DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI vs. THE OLD GOA URBAN CO-OPERATIVE CREDIT SOCIETY LIMITED, OLD GOA

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ITA 175/PAN/2019Status: DisposedITAT Panaji24 July 2023AY 2016-17Bench: SHRI SATBEER SINGH GODARA (Judicial Member), SHRI G.D. PADMAHSHALI (Accountant Member)4 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, referencing a CBDT circular and a Supreme Court judgment. It held that disallowance under Section 40(a)(ia) enhances business income eligible for Chapter VI-A deduction, and the status of members (nominal or otherwise) does not preclude Section 80P deduction.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 2,08,55,277/-. This addition was made on account of disallowance of deduction under Section 40(a)(ia) for interest paid to members, due to non-deduction of TDS.

What were the issues?

Whether interest paid to members is disallowable under Section 40(a)(ia) when the assessee is eligible for deduction under Section 80P, and whether the status of members affects eligibility for Section 80P deduction.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 80P

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, PANAJI BENCH : PANAJI

Before: SHRI SATBEER SINGH GODARA & SHRI G.D. PADMAHSHALI

Hearing: 13.07.2023Pronounced: 24.07.2023

ORDER PER SATBEER SINGH GODARA, J.M. :

This Revenue’s appeal for assessment year 2016- 2017, arises against the CIT(A) Panaji-1, Panaji's order dated 28.02.2019, in case no.CIT(A), PNJ-1/10201/2018-19, in proceedings u/sec.143(3) of the Income Tax Act, 1961 (in short "the Act").

2 ITA.No.175/PAN./2019

Heard both the parties. Case file perused.

2.

The Revenue pleads the following substantive grounds in the instant appeal :

1.

“The order of the Ld. CIT (A) is opposed to law and facts of the case.

2. The Ld. CIT(A) has erred in deleting addition of Rs.2,08,55,277/- on account of disallowance of deduction under section 40(a)(ia) on interest paid to members. 3. Appellant craves leave to amend or alter any of the grounds of appeal or add to the same, if deemed necessary.”

3. Both the parties next invited our attention to the CIT(A)'s detailed discussion reversing the assessment findings invoking sec.40(a)(ia) disallowance of Rs.2,08,55,277/- on account of non-deduction of TDS regarding interest payments made to members, reading as under :

“8. Ground No.1 (Part-II) This ground is directed against the disallowance of deduction claimed.

3 ITA.No.175/PAN./2019

4.

Suffice to say, it has come on record that the CIT(A) has upheld the assessee’s claim as eligible for sec.80P(2)(a)(i) deduction since he has directed the Assessing Officer to verify

4 ITA.No.175/PAN./2019 about it’s nominal members. That being the case, we first of all quote the CBDT’s circular no.37/2016 dated 02.11.2016 that such a disallowance u/sec.40(a)(ia); in turn, enhances business income which is otherwise eligible for Chapter-VIA deduction. Coupled with this, case law Mavilayi Service Cooperative Bank Ltd., vs. CIT [2021] 431 ITR 1 (SC) holds that the status of the corresponding members i.e., those having voting rights and nominal memberships; hardly forms a condition precedent for the purpose of allowing sec.80P deduction. We see no merit in Revenue’s instant sole substantive grievance. Rejected accordingly.

5.

This Revenue’s appeal is dismissed in above terms.

Order pronounced in the open court on 24.07.2023.

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