2024 (10) TMI 697

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.... income of Rs. 3,12,33,210/- after claiming deductions under Section 80P of the Act amounting to Rs. 1,44,48,096/-. The case was selected for scrutiny under CASS, and the AO disallowed deductions claimed under Section 80P(2)(d) and treated government grants of Rs. 50,00,000/- received during the year as revenue receipts. The disallowed amount u/s 80P(2)(d) of the Act comprised: * Interest from Ahmedabad District Co-Op Bank: Rs. 1,04,14,746/-. * Dividend received from Gujarat Co-Op Milk Marketing Federation Ltd. (GCMMF Ltd.): Rs. 40,25,100/-. * Dividend from Ahmedabad District Co-Op Bank: Rs. 8,250/-. 2.1. The AO concluded that the phrase "Co-operative Society" in Section 80P(2)(d) of the Act does not include cooperative banks. Since the income in question was earned from cooperative banks and not directly from cooperative societies, the AO disallowed the deduction. The AO emphasized that cooperative banks are distinct entities engaged in banking business governed by the Banking Regulation Act, 1949, and are explicitly excluded from Section 80P benefits by virtue of Section 80P(4) of the Act. The AO relied on the decision of the Karnataka High Court in Principal Commissioner ....

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....n the sum of Rs. 1,44,48,096/-. In the facts and circumstances of the case, intimation u/s 143(1)(a) wherein such claim was denied has merged into assessment order framed u/s 143(3) of the Act, Id. CIT(A) ought to have adjudicated upon the same. 6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 7. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s. 234A/B/C/D of the Act. 8. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of Ld. AO in levying penalty u/s. 270A of the Act. 9. The Appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 5. During the course of hearing before us, the Authorised Repre....

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....that during the subsequent financial year 2020-21 and 2021-22, the assessee utilized the grant for the specified project activities, as detailed in the MOU. The AR placed reliance on following judicial precedents: a. ACIT vs. Gujarat State Road Development Corporation Ltd. [(2023) 202 ITD 510 / 153 taxmann.com 744 (Ahd.)]: b. ACIT vs. Gujarat Rural Industries Marketing Corporation [ITA 2597/Ahd/2013]: 5.4. The Departmental Representative (DR) on the other hand relied on the order of lower authorities. The DR stated that the grant is taxable in accordance with section Sub-Clause (xviii) in Section 2(24) of the Act. In rebuttal, the AR stated that the question is not whether it is taxable or not but the timing when it is taxed in the hands of recipient and the same is decided by the term of MOU. 6. We have heard the rival contentions and perused the material available on records. The primary issues in this appeal involve the disallowance of deductions under Sections 80P(2)(d) and 80P(2)(c) of the Act and the treatment of a government grant as revenue income. 6.1. Ground numbers 1,2,3 and 5 deal with deduction u/s 80P of the Act. The main contention in this set of grounds perta....

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....promote cooperative financial activity, and there is no legal basis to exclude cooperative banks from this benefit. Allowing the deduction is consistent with the legislative intent to foster the growth and sustainability of cooperative societies by providing tax incentives on income earned from mutual investments. The income from cooperative banks, whether as interest or dividends, remains within the cooperative framework, justifying the tax relief. Jurisdictional precedents from the Gujarat High Court and Co-ordinate bench consistently support the view that income earned from cooperative banks should be deductible under Section 80P(2)(d) of the Act. 6.3. Section 80P(2)(c) of the Act provides a standard deduction for cooperative societies engaged in activities that are not specifically covered under Section 80P(2)(a) or (b). Specifically, it allows a deduction of up to Rs. 50,000/- for any co-operative society other than those involved in banking, providing credit facilities to members, or the other activities explicitly listed under clauses (a) or (b). The assessee, being a cooperative society engaged in collecting and marketing milk, primarily falls under activities that are not....