2018 (5) TMI 246

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.... 2. A.O. has wrongly disallowed and C.l.T (A) has wrongly upheld the disallowance of deduction claimed by 'A' u/s 80P for the interest on FDR earned by it on FDR kept with Bombay Mercantile Co Operative Bank Limited of Rs. 1,31,01,754/- and also saving bank interest of Rs. 22,163/- and also has wrongly upheld that interest on FDR kept with Bombay Mercantile Co Operative Bank Limited is 'Income from Other Sources' while 'A' claiming it is a business income." 5. The A.O. made disallowance of deduction under section 80P(2)(d) being interest on FDR amounting to Rs. 1,34,65,081/- and S.B. interest of Rs. 22,163/- by treating them as income from other sources. The assessee took the plea that income of the assessee from Bombay Mercantile Cooperative Bank Ltd., is exempt under section 80P(2)(d) of the I.T. Act. The assessee filed written submissions before Ld. CIT(A) which is reproduced in the appellate order in which the assessee explained that assessee is a Cooperative Urban Thrift & Credit Society engaged in providing credit facilities to its Members. Only a Member can get credit facilities say up to Rs. 1.50,000/- after providing personal surety of the Members. Return was filed de....

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....assessee are identical. Therefore, interest income on such funds deposited in the Banks are eligible for deduction under section 80P(2)(a)(i) of the I.T. Act. The assessee invested surplus funds in FDR and earned interest. These funds were always available to assessee for utilisation for providing credit facilities to its Members. The A.O. failed to note that income on FDR on which interest income is accrued have all been pledged with the same bank and O.D. facility is obtained, on which, interest have been paid. The O.D. facility, thus, obtained were used for providing credit facilities to its Members and the FDR invested was of Rs. 19.62 crores (On Asset side). It was submitted that Bombay Mercantile Cooperative Bank Ltd., does not fall within the purview of TDS provisions. Certificate to that effect was filed. The O.D. against FDs are utilised by the assessee for the purpose of its business for running Thrift Credit Society for payment to its Members. Bombay Mercantile Cooperative Bank Ltd., is a Cooperative Bank and therefore, interest income received from the fixed deposits placed with it also quantified for deduction under section 80P(2)(d) of the I.T. Act. The assessee relie....

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....iety was paying interest. The other decision relied upon by A.O. are not applicable. 5.2. The Ld. CIT(A) quoted the order of ITAT, Delhi Bench in the case of same assessee for A.Y. 2008-2009 (supra), but, tried to distinguish the said decision and ultimately held that the earlier order of the Tribunal is distinguishable on facts. It was held that facts of the case in the case of Totgar's Cooperative Sale Society Ltd. vs. ITO (supra) are similar to the case of the assessee. It was noted that as per Section 80P(4) the provisions of this Section shall not apply in relation to any Cooperative Bank. The assessee deposited the money with Bombay Mercantile Cooperative Bank Ltd., which has filed its return as a Bank and not as Cooperative Society. Therefore, no benefit is allowable to assessee. The Ld. CIT(A), therefore, held that assessee is not entitled for deduction under section 80P(2)(d) of the I.T. Act and dismissed the appeal of assessee. 6. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that issue is identical as have been decided by ITAT, Delhi Bench in the case of the assessee for A.Y. 2008-2009 (supra) in which t....

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....ed deduction under section 80P of the I.T. Act on interest income on FDR with Bombay Mercantile Cooperative Bank Ltd., and was taxed. The Ld. CIT(A), however, deleted the addition and the Tribunal dismissed the appeal of Revenue. The assessee placed sufficient material before the authorities below to prove that it has invested surplus funds in FDR and earned interest. These funds were available to assessee for utilisation for providing credit facilities to its Members. The interest on FDR have been pledged with the same Bank and O.D. facility have been obtained. The O.D. facility obtained were used for providing credit facilities to its Members. The assessee also filed Certificate that Bombay Mercantile Cooperative Bank Ltd., is a Cooperative Society. The findings of the Tribunal in the case of assessee for A.Y. 2008- 2009 have already been reproduced above in which it was held that Bombay Mercantile Cooperative Bank Ltd., have been assessed as a Cooperative Society and its income was allowed to be exempt under section 80P(2)(a)(i) of the I.T. Act by the Mumbai Bench. It was, therefore, held that fixed deposits placed with this Bank falls within the exemption granted by Section 80P....

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..... The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act. 8.1. In the said decision, the Judgment of Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd., (supra) have been considered by the High Court and it was held that the said decision is confined to facts of that case. The appeal of assessee was allowed. The Ahmedabad Bench of the Tribunal in the case of Arbuda Credit Co-op. Society Ltd., vs. ACIT (supra), followed the Order in the case of same assessee for A.Y. 2008-2009 and decision of the Hon'ble Karnataka High Court above and decided the issue in favour of the assessee and held that assessee is eligible for deduction under section 80P(2)(a)(i) of the I.T. Act for the interest income earned on unutilized idle funds kept for business purposes of the Society being deposited with Banas Bank. The Ld. CIT(A) in the case of the same assessee for A.Y. 2013-2014 vide order dated 15.02.2018 following the order of the Trib....