TaxTMI 
TaxTMI 
2024 (4) TMI 1161
X X X X Extracts X X X X
X X X X Extracts X X X X
....als are common, both these appeals were heard together and are disposed of by this Common Order. First, we shall take up appeal of the Revenue in ITA no. 525/Ahd/2023 for assessment year 2017-18. ITA No. 525/Ahd/2023-Assessment Year:2017-18 2. The Revenue has raised following grounds of appeal in Memo of Appeal filed with the Income Tax Appellate Tribunal, Ahmedabad (hereinafter called "the tribunal") w.r.t. Appeal in ITA no. 525/Ahd/2023 for the assessment year 2017-18 :- "(a) The Ld. CIT (A) has erred in law and on facts in allowing the deduction of Rs. 32,449/- claimed u/s 80P(2)(a)(i) of the IT Act in respect of the interest received from the Nationalized Banks. (b) The Ld. CIT (A) has erred in law and on facts in allowing the deduction of Rs. 1,62,24,334/- claimed u/s 80P(2)(d) of the IT Act in respect of the interest received from the Co-operative Banks. (c) The Ld. CIT (A) has erred in law and on facts in allowing the deduction of u/s 80P(2)(a)(i) of the IT Act without considering the provisions of section 56 of the IT Act. (d) The appellant craves leave to add, alter and/or to amend all or any of the ground before the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to the income of the assessee by the AO and deduction u/s 80P(2)(a)(i) of the 1961 Act was denied to the assessee. Further, the AO observed that in view of decision of Hon'ble Supreme Court in the case of M/s Totgar Co-operative Sale Society (2010) 322 ITR 283 (SC), the income earned from surplus invested in short term deposits and securities is to be brought to tax under section 56 of the Act and hence the addition was made by the AO by denying the deduction under section 80P(2)(a)(i) of the Act while bringing the same as income chargeable to tax under section 56 of the Act to the tune of Rs. 32,449/-. Disallowance out of deduction under section 80P(2)(d) of the Act. 3.3 The AO further observed during assessment proceedings that the assessee has received interest income of Rs. 1,62,24,334/- from Co-operative Banks, which was claimed as deduction u/s 80P of the 1961 Act, as 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing that its claim for deduction under section 57 of the Act in respect of the proportionate expenses as decided by the Hon'ble Karnataka High Court in the case of Totgar Cooperative Sale Society Ltd. v. ITO (2015)231 taxman 794(Kar.),and also per decision of ITAT, Ahmedabad in the case of Kalol Peoples Cooperative Credit Society Limited v. CIT-4, Vadodra in ITA No. 2229/Ahd/2017 and it was submitted that the claim for deduction for proportionate expenses u/s 57 is to be allowed as under:- Sr. No. Particulars Amount 1. Gross Receipts as per P & L a/c. 4,26,45,889/- 2. Gross income as per Computation of income 2,19,39,346/- 3. Expense claimed from gross receipts (1-2) out of total expenses of Rs. 3,74,95,389/- debited in P & L account 2,07,06,543/- 4. Interest on investment with co-op banks 1,62,24,334/- 5. Proportionate expenses available as deduction u/s. 57 of the I.T. Act. 20706543*(16224334/42645889) 78,77,661 6. Income from other sources (4-5) 83,46,673/- 7. Deduction u/s 80P(2)(d) 83,46,673/- 3.6 The assessee also submitted that the assessee is entitled for aggregate deduction under sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g as under:- "5. I have carefully perused the materials on record. The first issue in this appeal is regarding disallowance out of deduction claimed u/s 80(2)(d) of the I.T. Act. I find this issue to be squarely covered in favour of the assessee by the decision of ITAT in assessee's own case for the Assessment Year 2016-17 vide ITA No. 1404/Ahd/2019. The ITAT deleted the disallowance with the following finding: "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 co-operative 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. 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 in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....own case in ITA No. 1723/Ahd/2012 along with C.O. No. 161/Ahd/2012 for assessment year 2009-10 as well for assessment year 2010-11 in ITA No. 2941/Ahd/2013, by holding as under:- "7. The other issue raised for consideration is disallowance out of deduction claimed u/s 80(2)(a)(i) of 1.T. Act. On perusal of the record, I observe that the A.O. has concluded the assessment stating "The assessee has wrongly claimed deduction to the extent of interest income earned from above bank/institution during the year which comes to Rs. 32,449/-. The interest earned from the bank/institution as enumerated above which inter-alia has claimed as deduction u/s 80P of I.T.Act, is not eligible for such deduction. Therefore, the deduction claimed by the assessee to the extent of Rs. 32,449/- is disallowed treating the same as income u/s 56 of I.T. Act and added to the income declared for the year under consideration." 7.1 Again, I find this issue of the appellant to be squarely covered in favour of the appellant by the decision of ITAT in assessee's own case for the Assessment Year 2009-10 vide ITA No. 1723/Ahd/2012 Along with C.O. No. 161/Ahd/2012 hol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld. DR opened argument before the Bench and submitted that the assessee is a Cooperative Credit Society, and the assessee has claimed deduction under section 80P(2) of the Act which was denied by the AO but allowed by ld. CIT(A). The ld. DR submitted that as per Hon'ble Karnataka High Court in the case of Totgars Co-operative Sale Society (supra), the assessee is not entitled for deduction under section 80P(2)(d) of the Act as the assessee has not received interest income from the Cooperative Society, but has received interest income from investment made in Cooperative Banks. The ld. Counsel for the assessee drew our attention to section 2(19) and to section 80P(2)(d) of the Act. He submitted that as per decision of Hon'ble Gujarat High Court in the case of CIT v. Sabarkantha District Milk Cooperative Producers Union Ltd. in Tax Appeal No. 473 of 2014 order dated 16.06.2014, the interest income earned from Cooperative Bank is to be allowed as deduction. It was submitted that the Tribunal has followed this decision in many cases. The ld. Counsel for the assessee also relied upon the judgment of Hon'ble Kerela High Court in the case of PCIT v. Peroorkada Service Cooperative Bank....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roviding 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 claimed deduction u/s 80P(2)(a)(i) of the 1961 Act to the tune of Rs. 32,449/- being interest income from Banks as detailed hereunder: Sr. No. Name of Bank Amount (Rs.) 1. Interest income from Dena Gujarat Gramin Bank 426/- 2. Interest income from State Bank of India 855/- 3. Interest income from Bank of Baroda 31,168/- The AO denied the above deduction by relying on the decision of Hon'ble Gujarat High Court in the case of State Bank of India v. CIT, reported in (2016) 72 taxmann.com 64(Guj.) and decision of Hon'ble Supreme Court in the case of Totgar Cooperative Sale Society(2010) 322 ITR 283(SC). The ld. CIT (A) allowed the appeal of the assessee on this issue by following the decision of ITAT, Ahmedabad Bench in ITA no. 1723/Ahd/2012 along with CO No. 161/Ahd./2012 for AY : 2009-10 in assessee's own case. The ITAT has also decided this issue in favour of the assessee for ay:2010-11. The Revenue has come in appeal before the ITAT against the decision of ld. CIT ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee by depositing its surplus funds with banks /institutions who are not members of the assessee nor are these banks are credit societies but are commercial banks, has earned interest income which is income from other sources chargeable to tax u/s 56, and the assessee cannot be considered to be engaged in any 'activities' other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all of any of the activities so specified) from which profit or gains attributable to such activities have arisen, as is required u/s 80P(2)(c)(ii), rather it is the surplus funds deposited by the assessee with these banks/institution which generated interest income chargeable to tax u/s 56. Reference is drawn to the decision of Hon'ble Kerala High Court in the case of Kottayam Co-operative Land Mortgage Bank Limited v. CIT, reported in (1988) 172 ITR 443(Ker. HC). No evidence is brought on record to substantiate that these amounts were deposited with commercial banks under the statutory requirements with respect to its business activities of providing credit facilities to its members, and are not merely surplus funds placed with these commercial banks with a v....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 depositing surplus funds with the State Bank of India not being attributable to the business carried on by the appellant, cannot be deducted under section 80P(2)(a) (i) of the Act. If the appellant wants to avail of the benefit of deduction of such interest income, it is always open for it to deposit the surplus funds with a co-operative bank and avail of deduction under section 80P(2)(d) of the Act. 5.2 In the case of Surat Vankar Sahakari Sangh Ltd. v Assistant Commissioner of Income-tax [2016] 72 taxmann.com 169 (Gujarat), the Gujarat High Court held assessee-co-operative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from cooperative bank without adjusting interest paid to said bank. 5.3 In the case of Surendranagar District Co-op. Milk Producers Union Ltd. v Deputy Ld. CIT (A) 111 taxmann.com 69 (Rajkot Bench) the ITAT held that assessee-co-operative society could not claim benefit of section 80P(2)(d) in respect of interest earned by it from deposits made with nat....