ITO Vs Yendagandhi Large Sized Co-operative Society Ltd. (ITAT Visakhapatnam)
ITAT Visakhapatnam held that cooperative society is eligible for deduction U/s. 80P(2)(a)(i) of the Income Tax Act on the interest income received from investment in banks.
Facts-
The assessee, a primary agricultural cooperative credit society engaged in the business of providing credit facilities, supply of agricultural inputs and consumer goods to it’s members filed it’s return of income admitting “Nil” income, after claiming a deduction of Rs. 2,91,39,357 u/s. 80P(2). The return was processed u/s. 143(1). The increase in income was on account of disallowance of deduction claimed u/s. 80P in respect of the dividend of Rs. 3,70,365/-. The assessee’s case was selected for scrutiny under CASS to verify the investments/ advances/ loans made by the assessee and the deductions claimed under Chapter VIA and a notice u/s. 143(2) was issued.
AO was of the view that the investments with the banks were made from surplus funds which is not attributable to the activity of the assessee in providing credit facilities to it’s members. Therefore, the AO issued a show cause letter and a draft assessment order proposing to disallow the deduction to the extent of interest income received from institutions other than cooperative societies.
AO completed the assessment vide order dated 16.02.2021 u/s 143(3) of the Act by disallowing to the extent of Rs.2,59,54,906/-, the deduction claimed u/s 80P(2) of the Act towards interest income received from District Central Cooperative Bank, Andhra Bank, AP Cooperative bank and interest received on savings account and disallowance of dividend income of Rs.3,70,365/-, aggregating to 2,63,25,271/- and the tax payable was computed at Rs.1,22,77,993/- including the interests.
CIT(A) allowed the appeal. Being aggrieved, revenue has preferred the present appeal.
Conclusion-
Hon’ble jurisdictional High Court of Andhra Pradesh and Telangana in the case of Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another has held that the cooperative society is eligible for deduction U/s. 80P(2)(a)(i) of the Act on the interest income received from investment in banks.
Held that respectfully following the decision of the Hon’ble High Court of Andhra Pradesh in the case of Vavveru Cooperative Rural Bank Ltd. and the ratio laid down by the coordinate bench of the Tribunal in the case of Kakateeya Mutually Aided Thrift and Credit Co-op Society Limited, we are inclined to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the revenue. Hence, all the grounds raised by the revenue are dismissed.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
This appeal is filed by the revenue against the order of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi vide DIN & Order No. ITBA/NFAC/S/250/2021-22/1046341784(1) dated 17.10.2022, arising out of assessment order passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 17.10.2022 for the Assessment Year (A.Y.) 2018-19 and the cross objections filed by the assessee in support of the order of the Ld.CIT(A).
2. Brief facts of the case are that the assessee, a Primary Agricultural Co-operative Credit Society engaged in the business of providing credit facilities, supply of agricultural inputs and consumer goods to it’s members filed it’s return of income for the A.Y.2018-19 on 18.08.2018, admitting “Nil” income, after claiming deduction of Rs.2,91,39,357/- u/s 80P(2) of the Act. The return was processed u/s 143(1) and vide intimation dated 12.07.2019 the total income was computed at Rs.3,70,370/-. The increase in income was on account of disallowance of deduction claimed u/s 80P in respect of dividend of Rs.3,70,365/-. The assessee’s case was selected for scrutiny under CASS to verify the investments / advances / loans made by the assessee and the deductions claimed under Chapter VI A of the Act and a notice u/s 143(2) was issued. In response, the assessee furnished details of it’s receipts and the deduction claimed u/s 80P(2) of the Act as under :
