INCOME TAX OFFICER, WARD 1, DHARMAPURI, DHARMAPURI V. SUBRAMANIYA SIVA COOPERATIVE SUGAR MILLS LIMITED, DHARMAPURI

ITA 2551/CHNY/2024

AI Insights

The case involves M/s. Subramaniya Siva Co-op. Sugar Mills Ltd., which appealed against the order of the Income Tax Officer (ITO) disallowing a deduction claimed under section 80P(2)(d) of the Income Tax Act for interest income from investments in the Dharmapuri District Central Co-operative Bank Ltd. The ITO had initially disallowed the deduction, leading the assessee to appeal to the CIT(A), who reversed the ITO's decision. The Revenue then appealed to the Tribunal, which upheld the CIT(A)'s decision, referencing previous Tribunal decisions and High Court judgments that supported the assessee's position.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107495 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Other Referred Cases: CIT vs Salem Agricultural Producers' Cooperative Marketing Society, Kangra Cooperative Bank Ltd. vs CIT, Mavilayi Service Cooperative Bank Ltd. & Others vs CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CLEMENT RAMESH KUMAR
• Assessee Lawyers: G. BASKAR
• Keywords: Question of law
• Section: 251; 80P

Judgement Text

"आयकर अपीलीय अिधकरण, ’सी’ \u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ी जगदीश, लेखा सद\f क े सम\u0015 BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2551/Chny/2024 िनधा\u000eरणवष\u000e/Assessment Year: 2018-19 The ITO, Ward-I, Dharmapuri. v. M/s.Subramaniya Siva Co-op. Sugar Mills Ltd., Nilalapuram Post, Pappireddipatty Taluk, Dharmapuri-636 904. [PAN: AAAAS 6230 R] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.Clement Ramesh Kumar, CIT \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Mr.G. Baskar, Advocate सुनवाईक\u001aतारीख/Date of Hearing : 26.12.2024 घोषणाक\u001aतारीख /Date of Pronouncement : 31.01.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short \"the Ld.CIT(A)”), Delhi, dated 08.08.2024 for the Assessment Year (hereinafter in short \"AY”) 2018-19. 2. The main grievance of the Revenue is against the action of the Ld.CIT(A) allowing the deduction u/s.80P(2)(d) of the Income Tax Act, ITA No.2551/Chny/2024 (AY 2018-19) M/s.Subramaniya Siva Co-op. Sugar Mills Ltd. :: 2 :: 1961 (hereinafter in short \"the Act”) in respect of interest earned by the assessee on investment made in the Co-operative Banks. 3. The brief facts relating to the sole issue are that the assessee is a Co-operative Sugar Mills Ltd., deriving income from manufacturing of sugar and filed its return of income (RoI) for AY 2018-19 on 29.01.2018 admitting an income of Rs.4,21,14,400/- after claiming deduction of Rs.7,98,86,603/- u/s.80P of the Act. The return was taken up for scrutiny and the AO inter-alia disallowed the deduction claimed u/s.80P of the Act on the ground that assessee had earned interest amounting to Rs.7,98,86,603/- from investment/Fixed Deposits made in M/s.Dharmapuri District Central Co-operative Bank Ltd., (hereinafter referred to as ‘M/s.DDCCBL’] which interest income assessee is not entitled for deduction u/s.80P(2)(d) of the Act. The AO disallowed the deduction claimed u/s.80P of the Act and inter-alia, determined the income of the assessee at Rs.12,20,01,003/-. 4. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A)/NFAC wherein assessee brought to the notice of the Ld.CIT(A) that interest income earned from M/s.DDCCBL is allowable deduction u/s.80P(2)(d) of the Act by relying on the order of this Tribunal in the assessee’s own case [in ITA No.1378/Chny/2019 dated 20.02.2024 for AY ITA No.2551/Chny/2024 (AY 2018-19) M/s.Subramaniya Siva Co-op. Sugar Mills Ltd. :: 3 :: 2015-16] in which the Tribunal has allowed the deduction on the interest earned from M/s.DDCCBL by holding as under: 5. We heard the rival submissions, gone through the relevant material and find merit in the submission of the Ld. AR. The fact remains that the assessee is a co-operative society. It has earned the impugned interest from Dharmapuri District Co-operative Bank Ltd., which is also a co-operative society engaged in banking business. The relevant portion of the order of the Jurisdictional High Court in the case of CIT vs Salem Agricultural Producers’ Cooperative Marketing Society in TCA No. 5/2015 dated 10.08.2016 is extracted as under: “6. Addressing the said issue, at paragraph No.8, in I.T.A.No.732/MDS/2014 dated 30/6/2014, the Tribunal has ordered as hereunder:- “The case of the assessee is that the income by way of interest and dividend earned by the assessee Society are from investments made in Salem District Central Co-operative Bank, which is also admittedly, a cooperative society and are allowable deduction. The Assessing Officer has held that the assessee has made only with Salem District Central Cooperative Bank and therefore, the income from investment with the Bank is not entitled for deduction under Section 80 P (2) (d) of the Act. On appeal, the Id.CIT (Appeals confirmed the order passed by the Id.CIT (Appeals). We find that in the case of CIT Vs. Kangra Co- operative Bank Ltd. [2009] 309 ITR 106 (HP), the Hon'ble Himachal Pradesh High Court has considered Section 80 P (2) (d) of the Act. The interest earned by the assessee co-operative bank on fixed deposits with Himachal Pradesh State Co-operative Bank in compliance with the provisions of Section 57 of the Himachal Pradesh Co-operative Societies Act, 1968, the income derived from banking business is eligible for deduction under Section 80 P (2) (a) (i) of the Act. Exemption is also available under Section 80 P (2) (d) of the Act. In the present case, the assessee is an Agricultural Producers Co- operative Marketing Society Ltd., registered under Tamil Nadu Co- operative Societies Act and established for the benefit of the Agricultural producers and the interest or dividend earned by the assessee will be beneficial to the members alone. Therefore, keeping in view of the decision, in the case of CIT Vs. Kangra Co-operative Bank Ltd., (supra), we hold that the assessee is eligible for benefit under Section 80 P (2) (d) of the Act and also this being a beneficial section to the co-operative Societies.” 7. Let us consider the decision in KANGRA CO-OPERATIVE BANK LTD'S case referred to by the tribunal. The question of law framed therein is as follows:- “Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the interest income earned by the assessee on deposits made with H.P.State Co-operative Bank in the shape of F.D.Rs. is income derived from banking business and therefore, eligible for deduction under Section 80 P (2) (a) (i) of the Income Tax Act ?” ITA No.2551/Chny/2024 (AY 2018-19) M/s.Subramaniya Siva Co-op. Sugar Mills Ltd. :: 4 :: 8. After considering the decisions in CIT Vs. Karnataka State Co- operative Apex Bank reported in [2001] 251 ITR 194, CIT Vs. Ramanathapuram District Co-operative Central Bank Ltd reported in [2002] 255 ITR 423 (SC), a Division Bench of the Himachal Pradesh High Court, at paragraph Nos.10 and 11 held thus:- “The Karnataka High Court in CIT Vs. Sri Ram Sahakari Bank Ltd., [2004] 266 ITR 632, held that the interest on investments and short- term fixed deposits in banks was entitled to be deducted under Section 80 P (2) (a) (i) of the Act. In fact, in CIT Vs. Nawanshahar Central Co- operative Bank Ltd., [2007] 289 ITR 6, the Apex Court has held that where under the provisions of the Co-operative Societies Act , the co- operative bank is statutorily required to place part of its funds in approved securities, the income attributable thereto is not taxable under Section 80 P (2) (a) (i) of the Income-tax Act , 1961. In the present case, we have noted above that under Section 57 , every co-operative Society including the assessee is required by law to keep a percentage of its profits in reserve funds. These reserve funds can only be invested or deposited in a certain manner. Applying the ration of the judgment in Nawanshahar Central Co-operative Bank Ltd's case [2007] 289 ITR 6, it is apparent that any interest on such investments is required to be deducted under Section 80 P (2) (a) (i) of the Act. At para 12 of the judgment, further reiterated that .... Furthermore, the investments have been made in the H.P.State Co- operative Bank which is also a cooperative Society and, therefore, even under Section 80 P (2) (d) of the Act, interest income from investments made in any co-operative Society would also be entitled for deduction.” 9. Though Mr.J.Narayanasamy, learned Senior Standing Counsel for Income Tax Department submitted that the Tribunal was not right in holding that the interest earned from the Salem Agricultural Producers Co-operative Marketing Society Ltd., for reduction under Section 80 P (2(a) (i) of the Income Tax Act , we are not inclined to accept the said contentions. For the reason that a District Central Co-operative Bank, is also a Society, in which event, the income by way of interest and dividend earned by the assessee/respondent Society from the investments made in Salem District Central Co-operative Bank, which is also a Co-operative Society is entitled for deduction under Section 80 P (2) (a) (i) of the Income Tax Act . Decision relied on by the assessee and considered by the Tribunal squarely applies to the facts on hand. Question of law, figuring as 4, is negatived as against the appellant.” From the above it is clear that the facts of this assessee is clearly falling within the four corners of the case decided by the Jurisdictional High Court, supra, and hence we allow the assessee’s appeal. The AO is directed to grant the deduction claimed by the assessee u/s. 80P(2), accordingly. 6. In the result, the assessee’s appeal is allowed. 5. The Ld.CIT(A) finding that there is no change in facts or law has followed the decision of this Tribunal in the assessee’s own case (supra). ITA No.2551/Chny/2024 (AY 2018-19) M/s.Subramaniya Siva Co-op. Sugar Mills Ltd. :: 5 :: 6. Aggrieved, the Revenue is in appeal before us. 7. We have heard both the parties and perused the material available on record. The only issue is regarding the deduction claimed by the assessee u/s.80P(2)(d) of the Act on the interest income earned from the investment/Fixed Deposits at M/s.DDCCBL amounting to Rs.7,98,86,603/- In this regard, it would be gainful to reproduce relevant provisions of Sec.80P(2)(d) of the Act, which reads as under: Deduction in respect of income of co-operative societies. 80P.(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:- (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; [(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation - For the purposes of this sub-section,- (a) \"co-operative bank\" and \"primary agricultural credit society\" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) primary co-operative agricultural and rural development bank\" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.] 8. The controversy raised by the Revenue has no legs to stand because, the assessee has received interest from M/s.DDCCBL/Co- operative Society/Co-operative Bank which are basically Co-operative ITA No.2551/Chny/2024 (AY 2018-19) M/s.Subramaniya Siva Co-op. Sugar Mills Ltd. :: 6 :: Society; therefore, we are of the considered view that interest earned by assessee from another Co-operative Society, which in this case a Co- operative Society/Bank is eligible u/s.80P(2)(d) of the Act; unless the Revenue/AO could show that those Co-operative Banks (from whom assessee earned interest on its deposits i.e M/s.DDCCBL) possess a license from the RBI to do banking business with the public, the deduction u/s.80P can’t be denied; and for such a proposition, we rely on the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co- operative Bank Ltd. & Othrs. v. CIT reported in [2021] 431 ITR 1 (SC); wherein, all these controversies has been put to rest; and since, it is not the case of the Revenue/AO that the Co-operative Societies/Bank from whom the assessee has derived interest had possessed license from RBI to do banking business, we are unable to accept the contention of the Ld.DR to overturn the impugned action of the Ld.CIT(A). Therefore, we are of the considered opinion that unless the assessee earns interest income from a Co-operative Bank which possess RBI license, the assessee can’t be denied the deduction u/s.80P of the Act, which the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. & Othrs. (supra) observed that section 80P is a benevolent provision enacted by the Parliament to encourage and promote the cooperative sector in general and therefore, must be read liberally and reasonably, ITA No.2551/Chny/2024 (AY 2018-19) M/s.Subramaniya Siva Co-op. Sugar Mills Ltd. :: 7 :: and if there is ambiguity in favour of the assessee. A deduction that is given without any reference to any restriction, or limitation cannot be restricted or limited by implication. Therefore, the Ld.CIT(A) has rightly allowed the claim of deduction u/s.80P of the Act to the assessee by following the decision of this Tribunal in the assessee’s own case for AY 2015-16. 9. Since there is no change in fact or law, the Ld.CIT(A) rightly followed it and allowed the claim of deduction u/s.80P(2)(d) of the Act, therefore, we uphold the order of the Ld.CIT(A) and dismiss the appeal filed by the Revenue. 10. In the result, appeal filed by the Revenue is dismissed. Order pronounced on the 31st day of January, 2025, in Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद\f/ACCOUNTANT MEMBER (एबी टी. वक ) (ABY T. VARKEY) \u0001याियक सद\bय/JUDICIAL MEMBER चे\tई/Chennai, !दनांक/Dated: 31st January, 2025. TLN, Sr.PS आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ\u0010/Appellant 2. \u0011\u0012थ\u0010/Respondent 3. आयकरआयु\u0018/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0011ितिनिध/DR 5. गाड फाईल/GF "