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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 ..... he Co-operative Societies Act or under the State Act, and to this limited extent directed AO to verify the facts before granting relief to the assessee. Disallowability of expenses incurred against commission and other income - Since, there is prima-facie alleged discrepancy in the disallowance by the AO u/s 80P itself to the tune of Rs. 11,12,839/- as against the claim of the assessee that it earned interest income of Rs. 16,89,753/- from the amount deposited in FDR and saving bank with Co-operative Banks, it became necessary to verify this aspect also. Deduction u/s 80P(2)(d) - As observed that one of the plea taken by Revenue that the assessee has claimed deduction u/s 80P(2)(a)(i) and now deduction u/s 80P(2)(d) cannot be allowed to the assessee as the assessee has not filed revised return of income and time for filing revised return of income has already expired, and in this context it will be relevant and suffice here to refer to department circular No. 14(XL-35) dated 11.04.1955. Reference is also drawn to the decision of Hedrick and Struggles Inc [ 2023 (8) TMI 159 - DELHI HIGH COURT] The appeal of the assessee is allowed as indicated above. We order accordingly. - Shri R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(i) and 80P(2)(d) of the Act is, being without jurisdiction, unwarranted of facts, arbitrary, perverse, bad in law, illegal and invalid, liable to be stuck down. 4. The appellant further reserves its right to add, alter, amend or modify any of the aforesaid grounds before or at the time of hearing of an appeal. 3.2 The assessee has also raised additional grounds of appeal vide application filed with ITAT, Ahmedabad Bench, Ahmedabad, on 22.04.2024(filed on 23.04.2024), which reads as under: While preparing the case, we realized that thought the AO has only disallowed the claim of deduction u/s 80P however the assessee has taken ground of disallowance of expense against commission income before Ld. CIT(A) and Ld. CIT(A) has disallowed the expense so incurred against commission income and hence we request your honours to allow us to take following additional grounds. The CIT Appeals has erred in law and in facts in deciding on an issue which was never subject matter of dispute between Assessee and Ld AO in the Assessment Order. The Ld CIT Appeals has erred in law and in facts in disallowing the expense incurred to the tune of Rs. 3,98,777/- against the Commission Income from UGVCL 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon ble Supreme Court in the case of M/s. Totgar Co-operative Sale Society reported in 322 ITR 283(SC), and the addition of Rs. 11,12,839/- was made by the A.O. to the income of the assessee by denying the deduction u/s. 80P(2)(a)(i) of the Act. 5. Aggrieved, the assessee filed first appeal with ld. CIT(A). The assessee vide grounds of appeal and statement of facts filed in Form No. 35 before ld. CIT(A) claimed that the assessee is entitled for deduction u/s 80P(2)(d) with respect to interest income earned from FD kept with Co-operative banks and also claimed further that the A.O. has not allowed deduction with respect to expenses incurred for earning commission and other income. The assessee filed written submission before the Ld. CIT(A). The assessee submitted Copy of Registration Certificate as a Credit Society with Jilla Registrar of Co-Operative Society, Mehsana and Copy of Balance Sheet and Profit and Loss account as on 31.03.2017, before ld. CIT(A). The assessee stated that the interest income of Rs. 16,89,753/- was received from FDR and Saving Bank Account in Kadi Nagarik Co-operative Bank, Mehsana Urban Co- Operative Bank, Rajkot Nagarik Co-operative Bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of savings and providing credit facilities to the members of the Society. It was submitted that the assessee is not engaged in any other activity except giving credit facility to its members, and the income generated is mainly on account of differential rate of amount of deposits received from members and the amount of loans given to its members. The assessee submitted that the income generated is only from contribution received from the members and it does not deal in any way with any persons other than the members. During the intervening period, the idle money collected by the assessee is deposited with various Co-operative Banks for the purpose of earning interest. Thus, it was submitted that the deposits of amount with the Banks are, therefore, incurred during the course of business and part of activities of the assessee. The assessee also relied upon certain judicial pronouncements in its submissions before ld. CIT(A). Thus, the assessee submitted that the assessee has invested in Co-operative Banks FDR s and earning of income is not from surplus funds but part of the business activity, and claim was made for allowing deduction u/s 80P. The Ld. CIT(A) relied upon decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a in ITA No. 442/Ahd/2022 for assessment year 2018-19, vide appellate order dated 17.03.2023., in which the Tribunal has held that the interest derived by Credit Co-operative Society from deposits made with Co-operative Society Bank shall be eligible for deduction u/s 80P(2)(d). The assessee has also relied upon other cases in which similar view has been taken by the Courts/Tribunal including the decision of Hon ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. v. ACIT reported in (2016) 72 taxmann.com 169(Guj HC) and State Bank of India v. CIT reported in (2016) 72 taxmann.com 64(Guj HC). 6.3 The Sr. Ld. D.R. on the other hand relied upon the decision of Hon ble Gujarat High Court in the case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v. ACIT, reported in (2022) 140 taxmann.com 602(Guj. HC) to contend that the Hon ble Jurisdictional High Court has decided this issue in favour of Revenue, and hence interest income received by the assessee from deposits made with Co-operative Banks shall be chargeable to income-tax. At this point, the Ld. Counsel for the assessee submitted that the aforesaid judgment and order of the Hon ble Gujarat High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee., by holding as under(ITA No. 525 526/Ahd/2023) :- 7. We have considered rival contentions and perused the material on record. We have observed that the assessee is Co-operative Credit Society engaged in providing credit facility to its members. The case of the assessee was selected by Revenue for framing limited scrutiny assessment under CASS. *** 7.2 The assessee has also claimed deduction u/s 80P(2)(d) of Rs. 1,62,24,334/- towards interest earned from deposits made with Co-operative banks, detailed hereunder: Sr. No. Name of Bank Interest receipt (Rs.) 1. Interest income from Mehsana Urban Co-op. Bank Ltd. 1,59,13,246/- 2. Interest income from Kukarwada Nagrik Bank Ltd 3,02,706/- 3. Interest income from Mehsana Dist. Bank 159/- 4. Interest Income from Vijapur Nagarik Sahakari Bank Ltd. 31.168/- The AO has denied the deduction u/s 80P(2)(d) to the assessee by following the decision of Hon ble Karnataka High Court in the case of PCIT v. Totgar Co-operative Sale Society(supra), while ld. CIT(A) had allowed the deduction by following the decision of ITAT, Ahmedabad Bench in the assessee s own case for assessment year 2016-17. The tribunal while allowing the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn), the Karnataka High Court has held that the interest income earned by a cooperative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 5.5 Respectfully, following the decision of Honourable High Court of Gujarat and other cases cited above, in our view, interest earned by the assessee on surplus held with cooperative banks would be eligible for deduction under Sec.80P(2)(d) of the Act. 6. In the result, the appeal of the revenue is dismissed. Respectfully following the aforesaid decision of ITAT, Ahmedabad Bench (which has followed the decision of jurisdictional High Court), in assessee s own case, for assessment year 2016-17 which is immediately preceding year, and in order to maintain consistency, we allow the claim of the assessee for deduction u/s 80P(2)(d) with respect to interest income earned from Co-operative Banks. However, none of the authorities below have given a finding that these four entities from whom the interest income is earned by the assessee are Co-operative Banks which are co- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contentions of the assessee by verifying the assessment records, and if the AO while framing assessment has not considered this disallowance of this expenses, then the ld. CIT(A) could not have confirmed disallowance of expenses incurred in earning commission and other income, without giving notice of enhancement to the assessee, which as is emerging from the records before me, was not given by ld. CIT(A), and in that scenario, the disallowance made by the ld. CIT(A) towards disallowance of expenses incurred for earning of commission and other income shall stand quashed. Since, there is prima-facie alleged discrepancy in the disallowance by the AO u/s 80P itself to the tune of Rs. 11,12,839/- as against the claim of the assessee that it earned interest income of Rs. 16,89,753/- from the amount deposited in FDR and saving bank with Co-operative Banks, it became necessary to verify this aspect also. I have observed that one of the plea taken by Revenue before me is that the assessee has claimed deduction u/s 80P(2)(a)(i) and now deduction u/s 80P(2)(d) cannot be allowed to the assessee as the assessee has not filed revised return of income and time for filing revised return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id grounds before or at the time of hearing of an appeal. 11. Similar issue as to allowability of deduction u/s. 80P(2)(d) of the Act w.r.t. to the interest income received by the Credit Co-operative Society from the Co-operative bank has also arisen in this appeal in ITA No. 267/Ahd/2024 for assessment year 2020-21, which had arisen in ITA No. 135/Ahd/2024 for assessment year 2017-18, and the said appeal in ITA No. 135/Ahd/2024 has been adjudicated by me in the preceding para s of this order and my decision in ITA No. 135/Ahd/2024 shall apply mutatis mutandis to this appeal filed by this assessee in ITA no. 267/Ahd/2024, and thus, I hold that the assessee is entitled for claim of deduction with respect to interest income earned from the FDR s and deposits with Co-operative bank as was decided by me in ITA No. 135/Ahd/2024 in the preceding Para s of this common order. The AO shall make similar verification as were directed by me in ITA no. 135/Ahd/2024 i.e. whether the entities from whom the assessee has claimed to have earned interest income against which deduction u/s 80P(2)(d) is now claimed, are duly registered under the Cooperative Societies Act or under the State Act, before ..... X X X X Extracts X X X X X X X X Extracts X X X X
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