×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
02-01-2019, The Railway Employees, Section 80P, 2(19), Tribunal Chennai
All the three appeals filed by the Revenue are directed against the different orders of the Commissioner of Income Tax (Appeals)-5, Chennai, all dated 04.01.2018, relevant to the AYs 2010-11, 2011-12 & 2014-15. The assessee also filed Cross Objections for the AYs 2010-11 & 2011-12. The only effective ground raised in all the three appeals filed by the Revenue is that the Ld.CIT(A) erred in directing the Assessing Officer to delete the addition made on account of deduction claimed under section 80P of the Income Tax Act.
2. Brief facts of the case are that the assessee is co-operative society and registered under Multi-State Cooperative Societies Act, 2002. During the course of assessment proceedings in the case of the assessee for the AYs 2010-11, 2011-12 and 2014-15, the Assessing Officer has noticed that the assessee has made deposits with non-cooperative banks, besides, it was maintaining SB accounts also with these banks. The assessee has claimed interest incomes from the above investments as well as from the SB accounts as deduction u/s.80P of the Act along with its profits from the business of banking or providing facilities to its members. It was also noticed that the assessee did not file any return prior to AY 2012-13. As the above interest incomes are not covered by either Sec.80P(2)(a)(1) or Sec.80P(2)(d) of the Income Tax Act, a notice u/s.148 was issued on 30.03.2015 calling for return of income for the AY 2010-11. In response the Notice issued u/s.148, the assessee filed its return of income on 26.06.2015 for the AY 2010-11 admitting ‘Nil’ income. After considering the submissions of the assessee and following the various decisions, the AO has held that as the interest income on deposits and in the SB Accounts with non-cooperative banks is not covered by Sec.80P of the Act, the claim made by the assessee as exempt u/s.80P is not correct and disallowed the entire claim of the assessee and added to the income of the assessee. The assessee carried the matter on appeal before the Ld.CIT(A).
3. After considering the submissions of the assessee and following the various decisions, the Ld.CIT(A) deleted the addition made by the AO.
4. Aggrieved, the Revenue is in appeal before the Tribunal by relying on the various decisions and the Ld DR has prayed that the deletion made by the Ld.CIT(A) should be reversed. On the other hand, the Ld.AR strongly supported the order of the Ld.CIT(A).
5. The Ld.CIT(A) by relying on the Tribunal orders in the assessee’s own case, passed order in favour of the assessee for the AYs 2008-09, 2009-10, 2012-13 & 2013-14. The findings of the Tribunal are as under:
6.1 A co-op. credit society, though not a co-operative Bank, but its nature of business is coupled with banking with its members, as it accepts deposits from and lends the same to its members. To meet any eventuality, the assessee society is required to maintain some liquid funds. That is why, generally, credit societies used to invest in fixed deposits. Furthermore, in many cases, credit societies maintain overdraft facility with nationalized banks’ to augment its day to day business needs. Furthermore, to some extent, the deposits are also required to be kept, out of operational funds, as per extant legislative requirements. Naturally, this entire activity and income arising there from is nothing but attributable to business of banking. Section 80P reads as follows: [Relevant part only] [Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assessee being a co-operative society,the gross total income includes any income referred to in sub-section(2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee.
(2) The sums referred to in sub-section (1) shall be the following, namely :—
(a) in the case of a co-operative society engaged in—
(i) carrying on the business of banking or providing credit facilities to its members, or the whole of the amount of profits and gains of business attributable to any one or more of such activities. [Note: As per section 2(19), “co-operative society” means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies].
6.2 The Hon’ble Supreme Court in case of The Totgars’ Cooperative Sale Society Ltd v. ITO [322 ITR 283 (SC)] held that, the words “the whole of the amount of profits and gains of business” in section 80P(2)(a) emphasizes that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Society. Accordingly, it was held that interest earned by appellant cooperative society on surplus funds invested in short-term deposits with banks and in govt. securities is not eligible for deduction under section 80P of the Act. However, in the present case, admittedly, the assessee is a cooperative credit society and the only activity of the assessee society was providing credit facility to its members and nowhere the Assessing Officer has disputed in the assessment order that the assessee society has engaged in any other activity other than providing credit facility to its members or the assessee earned income out of deposits of other activities or deposited surplus funds with the banks.
6.3 The above judgement was rendered on the context that the interest income arising on the surplus invested in short term deposits and securities which surplus was not required for business purposes.