the similar view taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME TAX III HYDERABAD v. ANDHRA PRADESH STATE COOPERATIVE BANK LTD. (supra), respectfully following the same, we hold that the interest income received on amounts deposited by the assessee society in commercial / nationalised banks shall be eligible for deduction u/s 80P(2)(a)(i) of the Act.

10. Another issue raised by the assess in ITA 285/RPR/2023 is regarding disallowance made by in the AY 2017-18 on account of delayed payment of PF- ESI. On this issue Ld. AR of the assessee has submitted that all the payments of EPF were made in time considering the extended grace period of 5 days available to the assessee. Such facts were not considered by the Ld. AO as well as Ld. CIT(A), thus no disallowance on this count is called for.

12. After going through the facts and on a thoughtful consideration of submissions and explanations, it is observed that the aforesaid issues has been dealt with coordinate bench of the ITAT, Raipur in in the case of Dilip Construction Company Vs. DCIT, 1(1), Bhilai (CG) dated 01.06.2023, wherein regarding delay and grace period it has been observed that:

12. As can be gathered from “Explanation 1” to Section 36(1)(va) of the Act, the term “due date” has been explained as under: “[Explanation 1]-For the purposes of this clause, "due date" means the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise.”

Although the assessee as an employer is obligated to credit an employee’s share of contribution to the employee’s account in the relevant fund under the EPF Act within 15 days from closure of every month, but as stated by the Ld. AR, and, rightly so, a further the grace period of 5 days to remit the contribution had been allowed under the said Act. The issue as to whether or not the grace period would fall within the meaning of the term “due date” as contemplated in Section 36(1)(va) of the Act, had come up Section 43on’ble High Court of Bombay in the case of Pr. CIT Vs. Hind Filter Ltd. (2018) 90 taxmann.com 51(Bom.). Thus, Hon’ble High Court in its said aforesaid order had, inter alia, observed that payments having been made within the grace period were to be held as having been made within the period prescribed by law. For the sake of clarity, the relevant observations of the Hon’ble High Court are culled out as under:

“7. In the present case, the Tribunal found that the assessee had deposited the contribution within the grace period and having done so, even assuming applicability of Section 43B, the requirement of law is deemed to have been complied.

12 & 287/RPR/2023 Chhattisgarh Sahkari Sakh Samiti Maryadit Furthermore, the payment having been made within grace period, the same was held to have been made within the period prescribed by law. On this ground also the order of CIT(A) was upheld by the Tribunal. The order of the CIT(A) noted that the due date of the amount was 21st September, 2008 and the actual date of payment was 29th September, 2008. The CIT(A) also had found that the addition made by the Assessing Officer was not justified and the same was deleted. The only ground on which the Assessing Officer sought to make addition was apparently default in payment before the due date and the amount of Rs.9,770/- was required to be treated as income of the assessee in accordance with Section 2(24)(x), however, it was admittedly deposited in the ESIC account before expiry of the grace period which was not considered by the Assessing Officer. 8. xxxxxxxxx

9. xxxxxxxxx 10. xxxxxxxx 11. In our view the decision of the Tribunal in upholding the order of the CIT(A) in the case at hand cannot be faulted. The assessee was found to have deposited the amount within grace period and hence there is no substance in the grievance of the Revenue. Thus, even the third question does not require any further consideration.”

As the assessee firm in the case before me had deposited the employees share of contribution towards EPF of Rs.1,88,346/- (supra) within the grace period under the EPF Act, 1952, therefore, respectfully following the judgment of the Hon’ble High Court of Bombay in the case of Pr. CIT Vs. Hind Filter Ltd. (supra), I am of the view that the said amount could not have been disallowed u/s.36(1)(va) r.w.s 2(24)(x) of the Act.

13. At this stage, I may herein observe that the Hon’ble Apex Court in the case of Checkmate Services Pvt. Ltd. (supra) had held that employees share of contribution towards the 13 & 287/RPR/2023 Chhattisgarh Sahkari Sakh Samiti Maryadit welfare enactment had to be deposited by the assessee in terms of those enactments and on or before the due dates mandated by such concerned law. For the sake of clarity, the observation of the Hon’ble Apex Court is culled out as under:

“…….That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees’ contributions- which are deducted from their income. They are not part of the assessee employer’s income, nor are they heads of deduction per se in the form of statutory pay out. They are others income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in the particular law. They have to be deposited in terms of such welfare enactments. It is upon deposit, in terms of those enactments and on or before the due dates mandated by such concerned law, that the amount which is otherwise retained, and deemed an income, is treated as a deduction. Thus, it is an essential condition for the deduction that such amounts are deposited on or before the due date.”

14. Considering the facts involved in the case of the assessee before me r.w the settled position of law, I am unable to persuade myself to subscribe to the disallowance of employees share of contribution of Rs.1,88,346/- made by the A.O u/s.36(1)(va) r.w.s 2(24)(x) of the Act. Accordingly, the disallowance of Rs.1,88,346/- made by the A.O u/s.36(1)(va) r.w.s 2(24)(x) of the Act is herein vacated.

13. The contention raised by the assessee regarding grace period is found to be acceptable, but subject to verification of the fact that the payments were made in prescribed time including the time available with grace period. Under such facts and circumstances, we direct the Ld. AO to verify the payment details of EPF qua the disallowance made and vacate the same if 14 & 287/RPR/2023 Chhattisgarh Sahkari Sakh Samiti Maryadit the same are paid within stipulated time, on the contrary sustain the same if not paid in time, as described herein above.

Order pronounced in the open court on 30/11/2023.