2017 (3) TMI 1795 - AT - Income Tax

Tribunal confirms cooperative society's deduction eligibility under Section 80P

Asstt. Commissioner of Income Tax Officer 1 (1) Bhopal Versus M/s M.P. State Cooperative Housing Federation Society And Vice Versa

The Tribunal upheld the CIT(A)'s decision, confirming the cooperative society's eligibility for deduction under Section 80P(2)(a)(i) on interest income ... Deduction u/s 80P - interest income from fixed deposits with the Banks and interest from Savings bank Account - HELD THAT:- As relying on own case [2012 (2) TMI 689 - ITAT INDORE] and MALAD SAHAKARI BANK LTD., MUMBAI [2011 (9) TMI 1195 - ITAT MUMBAI] assessee was eligible for deduction under section 80-P(2)(a)(i) of the Act on the interest income from fixed deposits with the Banks and interest from Savings bank Account. We, therefore, confirm the order of the learned CIT(A) and dismiss the grounds of appeal of the Revenue. Issues Involved:1. Deletion of addition of Rs. 1,15,29,031/- by CIT(A) regarding eligibility for deduction under Section 80P of the Income Tax Act, 1961.2. Depreciation disallowance of Rs. 47,339/- on land and building.Detailed Analysis:Issue 1: Deletion of Addition of Rs. 1,15,29,031/-1.1 The assessee, a cooperative society, filed its return for the Assessment Year 2013-14, declaring a total income of Rs. 41,90,000/-. The primary activity of the assessee is providing credit facilities in the form of housing loans to its members. The assessee claimed a deduction of Rs. 6,57,59,166/- under Section 80P of the Income Tax Act. However, the Assessing Officer (AO) added an amount of Rs. 1,15,29,031/- to the income, which included interest from IDBI Bank, Bank of Baroda, PNB Bank, and savings bank account, stating that this interest is not covered by Section 80P(2)(a)(i) of the Act.1.2 The CIT(A) deleted the addition, holding that the interest earned on deposits with bank FDRs and saving bank accounts is an integral part of the business activity of providing credit facilities to its members and, therefore, covered under Section 80P(2)(a)(i) of the Act. This decision was based on various Tribunal decisions favoring the assessee, including a previous Tribunal decision dated 16.5.2008 in ITA No. 41/Ind/2007.1.3 The Revenue appealed against the CIT(A)'s order. The Revenue argued that since the interest income was earned from commercial banks that are not members of the assessee society, it should not be eligible for deduction under Section 80P(2)(a)(i). The Revenue also noted that the matter is sub-judice before the Hon'ble High Court of Madhya Pradesh.1.4 The assessee's counsel supported the CIT(A)'s decision, arguing that the Tribunal had previously decided the issue in favor of the assessee.1.5 The Tribunal considered the rival submissions and found that the decision of the Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. (2010) was not applicable to the present case. The Tribunal noted that the facts of the present case are distinguishable as the assessee did not invest surplus funds in short-term deposits but earned interest from fixed deposits and savings bank accounts. The Tribunal also referenced decisions from the ITAT Indore Bench and the 'B' Bench of the ITAT Mumbai, which supported the assessee's eligibility for deduction under Section 80P(2)(a)(i).1.5.1 The Tribunal upheld the CIT(A)'s order, confirming that the assessee was eligible for deduction under Section 80P(2)(a)(i) on the interest income from fixed deposits and savings bank accounts. Consequently, the grounds of appeal by the Revenue were dismissed.Issue 2: Depreciation Disallowance of Rs. 47,339/- on Land and Building2. The assessee's appeal regarding the disallowance of Rs. 47,339/- for depreciation on land and building was dismissed. The Tribunal noted that this ground was not raised before the CIT(A). Given the small quantum and the facts of the case, the Tribunal dismissed this ground but allowed the possibility for the assessee to raise it in other years where the quantum is higher.Conclusion:3. Both the appeal of the Revenue and the appeal of the assessee were dismissed.4. The order was pronounced in open Court on 27th March, 2016.