Income Tax Appellate Tribunal - Delhi
Radial International, New Delhi vs Dcit,Central Circle-1, New Delhi on 19 April, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL,
DELHI BENCH: 'SMC' NEW DELHI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA No.346/Del/2023
Assessment Year: 2019-20
CA Cooperative Thrift & Vs. DCIT, Circle 58(1),
Credit Society Ltd., Delhi.
nd
D-251, 2 Floor, Gali
No.10, Laxmi Nagar,
Delhi.
PAN :AADAC6816A
(Appellant) (Respondent)
Appellant by Shri Yudhister Mehtani, CA
Respondent by Shri D.K. Srivastav, Sr. DR
Date of hearing 27.03.2023
Date of pronouncement 19.04.2023
ORDER
This is an appeal by the assessee against order dated 15.12.2022 of National Faceless Appeal Centre (NFAC), Delhi pertaining to assessment year 2019-20.
2
ITA No.346/Del./2023
2. The dispute in the present appeal is confined to disallowance of deduction claimed under Section 80P of the Income-Tax Act, 1961 for an amount of Rs.32,30,040.
3. Briefly, the facts relating to this issue are, the assessee is a registered thrift and credit cooperative society engaged in the business of providing credit facility to its members. The assessee accepts deposits from its members and deploys funds to the members at the time of their requirement. The deposits received from members if not immediately required for deployment are kept in bank on which interest is earned. In the year under consideration, the assessee had earned interest of Rs.32,30,040 on bank deposits. In the return of income filed for the impugned assessment year, assessee claimed deduction under Section 80P of the Act for an amount of Rs.1,36,48,386, which included the bank interest of Rs.32,30,040. While processing the return of income, the Centralized Processing Centre (CPC) disallowed the deduction claimed under Section 80P of the Act in respect of bank interest. Though, the assessee contested the aforesaid disallowance before learned Commissioner (Appeals), however, referring to the provisions of section 80P(2) of the Act he 3 ITA No.346/Del./2023 upheld the disallowance on the reasoning that the interest income earned by the assessee is chargeable under the head 'income from other sources' and not the 'business income' of the assessee.
4. Before me, learned counsel appearing for the assessee submitted that, since, the assessee is in the business of accepting deposits from members and providing credit facility to them at the time of their requirement, instead of transferring funds from its bank account, it transfers funds from the over draft facility availed by it by pledging its FDRs/deposits. He submitted, the investment in fixed deposits is only for purposes of availing over draft facility from the bank which is utilized for providing credit facility and repayment of deposits to its members. Further, he submitted, instead of keeping this surplus funds and not immediately required for deployment in the current account, the assessee had kept the funds in fixed deposits so as to facilitate immediate transfer of funds to members from the over draft account. He submitted by adopting this measure the interest income generated is applied for disbursement of loan and repayment of deposits to its members. Thus, he submitted, the interest income earned is connected 4 ITA No.346/Del./2023 to assessee's business, hence, would be covered under Section 80P of the Act. In this context, he relied upon the following decisions:
1. CIT vs. Shikhar Chand Jain, IT Appeal Nol.22 of 1999 dated 28.04.2003 (Hon'ble Madhya Pradesh High Court);
2. Nishpaksh Co-operative T & C Society Ltd. Vs. ITO, Ward 49(5), New Delhi, ITA No.7137/Del/2019 dated 28.02.2022 (Hon'ble Tribunal, Delhi Bench);
3. National Co-operative Development Corporation Vs. Commissioner of Income-Tax - V, Civil appeal No.5105-
5107 of 2009, dated 11.09.2022 (Hon'ble Supreme Court ); &
4. Bajaj Auto Finance Ltd. Vs.CIT, (2018) 404 ITR 564 dated 23.02.2018 (Hon'ble Bombay High Court).
5. Learned Departmental Representative strongly relied upon the observations of learned Commissioner (Appeals).
6. I have considered rival submissions and perused the material available on record.
7. From the modus operandi of the assessee discussed above, it is observed that the assessee accepts deposits from its members and provides credit facility to them at the time of their requirement. It is further observed that surplus funds not immediately required for deployment is kept in fixed deposits, which in turn, are pledged to the over draft facility taken by the assessee for transfer of funds to 5 ITA No.346/Del./2023 members either as loan or as repayment. Thus, it can be seen that the investment in fixed deposits is to augment the business activity of the assessee. In any case of the matter, as explained before me by the learned counsel for the assessee, the interest income is also utilized for providing credit facility or repayment to members. Thus, in my view, the interest income being inextricably linked to assessee's business activities as a credit society, would be eligible for deduction under Section 80P(2) of the Act. The decisions relied upon by learned counsel clearly support this view. Accordingly, I direct the Assessing Officer to allow assessee's claim of deduction under Section 80P(2) of the Act on Rs.32,30.040.
8. In the result, the appeal is allowed.
Order pronounced in the open court on 19th April, 2023.
Sd/-
(SAKTIJIT DEY) JUDICIAL MEMBER Dated: 19th April, 2023.
Mohan Lal 6 ITA No.346/Del./2023 Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR Asst. Registrar, ITAT, New Delhi