Citation Codes

Equivalent Citations

citation codes

Case Number

ITA 585/KOL/2021

Disposition

Attorney(S)

Acts

INCOME TAX ACT 1961
u/s 80P(2)(a)(i) of the Income-tax Act, 1961
u/s 80P of Income-tax Act, 1961

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Smart Summary

Summary of Opinion: ITA Nos. 584 & 585/Kol/2021 (AYs 2017-18 & 2018-19)

Factual and Procedural Background

The assessee, Rabindra Bharati University Co-operative Credit Society Ltd. (PAN: AADAR1051L), appealed orders of the Commissioner of Income-tax (Appeals) dated 07-07-2021 and 08-07-2021 under section 250 of the Income-tax Act, 1961, in respect of assessment years 2017-18 (ITA No. 584/Kol/2021) and 2018-19 (ITA No. 585/Kol/2021). The Tribunal's registry reported that both appeals were time-barred by 105 days; the assessee filed a condonation application by affidavit dated 10-11-2021 attributing delay to illness of the society's treasurer and to COVID-19 restrictions. The Tribunal applied the Hon'ble Supreme Court's Miscellaneous Application No. 21 of 2022 ruling on exclusion of the period 15-03-2020 to 28-02-2022 from limitation and condoned the delay, admitting both appeals for merits.

For AY 2017-18, the assessing officer (AO) assessed interest income of Rs. 91,091 earned on the society's savings bank account as "income from other sources" and denied deduction under section 80P(2)(a)(i), a decision confirmed by the CIT(A). For AY 2018-19, the assessee claimed a deduction under section 80P(2)(a)(i) of Rs. 13,52,434 in its return; the return was processed under section 143(1) without allowing the deduction, a revised return and rectification petition were not accepted, and the CIT(A) upheld the assessment. The assessee appealed both matters to the Tribunal.

Legal Issues Presented

Whether interest earned on the assessee's savings bank account is part of its business income and therefore eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, or is to be treated as income from other sources under section 56 because it arises from surplus/idle funds.
Whether the denial of deduction under section 80P(2)(a)(i) by the AO and confirmation by the CIT(A), based on the Supreme Court's decision in Totgars Co-op Sale Society Ltd. v. ITO, is correct on the facts of these cases.

Arguments of the Parties

Appellant's Arguments

The interest income arises from a savings bank account (not fixed deposits) used in the ordinary course of the society's business—receiving funds from members and providing credits to members.
Maintaining a savings bank account is essential and necessary for the business of the society; therefore, interest earned on balances in such an account should be treated as business income and be eligible for deduction under section 80P(2)(a)(i).
The assessee filed written submissions and a paper book (35 pages) supporting these contentions and explaining that the interest is not on surplus or idle funds.

Respondent's Arguments

The Departmental Representative supported the orders of the lower authorities (the AO and the CIT(A)) which treated the bank interest as income from other sources and denied deduction under section 80P(2)(a)(i).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Totgars Co-op Sale Society Ltd. vs. ITO (188 Taxmann.com 282) (2010) (Hon'ble Supreme Court)	The ratio that interest income earned on surplus or idle funds not immediately required for business is not business income (section 28) but is taxable as income from other sources (section 56).	The CIT(A) relied on this decision to deny deduction under section 80P(2)(a)(i). The Tribunal distinguished the Totgars case on facts, holding that in the present case the interest arose from savings bank balances used in the regular business operations and was therefore not income from surplus/idle funds; consequently Totgars was held not applicable here.
Miscellaneous Application No. 21 of 2022 (Hon'ble Supreme Court)	Exclusion of the period 15-03-2020 to 28-02-2022 for computation of limitation due to COVID-19 restrictions.	The Tribunal applied this principle to exclude the COVID-19 period from limitation calculation and thereby condoned the delay of 105 days in filing the appeals, admitting both appeals for adjudication on merits.

Court's Reasoning and Analysis

The Tribunal proceeded in two principal stages: first addressing the procedural point of delay in filing; and second deciding the substantive issue(s) on the merits (and remitting where appropriate).

Condonation of Delay: The Tribunal reviewed the affidavit filed on behalf of the assessee attributing delay to the illness of the treasurer (who handles tax matters) and to COVID-19 restrictions. Applying the Supreme Court's Miscellaneous Application No. 21 of 2022, the Tribunal excluded the period 15-03-2020 to 28-02-2022 from the limitation computation and, since the relevant limitation period fell within this excluded period, condoned the delay of 105 days and admitted both appeals for adjudication on merits.

Merits – AY 2017-18 (ITA No. 584/Kol/2021):

Facts before AO/CIT(A): The assessee declared nil income; during scrutiny the AO observed interest of Rs. 91,091 from a savings bank account with State Bank of India and treated this as income from other sources, denying deduction under section 80P(2)(a)(i). The CIT(A) confirmed that view, relying on the Supreme Court's Totgars decision.
Tribunal's factual finding: The interest in question arose from a savings bank account used for ordinary business operations—receipts from members and disbursement of credits to members. The interest was not on fixed deposits nor was it shown to be from surplus/idle funds not required for business.
Legal analysis: Although the CIT(A) relied on Totgars (which treats interest on surplus/idle funds as income from other sources), the Tribunal found Totgars inapplicable where interest is earned on balances held in a savings account used integrally for business operations. Therefore, the interest here is akin to business income and eligible for deduction under section 80P(2)(a)(i).
Conclusion for AY 2017-18: The Tribunal reversed the CIT(A)'s finding and allowed the grounds raised by the assessee, holding that the saving bank interest of Rs. 91,091 is part of business income eligible for deduction under section 80P(2)(a)(i).

Merits – AY 2018-19 (ITA No. 585/Kol/2021):

Facts before AO/CIT(A): The assessee claimed deduction under section 80P(2)(a)(i) of Rs. 13,52,434 in the return. The return was processed under section 143(1) without allowing the deduction; a revised return and a rectification petition were not considered/accepted. The CIT(A) did not allow the claim and, according to the Tribunal, did not consider the documents and schedules uploaded on the e-portal.
Tribunal's analysis: The Tribunal observed that the factual matrix in AY 2018-19 is materially similar to AY 2017-18, where the Tribunal had found the interest to be business-related and eligible for deduction. The Tribunal found that the CIT(A) failed to examine the uploaded documents and relevant details on the e-portal.
Remand and directions: In the interest of justice, the Tribunal restored all issues in the AY 2018-19 appeal to the file of the CIT(A) for fresh adjudication. The CIT(A) was directed to reconsider the issues afresh, taking into account the assessee's submissions and the Tribunal's findings in AY 2017-18, and to give the assessee adequate opportunity of being heard. If the assessee can comply/satisfy the CIT(A), then it may be eligible for the claim of deduction under section 80P(2)(a)(i).
Result for AY 2018-19: The Tribunal allowed the grounds for statistical purposes and remitted the matter to the CIT(A) for fresh consideration as directed.

Holding and Implications

Holding:

For ITA No. 584/Kol/2021 (Assessment Year 2017-18): APPEAL ALLOWED. The Tribunal held that the interest of Rs. 91,091 earned on the society's savings bank account is part of the business operations and is eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.
For ITA No. 585/Kol/2021 (Assessment Year 2018-19): APPEAL ALLOWED FOR STATISTICAL PURPOSE / REMANDED. The Tribunal restored the appeal to the file of the CIT(A) for fresh adjudication after considering the documents and the Tribunal's findings in AY 2017-18 and after giving the assessee adequate opportunity of being heard.

Implications:

Direct effect on the parties: The assessee succeeds on merits for AY 2017-18 and obtains allowance of the claimed deduction for interest of Rs. 91,091. For AY 2018-19 the matter is remitted to the CIT(A) for reconsideration; the assessee may obtain the claimed deduction if it satisfies the CIT(A) upon fresh consideration.
On precedent and broader law: The Tribunal distinguished the Supreme Court's Totgars decision on the facts, finding it inapplicable where interest arises from savings account balances integrally connected with the society's business. The opinion does not indicate that the Tribunal intended to lay down a broader binding precedent beyond the facts of these cases; accordingly, no new general precedent was announced by the Tribunal in this order.

Order pronounced in open court on 11-11-2022. (MANISH BORAD) — Accountant Member.

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RABINDRA BHARATI UNIVERSITY COOPERATIVE CREDIT SOCIETY LIMITED, KOLKATA v. DCIT-CPC, Bangalore Jurisdictional AO – ITO Ward 51(4)/Kolkata, BENGALURU

आयकर अपीलय अधकरण, पीठ "A-SMC" , कोलकाता

IN THE INCOME TAX APPELLATE TRIBUNAL

BENCH "A-SMC"KOLKATA

सम : ी मनीष बोरड, लेखा

Before: Shri Manish Borad, Hon'ble Accountant Member आयकर अपील सं.य/

ITA Nos.584 & 585/Kol/2021

Assessment Years: 2017-18 & 2018-19

Rabindra Bharati बनाम Income Tax Officer Univeristy Co- Ward 50(7), Kolkata

V/s.

operative Credit

Society Ltd.

56A Brackpore Trunk

Road, Kolkata-700050.

PAN: AADAR1051L

अपीलाथ /Appellant .. यथ /Respondent अपीलाथ क ओर स/ेBy Appellant Shri A.K.Ghosh, Advocate,Ld.AR यथ क ओर स/ेBy Respondent Shri Vijay Kumar, Ld.Addl.CIT/DR सुनवाई क तारख/Date of Hearing 14-09-2022 घोषणा क तारख/ 11-11-2022

Date of Pronouncement

आदेश /O R D E R

PER MANISH BORAD, AM.

Both the appeals of the assessee for the assessment years 2017-18 & 2018-19 are directed against the separate orders dt. 07-07-2021 & 08-07- 2021 passed u/s. 250 of the Income-tax Act, 1961 [ hereinafter, referred to as 'the Act'] by the ld. Commissioner of Income-tax, Appeals [ in short, hereafter referred to as 'the 'ld. CIT(A) Kolkata (National Faceless Appeal Centre.

2. Registry has informed that the both the appeal(s) filed by the assessee are time barred by 105 days. Condonation application has been filed by the assessee by way of Affidavit Dt. Nov., 10, 2021 (copy of which is placed on record). Perusal of the same shows that the delay was on account of illness of assessee's Treasurer, who looks after the tax matter. For his illness he could not communicate the lawyer for taking necessary step in filing the appeal mater in time. From 15.03.2020 till 28.02.2022 there was COVID-19 restrictions. We, therefore, in view of the reasoning therein in the affidavit and judgment of The Hon 'ble Supreme Court vide Miscellaneous Application No. 21 of 2022 find that the limitation period in filing appeal between 15.03.2020 till 28.02.2022 has been excluded for calculating the limitation period. Since the period of limitation in the case of the assessee falls during this period, the same deserves to be extended and we, therefore, condone the delay of 105 days and admit both the appeal(s) for adjudication on merits.

3. First I take up the appeal number ITA No. 584/Kol/2021 for the AY 2017-18, wherein following grounds are raised by the assessee.

1. For that under the facts and circumstances of the case the Ld. Appellate Authority erred in law and facts, in confirming the action of the learned Assessing Authority in denying the claim of deduction u/s 80P(2)(a)(i) of the Income-tax Act, 1961 amounting to Rs. 91,091/-.

2. For that the Ld. Appellate Authority and the learned Assessing Authority erred in law and on facts in denying deduction u/s 80P of Income-tax Act, 1961 amounting to Rs. 91,091/-. The authorities treated the entire bank interest income under the head of income from other sources.

3. For that the Ld. CIT (A) erred in law and on facts in not allowing the claim of deduction of such interest income and ought to have appreciated that deposits were kept with banks for safety and prudence perspective which is at all-time available for disbursement to the members of the credit society.

4. For that the Ld. Appellate Authority and the learned Assessing Authority erred in relying on the judgement pronounced by the Honourable Supreme Court in the case of The Totgars Sales Cooperative Society vs. The Income Tax Officer, Karnataka, though the facts of the case and the business activities of The Totgars Sales Cooperative Society and that of the appellant are entirely different.

5. For that your petitioner craves leave to add, alter, modify or delete any of the grounds at the time of hearing of the appeal or before.

4. Brief facts of the case are that the assessee is a co-operative credit society and declared Nil income in the e-return filed on 28-03-2018 for the AY 2017-18. After the case being selected for a limited scrutiny under CASS followed by serving of notices u/s. 143(2) and 142(1) of the Act. Thereafter, the ld. AO carried out the assessment proceedings and noticed that the assessee received interest on saving Bank a/c held with State Bank of India at Rs. 91,091/- and observed that since the said income is not earned from the activities carried out by the society, therefore, the interest received by the society is liable to be taxed as income from other sources and the same is not liable for deduction u/s. 80P(2)(a)(i) of the Act.

5. Aggrieved, the assessee preferred appeal before the ld. CIT(A), but failed to succeed.

6. Aggrieved, the assessee is now in appeal before this Tribunal.

7. Ld. Counsel for the assessee vehemently argued, filed written submissions and paper book containing 35 pages and contended that the alleged interest income was from saving bank account and is not from any deposits. It was submitted that maintaining of saving bank account is essential to carry out the business activities of the society and the same is necessary for business of the society. Therefore, the interest earned from such saving bank account should be treated as 'business income' eligible for deduction u/s. 80P(2)(a)(i) of the Act.

8. Per contra, the Ld. Departmental Representative vehemently argued supporting the orders of the lower authorities.

9. I have heard the rival contentions and perused the material placed on record before us. The only issue raised before me is that the ld. CIT(A) erred in not allowing the deduction u/s. 80P(2)(a)(i) of the Act that the interest earned at Rs.91,091/- from saving bank account. I notice that the ld. CIT(A) denied the deduction following the judgment of Hon'ble Supreme Court in the case of Totgars Co-op Sale Society Ltd Vs. ITO (188 Taxmann.com 282) (2010), wherein the Hon'ble Apex Court laid down the ratio that interest income earned on the surplus or idle funds not immediately required for its business is not income from business taxable u/s. 28 of the Act, but was taxable as 'income from other sources' u/s. 56 of the Act.

10. However, I find that in the instant case alleged interest is neither earned on any surplus/idle funds nor from any fixed deposits. The said sum is in the nature of saving bank interest. This saving bank account in the name of the assessee society is used for carrying out the business activities of the assessee society for receiving of funds from the members and then providing credits to its members. In this process some bank balance is always there in the saving bank account on which quarterly interest is given. It is not in dispute that the assessee society is eligible for deduction u/s. 80P(2)(a)(i) of the Act. It is only the interest income from saving bank account, which has been excluded from the deduction u/s. 80P(2)(a)(i) of the Act.

11. I, therefore, under the given facts and circumstances of the case am of the view that since the alleged sum is earned from saving bank account, which is akin to the business activities carried out by the assessee the alleged interest is not earned from any surplus or idle funds and it is part of the business income and therefore, the judgment of the Hon'ble Apex Court

in the case of Totgars Co-op Sale Society Ltd supra is not applicable on the facts of the instant case. Thus the alleged sum is eligible for deduction u/s. 80P(2)(a)(i) of the Act and should not be treated as income from 'other sources'. I, therefore, reverse the findings of the ld. CIT(A) and allow all the grounds raised by the assessee in appeal no. ITA No. 584/Kol/2021 for the AY 2017-18.

12. Now, I take up the appeal No. 585/Kol/2022 for the AY 2018-19, wherein following grounds have been raised :-

2. For that the Ld. Appellate Authority and the learned Assessing Authority erred in

law and on facts in denying deduction u/s 80P of Income-tax Act, 1961 amounting to Rs. 13,52,434/-. The authorities treated the entire bank interest income under the head of income from other sources.

5. For that your petitioner craves leave to add, alter, modify or delete any of the grounds at the time of hearing of the appeal or before.

13. Brief facts of the case are that the assessee for the assessment year 2018-19 assessee filed e return on 16-08-2018 declaring Nil income after claiming deduction u/s. 80P(2)(a)(i) of the Act at Rs. 13,52,434/-. Thereafter, the said return was processed by the Centralized Processing Center,

Bangalore u/s.143(1) of the Act on 12-07-2019, wherein claim of deduction u/s. u/s. 80P(2)(a)(i) of the Act was not considered and income of the assessee society was assessed at Rs 13,52,430/-. Thereafter, the assessee filed revised return on 23-08-2019 after correctly uploading the schedule on the portal of income-tax for claiming the deduction u/s. 80P(2)(a)(i) of the Act, but the said revised return was not considered and the rectification petition dt. 03-08-2019 was also rejected.

14. Aggrieved, the assessee preferred appeal before the ld. CIT(A), but failed to succeed as the ld. CIT(A) did not consider the relevant details and documents as well as the schedule(s) uploaded on the e-portal faceless compliance.

15. Aggrieved, now the assessee is in appeal before this Tribunal.

16. The Ld. Counsel for the assessee vehemently argued and filed written submissions.

17. Per contra, the ld. Departmental Representative vehemently argued supporting the orders of the lower authorities.

18. I have considered the rival contentions and perused the material placed on record before me. While dealing with assessee's appeal (ITA No. 584/Kol/2021 for the AY 2017-18), I observed that the assessee trust was found to be eligible for deduction u/s. u/s. 80P(2)(a)(i) of the Act by the AO. I find that in the proceedings carried out u/s. 143(3) of the AY for the AY 2017- 18 there is no change of facts and figure to that of in the current / present appeal (ITA No. 585/Kol/2021 for the AY 2018-19). It seems that the ld. CIT(A) has not examined the documents filed/uploaded by the assessee on e-portal of income-tax. Therefore, in the interest of justice and being fair to both the parties I hereby restore all the issues raised in the instant appeal to the file of the ld. CIT(A) for adjudicating the issues afresh after considering the submissions made by the assessee as well as our given findings in

assessee's appeal no. ITA No. 584/Kol/2021 for the AY 2017-18 and if the assessee is able to comply/satisfy then it is eligible for claim of deduction u/s. 80P(2)(a)(i) of the Act, then ld. CIT(A) shall decide the issues in accordance with law after giving the assessee adequate opportunity of being heard. Thus, all the grounds raised by the assessee in this appeal for the AY 2018-19 are allowed for statistical purpose.

19. In the result, the appeal of assessee in ITA No. 584/Kol/2021 for the AY 2017-18 is allowed and that in ITA No. 585/Kol/2021 for the AY 2018-19 is allowed for statistical purpose.

आदेश खलु ेयायपीठ म दनांक 11 -11-2022 को उघोषत। The order pronounced in the open Court on 11 -11-2022 Sd/-

(MANISHBORAD)

ACCOUNTANT MEMBER

Dated :11-11-2022 **PP/SPS

आदेश क तलप अेषत / Copy of Order Forwarded to:-

1.अपीलाथ/Appellant/: Rabindra Bharati Univeristy Co-operative Credit Society Ltd.56A Brackpore Trunk Road, Kolkata-

700050.

2. यथ/Respondent/:Income Tax Officer, Ward 50(7), Kolkata

3. संबंधत आयकर आयुत / Concerned CIT

4. आयकर आयुत- अपील / CIT (A)

5. वभागीय तनध, आयकर अपीलय अधकरण कोलकाता / DR, ITAT, Kolkata 6.गाडफ ाइल/Guardfile.

By order/आदेश स,े /True Copy/ Assistant Registrar ITAT, Kolkata

RABINDRA BHARATI UNI... v. DCIT-CPC, Bangalore ...