TaxTMI 
TaxTMI 
2026 (1) TMI 1613
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....g the submissions of the assessee, the Assessing Officer completed the assessment proceedings u/s 143(3) of the IT Act and vide order dated 23.03.2021 determined total income at Rs. 2,95,71,620/- as against the Nil income returned by the assessee. The above assessed income includes addition of Rs. 2,94,35,283/- (Rs. 2,94,11,786/- interest earned from cooperative banks + Rs. 23,497/- interest earned from Axis Bank) disallowance on account of deduction u/s 80P(2)(d) of the IT Act and addition of Rs. 58,631/- being delayed payment of employees' contribution to Provident Fund u/s 36(1)(va) of the IT Act and addition of Rs. 77,708/- (Rs. 58,134/- + Rs.19,574/-) u/s 28 of the IT Act. 3. Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A)/NFAC. After considering the written submission furnished by the assessee, Ld. CIT(A)/NFAC partly allowed the appeal filed by the assessee by observing as under :- "7.6 The appellant stated that as per the bylaws of the society, it was required to keep certain funds as deposits with co-operative banks. Further, the appellant has stated that the appellant society is not the bank but that its natur....
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....ibution of Rs. 58,631/- for payment of provident fund and the same should be credited to the employees account on or before the due date whereas the appellant has not paid the employees contribution on or before the due date. As per section 36(1)(va) of the Act, if the employees contribution is not paid to the government account on or before the due date, the same is not allowable deduction. Therefore, ground no. 4 is decided against the appellant. 8.0 In the result, the appeal of the appellant is partly allowed." 4. It is the above order against which the Revenue is in appeal and the assessee is in Cross Objection before this Tribunal. 5. First, we shall take up the Cross Objection filed by the assessee for adjudication. C.O. No.49/PUN/2025 : 6. The assessee raised the following grounds in its cross objection :- "1. Under the facts and circumstances of the case and in law, appellant is eligible for deduction u/s 80P(2)(a)(i). 2. Under the facts and circumstances of the case and in law, the Ld Commissioner of Income Tax (Appeals) has erred in not allowing deduction u/s 80P in respect to interest of Rs. 23,497/- from nationalized bank i.e. Axis....
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....dia Ministry of Finance, Department of Revenue Central Board of Direct Taxes ****** New Delhi, Dated 2nd November 2016 Subject: Chapter VI-A deduction on enhanced profits- Reg. Chapter VI-A of the Income-tax Act, 1961 ("the Act"), provides for deductions III respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter VI-A. 2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However,the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed,the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: ....
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....ction of Rs. 58,631/- u/s 80P(2)(a)(i) of the IT Act. Accordingly, the ground no.3 & 4 raised by the assessee in its cross objection are allowed. 11. With regard to ground no.5 nothing was pleaded by the counsel of the assessee at the time of hearing of appeal, hence dismissed. 12. In the result, the Cross Objection filed by the assessee is partly allowed. 13. Now, we come to the appeal of the Revenue in ITA No. 2375/PUN/2025 for adjudication. ITA No.2375/PUN/2025 : 14. The Revenue has raised the following grounds of appeal :- "i) Whether on the facts and in circumstances of the case and in the Law the Ld CIT(A) is justified in holding that the co-operative banks are also another specie of a cooperative society and therefore interest income earned on investments and on deposits made with order cooperative banks qualifies for deduction under section 8P(2)(d) of the Income Tax Act 1961. ii) Whether on the facts and in the circumstances of the case and in Law the Ld CIT(A) is justified in not following the ratio decedendi of the Hon'ble Karnataka High Court in the case of Pr CIT vs Totagars Co-Operative Sale Society 2017 395 ITR 611 Karn which was rend....
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....f deduction u/s 80P(2) of the IT Act to a primary credit cooperative society was also decided by Hon'ble Jurisdictional Bombay High Court in the case of Annasaheb Patil Mathadi Kamgar Sahkari Pathpedhi Ltd. in ITANo.933/2017 order dated 14-10-2019 wherein deduction u/s 80P(2) of the IT Act was allowed to a primary credit cooperative society. Subsequently, this Judgement was also approved by Hon'ble Supreme Court in Civil Appeal No. 8719 of 2022 order dated April 20, 2023 by observing as under :- "1. Feeling aggrieved and dissatisfied with the impugned order dated 14-10-2019 passed by the High Court of Judicature at Bombay in ITA No. 933/2017, by which the High Court has dismissed the said appeal preferred by the Revenue, relying upon its earlier decision in the case of Quepem Urban Co-operative Credit Society Ltd. v. Asstt. CIT [2015] 58 taxmann.com 113/232 Taxman 510/377 ITR 272 (Bom.), the Revenue has preferred the present appeal. 2. The High Court considered the following question of law - "Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified as claimed by the assessee on the ground that the assessee, a co-ope....