Income Tax Act, 1961, Section
80P(2)(a)(i)
Deduction under section 80P--Co-operative
society--Interest earned from co-operative institutions
Conclusion: Interest income earned by co-operative
society on investments with co-operative banks/institutions, would be entitled
for claim of deduction under section 80P(2)(a)(i).
AO disallowed assessee-society s claim of deduction under
section 80P(2)(a)(i) in respect of interest earned from co-operative
institutions. CIT(A) upheld the disallowance. Held: In view of
decision of Co-ordinate Bench of this Tribunal in the case of Rena Sahakari
Sakhar Karkhana Ltd. v. Pr. CIT-2, Aurangabad [ITA No. 1249//PUN/2018,
dt. 7-1-2022] : 2022 TaxPub(DT) 0787 (Pune-Trib), interest income earned by co-operative society on investments
with co-operative banks/institutions, would be entitled for claim of deduction
under section 80P(2)(a)(i).
Decision: In
assessee s favour
Followed: Rena
Sahakari Sakhar Karkhana Ltd. v. Pr. CIT-2, Aurangabad [ITA No. 1249//PUN/2018,
dt. 7-1-2022] : 2022 TaxPub(DT) 0787 (Pune-Trib)
Income Tax Act, 1961, Section
80P(2)(a)(i)
Deduction under section 80P--Co-operative
society--Interest earned from other banks
Conclusion: Interest
income derived by co-operative-society from nationalized/other banks would
qualify for deduction under section 80P(2)(a)(i).
AO disallowed assessee-society s claim of deduction under
section 80P(2)(a)(i) in respect of interest earned from other banks. CIT(A)
upheld the disallowance. Held: In view of decision of High Court
in the case of The Vavveru Co-operative Rural Bank Ltd. v. The Chief CIT,
Vijayawada (2017) 396 ITR 371 (AP) : 2017 TaxPub(DT) 1639 (Hyd-HC), interest
income derived by co-operative-society from nationalized/other banks would
qualify for deduction under section 80P(2)(a)(i).
Decision: In
assessee s favour
Followed: The
Vavveru Co-operative Rural Bank Ltd. v. The Chief CIT, Vijayawada (2017) 396
ITR 371 (AP) : 2017 TaxPub(DT) 1639 (Hyd-HC)
IN THE ITAT PUNE BENCH
SATBEER SINGH GODARA, J.M.
Sharad Nagari Sahakari Patsanstha Maryadit v. ITO
I.T.A. No. 335/PUN./2024
16 April, 2024
Assessee by: None
Revenue by: Shri Manish
Mehta
Satbeer Singh Godara, J.M.
This assessee s appeal for assessment year 2020-21, arises
against the National Faceless Appeal Centre (in short the NFAC ) Delhi s Din
and Order No. ITBA/NFAC/S/250/2023-24/ 1059217305(1), dated 29-12-2023, involving
proceedings under section 143(3) of the Income Tax Act, 1961 (in short the
Act ).
Case called twice. None appears at assessee s behest. It is
accordingly proceeded ex-parte.
2. Coming to the assessee s
sole substantive grievance claiming Sec. 80P(2)(a)(i) deduction of Rs.
21,42,515 representing interest from cooperative institution(s) and other
bank(s) involving Rs. 20,46,515 and Rs. 96,000 respectively; it is noticed that
the same is no more res integra in light of this tribunal s recent coordinate
bench s order ITA No. 1249//PUN/2018, dt. 7-1-2022 : 2022 TaxPub(DT) 0787
(Pune-Trib) in The Rena Sahakari Sakhar Karkhana Ltd. vs. PCIT s case
has rejected the Revenue s identical arguments as follows :
3. After culmination of the
assessment proceedings, the Principal Commissioner called for the assessment
records of the assessee. It was observed by the Principal Commissioner that the
assessee had during the year shown interest income from FDs with Co-operative
Banks amounting to Rs. 75,38,534, against which it had claimed deduction under
section 80P(2)(d) of the Act. It was observed by the Principal Commissioner,
that the assessing officer while framing the assessment had allowed the
aforesaid claim of deduction raised by the assessee. Observing, that as
co-operative banks were commercial banks and not a co-operative society,
therefore, the Principal Commissioner was of the view that the assessee was not
eligible for claim of deduction under section 80P(2)(d). In the backdrop of his
aforesaid conviction, the Principal Commissioner was of the view that the
assessment order passed by the assessing officer under section 143(3), dated
07-3-2016, therein allowing the assesses claim for deduction under section 80P(2)(d),
had therein rendered his order as erroneous, insofar it was prejudicial to the
interest of the revenue. Accordingly, the Principal Commissioner not finding
favour with the reply of the assessee, wherein the latter had tried to impress
upon him that it was duly eligible for claim of deduction under section
80P(2)(d) of the Act, therein set aside the order of the assessing officer
with a direction to redecide the issue afresh and reframe the assessment.
4. The assessee being aggrieved
with the order of the Principal Commissioner has carried the matter in appeal
before us. As the present appeal involved a delay of 52 days, therefore, the
learned Authorised Representative took us through the reasons leading to the
same. It was submitted by the learned Authorised Representative that as the
then counsel of the assessee society who was looking after its tax matters,
viz. Shr. Ravikiran Pandurang Todkar, Chartered Accountant was taken unwell due
to kidney failure and had undergone kidney transplant, therefore, due to his
unavailability the appeal could not be filed within the stipulated time period.
Our attention was drawn towards the "affidavit" of the assessee
society wherein the aforesaid facts were deposed. On the basis of the aforesaid
facts, it was submitted by the learned Authorised Representative that the delay
involved in filing of the present appeal in all fairness may be condoned. Per
contra, the learned Departmental Representative did not object to the seeking
of condonation of the delay in filing of the appeal by the assessee society.
After giving a thoughtful consideration, we are of the considered view, that as
there were justifiable reasons leading to delay on the part of the assessee in
filing of the present appeal before us, therefore, the same merits to be
condoned.
5. On merits, it was submitted by
the learned Authorised Representative, that as the assessing officer while
framing the assessment had after making necessary verifications taken a
plausible view, therefore, the Principal Commissioner had exceeded his jurisdiction
by seeking to review the order passed by him in the garb of the revisional
powers vested with him under section 263 of the Act. It was submitted by the
learned Authorised Representative, that the issue as regards the eligibility of
the assessee for claim of deduction under section 80P(2)(d) on interest income
derived from investments/deposits lying with co-operative banks was squarely
covered by the various orders of the coordinate benches of the Tribunal viz., (i).
M/s Solitaire CHS Ltd. v. Principal Commissioner, ITA No. 3155/Mum/2019,
dt. 29-11-2019 : 2019 TaxPub(DT) 8002 (Mum-Trib) ( ITAT G Bench, Mumbai);
Kaliandas Udyog Bhavan Premises Co-op Society Ltd. v. ITO-21(2)(1), Mumbai, ITA
No. 6547/Mum/2017, dt. 25-4-2018 : 2018 TaxPub(DT) 3128 (Mum-Trib); and (iii).
Majalgaon Sahakari Sakhar Karkhana Ltd. v. ACIT, Circle-3, Aurangabad, ITA No.
308/Pun/2018, dt. 14-3-2019 : 2019 TaxPub(DT) 2137 (Pune-Trib). On the
basis of his aforesaid contentions, it was averred by the learned Authorised
Representative that as the Principal Commissioner had exceeded his jurisdiction
and had not only sought to review the plausible view that was taken by the
assessing officer after necessary deliberations which was in conformity with
the order of the jurisdictional bench of the Tribunal, therefore, his order may
be vacated and that of the assessing officer be restored.
6. Per contra, the learned
Departmental Representative (for short D.R ) relied on the order passed by the
Principal Commissioner under section 263 of the Act. It was submitted by the
learned Departmental Representative, that as the assessee was not eligible for
claim of deduction under section 80P on the interest income received on the
investments/deposits lying with the co-operative banks, therefore, the
Principal Commissioner finding the assessment order passed by the assessing
officer under section 143(3), dated 7-3-2016 as erroneous, insofar it was
prejudicial to the interest of the revenue, had rightly "set aside"
his assessment with a direction to re-adjudicate the issue therein involved.
Our attention was also drawn by the learned Departmental Representative to his
written submissions and certain judicial pronouncements in support of his
aforesaid contention.
7. We have heard the learned
authorised representatives for both the parties, perused the orders of the
lower authorities and the material available on record, as well as the judicial
pronouncements relied upon by them. Our indulgence in the present appeal has
been sought, for adjudicating, as to whether or not the claim of the assessee
for deduction under section 80P(2)(d) in respect of interest income earned from
the investments/deposits made with the co-operative banks is in order. In our
considered view, the issue involved in the present appeal hinges around the
adjudication of the scope and gamut of sub-section (4) of section 80P as had
been made available on the statute, vide the Finance Act 2006, with effect from
1-4-2007. On a perusal of the order passed by the Principal Commissioner under
section 263 of the Act, we find, that he was of the view that pursuant to
insertion of sub-section (4) of section 80P, the assessee would no more be
entitled for claim of deduction under section 80P(2)(d) in respect of the
interest income that was earned on the amounts which were parked as
investments/deposits with the cooperative bank, other than a Primary
Agricultural Credit Society or a Primary Co-operative Agricultural and Rural
Development Bank. Observing, that the co-operative banks from where the
assessee was in receipt of interest income were not cooperative societies, the
Principal Commissioner was of the view that the interest income earned on such
investments/deposits would not be eligible for deduction under section
80P(2)(d) of the Act.
8. After necessary deliberations,
we are unable to persuade ourselves to concur with the view taken by the
Principal Commissioner. Before proceeding any further, we may herein cull out
the relevant extract of the aforesaid statutory provision, viz. section
80P(2)(d), as the same would have a strong bearing on the adjudication of the
issue before us.
80P(2)(d) (1).
Where in the case of an assessee
being a co-operative society, the gross total income includes any income
referred to in sub-section (2), there shall be deducted, in accordance with and
subject to the provisions of this section, the sums specified in sub-section
(2), in computing the total income of the assessee.
(2). The sums referred to in
sub-section (1) shall be the following, namely:-
(a).................................................................................
(b).................................................................................
(c)..................................................................................
(d) in respect of any income by
way of interest or dividends derived by the cooperative society from its
investments with any other co-operative society, the whole of such income;
On a perusal of section 80P(2)(d),
it can safely be gathered that interest income derived by an assessee
co-operative society from its investments held with any other cooperative
society shall be deducted in computing its total income. We may herein observe,
that what is relevant for claim of deduction under section 80P(2)(d) is that
the interest income should have been derived from the investments made by the
assessee co-operative society with any other co-operative society. We are in
agreement with the view taken by the Principal Commissioner, that with the
insertion of sub-section (4) to section 80P of the Act, vide the Finance Act,
2006 with effect from 1-4-2007, the provisions of section 80P would no more be
applicable in relation to any co-operative bank, other than a primary
agricultural credit society or a primary co-operative agricultural and rural
development bank. However, at the same time, we are unable to subscribe to his
view that the aforesaid amendment would jeopardize the claim of deduction of a
co-operative society under section 80P(2)(d) in respect of its interest income
on investments/deposits parked with a co-operative bank. In our considered
view, as long as it is proved that the interest income is being derived by a
co-operative society from its investments made with any other co-operative
society, the claim of deduction under the aforesaid statutory provision, viz.
section 80P(2)(d) would be duly available. We find that the term
"co-operative society" had been defined under section 2(19) of the
Act, as under:-
(19) Co-operative society
means a cooperative society registered under the Co-operative Societies Act,
1912 (2 of 1912), or under any other law for the time being in force in any
state for the registration of co-operative societies;
We are of the considered view,
that though the cooperative banks pursuant to the insertion of sub-section (4)
to section 80P would no more be entitled for claim of deduction under section
80P of the Act, but as a cooperative bank continues to be a co-operative
society registered under the Co-operative Societies Act, 1912 (2 of 1912), or
under any other law for the time being in force in any State for the
registration of co-operative societies, therefore, the interest income derived
by a co-operative society from its investments held with a co-operative bank
would be entitled for claim of deduction under section 80P(2)(d) of the Act.
9. In so far the judicial
pronouncements that have been relied upon by the learned Authorised
Representative are concerned, we find that the issue that a co-operative
society would be entitled for claim of deduction under section 80P(2)(d) on the
interest income derived from its investments held with a co-operative bank is
covered in favour of the assessee in the following cases:
(i). M/s Solitaire CHS Ltd. v.
Pr. CIT, ITA No. 3155/Mum/2019, dt. 29-11-2019 : 2019 TaxPub(DT) 8002
(Mum-Trib) (ITAT G Bench, Mumbai);
(ii). Majalgaon Sahakari Sakhar
Karkhana Ltd. v. ACIT, Circle-3, Aurangabad, ITA No. 308/Pun/2018, dt.
14-3-2019 : 2019 TaxPub(DT) 2137 (Pune-Trib)
(iiii). Kaliandas Udyog Bhavan
Pemises Co-op. Society Ltd. v. ITO, 21(2)(1), Mumbai
We further find that the Hon'ble
High Court of Karnataka in the case of Pr. Commissioner of Income Tax and
Anr. v. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) :
2017 TaxPub(DT) 0677 (Karn-HC) and Hon ble High Court of Gujarat in the
case of State Bank Of India v. CIT (2016) 389 ITR 578 (Guj) : 2016
TaxPub(DT) 3564 (Guj-HC), had held, that the interest income earned by the
assessee on its investments with a co-operative bank would be eligible for
claim of deduction under section 80P(2)(d) of the Act. Still further, we find
that the CBDT Circular No. 14, dated 28-12-2006 also makes it clear
beyond any scope of doubt that the purpose behind enactment of sub-section (4)
of section 80P was that the co-operative banks which were functioning at par
with other banks would no more be entitled for claim of deduction under section
80P(4) of the Act. Although, in all fairness, we may herein observe that the
Hon'ble High Court of Karnataka in the case of Pr. CIT v. Totagars
co-operative Sale Society (2017) 395 ITR 611 (Karn) : 2017 TaxPub(DT)
1748 (Karn-HC), as had been relied upon by the learned Departmental
Representative before us, had held, that a co-operative society would not be
entitled to claim deduction under section 80P(2)(d); but then, the Hon'ble High
Court in the case of Pr. CIT and Anr. v. Totagars Cooperative Sale Society
(2017) 392 ITR 74 (Karn) : 2017 TaxPub(DT) 0677 (Karn-HC) and
Hon ble High Court of Gujarat in the case of State Bank of India v. CIT
(2016) 389 ITR 578 (Guj) : 2016 TaxPub(DT) 3564 (Guj-HC), had
observed, that the interest income earned by a co-operative society on its
investments held with a co-operative bank would be eligible for claim of
deduction under section 80P(2)(d) of the Act. Backed by the aforesaid
conflicting judicial pronouncements, we may herein observe, that as held by the
Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. v.
Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom) : 1985 TaxPub(DT)
0158 (Bom-HC), where there is a conflict between the decisions of
non-jurisdictional High Court s, then a view which is in favour of the assessee
is to be preferred as against that taken against him. Accordingly, taking
support from the aforesaid judicial pronouncement of the Hon ble High Court of
jurisdiction, we respectfully follow the view taken by the Hon'ble High Court
of Karnataka in the case of Pr. CIT and Anr. v. Totagars Cooperative Sale
Society (2017) 392 ITR 74 (Karn) : 2017 TaxPub(DT) 0677 (Karn-HC) and
that of the Hon ble High Court of Gujarat in the case of State Bank of India
v. CIT (2016) 389 ITR 578 (Guj) : 2016 TaxPub(DT) 3564 (Guj-HC), wherein
it was observed that the interest income earned by a co-operative society on
its investments held with a co-operative bank would be eligible for claim of
deduction under section 80P(2)(d) of the Act.
10. Be that as it may, in our
considered view, as the assessing officer while framing the assessment had
taken a possible view, and allowed the assessee s claim for deduction under
section 80P(2)(d) on the interest income earned on its investments/deposits
with co-operative banks, therefore, the Principal Commissioner was in error in
exercising his revisional jurisdiction under section 263 of the Act for
dislodging the same. Accordingly, finding no justification on the part of the
Principal Commissioner, who in exercise of his powers under section 263 of the
Act, had dislodged the view that was taken by the assessing officer as regards
the eligibility of the assessee towards claim of deduction under section
80P(2)(d), we set-aside his order and restore the order passed by the assessing
officer under section 143(3), dated 07-3-2016.
3. Even the latter limb of
interest income of Rs. 96,000 derived from investments made in
nationalized/other bank(s), the Revenue could hardly dispute that case law The
Vaveru Cooperative Rural Bank Ltd., v. CCIT (2017) 396 ITR 371 (AP) :
2017 TaxPub(DT) 1639 (Hyd-HC) that interest income(s) derived from such
nationalized/other bank(s) also qualifies for section 80P deduction and thereby
declined it s very stand. Faced with this situation, I adopt the foregoing
detailed discussion mutatis mutandis to accept the assessee s section
80P(2)(a)(i)/80P(2)(d) deduction claim(s) in very terms. Ordered accordingly.
4. This assessee s appeal is
allowed in above terms.
Order pronounced in the open Court on
16-4-2024.