IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member ITA No. 2063/Ahd/2017 Assessment Year 2014-15

Revenue by: Shri S.K. Dev, Sr. D.R.

Assessee by: Shri Pratik H. Shah, A.R. Date of hearing : 21-02-2019 Date of pronouncement : 07-03-2019 /ORDER आदेश PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-

This assessee’s appeal for A.Y. 2014-15, arises from order of the CIT(A)-4, Vadodara dated 02-05-2017, in proceedings under section 143(3)

of the Income Tax Act, 1961; in short “the Act”.

2. The six grounds of appeal of the assessee against the order of ld. CIT(A) are pertained to the disallowance of claim of deduction u/s. 80P in respect of interest income of Rs. 1,26,63,604/- and commission income of Rs. 2,73,215/- treating the same as income from other sources. Since common issue of disallowance of deduction u/s. 80P is involved in these grounds of appeal, therefore, for the sake of convenience, the same are adjudicated together as under.

3. The fact in brief is that assessee has filed return of income on 9^th Sep, 2014 declaring total income at Rs. nil. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 28^th August, 2015. The assessee is a co-operative society engaged in providing credit facilities to its members on interest and used to claim deduction u/s. 80P(2)(a)(i) of the act. During assessment, the assessing officer has noticed that assessee has also received interest income from schedule bank to the amount of Rs. 1,26,63,604/- and commission income of Rs. 2,73,215/- from MGVCL. Apart of the above, the assessee has shown interest income from its members on loan and advances to the amount of Rs. 3,01,37,554/-. However, the assessee has also claimed deduction u/s. 80P on the interest income earned from schedule bank and commission income from MGVCL. After examination of the material furnished by the assessee during the course of assessment proceedings, the assessing officer has observed that assessee had earned the aforesaid interest income totaling to Rs. 1,26,63,604/- from the nationalized bank which was not derived from its activity of providing credit facilities to its members and also the commission income of Rs. 2,73,215/- from MGVCL was also not attributable to the business of the assessee. The assessing officer has also referred section 80P(2)(a)(i) of the act that a co-operative society engaged in carrying the business of banking or providing credit facilities to its member, the whole of the profit and gains of business attributable to such activities would be deductible under the section. Since earning of interest income from bank is not activity attributable to the activity of providing of credit facilities to its member, therefore, the assessing officer has disallowed the deduction u/s. 80P on the aforesaid amount and treated the same as income from other sources u/s. 56 of the act. Similarly the assessing officer has treated the commission income to the amount of Rs. 2,73,215/- as income from other sources and added to the total income of the assessee.

4. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld.

CIT(A) has dismissed the appeal of the assessee.

5. We have heard both the sides and perused the material on record carefully. We observed that Hon'ble High Court of Gujarat in the case of State Bank of India (SBI) vs. Commissioner of Income tax (2016) 72 Taxmann.com 64 has held that interest derived by the Co-Operative society by depositing surplus fund with the bank not being attributable to business carried on by the society cannot be deducted u/s 80P. In view of decision of Hon'ble High Court of Gujarat as supra, we considered that the AO has correctly made disallowance of cl