TaxTMI 
TaxTMI 
2014 (5) TMI 1100
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.... filed its return of income on 30-09-2009 declaring NIL income after claiming deduction of Rs. 6,67,947/- under Chapter VIA of the Income Tax Act. 3.1 During the course of assessment proceedings the Assessing Officer observed from the annual report filed by the assessee society that it is having gross receipt of Rs. 73,88,660/-. Despite being asked by the Assessing Officer to file tax audit report the assessee did not file the said tax audit report as required u/s.44AB of the I.T. Act. According to the Assessing Officer no tax audit report under the Cooperative Societies Act was also filed before him. Further, the assessee did not file the copies of challans of TDS paid into Government account although it filed the ledger account of commission which shows payment of commission of Rs. 19,13,706/-. The Assessing Officer, therefore, disallowed the same u/s.40(a)(ia) of the I.T. Act. Similarly, the commission paid to MSEB amounting to Rs. 2,27,109/- was also disallowed by the Assessing Officer since assessee did not furnish the audit report either u/s.44AB or under the Cooperative Societies Act. Rejecting the claim of deduction u/s.80P(2)(c)(i), the Assessing Officer determined the ....
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.... the commission paid Date / month of payment Amount of TDS paid as per challan April, 2008 16/5/2008 8,441 May, 2008 27/8/2008 3,986 June, 2008 27/8/2008 8,959 July, 2008 27/8/2008 8,633 August, 2008 25/11/2008 8,549 September, 2008 25/11/2008 7,310 October, 2008 25/11/2008 8,482 November, 2008 22/1/2009 9,657 December, 2008 22/1/2009 9,027 January, 2009 19/3/2009 9,667 February, 2009 19/3/2009 8,165 March, 2009 12/6/2009 8,619 Total 99,495 4.3 It was claimed that wherever applicable the assessee society has deducted and paid TDS in Government Treasury as required u/s.194H for all the months of the year under appeal and therefore the Assessing Officer was not justified in disallowing the said commission debited to the profit and loss account. It was also submitted that addition u/s.40(a)(ia) shall increase the income of the assessee under the head 'business income' which is eligible for deduction u/s.80P. Therefore, on this account also, the addition is not justified. For this proposition the decision of the Pune Bench of the Tribu....
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....that the A.O. is not justified in making addition of Rs. 19,13,706/- to the income returned by the appellant society. The said addition of Rs. 19,13,706/- is therefore deleted. The A.O. is directed accordingly. Ground No.3 is allowed". 5. So far as the addition of Rs. 2,17,109/- on account of MSEB commission is concerned it was argued that the total gross income earned by the assessee society is Rs. 73,88,660/- whereas the expenditure incurred is Rs. 67,53,713/- which is 91.40% of the income and hence net income from MSEB commission is only Rs. 19,531/- after considering proportionate expenses of Rs. 2,07,578/- @91.40%. It was argued that substantial deposit has to be kept with MSEB for earning commission income and also staff of the society is to be employed and various administration expenses are also to be incurred for earning MSEB commission income. It was accordingly argued that even if it is considered that the said net income of Rs. 19,531/- is not eligible for deduction u/s.80P, the income of cooperative society is eligible for deduction u/s.80P(2)(c) to the extent of Rs. 50,000/- and hence the taxable income shall remain NIL. 6. The Ld.CIT(A) forwarded the above subm....
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.... and Credit Society Ltd. Vs. ITO (2006) 287 ITR 40 and State Bank of India, Staff Co-Op. Society Vs. ITO 234 ITR 104 has held as under: "The term" co-operative society" preceding the words "carrying on the business of banking" refers to co-operative society which need not necessarily be a banking company or a company to which the provisions of Banking Regulation Act, 1949 are made applicable. A Co-operative society which is lending money to its members or accepting deposits or raising loans from financial or banking institutions and advancing the same to its members, amounts to doing the business of banking." "We feel that the term" a co-operative society engaged in carrying on business of banking" refers to a particulars kind of co-operative society and it need not be a banking company or a company to which the provisions of Banking Regulation Act are made applicable." In view of the above facts and discussion and following the ratio laid down by the decision of Hon'ble Madras High Court and Bombay High Court referred to above, I am of the considered view that the A.O. is not justified in making addition of Rs. 2,27,109/- by treating the gross commission as i....
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....the TDS of Rs. 52784/- pertains to A.Y.2009-10 and balance TDS of Rs. 29,519/- pertains to A.Y.2008-09. The assessee paid commission of Rs. 19,13,706/- on which TDS claimed to be deducted at Rs. 1,58,678/-. The assessee now produced the copies of challans before appellate proceedings which he failed to produce during assessment proceedings. The assessee also failed to furnish the copies of Form No.26Q of relevant quarters of F.Y.2008-09 relevant to A.Y.2009- 10 in order to match the TDS made with commission paid. Since the TDS was not made and paid fully in to Government Treasury, the disallowance made u/s.40a(ia) was justified and deserves to be sustained. 9.1 He submitted that the Ld.CIT(A)-I, Nashik has erred in his version that the MSEB Commission at Rs. 2,27,109/- cannot be taxed at gross figure without allowing expenditure towards the same and no separate record can be maintained in respect of said expenditure. He has entirely relied upon the assessee's contention with regard to eligibility for deduction u/s.80P(2)(a)(i) of the Act being part of banking activity of the said co-operative bank. Thus, the CIT(A)-I, Nashik has not appreciated the facts of the case with regard ....
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....out understanding the ratio laid down by the said decision. "Ground No.2 raised by the Revenue is that the CIT(A)-I, Nashik has erred in deleting addition of Rs. 2,27,109/- which was made on account of MSEB commission. The Hon'ble Bombay High Court, Aurangabad Bench, in the case of CIT, Nashik Vs. Jalgaon District Central Co-Op. Bank in Tax Appeal No.20 of 2008, order dated 8th July, 2011, has held that the commission received for collecting electric bills from customers on behalf of/as agent of Government is banking activity eligible for deduction u/s. 80P(2)(a)(i). This proposition of law is also supported by decision in the case of Electro Urban Co-Op. Cr. Society Ltd. Vs. ITO 70 TTJ 441 (Cal). It is also worth noting here that in the case of ITO Ward 1(4) Vs. Niphad Nagari Sahakari Patsanstha Ltd., ITA No. 1336/PN/2011, dated 31/7/2013, the Hon'ble ITAT, Pune in para 1 1.3, page No. 14 of the order has laid down as under: "We find the Pune Bench of the Tribunal in the case of Mahavir Nagari Sahakari Patsanstha Ltd. reported 74 TTJ 793 (Pune) has held that credit society which is carrying on business of banking activity and providing credit fac....
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....e CIT(A) has held that the assessee credit society is eligible for deduction u/s.80P(2)(a)(i) and the Revenue is not in appeal against the said observation of the CIT(A). Therefore, the assessee credit society is eligible for deduction u/s.80P(2)(a)(i). 11.2 Now the question that arises is as to whether the addition if any sustained u/s. 40(a)(ia) is eligible for deduction u/s.80P(2)(a)(i). In our opinion, the answer is in the affirmative. We find the Hon'ble Gujarat High Court in the case of ITO Vs. Keval Construction reported in 354 ITR 13 has held that when any disallowance u/s.40(a)(ia) of the Act is made it will increase the business income of the assessee and in case the assessee is eligible for deduction u/s.80IB(10) the entire profit will qualify for deduction u/s.80IB(10). Similar view has been taken by the Pune Bench of the Tribunal in the case of Pharande Developers Vs. ITO and vice versa vide ITA Nos. 715/PN/2009 and 175/PN/2011 order dated 25- 06-2013 for A.Yrs. 2005-06 and 2006-07 respectively. The operative portion of the order of the Tribunal reads as under : "22. In our considered opinion, the stand of the assessee is fully covered by the judgement of t....