Shree Salabatpura Urban Co.Op. Credit Society Limited Vs DCIT (ITAT Surat)
Summary: The Income Tax Appellate Tribunal, Surat SMC Bench, in Shree Salabatpura Urban Co.Op. Credit Society Limited Vs DCIT, considered an appeal concerning the denial of deduction under Section 80P of the Income-tax Act, 1961, for Assessment Year 2018-19. The assessee challenged the order dated 6 August 2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, arising from an assessment order dated 5 April 2021 passed under Section 143(3) read with Sections 143(3A) and 143(3B). The assessee disputed the denial of a deduction of ₹21,58,230 under Section 80P, including the deduction claimed in respect of interest and dividend income received from a co-operative bank. It also challenged a demand of ₹33,25,481, alleging that an incorrect tax rate had been applied and that the appellate authority had reproduced findings relating to Assessment Year 2015-16 without properly considering the facts of the year under appeal.
Before examining the merits, the Tribunal considered a delay of 146 days in filing the appeal. The assessee explained that its accountant, who was responsible for filing the appeal, had taken extended leave because of his father’s serious illness and subsequent death. A death certificate was submitted in support of the explanation. The Departmental Representative opposed the request for condonation. The Tribunal referred to the Supreme Court’s decision in Collector, Land Acquisition Vs Mst. Katiji and Others, reported in 167 ITR 471, which recognised that substantial justice should ordinarily prevail over technical considerations where sufficient cause is established. Finding the explanation convincing and supported by the circumstances placed on record, the Tribunal condoned the delay and admitted the appeal for hearing.
On the substantive issue, the assessee argued that the deduction under Section 80P(2)(d) was allowable in accordance with earlier decisions concerning interest received from co-operative banks. The assessee also contended that the CIT(A) had reproduced an order relating to an earlier assessment year without appropriately addressing the present claim. Its counsel drew attention to an earlier appellate finding stating that interest earned from deposits with co-operative banks was eligible for deduction under Section 80P(2)(d). The assessee requested that the matter be restored to the Assessing Officer with directions to allow the deduction and correctly compute the resulting tax demand. The Revenue supported the orders of the lower authorities.
The Tribunal examined the decision of its co-ordinate Surat Bench in The Amroli Vibhag Vividh Karyakari Sahkari M. Ltd. Vs DCIT, ITA No. 672/SRT/2023 for Assessment Year 2017-18. That decision had followed the Gujarat High Court’s ruling in Surat Vankar Sahakari Sangh Ltd. Vs ACIT, which considered the deduction available on income from investments with co-operative societies. The reproduced reasoning also discussed K. Nandakumar Vs ITO, Doaba Co-operative Sugar Mills Ltd., Cape Brandy Syndicate Vs IRC, Hansraj Gordhandas Vs H.H. Dave and Bai Bhuriben Lallubhai. The authorities addressed the interpretation of tax deductions, the treatment of interest receipts and related expenditure, and the statutory language permitting deduction of interest or dividend income derived by a co-operative society from investments with another co-operative society.
Particular importance was placed on the reasoning that Section 80P(2)(d) does not distinguish between investments made from surplus funds and those made from other sources. The cited authorities also explained that the statutory deduction could not be reduced merely because the assessee had paid interest on separate borrowings. The Tribunal noted that the earlier Surat Bench decision had applied the binding judgment of the Gujarat High Court and had also referred to The Deesa Mercantile Co-operative Society Limited Vs ACIT, decided by the Ahmedabad Bench. The Revenue did not produce material establishing a relevant change in facts or law that would justify departing from the earlier Tribunal decision.
Accordingly, the Tribunal held that the issue was squarely covered in favour of the assessee by The Amroli Vibhag Vividh Karyakari Sahkari M. Ltd. and directed the Assessing Officer to allow the deduction under Section 80P(2)(d) in respect of interest received from the co-operative bank. Grounds 1 and 2 were allowed, while grounds 3 to 6, relating principally to the resulting demand and other consequential or general matters, were held not to require separate adjudication. The appeal was allowed. The order thus addresses both the condonation of a 146-day filing delay on sufficient cause and the application of jurisdictional precedents concerning deduction of co-operative bank interest under Section 80P(2)(d).
Cases Discussed:
- Collector, Land Acquisition Vs Mst. Katiji and Others (Supreme Court); 167 ITR 471: Relied upon while condoning the 146-day delay in filing the appeal, emphasising substantial justice over technical considerations.
- The Amroli Vibhag Vividh Karyakari Sahkari M. Ltd. Vs DCIT (ITAT Surat); ITA No. 672/SRT/2023; AY 2017-18: Directly followed for allowing deduction under Section 80P(2)(d) on interest received from a co-operative bank.
- Surat Vankar Sahakari Sangh Ltd. Vs ACIT (Gujarat High Court): Jurisdictional High Court authority reproduced through the earlier Tribunal decision concerning deduction on income from investments with co-operative societies.
- K. Nandakumar Vs ITO (Kerala High Court); [1993] 204 ITR 856 / [1994] 72 Taxman 223: Discussed in the quoted judgment regarding computation of interest income and the treatment of interest expenditure.
- Doaba Co-operative Sugar Mills Ltd. (Punjab and Haryana High Court): Discussed for the interpretation of Section 80P(2)(d), including the absence of a statutory requirement to adjust interest paid against qualifying interest received.
- Cape Brandy Syndicate Vs IRC; [1921] 1 KB 64: Cited in the reproduced judgment for the principle that taxing statutes must be interpreted according to their express language.
- Hansraj Gordhandas Vs H.H. Dave, Assistant Collector of Central Excise and Customs (Supreme Court); AIR 1970 SC 755: Cited in support of the principle of strict interpretation of taxing statutes.
- Bai Bhuriben Lallubhai (Bombay High Court): Discussed regarding the relationship between expenditure incurred and the earning of interest income.
- The Deesa Mercantile Co-operative Society Limited Vs ACIT (ITAT Ahmedabad); ITA No. 2100/Ahd/2014; 17/06/2022; AY 2011-12: Cited as another jurisdictional Tribunal decision supporting the deduction.
FULL TEXT OF THE ORDER OF ITAT SURAT
Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2018-19, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 06.08.2022, which in turn arises out of an assessment order passed by Assessing Officer under section 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 05.04.2021.
2. The grounds of appeal raised by the assessee are as follows:
“1. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in not granting deduction u/s 80P of Rs.2158230/-.
2. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in not granting deduction in respect of interest and dividend received from Co.Op Bank.
3. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in raising demand of Rs.3325481/-.
4. Under facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in calculating demand raised as wrong rate is applied to the appellant total income.
5. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in not appreciating that there are various decision in favour of the appellant.
6. On the facts and circumstances of the case, the learned Commissioner of Income tax (Appeals) has erred in simply copying the appellant order of AY.2015-16 and has further erred in mentioning wrong facts of AY.2015-16 in the order for AY.2018-19.
7. The appellant reserves right to add, alter, vary or all grounds of appeal.”
3. At the outset, I note that appeal filed by the assessee is barred by limitation by one hundred forty six (146) days. The assessee moved a petition, requesting the Bench to condone the delay. The Ld. Counsel for the assessee explained the reasons of delay stating that father of accountant was very sick and after some time, the father of the accountant was died. The accountant of assessee was responsible to file the appeal before the Tribunal and the accountant took long leave, therefore delay has occurred due to death of accountant`s father. The Ld. Counsel submitted the death certificate of father of accountant also. Therefore Ld. Counsel contended that the delay should be condoned.
4. On the other hand, Learned Senior Departmental Representative (ld. Sr. DR) for the Revenue opposed the prayer of the Ld. Counsel for the assessee for condonation of delay and stated that delay should not be condoned.
5. I have heard both the parties on this preliminary issue. I note that provisions of law have to be adhered strictly and that one cannot be allowed to act in leisure and make a mockery of enacted law, because law and provisions are laid down to benefit both sides of litigation. Be that as it may, I have to do justice and the Hon’ble Supreme Court in the case of Collector, Land Acquisition vs Mst. Katiji and others, reported in 167 ITR 471, (1988 SC 897) (7) has observed as follows:
“4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay.”
6. When I weigh this aspect then the side of justice becomes heavier and casts a duty on me to deliver justice. The reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. I, therefore, condone the delay and admit the appeal for hearing.
7. The Ld. Counsel for the assessee submitted that assessee has claimed the deduction under section 80P(2)(d) of the Act, which is covered in favour of assessee, however the ld. CIT(A) has made the mistake, wherein the ld. CIT(A) has copy paste the exact previous order of ld. CIT(A) in previous assessment year of the assessee.
8. On merit, Ld. Counsel for the assessee submitted that assessee’s case is covered by assessee’s own case wherein the deduction under section 80P(2)(d) was granted to the assessee. The Ld. Counsel for the assessee took me through the findings of the ld. CIT(A) and stated that ld. CIT(A) has just copy paste the previous year’s order of the assessee and has allowed the appeal of the assessee, stating as follows:
“7.8 In view of the above binding judgments of the Hon’ble Supreme Court, the jurisdictional High Court, jurisdictional Tribunal and other various orders cited by the Appellant, I am declined to agree with the submissions made by the Appellant. Thus, the interest income earned from deposits in co-operative Banks by the Appellant assessee is held to be eligible for deduction under Section 80P(2)(d) of the Act. Hence, the action of the Ld. AO with regard to denial of deduction u/s 80P on the grounds mentioned in the assessment order is found unsustainable. Thus the ground of the Appellant on this aspect is Allowed.”
9. Therefore, Ld. Counsel for the assessee submitted that matter may be remitted back to the file of the Assessing Officer with the direction to allow the deduction under section 80P(2)(d) of the Act. The Ld. Counsel also submitted that the Assessing Officer has not computed the correct demand as per the provision of the Act, therefore necessary instruction may be given to the Assessing Officer to compute the correct demand of the assessee in accordance with law.
10. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the Revenue relied on the order of the lower authorities.
11. I have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. I note that the issue under consideration is squarely covered by the judgement of Coordinate Bench of Surat in the case of The Amroli Vibhag Vividh Karyakari Sahkari M. Ltd. vs. DCIT, in ITA No.672/SRT/2023 for AY.2017-18, wherein it was inter alia observed as follows:
“7. We see no reason to take any other view of the matter then the view so taken by the Hon’ble High Court of Gujarat in the case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT (supra). In this order, the Hon’ble High Court of Gujarat has inter alia observed as follows:
“8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar v. ITO [1993] 204 ITR 856/[1994] 72 Taxman 223 (Ker.), the Kerala High Court has held as under:
‘4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income “in accordance with the provisions” of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, and not from the interest received from the bank on the fixed deposits. The assessees were therefore right in the submissions which they made before the Commissioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5.’
8.1 Similarly, in the case of Doaba Co-operative Sugar Mills Ltd (supra), the Punjab & Haryana High Court has held as under:
‘5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Section 80P(2) (d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Co-operative Bank and has also received interest from the said co- operative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Section 80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under :
“80P. (2)(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co- operative society, the whole of such income.”
6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 :
“…In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used,”
7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759.
8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.’
8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed under Section 12(2). The High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the exercise of that option would come within the ambit of section 12(2) of the Indian Income-Tax Act but where the option has no connection with the carrying on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits.
9. In view of the above, the questions raised in the present appeals are answered in favour of the assessee and against the revenue. The order passed by the Tribunal is accordingly quashed and set aside.”
8. As the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. vs. ACIT (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the judgment of the Hon’ble Gujarat High Court (supra). The issue is also covered by the order of the jurisdictional Co-ordinate Bench of ITAT, Ahmedabad in the case of The Deesa Mercantile Co-operative Society Limited vs ACIT, in ITA No.2100/Ahd/2014 for AY.2011-12, order dated 17.06.2022.
9. Therefore, respectfully following the binding judgment of the Hon’ble Gujarat High Court, we delete the addition sustained by the ld. CIT(A) to the tune of Rs.6,49,886/-.
12. As the issue is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench of this Tribunal in the case of The Amroli Vibhag Vividh Karyakari Sahkari M. Ltd. (supra) and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the judgment of the Co-ordinate Bench (supra). Therefore, we direct the Assessing Officer to allow the deduction under section 80P(2) (d) of the Act in respect of interest received from Co-operative bank.
13. In the result, ground Nos.1 and 2 raised by the assessee are allowed.
14. Ground Nos.3 to 6 are consequential in nature/general in nature, therefore do not require adjudication.
15. In the result, appeal filed by the assessee is allowed.
Order is pronounced on 31/01/2024 in the open court.
