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TMI Blog2024 (8) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income-tax(Appeals ),NFAC, New Delhi u/s 250 of the Income-tax Act, 1961, which in turn has arisen from the assessment order dated 05-12-2019 passed by the learned Assessing Officer u/s. 143(3) of the 1961 Act vide order no. ITBA/AST/S/ 143(3)/2019-20/1021708161(1). 3. The grounds of appeal raised by the assessee in Memo of Appeal filed with the ITAT, Ahmedabad Bench, Ahmedabad, reads as under:- "1. On the facts and in the circumstances of the case as well in law, the (Appeals), NFAC, New Delhi erred in upholding the order of the ITO, Ward 4, Mahesana (for the sake of brevity "The AO") passed u/s 143(3) of the Act, is purely on misleading, misconception, arbitrary and perverse observations and hence, being without jurisdiction, bad in law, in-valid, illegal, unwarranted of facts is liable to be quashed. 2. On the facts and in the circumstances of the case as well in law, both the lower authorities have erred in not allowing deduction u/s 80P of the Act to the extent of Rs. 11,12,839/- and hence, the order passed under complete misconception, misconstruction and misinterpretation of the relevant provisions of law and facts of the case, is liable to be quashed. 3. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has received total income of Rs. 59,12,275/- during the year under consideration, out of which Rs. 38,42,268/- were interest received from the members and Rs. 16,89,753/- were received from banks as interest from investment in bank FDR's etc.. The AO observed that other income received by the assessee was to the tune of Rs. 3,80,254/- as commission and other income. The A.O. observes that the assessee is entitled for deduction u/s. 80P(2)(a)(i) with respect to interest received from its members. The A.O. observed that while eligibility of claim of deduction u/s 80P, income and expenses from society members are to be considered and any surplus of receipt from members over the expenditure would qualify for deduction u/s 80P. The AO observed that the assessee was not eligible for the claim of deduction u/s. 80P(2)(a)(i) of the Act with respect to interest income received on investment with banks as the same was not receipts from members of the co-operative society, and the assessee is not eligible for deduction u/s 80P(2)(a)(i) of the 1961 Act w.r.t. interest received totaling to Rs. 16,89,750/-. Further, the assessee has itself declared other income in P& L A/c to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure. The assessee claimed that it showed gross total income of Rs. 12,27,281/- and claimed deduction u/s 80P of Rs. 11,12,839/-, and paid tax on taxable income of Rs. 1,14,442/- which is other income. The assessee submitted that the AO is correct that the other income is taxable, and the assessee has already offered for tax in the statement of account and not claimed net other income as deduction u/s 80P. Thus, the assessee contended that the claim of the assessee for deduction u/s 80P is correct and should not be reduced. The assessee submitted that the assessee has surplus fund of Rs. 10,75.000/- as per Balance Sheet as on 31.03.2017 shown under the head of Profit and Loss Account, while Rs. 1,00,68,351/- are various Reserve and Funds, and the assessee is required to distribute the same as per its Constitution stated at point no. 10, which also included depreciation fund and provision of NPA fund and others required by Constitution. The AO erred in interpreting that Reserve and fund of Rs. 1,00,68,351/- as surplus fund but it is maintained due to compulsion by law and constitution to reserve the fund. The assessee submitted that as per Balance Sheet, the assessee has invested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deducted bears the character which has connection with or relation to the particular activity which produces the income or constitutes its source either before the AO or during the appellate proceedings. The ld. CIT(A) observed that the nexus between the activity of earning income and the expenditure in persuit of such activity of earning income has not been clearly brought out by the assessee, and the ld. CIT(A) dismissed this ground of appeal raised by the assessee. 6. Still aggrieved, the assessee has filed second appeal with the Tribunal. At the outset, it was submitted by Ld. Counsel for the assessee that the assessee is entitled for deduction u/s. 80P(2)(d) with respect of interest earned from deposits made by the assessee in FDR's with Co-operative bank, to the tune of Rs. 11,12,839/- which was wrongly denied to the assessee. The Ld. Counsel for the assessee submitted that the assessee is a Co-operative Credit society duly registered under the Gujarat Co-operative Act. The ld. Counsel for the assessee drew my attention to the appellate order passed by the Division Bench of which I was part of the Division Bench in the case of ACIT v. The Sardar Patel Co-operative Credit S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. 7. I have considered the contentions of both the parties and perused the material on record. I have observed that the dispute between the two parties is in the narrow range as to addition being made by the AO to the tune of Rs. 11,12,839/- on account of disallowing of deduction claimed u/s 80P w.r.t. interest income earned by the assessee from the deposits made in the Fixed deposits and saving bank account with Co-operative Banks. The assessee is a Credit Co-operative society and claimed to have earned interest income of Rs. 16,89,753/- from Fixed deposits and saving bank account maintained with Kadi Nagrik Co-operative Bank, Mehsana Urban Co-Operative Bank, Rajkot Nagarik Co-operative Bank and Kalol Nagarik Co-operative Bank, while the assessee has claimed deduction of Rs. 11,12,839/- u/s 80P in the return of income filed with Revenue. The issue is no more res integra as the Hon'ble Jurisdictional High Court in the case of Surat Vankar Sahakari Sangh Ltd.(supra) and State Bank of India (SBI) (supra) has decided this issue in favour of the tax-payer by holding that interest income received by Credit Co-operative Society from deposits made with Co-operative Bank registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. The Honourable Gujarat High Court made following observations in respect of interest earned from deposits kept with a cooperative bank: Therefore, it is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India not being attributable to the business carried on by the appellant, cannot be deducted under section 80P(2)(a) (i) of the Act. If the appellant wants to avail of the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a cooperative bank and avail of deduction under section 80P(2)(d) of the Act. 5.2 In the case of Surat Vankar Sahakari Sangh Ltd. v Assistant Commissioner of Income-tax [2016] 72 taxmann.com 169 (Gujarat), the Gujarat High Court held assessee-co-operative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from cooperative bank without adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) vide order dated 04.01.2022 has decided the issue in favour of Revenue, but by order in MA dated 26.04.2024(supra), the aforesaid order dated 04.01.2022 was modified by Hon'ble Gujarat High Court, and this issue stood decided in favour of the tax-payer. The orders of Hon'ble Jurisdictional High Court as well of ITAT are placed on record in file. I, thus decide this issue in favour of the assessee that interest income earned from deposits with Co-operative Banks shall be allowed as deduction u/s 80P(2)(d). However, similar directions as were given by Division Bench in the appellate order in the case of Sardar Patel Co-operative Credit Society Limited ( ITA No. 525 & 526/Ahd/2023) are now given by me to the AO to verify that the four entities from whom the interest income is claimed to have been earned by the assessee namely Kadi Nagarik Co-operative Bank, Mehsana Urban Co-operative Bank, Rajkot Nagarik Co-operative Bank and Kalol Nagarik Co-operative Bank are Cooperative Banks which are Co-operative societies duly registered under the Co-operative Societies Act or under the State Act, and to this limited extent I am directed AO to verify the facts before granting relief to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 9. Now, I shall take up appeal in ITA no. 267/Ahd/2024 for assessment year 2020-21 filed by the assessee namely Government Employees Co-operative Credit Society Limited, Bhavnagar before the Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad, which has arisen from the appellate order dated 22-12-2023 vide DIN & Order No. ITBA/NFAC/S/ 250/2023-24/1058989368(1) passed by ld. CIT(A),NFAC, Delhi u/s 250 of the Income-tax Act, 1961, which in turn has arisen from the assessment order dated 12-09-2022 passed by the learned Assessing Officer u/s. 143(3) read with Section 144B of the Income-tax Act, 1961, vide DIN ITBA/AST/ S/143(3)/2022-23/1045409329(1). 10. The grounds of appeal raised by the assessee in Memo of appeal filed with Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad, reads as under: "1. On the facts and in the circumstances of the case as well in law, the (Appeals), NFAC, New Delhi erred in upholding the order of the Assessment Unit, National Faceless Assessment Centre/DCIT Circle 1(1), Bhavnagar ( for the sake of brevity "the AO") passed u/s 143(3) r.w.s. 144B of the Income-tax Act, 1961. 2. On the facts and in the circumstances of the case as well in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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