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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to the Assessment Year (AY) 2015-16, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-1, Surat [in short “the ld. CIT(A)”] in Appeal No. CIT(A), Surat-1/10982/2016-17, dated 28.02.2020 which in turn arise out of an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 06.09.2017.
Grounds of appeal
raised by the Revenue are as follows: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance amounting to Rs.2,21,93,840/- whereas the AO in his assessment order elaborately discussed and rightly treated it not to be eligible for deduction u/s 80P(2)(d) of the Act.
2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the Ld. CIT(A)-1, Surat may be set-aside and that of the Assessing Officer’s order may be restored.
123/SRT/2020/AY.2015-16 Vidyabharti Co.op. Credit Society Ltd. 3. Whether on the facts and circumstances of the case and in Law, the appellant craves its right to add, alter, amend, deleted, any of the ground or grounds of appeal.”
3. Succinct facts are that assessee before us Cooperative Credit Society Ltd; and filed its return of income for assessment year 2015-16 on 26.09.2015, declaring total income at Rs. Nil after claiming deduction u/s 80P of the Act to the tune of Rs.2,18,14,675/-. The assessee`s case was selected for scrutiny under CASS. Accordingly, notice u/s 143(2) of the Income tax Act was issued on 28.07.2016 and duly served on the assessee. Subsequently, a notice u/s 142(l) of the Act dated 29.05.2017 was issued and served on assessee. During the course of assessment proceedings, it was noticed by assessing officer that assessee society had earned interest income of Rs.2,21,91,839.76/- from Nationalized Banks and other Co-op Banks. Therefore, Assessing Officer issued a show cause notice to the assessee to explain the transaction. In response to show cause notice, the assessee submitted that it has not claimed Nationalized Bank interest in Section 80P (2)(d) of the Act, however assessee has only claimed Co-op Bank Interest and Co-op Dividend under section 80P(2)(d) of the Act. The Assessing Officer rejected the contention of the assessee and held that amount of interest of Rs.2,21,19,839.76/- received from other than co-operative societies , are not eligible for deduction u/s 80P(2)(d) of the Income Tax Act and hence disallowed the same.
4. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the addition made by the Assessing Officer observing as follows: “8. Discussion & Decision of the Appellate Authority 8.1 It is seen that Id. AO has disallowed deduction claimed u/s 80P(2)(a) claimed on interest & dividend received from other than co-operative Societies and also from Nationalised Banks as under: Sr. Name of the assessee Deduction u/s 80P(2)(a)(i) No. disallowed by Ld. AO 1 Vidyabharti Co.-operative Credit Interest from Nationalised Bank Society Limited, AY 2014-15 of Rs. 68,07,972/- 2 Vidyabharti Co.-operative Credit Interest from Nationalised Bank Society Limited, AY 2015-16 is Rs.1,66,83,334/- Interest received from Co-op. Societies is Rs.55,08,506/-
123/SRT/2020/AY.2015-16 Vidyabharti Co.op. Credit Society Ltd. Total = 2,21,93,840/- The assessee co-op Society has claimed deduction of the above interest income received. However, since the ITR pro forma does not allow further classification u/s 80P, the entire deduction is depicted as u/s 80P. The Ld. AO presumed that the assessee co-operative society, has claimed deduction u/s 80P(2)(d) and after detailed discussion on sec. 80P(2)(d), proceeded to disallow the same. I have examined the details & heard the AR & I find that the assessee CO-operative society has claimed the deduction u/s 80P(2)(a)(i) of the Act for the above interest income. It is further seen that for AY 2015-16, part of interest received is from co- operative bank which is eligible for deduction both under Sec. 80P(2)(d) as well as sec. 80P(2)(a)(i). 8.2 It is brought to my notice by AR that identical issue has been decided by Ld. CIT(A)-2, Surat in assessee's own case for AY 2013-14 vide appeal order No. GAS/1/661/15-16 & CAS/2/18/Trf/16-17 dated 17.01.2017. The operative part is given below: I have considered the assessment order as well as the submissions of the appellant. The Grounds of appeal- Ground No. 1 & 2 pertains to not taking into account the details given at the time of hearing and the Hon'ble DCIT has added back Rs.70,02,825/-interest income from other then Co-operative Societies and Co-operative Bank. The said i interest is not claimed u/s 80P(2)(d) of the Income Tax Act, 1961. The appellant had derived interest income of Rs.1,00,61,630/- and out of this interest income Rs.49,91,383/- was other than the investment in co- operative society. The AO held that the appellant business was under the category of 80P(2)(a) and therefore he is eligible for deduction u/s 80P(2)(d) of the Act of the interest income earned by the society from Cooperative society. The AO relying on the judgment in the case of Totgars Cooperative Sale Soc. Ltd. (supra) disallowed the interest income of Rs.49,91,383/-. The appellant submitted as per section 80P(2)(a)(i) in the case of a Co-operative society engaged in carrying on the business of Banking or providing credit facilities to its members the whole of the amount of profit and gains of business attributable to any one or more of such activities are allowable. It further submitted that the Hon'ble ITAT, SMC Bench, Ahmedabad has decided interest income received from other than cooperative society is allowable u/s 80P(2)(a)(i) of the Act in the case of Shree Balaji Urban Co-operative credit Soc. Ltd. 6.1.2. On the perusal of the judgment of the Hon'ble ITAT SMC bench Ahmedabad in the for AY.2012-13 in order dated 26.02.2016. The Hon'ble Bench had allowed the claim of the appellant relying on the earlier judgment of coordinate bench of ITAT Ahmedabad in the case of Amaalsad Vibhag Vividh Karyakari Sahkari Khedut Mandali Limited Vs. ITO in ITA Nos. 1710 & 1711/Ahd/2011 wherein vide order dated 13.08.2015. "I have considered submissions of both parties and gone through the facts of the case and also case laws cited by the Id. Counsel for the assessee. I find no reason to take any other view of the matter than the view of the matter than the view so taken by the ITAT, Ahmedabad Bench and the Hon'ble Karanataka High Court cited supra on this issue. Therefore, respectfully the same, I allow the claim of the 123/SRT/2020/AY.2015-16 Vidyabharti Co.op. Credit Society Ltd. assessee under section SOP and disapprove the order of the ld. CIT(A) on this issue." 6.1.3. In view of the above facts, it is evident that the issue has been decided by the jurisdictional ITAT, Ahmedabad in favour of the appellant. Hence the addition made by the AO of disallowance of Rs.70,02,825/- deleted and the ground of appeal is allowed.” 8.3 It can be seen that ld. CIT(A) has been guided by the binding decision of jurisdictional ITAT Ahmedabad. Since the facts are identical and reasons given by Ld. AO for the impugned disallowance are identical, the above decision applies mutatis mutandis to instant appeal. Respectfully following the same in interest of consistency & uniformity, the impugned disallowance are directed to be deleted in both the assessment years.”
5.Aggrieved by the order of ld CIT(A), the Revenue is in appeal before us.
We have given our thoughtful consideration to rival contention. Case file as well as paper books are carefully perused. In the light of the detailed discussion made by Assessing Officer as well as assessee, now the issue has to be decided whether the assessee is eligible for deduction in respect of Co-op Bank Interest and Co-op Dividend, under section 80P(2)(d) of the Act. The Learned Departmental Representative (Ld. DR) for the Revenue submitted before us that in the assessee`s case, the 'interest income' under question was not the interest received from the members of the assessee-society for providing credit facilities to them. What was sought to be taxed u/s 56 is the interest income arising on the surplus invested in co-operative bank. In the instant case, the assessee-society regularly invested funds not immediately required for business purposes. Interest on such investments, therefore, could not fall within the meaning of the expression ‘profits and gains of business' as held by Hon'ble Supreme Court in the case of Totgars, Co-operative Sale Society Ltd. Vs. Income-tax Officer, Karnataka [2010] 188 Taxman 282 (SC). Such interest income could not be said to be attributable to the activities of the society, viz., carrying on the business of providing credit facilities to its members. Hence, ld DR prayed the Bench that addition made by the Assessing Officer may be sustained.
123/SRT/2020/AY.2015-16 Vidyabharti Co.op. Credit Society Ltd. 7. None appeared on behalf of the assessee despite of issuance of notice of hearing on several times by registered post, therefore we do not have any option but to hear ld DR for the Revenue and to consider the material available on record.
We note that issue under consideration is no longer res-integra. The Hon'ble High Court of Gujarat in the case of Surat Vankar Sahkari Sangh Ltd. Vs. Asstt Commissioner of Income Tax, has held that interest income received from Co- operative Bank is allowable u/s 80P(2)(d) of the Income Tax Act 1961. We note that assessee has not claimed Nationalized Bank interest in Section 80P (2)(d) of the Act, it has only claimed Co-op Bank Interest and Co-op Dividend under section 80P(2)(d) of the Act. That is, assessee-society has claimed deduction under section 80P(2)(d) of the Act, on interest and dividend income received from Co- operative societies and Co-operative Bank. Therefore, assessee-society is eligible to claim deduction u/s 80P(2)(d) of the Act, as held by the Hon'ble High Court of Gujarat in the case of Surat Vankar Sahkari Sangh Ltd (supra). Therefore, we do not find any infirmity in the order of ld CIT(A).That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed.
In the result, appeal filed by Revenue is dismissed.
Order is pronounced in the open court on 22/08/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.