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2016 (4) TMI 473 - ITAT PUNE

2016 (4) TMI 473 - ITAT PUNE - TMI - Eligibility for deduction under section 80P(2)(a) or 80P(2)(b) - determine eligibility of deduction under section 80P of the Act in respect of income earned from certain allied activities viz. (i) Locker Rent; (ii) Ambulance Rent; (iii) Commission on Collection of MSEB bills; and (iv) Health Club by cooperative credit society carrying on banking business - Held that:- We find that eligibility of the assessee for deduction under section 80P of the Act in respe .....

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) or (b), we are in total agreement with the alternate plea of the assessee that the expenses attributable for the purpose operating such activity ought to have to be allowed on actual/proportionate basis. We are of the view that the action of the CIT(A) in restricting the expenses artificially @ 10% of the gross income from such activities is not sustainable in law being devoid of objectivity. The Assessing Officer is accordingly directed to allow the expenses which are attributable to the runn .....

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r section 80P as per law.

We also simultaneously find merit in the alternate plea of the assessee that proportionate expenses attributable to earning of such income ought to have been allowed by the authorities below. In view of the fair admission on the part of the assessee, the finding of the CIT(A) in respect of Shop Rent Income is sustained. With regard to other income, namely, Health Club Fees, we once again hold that expenses attributable to the running of the Health Club should .....

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otherwise eligible for deduction under section 80P(2)(a) or (b), in such a scenario, it is eligible for deduction to the extent of ₹ 50,000/- as per plain provisions of the Act. We also find that the action of the CIT(A) in withdrawing the aforesaid deduction without affording the opportunity to the assessee in this regard also offends the provisions of the Act as well as principles of natural justice. In the light of the aforesaid, we hold that the assessee is entitled to deduction under .....

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essee are against the common order of CIT(A)-I, Nashik dated 14.09.2015 relating to assessment years 2010-11 and 2011-12 passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. Both the captioned appeals preferred by the assessee are on identical grounds except for the difference in quantum. Accordingly, we shall take-up the appeal for assessment year 2010-11 as the lead case. ITA No.1521/PN/2015 (A.Y. 2010-11) 3. In this appeal, the assessee has raised the following Grou .....

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claimed u/s. 80P in respect of Locker Rent, Ambulance Rent, Commission on collection of MSEB bills, Health Club Fees and Rent from property. 3. Without prejudice to Ground of Appeal No. 1 & 2 and on the basis of facts and in the circumstances of the case, the Commissioner of Income Tax, (Appeals)-I, Nashik is not justified in restricting the deductions of expenses attributable to Ambulance Rent received at 10% of gross ambulance rent received instead of actual expenses incurred at ₹ 1 .....

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nder appeal. 5. Without prejudice to Ground of Appeal No. 1 & 2 and on the basis of facts and in the circumstances of the case, the Commissioner of Income Tax, (Appeals)-I, Nashik is not justified in restricting the deductions of expenses attributable to Health Club income received at 10% of gross health club income received instead of actual expenses incurred at ₹ 34,750/-. 6. On the basis of facts and in the circumstances of the case, the Commissioner of Income Tax, (Appeals)-I, Nash .....

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ciety engaged in the business of giving loans/advances and accepting deposits from its members. The society was incorporated on 25.07.2000 and is registered under Maharashtra Co-operative Societies Act, 1980. The assessee society thus is engaged in the business as a credit society carrying on the business of providing banking services to its members. In the course of assessment proceedings under section 143(2) of the Act, the Assessing Officer noticed that the assessee society has inter-alia dec .....

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0P of the Act. However, deduction under section 80P(2)(c)(ii) of the Act to the extent of ₹ 50,000/- was granted to the assessee by the Assessing Officer. 5. Against the denial of deduction under section 80P on income earned under various heads noted above and also for adopting the gross amount of receipt in various heads as noted above instead of net income under the respective heads after appropriation of expenses, the assessee preferred appeal before the first appellate authority i.e. t .....

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the contention of the assessee that expenses attributable to these various streams of income should be allowed as deduction which was estimated at 10% of the gross income. As regards property rent income of ₹ 40,900/-, the CIT(A) directed the Assessing Officer to tax the rent income under the head income from house property and grant statutory deduction of 30% under section 24 as per law. The claim of deduction under section 80P(2) of the assessee was denied by the CIT(A) on this source o .....

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se, the assessment order, judicial pronouncements cited and oral as well as written submissions on behalf of the appellant. The A.O. has disallowed the deduction claimed u/s. 80P(2) in respect of certain classes of income as mentioned hereinabove for the reason that the said activities are not related to business of the society and hence not eligible for deduction u/s 80P(2) of the Act. The judicial decisions relied upon be the Ld. A.R. are in respect of Co-operative bank and not Co-operative cr .....

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assessed under the head 'Income From Business'. Therefore the A.O. is directed to tax the income out of above class of activities i.e. locker rent ₹ 14,295/-, ambulance rent ₹ 1,08,116/-, M.S.E.B. commission ₹ 1,85,624/- and health club income ₹ 38,400/- under the head 'Income from Other Sources'. However, another contention of the Ld. A. R. to tax the net income instead of gross income in respect of above class of income is correct. The A.O. has disallowe .....

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nt of other expenses @ 10% of the gross income out of locker rent, ambulance rent, M.S.E.B. commission and health club income for appellant's expenses on earning of such income. This ground, therefore is partly allowed. 9. Ground No. 6 is in respect of disallowance of deduction claimed u/s. 80P(2) in respect of property rent income of ₹ 40,900/-. Brief facts of the issue are that the appellant, during the year under consideration leased out certain portion of its constructed property a .....

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f income as deduction there from because the A.O. has disallowed the gross income instead of net income out of the above classes of income. 9.1 The relevant submission of the Ld. A.R. for the appellant is as under- Disallowance of deduction claimed U/s. 80P in respect of gross income of ₹ 40,900/- on account of shop rent income. The A. O. has completely erred in not considering the expenses incurred in connection with the rent income from property. What he has taxed is gross rent income an .....

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pect of said rent income or allow the expenses attributable to earn the said income. 10. I have carefully considered the facts of the case, the assessment order, judicial pronouncements cited and oral as well as written submissions on behalf of the appellant. The A.O. has disallowed the deduction claimed u/s. 80P(2) in respect of property rent income for the reason that the said activity is not related to the business of the appellant. Before me also the Ld. A.R. also could not substantiate its .....

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e net income instead of gross income in respect of above class of income is correct. The A.O. has disallowed the claim of deduction u/s. 80P of the gross amount on account of rent income as credited to Profit and Loss Account. As the impugned income is directed to tax under 'Income from House Property, the appellant is also eligible for statutory deduction of 30% of ₹ 12,270/- u/s. 24. This ground, therefore is partly allowed. 11. Before partying with the order, the A.O. is also direct .....

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0,000/- granted to appellant. 7. Aggrieved by the impugned order of the CIT(A), the assessee is in appeal before us. 8. None appeared on behalf of the assessee. However, written submissions on behalf of the assessee was received by fax on 31st January, 2016 which is placed on record and considered for adjudicating the issue. 8.1 As per the written submissions, the assessee contended that first issue involved in the present appeal is that the Assessing Officer has not granted deduction under sect .....

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as per audited books of accounts. The CIT(A) has also directed to withdraw the deduction of ₹ 50,000/- granted by the Assessing Officer under section 80P(2)(c) of the Act. 8.3 As regards the eligibility for deduction under section 80P(2) of the Act in respect of Locker Rent Income, the assessee relied upon the decision of the Hon ble Supreme Court in the case of Mehsana District Central Co-op. Bank Ltd. vs. ITO, 251 ITR 522 (SC) wherein the Hon ble Apex Court held that income derived by t .....

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s well as the CIT(A) which were not doubted by them. It is further case of the assessee that the CIT(A) is not justified in not appreciating the fact that the running of Ambulance by society is not for profit but the same is for social cause. The assessee, accordingly, pleaded that expenses which are attributable to running of Ambulance as per audited accounts of the assessee i.e. fuel expenses for running the Ambulance as well as driver s salary and day to day repairs of Ambulance should be all .....

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ynagar Co-op. Credit Society (ITA No.1247/PN/2013 dated 29.05.2014 wherein it held to be akin banking activity is eligible for deduction under section 80P(2)(a)(i) of the Act. Without prejudice to the aforesaid plea, the assessee contended that the CIT(A) was not justified in restricting the expenses to earn said income artificially 10% of the gross receipt and therefore the Assessing Officer should be directed to allow proportionate expenses on account of salary, depreciation, stationary, etc.. .....

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is not justified. 8.8 With regard to the direction of the CIT(A) for withdrawal of deduction of ₹ 50,000/- under section 80P(2)(c) of the Act, the assessee alleged that the CIT(A) has withdrawn the deduction allowed by the Assessing Officer without giving any notice of enhancement. The assessee further submitted that as per the provisions of law, the deduction of ₹ 50,000/- is available to the cooperative society if it is engaged in any activity which is otherwise not eligible for de .....

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ce for proposed action. In this regard, the assessee relied upon the decision of Pune Bench of the Tribunal in the case of ITO vs. Shri Gogababa Nagari Sahakari Patsanstha Ltd. in ITA No.2452/PN/2012, order dated 30.05.2014 wherein the Tribunal fortified the above view by holding as under :- We find the AO made the entire addition of ₹ 2,27,109/- which is the gross amount of MSEB commission and he has not allowed the expenditure for earning the said commission. We find merit in the submiss .....

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nd the ground raised by the Revenue is dismissed. In the light of aforesaid submissions, the assessee pleaded for suitable relief. 9. The Ld. Departmental Representative for the Revenue, on the other hand, relied upon the order of the CIT(A). 10. We have carefully considered the rival submissions, orders of the authorities below and case law cited. The short question before us is to determine eligibility of deduction under section 80P of the Act in respect of income earned from certain allied ac .....

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f deduction under section 80P on such income. We find that eligibility of the assessee for deduction under section 80P of the Act in respect of locker rent income is covered by the decision of the Hon ble Supreme Court in the case of Mehsana District Central Co-op. Bank Ltd. (supra). Therefore, we set-aside the direction of the CIT(A) in this regard and hold that the assessee is eligible for deduction under section 80P of the Act in respect of this income. With respect to the income from running .....

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Assessing Officer is accordingly directed to allow the expenses which are attributable to the running of Ambulance and determine the income from the aforesaid activity. The surplus if any, from this activity would be entitled to relief made residuary clause of section 80P(2)(c)(ii). We also notice that the Income from MSEB commission is held to be business activity as per decision cited by the assessee in the case of Ahmednagar District Co-operative Bank Ltd. (supra) and other decisions noted a .....

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penses attributable to the running of the Health Club should be allowed to the assessee while determining the income from such activity on reasonable/proportionate basis. However, we do not find any merit in claim of the assessee for deduction under section 80P(2)(a)/80P(2)(b) of the Act in respect of this activity. 11. As regards withdrawal of deduction of ₹ 50,000/- as allowed by the Assessing Officer under section 80P(2)(c), we find merit in the plea of the assessee that a co-operative .....

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