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TMI Blog2024 (8) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome received by assessee from saving bank account maintained with Axis Bank - As the same shall not be allowed as deduction, keeping in view decision of Hon ble Supreme Court in the case of Totgar [2010 (2) TMI 3 - Supreme Court ] as well decision of Sardar Patel Co-operative Credit Society Limited[supra]. The assessee has claimed that it has not invested surplus funds in its bank account, but there is no evidence to support its contentions. The appeal of the assessee is partly allowed as indicated above. - Shri Ramit Kochar, Accountant Member For the Assessee : Shri Pradeep G Tulsian, AR For the Revenue : Shri Sanjay Jain, Sr. D.R. ORDER This appeal in ITA No. 612/Ahd/2024 for assessment year 2017-18 is filed by the assessee before Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad, which has arisen from the appellate order dated 16-10-2023 in DIN Order No. ITBA/APL/S/250/2023-24/1057104725(1) passed by ld. Commissioner of Income-Tax(Appeals),Addl/ JCIT(A),2 Coimbatore u/s 250 of the Income-tax Act, 1961, which in turn has arisen from the assessment order dated 17- 12-2019 passed by learned Assessing Officer u/s. 143(3) of the Income-tax Act, 1961(Order No. ITBA/AST/S/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dismissal of appeal of the assessee. Thus, the assessee pleaded bonafide in filing this appeal belatedly with ITAT. The Ld. D.R. did not oppose the condonation application but submitted that there is a lacuna in the system wherein the orders of Ld. CIT(A) could not be retrieved/available on record under the faceless scheme, which led to dismissal of the rectification application u/s 154 filed by the assessee, I have considered the contention of both the parties, and I am of the considered view that the assessee bonafidely filed its rectification application u/s 154 of the 1961 Act with ld. CIT(A) seeking to correct mistake apparent from records in the appellate order dated 16.10.2023 passed by ld. CIT(A) instead of filing appeal with ITAT. The assessee has shown reasonable and sufficient cause for filing this appeal belatedly with ITAT. The assessee has ultimately filed appeal with ITAT even before dismissal of its rectification application u/s 154. Under these facts and circumstances, I am of the considered view that the assessee has shown reasonable and sufficient cause in filing this appeal belatedly with ITAT beyond the time stipulated u/s 253(3), and delay needs to be condon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible under Section 80P of the Act. As regards interest derived from loans given to staff, the same is also eligible for deduction under Section 80P of the Act as the staff are the members of Co-operative Credit Society as they are employees of Axis Bank. Thus, the Assessing Officer as well as the CIT(A) was not right in rejecting the deduction under Section 80P of the Act. 3) CIT (A) has not allowed the deduction of Rs. 32,755/- of saving bank interest received from axis bank. According to CIT(A) the twin test of income attributable to activity and mutuality principle has to be applied. While the first limb is satisfied, interest accrued attributable/incident to the specified activity, the second limb is not fulfilled. The Axis bank is not a member of the appellant society. But he failed to appreciate that the saving bank account is not an investment and the interest earned on saving bank accounts is the assessee's day to day activity and interest earned is an incidental to the same and hence it is attributable to the business activity. CIT(A) has also ignored the fact that Honorable ITAT Ahmedabad, has already allowed the same u/s 80P while passing an order for the AY 2014-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce in any state for the registration of co-operative societies. 7) According to the above, AO while passing the order u/s 143(3) has failed to consider that co- operative bank falls within the definition of the term cooperative society. Thus, interest received by a co-operative society from a co-operative bank is nothing, but interest received from a co-operative society and eligible for deduction u/s 80P(2)(d). 8) Learned A.O is not justified in denying the deduction of Rs. 1,19,485/- (Rs. 86730 on FD and Rs. 32755/- on saving bank interest) u/s 80P of the I.T Act and consequently erred in making addition of Rs. 1,19,485/- to the total income of the assessee. 9) The addition made by the AO is bad in law and therefore, requires to be quashed. 10) That on the facts and in the circumstances of the case, the ld. Assessing Officer grossly erred in charging interest u/s 234A and 234B, of the Income Tax Act. 11) Further learned AO also initiated penalty proceedings u/s 270A stated that Assessee has underreported the income whereas this is not the case of underreporting of income. It is based on the AO opinion and deduction has been reduced to that extent. No penalty proceedings should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which stood dismissed by Ld. CIT(A) by holding that interest received from FD in Axis Bank to the tune of Rs. 86,730/- is not allowable. Although as per the grounds of appeal and statement of fact(SOF) filed by the assessee before ld. CIT(A), the assessee has stated that the said interest on FDR to the tune of Rs. 86,730/- was received from Ahmedabad District Co-Operative Bank Ltd. The assessee also stated that the assessee has maintained Loan CC account(against FDR) with the Ahmedabad District Co-operative Bank Limited and paid interest of Rs. 88,956/- on the same. The assessee stated that the facts of the decision of Hon ble Supreme Court in the case of Totgar(supra) were different. The ld. CIT(A) dismissed the appeal by holding that the interest income from FDR from Axis Bank which is a scheduled bank is not deductible u/s 80P(2)(d)(while the claim of the assessee was that interest income on FDR were earned w.r.t. FDR maintained by the assessee with Ahmedabad District Co-operative Bank and not with Axis Bank). Further, the ld. CIT(A) held that no deduction u/s 80P(2)(i) shall also be allowed as the Axis Bank is not member of the society. As there was apparently mistake on the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee earned interest on FDR maintained with Axis Bank despite being clearly spelled out by the assessee in Grounds of Appeal/SOF filed before ld. CIT(A), and hence the same is not allowable as deduction u/s 80P as the Axis Bank is a scheduled bank and is also not member of the assessee s credit co-operative society. The assessee filed rectification application u/s 154 before ld. CIT(A),and the said application stood dismissed on the ground that the appellate order u/s 250 originally passed by ld. CIT(A) on 16.10.2023 is not retrievable/available on record. The ld. Sr. DR stated before the Bench that this is a deficiency in the system under faceless regime, that once the appellate orders are passed by ld. CIT(A), it became non retrievable/not available on record. Be that it may be so, there is no reason why the assessee suffers owing to deficiency in the system of the department, and the assessee s cannot be made to run from pillar to post and incur costs and time owing to deficiency in the system of department. The Department and its officers are Authorities who must act diligently so that the tax-payers do not suffer un-necessary and un-called for difficulties, for no fault of them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2016-17(immediately preceding assessment year) has followed the decision(s) of Hon ble Gujarat High Court in the case of State Bank of India v. CIT, reported in (2016) 389 ITR 578(Guj.) and Surat Vankar Sahakari Sangh Limited v. ACIT, reported in (2016) 72 taxmann.com 169(Guj). The Tribunal in ITA No 1404/Ahd/2019 in assessee s own case for assessment year 2016-17 allowed the relief to the assessee, by holding as under : 5.1 The issue for consideration before us is whether the assessee is eligible to claim deduction on interest earned from Co-Operative Banks u/s 80P(2)(d) of the Act. The Hon ble Gujarat High Court in the case of State Bank of India Vs. CIT (2016) 389 ITR 578 (Guj), held that 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 depositi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stered under the Co-operative Societies Act or under the State Act and to this limited extent we are directing AO to verify the facts before granting relief to the assessee. While allowing the claim of the assessee, we note that principles of res judicate are not applicable to the income tax proceedings, but principles of consistency is to be maintained. Reference is drawn to the decision of Hon ble Supreme Court in the case of Radhasoami Satsang v. CIT, reported in (1992) 193 ITR 321(SC). The assessee succeeds on this issue in the manner as indicated above. We order accordingly. The 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) vide order dated 04.01.2022 has decided the issue in favour of Revenue, but by order in MA dated 26.04.2024 in R/Special Civil Application No. 20585 of 2019, 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. I, thus decide this issue in favour of the assessee that interest income earned from deposits with Cooperative Banks shall be allowed as deduction u/s 80P(2)(d) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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