Mantola Co-Operative Thrift & Creditsociety Ltd v. Principal Commissioner Ofincome- Tax- 21

$~2-8 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 128/2017, 129/2017, 130/2017, 131/2017, 132/2017,133/2017 & 134/2017133/2017 & 134/2017 MANTOLA CO-OPERATIVE THRIFT & CREDITSOCIETY LTD. .... Appellant Through: Mr. Gautam Jain, Adv. versus PRINCIPAL COMMISSIONER OFINCOME- TAX- 21, ..... Respondent Through: Ms. Vibhooti Malhotra, Adv. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRIO R D E R%07.03.2017 CM 4908/2017 (condonation of delay) in ITA 128/2017CM 4909/2017 (condonation of delay) in ITA 129/2017CM 4911/2017 (condonation of delay) in ITA 130/2017CM 4913/2017 (condonation of delay) in ITA 131/2017CM 4915/2017 (condonation of delay) in ITA 132/2017CM 4917/2017 (condonation of delay) in ITA 133/2017CM 4919/2017 (condonation of delay) in ITA 134/2017 1.Issue notice. 2.Ms. Vibhooti Malhotra accepts notice for the respondent. Forthe reasons given therein, the applications are allowed and the delay iscondoned. The applications stand disposed off.ITA Nos. 128/2017, 129/2017, 130/2017, 131/2017, 132/2017,133/2017 & 134/2017 3.Issue notice. 4.Ms. Vibhooti Malhotra accepts notice for the respondents. 5.The question urged by the assessee is whether the impugnedorder of the ITAT to the extent it disallowed the deduction claimed bythe assessee towards interest income earned on deposits made incommercial banks and interest earned on deposits made in co-operative banks, are not eligible for deduction under Section 80P ofthe Income Tax Act, 1961 (in short the Act). 6.As far as treatment under Section 80P is concerned i.e. vis-a-visthe interest from commercial banks, the previous judgments of thisCourt in ITA No. 569/2013 and connected cases (Mantola Co-operative Thrift & Credit Society Ltd. vs CIT decided on 27.08.2014)could govern the issue.However, with respect to the treatment ofinterest the ITAT has held as follows: “...8. Applying the legal provision u/s 80P to thegross total income earned as enumerated in the chart,we hold that the Assessing officer was right inallowing the deduction u/s 80P only to the extent ofinterest earned from members who availed the creditfacility.Further from the column of interest earnedfrom investments with Co-operative Banks/ Societies,the assessee has neither been able to establish before usnor before the authorities below that interest has beenearnedexclusivelyfrominvestmentwithothercooperative banks. 8.1 Accordingly ground No.3 for assessment year2004-05 to 2007-08, 2009-10, 2010-11 and ground No.1 for assessment year 2008-09 stands dismissed.....” 7.We notice at the outset that the ITAT had in the course of itsimpugned order – in the immediately preceding paragraph i.e. para 7,ITA 128/2017 & Connected mattersPage 2 of 4 applying the ratio in ITA No. 839/2009 (CIT vs National AgriculturalCo-operative Marketing Federation of India Ltd., decided on03.05.2011), held that the assessee was eligible to deduction underSection 80P(2)(d) in respect of interest earned from investments madeby the Society in other co-operative banks. In these circumstances,the ITAT’s findings in this regard are unsustainable. The matter isremitted for appropriate tax treatment to the authorities having regardto the material placed before the Revenue which is broadly reflectedin the chart produced in para 7.1 of the impugned order. 7.We notice at the outset that the ITAT had in the course of itsimpugned order – in the immediately preceding paragraph i.e. para 7,ITA 128/2017 & Connected mattersPage 2 of 4 applying the ratio in ITA No. 839/2009 (CIT vs National AgriculturalCo-operative Marketing Federation of India Ltd., decided on03.05.2011), held that the assessee was eligible to deduction underSection 80P(2)(d) in respect of interest earned from investments madeby the Society in other co-operative banks. In these circumstances,the ITAT’s findings in this regard are unsustainable. The matter isremitted for appropriate tax treatment to the authorities having regardto the material placed before the Revenue which is broadly reflectedin the chart produced in para 7.1 of the impugned order. 8.The Revenue had sought to contend that as far as theexpenditure goes, this Court in a previous order dated 15.02.2017 inITA No. 148/2017 (PR. CIT-21 vs The Mantola Co-operative Thrift &Credit Society Ltd.) had not made a distinction between two types ofexpenditure attributable to the income derived i.e. expendituretowards interest earned from deposits in commercial banks on the onehand and expenditure towards interest earned from deposits made inco-operative banks on the other. Para 4 and 6 of this Court’s orderclearly noted the two different streams of income and also held thatthe proportionate expenditure could be allowed, the only rider beingthat incase the AO felt that the expenditure claimedwas“extraordinaryorseeminglydisproportionate”,hecouldpassappropriate orders. 9.In these circumstances, it is held that the assesse is entitled toclaim proportionate or suitable expenditure with respect to the incomeearned out of the non-exempt income i.e. interest earned fromITA 128/2017 & Connected mattersPage 3 of 4 commercialbanks.TheAOshallcarryoutthenecessaryconsequential exercise. The appeals are allowed in the above terms. S. RAVINDRA BHAT, J MARCH 07, 2017/kk NAJMI WAZIRI, J ITA 128/2017 & Connected mattersPage 4 of 4