Income Tax Appellate Tribunal - Ahmedabad
Vadodara Mahanagar Seva Sadan ... vs The Income Tax Officer, Ward-3(1)(3),, ... on 13 July, 2018
आयकर अपील
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IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
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BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER
And SMT MADHUMITA ROY, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No.1899/Ahd/2017
( नधा रण वष / Assessment Year : 2014-15)
Vadodara Mahanagar Seva बनाम/ The Income Tax
Sadan Employees Co- Vs. Officer,
Operative Credit Society Ltd., Ward -3(1)(3),
st
1 Floor, Old PO Building, Baroda.
Opposite Khanderao Market,
Vaodara.
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAAAV 6708 P
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से / Appellant by : --None--
यथ क ओर से/Respondent by : Shri Prasoon Kabra, Sr. D.R.
ु वाई क तार ख /
सन Date of Hearing 05/07/2018
घोषणा क तार ख /Date of Pronounce ment 13/07/2018
आदे श / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the assessee against the appellate order of the Commissioner of Income Tax(Appeals)-3, Vadodara [CIT(A) in short] vide appeal no.CAB- 3/10163/2016-17 dated 25.05.2017 arising in the assessment order passed ITA No.1899/Ahd/2017 Vadodara Mahanagar Seva Sadan Employees Co-Op Credit Society Ltd. vs. ITO Asst.Year -2014-15 -2- under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 11.07.2016 relevant to Assessment Year (AY) 2014-15.
2. The grounds of appeal raised by the assessee are as under:-
"1. The learned CIT(A)-3, has erred in law and on the facts in confirming the order of the Assessing Officer holding that the amount of interest income earned on fixed deposits made with nationalized banks and co-operative bank is not profits and gains attributable to the activity of providing credit facilities to members and hence not eligible for deduction under section 80P of the Act and thereby considering the amount of interest of Rs.11,54,648/- as income from other sources liable to be taxed under section 56 of the Act."
3. At the outset it was observed that the assessee/ his authorized representative neither appeared nor filed any adjournment petition at the time of hearing. However we observed that the issue involved in this appeal is already covered by various judicial pronouncements. Therefore we decided to proceed to adjudicate the issue raised by the assessee after hearing the ld. Departmental Representative on behalf of Revenue.
4. The solitary issue involved in the grounds of appeal relates to whether interest income earned on fixed deposits with the nationalized bank and cooperative bank would qualify for deduction under section 80P(2)(a)(i) of the Income Tax Act.
ITA No.1899/Ahd/2017Vadodara Mahanagar Seva Sadan Employees Co-Op Credit Society Ltd. vs. ITO Asst.Year -2014-15 -3-
5. The assessee during the year inter-alia has earned interest income from the nationalized bank and co-operative aggregating to Rs. 11,56.648.00 only. The assessee claimed deduction under section 80P(2)(a)(i) of the Income Tax Act in respect of interest income stated above.
However at the onset, we note that issue relating to interest income from nationalized bank is squarely covered against the assessee by the decision of the Hon'ble jurisdictional High Court in the case of State Bank of India Vs. CIT, 389 ITR 578 wherein Hon'ble Court held that interest earned from the investment made in any bank is not deductible under section 80P(2)(a)(i) of the Act.
However we note that the assessee is eligible for deduction in respect of the interest income earned from the cooperative bank under section 80P(2)(d) of the Act. In this connection we find support & guidance from the order of this Tribunal in the case of The Sarvoday Credit cum Consumers Co-operative Society Ltd. vs. ACIT in ITA No.1875Ahd/2015 pertaining to the ASSESSMENT YEAR 2011-12 wherein it was held as under:
"7. We have heard the Ld. Representatives of the respective parties and perused the relevant materials available on record. We find that the issue raised by the assessee as to whether the assessee is entitled to the claim u/s.80P(2)(a)(i) & 80P(2)(d) of the Act on the interest and dividend income received from the Banaskantha Dist.Central Co-operative Bank Ltd. is identical to the issue involved in those above appeals decided by ITA No.1899/Ahd/2017 Vadodara Mahanagar Seva Sadan Employees Co-Op Credit Society Ltd. vs. ITO Asst.Year -2014-15 -4- the Coordinate Bench of this Tribunal. The Coordinate Bench while deciding the issue has observed as follows:
"4. We now advert to the lead issue of Section 80(P)(2) disallowance of Rs.27,97,019/- in respect of assessee's interest income derived from its deposits with the Banas Co-operative Bank. Both the lower authorities quote the legislative amendment vide Finance Act, 2006 w.e.f. 01.04.2007 inserting subsection 4 in Section 80P as well as CBDT's explanatory notes to the above Finance Act dated 28.122006 in holding that the impugned interest income derived from co-operative bank is not eligible for deduction. Learned Departmental Representative vehemently contends that hon'ble Karnataka high court's recent decision in (2017) 83 taxmann.com 140 (Karnataka) PCIT vs. Totagars Co-operative Sale Society has settled the law that such an income is not allowable as Section 80P deduction in view of the legislative amendment hereinabove. Mr. Kabra thereafter files hon'ble apex court's judgment in (2017) 397 ITR 1 (SC). The Citizen Co- operative Society Ltd. vs. ACIT settling Section 80P deduction issue in respect of ordinary and nominal members. We however find that the above former decision goes contrary to hon'ble jurisdictional high court's judgment in Tax Appeal No. 473 of 2014 CIT vs. Sabarkantha District Cooperative Milk Producers Union Ltd. declining Revenue's identical question of law challenging tribunal's decision allowing Section 80P deduction in respect of interest earned on fixed deposits with a cooperative bank in assessment year 2009-10 i.e. post Section 80P(4) amendment w.e.f. 01.04.2007. Their lordships' reasoning to this effect reads as under:
"4.0. Now, so far as proposed question no. B i.e. whether the Appellate Tribunal has substantially erred in upholding the order of the CIT(A) in deleting the disallowances of Rs.1,42,19,5157- under Section 80(P)(2)(d) of the Act is concerned, it is required to be noted that the assessee claimed deduction under Section 80(P)(2)(d) of the Act on the interest earned on the fixed deposit with Cooperative Bank and the Societies and it has been found that as such the income was received from the investment in Cooperative Societies and Cooperative Bank. Considering Section 80(P)(2)(d) of the Act when ITA No.1899/Ahd/2017 Vadodara Mahanagar Seva Sadan Employees Co-Op Credit Society Ltd. vs. ITO Asst.Year -2014-15 -5- the only requirement was that the income should be received from investment in Cooperative Societies and the Cooperative Bank which in the present case has been fulfilled, it cannot be said that the learned Tribunal has committed any error in deleting disallowance of Rs.1,42,19,515/- under section 80(P)(2)(d) of the Act. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, proposed question B is also answered against the revenue."
We therefore follow hon'ble jurisdictional high court's judgment than hon'ble Karnataka high court's decision. Coming to hon'ble apex court's decision in the Citizen Co-operative Society Ltd. (supra), we find that there is no dispute about the category of members as it was before their lordships. We thus conclude in view of all these facts and circumstances that hon'ble jurisdictional high court's judgment is binding on us. We accordingly delete the impugned disallowance of Rs.27,97,019/- in question. This lead appeal ITA No. 1891/Ahd/2014 is partly accepted......"
8. Thus it is a fact in the aforesaid matter that the Co-ordinate Bench has been pleased to allow the claim of the assessee for deduction of interest income derived from the deposits with the Banaskantha Dist. Central Co-operative Bank Ltd.
9. Taking into consideration the entire facts of the matter and the decision cited by the Ld. AR, we are of the considered view that the assessee is entitled to deduction u/s.80(2)(a)(i) & 80P(2)(d) of Rs.22,52,868/- & Rs.4,44,200/- being interest and dividend income respectively derived from the deposits with the Banaskantha Dist.Central Co-operative Bank Ltd. and thus accordingly delete the impugned disallowance of Rs.22,51,000/-.
10. The ground of appeal preferred by the assessee is allowed."
ITA No.1899/Ahd/2017Vadodara Mahanagar Seva Sadan Employees Co-Op Credit Society Ltd. vs. ITO Asst.Year -2014-15 -6- Similarly, in the interest of justice and fair play we also note that net amount of interest income from nationalized bank should be considered for disallowing the deduction u/s 80P(2)(a)(i) of the Act. On the net amount of interest income deduction u/s 80P(2)(a)(i), the ld. Departmental Representative objected on the ground that the such issue was not raised by the assessee in the ground of appeal. However we are inclined to reject the argument of the ld. Departmental Representative on the ground that the claim for the expenses incurred in connection with interest income has already been adjudicated in favor of assessee in various judicial pronouncements. In this connection we find support & guidance from the order of this Tribunal in the case of Shreeji Co- operative Credit Society Ltd vs. ITO pertaining to the assessment year 2013-14 in ITA No.2751/Ahd/2016 vide order dated 15-02-2018 wherein it was held as under:
"3. At the outset, the ld. Counsel for the assessee fairy conceded that issue in dispute is squarely covered against the assessee by decision of the Hon'ble Jurisdictional High Court in the case of State Bank of India vs. CIT, 389 ITR 578 wherein Hon'ble Court held that interest earned from investment made in any bank is not deductible under section 80P(2)(d). In this view of the matter, we dismiss the appeal of the assessee. However, any expenditure incurred by the assessee for earning such income could be allowed to it. In other words, the ld. AO has to determine the net interest earned by the assessee on such investment with bank, and only thereafter that income has to be excluded from the admissibility of deduction under section 80P(2) of the Act.
4. In the result, appeal of the assessee is partly allowed for statistical purpose."ITA No.1899/Ahd/2017
Vadodara Mahanagar Seva Sadan Employees Co-Op Credit Society Ltd. vs. ITO Asst.Year -2014-15 -7- The facts of the case on hand are identical as discussed in the above case. Therefore, respectfully following the same, we direct the AO to exclude the amount of net interest income from the deduction claimed u/s 80P(2)(a)(i) of the Act. Thus the AO will allow the expenses incurred by the assessee in the earning of such interest income not eligible for deduction under section 80P(2)(a)(i) of the Act. Similarly, we also direct the Assessing Officer to allow the deduction to the assessee for the amount of interest earned from the co-operative bank under section 80P(2)(d) of the Act. Hence, grounds of appeal filed by the assessee are allowed for statistical purposes.
6. In the result, the appeal of the assessee is partly allowed for statistical purposes.
This Order pronounced in Open Court on 13/07/2018
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(MADHUMITA ROY) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 13/07/2018
Priti Yadav, Sr.PS
ITA No.1899/Ahd/2017
Vadodara Mahanagar Seva Sadan Employees Co-Op Credit Society Ltd. vs. ITO Asst.Year -2014-15 -8- आदे श 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 आय) ु त(अपील) / The CIT(A)-3, Vadodara.
5. ,वभागीय /त/न'ध, आयकर अपील य अ'धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड4 फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या,पत /त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad