2022 (1) TMI 351 - AT - Income Tax

Deduction u/s 80P - Receipt of loans and advance given to the employees/non-members - HELD THAT - CIT(A) has relied upon the decision of Hon ble Jurisdictional High Court in the case of CIT Vs S.B.V. Bank Ltd. 2008 (9) TMI 112 - HIGH COURT RAJASTHAN which is a binding precedent. Though the Hon ble Supreme Court had admitted the SLP filed by the assessee in the said case, however, no stay was granted by the Hon ble Supreme Court against the decision of the Hon ble High Court, therefore, so long the decision of the Hon ble High Court is in operation and holds the field, the same is binding on this Tribunal. Hence, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue and we uphold the same. Depreciation @ 10% to building-put in use by the assessee co-operative bank in its day to day work - HELD THAT - There is no dispute that in the return of income, the assessee has claimed ₹ 5.00 lacs being provision for building fund which was disallowed by the A.O. on the ground that this provision is not allowable and secondly it is capital expenditure. The assessee has not disputed the fact that this is a capital expenditure and therefore, the assessee has raised an alternate plea of allowance of depreciation on building which is duly reflected in the balance sheet of the assessee. Since the A.O. is otherwise bound to consider and allow the depreciation on the fixed assets which are eligible for depreciation as per Explanation (5) to Section 32 of the Act, therefore, non-consideration of the claim of depreciation on the part of the A.O. as well as on the part of the ld. CIT(A) is not justified and contrary to the provisions of Section 32 of the Act. This issue of depreciation is to be considered after verifying the eligible assets and the satisfaction of the conditions of Section 32 of the Act being an asset has been brought into existence and used in the business of the assessee or at least ready to use for the business of the assessee. Accordingly, in the facts and circumstances of the case, this issue is set aside to the record of the A.O. to consider and decide the same after giving an opportunity of hearing to the assessee.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961, in respect of interest received on loans and advances to employees.
2. Depreciation on addition to the building account.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80P(2)(a)(i):
Background:
The assessee, a cooperative society, claimed a deduction under Section 80P(2)(a)(i) for interest income amounting to ?5,66,036 received from loans and advances to employees. The Assessing Officer (A.O.) disallowed this deduction, considering the interest income as not arising from business activities with members of the cooperative society.

Arguments by Assessee:
The assessee argued that it is eligible for deduction under Section 80P since it is not a licensed bank but a cooperative society. It cited previous favorable decisions by the CIT(A) for A.Y. 2010-11 and 2012-13, which were not challenged by the department, thus attaining finality. The assessee also referenced the Supreme Court's decision in Citizen Co-operative Society Ltd. Vs ACIT, emphasizing the benevolent nature of Section 80P.

Arguments by Revenue:
The Revenue contended that the interest income was not from regular business activities but from loans to employees who are not members of the cooperative society. The CIT(A) had relied on the jurisdictional High Court's decision in CIT Vs S.B.V. Bank Ltd., which held that interest from loans to employees is not eligible for deduction under Section 80P(2)(a)(i).

Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, emphasizing the binding nature of the jurisdictional High Court's ruling in CIT Vs S.B.V. Bank Ltd. Despite the Supreme Court admitting an SLP against this High Court decision, no stay was granted, making the High Court's ruling binding. Consequently, the Tribunal found no error in the CIT(A)'s order and dismissed the assessee's ground of appeal.

2. Depreciation on Addition to Building Account:
Background:
The assessee claimed ?5.00 lacs as a provision for a building fund, which the A.O. disallowed as it was a capital expenditure. On appeal, the assessee alternatively claimed depreciation on the building, citing Section 32 r.w. Explanation (5) of the Income Tax Act.

Arguments by Assessee:
The assessee argued that the A.O. is duty-bound to allow depreciation even if not claimed in the return of income, as per Explanation (5) to Section 32. The assessee supported this with references to the balance sheet and audit report showing the building as a fixed asset.

Arguments by Revenue:
The Revenue maintained that the claim for depreciation was a fresh claim not made during assessment proceedings and supported the disallowance of the provision for the building fund as capital expenditure.

Tribunal's Decision:
The Tribunal acknowledged that the A.O. should consider depreciation on eligible assets as per Section 32, irrespective of the initial claim. The Tribunal set aside this issue to the A.O. for verification of the asset's eligibility and compliance with Section 32 conditions, directing the A.O. to allow depreciation after due verification.

Conclusion:
The appeal was partly allowed for statistical purposes. The Tribunal upheld the disallowance of the deduction under Section 80P(2)(a)(i) but remanded the issue of depreciation on the building to the A.O. for reconsideration. The Tribunal emphasized adherence to binding judicial precedents and proper verification of claims as per statutory provisions.