Appeal details
Counselvise Citation
[2020] 111 COUNSELVISE.COM (IT) 7834 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-01-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
20-01-2020
Assessment Year
2013-2014
Appeal Filed On
31-05-2018
Judgement Text
, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NOS. 1429 & 1430/AHD/2018 ( ASSESSMENT YEARS : 2013-14 & 2014-15) SHREE VIVEKANAD CO.OP. CREDIT SOCIETY LTD. GANDHI CHOWK, UNJHA / VS. ITO PATAN, WARD-4, UNJHA, PATAN ./ ./ PAN/GIR NO. : AABTS3562J ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BIREN SHAH, A.R. / RESPONDENT BY : SHRI SAMIR TEKRIWAL, SR. D.R. DATE OF HEARING 20/01/2020 !'# / DATE OF PRONOUNCEMENT 27/01/2020 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE COMMI SSIONER OF INCOME TAX, GANDHINAGAR (CIT IN SHORT), BOTH DATED 23.03 .2018 ARISING IN THE RESPECTIVE ASSESSMENT ORDERS DATED 28.08.2015 & 26. 07.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE I NCOME TAX ACT, 1961 (THE ACT) CONCERNING AYS. 2013-14 & 2014-15. ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 2 - 2. THE GRIEVANCES RAISED BEING COMMON, BOTH CASES W ERE HEARD TOGETHER AND DISPOSED OF BY WAY OF THE COMMON ORDER . 3. AS PER GROUNDS OF APPEAL, THE ASSESSEE HAS CHALL ENGED THE REVISIONAL JURISDICTION USURPED BY THE COMMISSIONER OF INCOME TAX UNDER S.263 OF THE ACT IN BOTH APPEALS. 4. IN THE INSTANT APPEALS, THE CIT IN EXERCISE OF REVISIONAL POWER VESTED UNDER S.263 OF THE ACT HAS HELD THE RESPECTI VE ORDERS OF THE AO PASSED UNDER S.143(3) OF THE ACT TO BE ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THE GROUND THAT THE INTE REST EARNED BY THE ASSESSEE SOCIETY FROM DEPOSITS PLACED IN SCHEDULED CO.OP. BANK IS NOT ELIGIBLE FOR DEDUCTION UNDER S.80P(2) OF THE ACT. 5. THE LEARNED AR FOR THE ASSESSEE CONTENDED THAT T HE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION ON INTEREST EARNED FROM FDS WITH CO- OPERATIVE BANKS AND THE SOCIETIES UNDER S.80P(2)(D) OF THE ACT. IT WAS POINTED OUT THAT THE ISSUE HAS BEEN EXAMINED THREAD BARE IN A RECENT DECISION RENDERED IN UTTAR GUJARAT UMA CO-OP CREDIT SOCIETY LTD. VS. ITO ITA NOS. 1670 & 1671/AHD/2018 ORDER DATED 28.02.2019 BY THE AHMEDABAD TRIBUNAL. 6. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T THE ISSUE HAS BEEN ADJUDICATED AGAINST THE ASSESSEE BY THE DECISI ON OF THE HONBLE KARNATAKA HIGH COURT IN PR.CIT VS. THE TOTAGARS CO-OPERATIVE SALE SOCIETY ITA NO. 100066/2016 & ORS. (KARNATAKA) . IT WAS ALSO POINTED OUT THAT AFTER THE INSERTION OF THE PROVISIONS OF S ECTION 80P(4) OF THE ACT BY THE FINANCE ACT, 2006 W.E.F. AY 2007-08, THE BEN EFITS OF DEDUCTION UNDER S.80P OF THE ACT IS NOT AVAILABLE TO CO-OPERA TIVE BANK AND THE CREDIT SOCIETY EXCEPT IN FEW SITUATION AS MENTIONED THEREIN. THE ASSESSEE IS THEREFORE NOT ENTITLED TO THE DEDUCTION CLAIMED UNDER S.80P OF THE ACT ON INTEREST INCOME IN LAW. THE AO HAS ERRONEOUSLY ALLOWED THE CLAIM IN CONTRAVENTION OF LAW WHICH HAS CAUSED PREJUDICE TO THE INTEREST OF THE REVENUE. IT WAS ALSO SUBMITTED THAT THE DEPARTMENT IS NOT ENTITLED TO FILE ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 3 - AN APPEAL AGAINST THE ORDER OF THE AO AND THEREFORE , THE CIT WAS CONSTRAINT TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT TO REMEDY THE LOSS OF REVENUE ON ACCOUNT OF THE ERROR COMMITT ED BY THE AO. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. SECTION 263 OF THE ACT CONFERS POWER UPON THE PR.CIT/CIT TO CAL L FOR AND EXAMINE THE RECORDS OF A PROCEEDING UNDER THE ACT AND REVIS E ANY ORDER IF HE CONSIDERS THE SAME TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PR.CIT CAN TAKE RECOURSE TO REVISION UNDER SECTION 263 OF THE ACT WHERE THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE TWIN CONDITIONS ARE R EQUIRED TO BE SATISFIED SIMULTANEOUSLY. THE PR.CIT IN THE PRESENT CASE HAS PURPORTED TO ACT IN EXERCISE OF POWER UNDER S.263 OF THE ACT AND THEREB Y HAS SOUGHT TO CANCEL THE ASSESSMENT ORDER OF THE AO PASSED UNDER S.143(3) OF THE ACT. THE PR.CIT ESSENTIALLY OBSERVED THAT THE AO HAS WRO NGLY ALLOWED DEDUCTION UNDER S.80P OF THE ACT TO THE ASSESSEE SO CIETY IN CONTRAVENTION OF THE PROVISION OF THE ACT. THE GROUND FOR IMPUGN ED ACTION UNDER S.263 OF THE ACT IS THAT THE AO HAS FAILED TO MAKE REQUIS ITE INQUIRY INTO THE CLAIM OF DEDUCTION OF THE ASSESSEE UNDER THE AMBIT OF S.80P OF THE ACT AND IN THE ABSENCE OF PROPER INQUIRY ON THE ELIGIBI LITY OF DEDUCTION INVOLVED, THE ORDER OF THE AO IS ERRONEOUS IN SO FA R AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7.1 AS POINTED OUT ON BEHALF OF THE ASSESSEE, TWO P RE-REQUISITES MUST CO-EXIST BEFORE THE DESIGNATED AUTHORITY TO ENABLE HIM TO EXERCISE THE REVISIONAL JURISDICTION CONFERRED ON HIM NAMELY; TH E ORDER SHOULD BE (I) ERRONEOUS & (II) THE ERROR MUST BE SUCH THAT IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HOWEVER, AN ERRONEOUS OR DER DOES NOT NECESSARILY MEAN AN ORDER WITH WHICH THE PR.CIT IS UNABLE TO AGREE. THE AO WHILE PASSING AN ORDER OF ASSESSMENT, PERFORMS J UDICIAL FUNCTIONS. AN ORDER OF ASSESSMENT PASSED BY THE AO CANNOT BE I NTERFERED ONLY BECAUSE AN ANOTHER VIEW IS ALSO POSSIBLE ON THE ISS UE AS HELD IN CIT VS. GREENWORLD CORPORATION (2009) 181 TAXMAN 111 (SC) . IF IN GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, TWO VIEWS ARE POSSIB LE AND ONE VIEW AS ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 4 - LEGALLY PLAUSIBLE HAS BEEN ADOPTED BY THE AO THEN E XISTENCE OF OTHER POSSIBLE VIEW ALONE WOULD NOT BE SUFFICIENT TO EXER CISE POWERS UNDER S.263 OF THE ACT BY THE PR.CIT / CIT CONCERNED. HE NCE, THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRE CT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO. IT I S ONLY WHEN AN ORDER IS ERRONEOUS AND CAUSING PREJUDICE, THAT THE SECTIO N WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENTS OF THE ORDER BEING ERRONEO US. 7.2 IN THE INSTANT CASE, IT IS DEMONSTRATED ON BEHA LF OF THE ASSESSEE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO-ORDINATE BENCH IN UTTAR GUJARAT UMA CO-OP CREDIT SOCIETY LTD. VS. ITO (2019) 70 ITR (TRIB) 49 (AHMED ABAD), WHEREIN THE DECISION RENDERED BY THE HONBLE KARNATAKA HIGH COU RT IN THE TOTAGARS CO-OPERATIVE SALE SOCIETY (SUPRA) RELIED UPON BY REVENUE HAS ALSO BEEN CONSIDERED AND ALL OTHER FACETS OF LAW IN THIS REGA RD WAS TAKEN INTO ACCOUNT. IT WILL BE RELEVANT TO REPRODUCE THE OPER ATIVE PARA OF THE ORDER OF THE TRIBUNAL IN UTTAR GUJARAT UMA CO-OP CREDIT SOCIETY LTD. (SUPRA) FOR EASY REFERENCE: 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE DISPUTE CONCERNS SECTION 80P OF THE ACT WHICH PROVIDES FOR DEDUCTION OF INCOME OF A CO-OPERATIVE SOCIETY ENGAGED IN SPECIFIED ACTI VITY CATALOGUED IN SECTION 80P(2) OF THE ACT. THE PRINCIPAL CONTROVE RSY IN THE CAPTIONED APPEAL IS TOWARDS MAINTAINABILITY OF DEDUCTION UNDE R S.80P(2)(D) OF THE ACT IN THE HANDS OF THE CREDIT CO-OPERATIVE SOCIETY TOWARDS INTEREST EARNED FROM DEPOSIT PLACED WITH CO-OPERATIVE BANKS, MORE SO, IN THE LIGHT OF INSERTION OF S. 80P(4) OF THE ACT BY FINAN CE ACT, 2006. THUS, THE INCIDENTAL POINT IN ISSUE IS WHETHER THE BENEFI T OF S. 80P DENIED TO COOP BANKS BY THE INSERTION OF 80P(4) ADVERSELY IMP ACTS THE INVESTMENT IN SUCH BANKS BY A CO-OP SOCIETY OR NOT? IT IS COM MON KNOWLEDGE THAT A LARGE NUMBER OF CO-OP. SOCIETIES PLACE THEIR SURPLU S WITH CO-OP. BANKS AND SEEK BENEFIT OF SECTION 80P(2)(D) OF THE ACT ON INTEREST INCOME DERIVED. HENCE, A NUANCED UNDERSTANDING OF THE RAG ING CONTROVERSY IS STRONGLY NEEDED. 9.1 IT IS PREDOMINANTLY THE CASE OF THE ASSESSEE TH AT THE CO-OPERATIVE BANKS ESSENTIALLY CONTINUE TO BE CO-OPERATIVE SOCIE TIES AND WHILE CO- OPERATIVE SOCIETIES IS A GENUS TERM, THE CO-OPERA TIVE BANKS ARE SPECIES THERETO. THEREFORE, SUCH CO-OPERATIVE BANK S ARE ESSENTIALLY CO- OPERATIVE SOCIETIES NOTWITHSTANDING THEIR ENGAGEMEN T IN BANKING BUSINESS. CONSEQUENTLY, IT IS CLAIMED THAT THE INVE STMENT IN CO- OPERATIVE BANKS ARE TO BE TREATED AT PAR WITH INVES TMENT IN CO-OPERATIVE ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 5 - SOCIETIES FOR THE PURPOSES OF ELIGIBILITY OF DEDUCT ION UNDER S.80P(2)(D) OF THE ACT. THE REVENUE, ON THE OTHER HAND, HAS CON TENDED THAT IN VIEW OF DEFINITION PROVIDED FOR CO-OPERATIVE SOCIETIES U NDER SECTION 2(19); DEDUCTION PROVIDED UNDER SECTION 80P(2)(D) R.W.S. 8 0P(4) OF THE ACT IS NOT AVAILABLE TO INVESTMENT IN A CO-OPERATIVE BANK AS SUCH INVESTMENT CANNOT BE TREATED AT PAR WITH THE INVESTMENT IN CO- OPERATIVE SOCIETY. IT IS ALSO CONTENDED ON BEHALF OF THE REVENUE THAT THE PROVISIONS OF SECTION 80P OF THE ACT ARE FOUNDED ON PRINCIPLES O F MUTUALITY I.E. COMMON IDENTITY BETWEEN THE CONTRIBUTORS AND PARTIC IPATORS. THE DEPOSIT IN THE CO-OPERATIVE BANK LACKS THE DEGREE O F PROXIMITY BETWEEN THE MEMBERS OF THE SOCIETY WITH THAT OF CO-OPERATIV E BANK AND THUS OFFENDS THIS SACROSANCT PRINCIPLE OF MUTUALITY. IT WAS THUS CONTENDED THAT INTEREST INCOME BY A CO-OPERATIVE SOCIETY FROM A CO-OPERATIVE BANK IS NOT COVERED IN THE FOLD OF SECTION 80P(2) OF THE ACT. IT IS FURTHER CASE OF THE ASSESSEE THAT EXCLUSION OF CO-OP BANKS FOR E LIGIBILITY OF DEDUCTION UNDER S. 80P OWING TO INSERTION OF S. 80P(4) DOES N OT, IN ANY MANNER, TAKE AWAY THE BENEFIT AVAILABLE UNDER S. 80P(2)(D) TO AN INVESTOR SOCIETY (EXCLUDING CO-OP BANK) IN A CO-OP BANK WHI CH IS A CO-OP SOCIETY FOR ALL INTENT AND PURPOSES WHILE CARRYING ON THE FUNCTIONS OF A BANK. IT IS THUS PADDLED THAT WHILE A CO-OP SOCIETY FUNCTIONING AS A CO- OP BANK IS NOT ENTITLED TO BENEFIT OF 80P OWING TO EXCLUSIONS MADE, A CO-OP SOCIETY NOT BEING A CO-OP BANK REMAINS UNAFFE CTED BY S. 80(4) AND CAN ENJOY THE BENEFITS OF S. 80P(2)(D) CONFERRE D ON THE SOCIETIES ON FULFILLMENT OF PRE-REQUISITES. 9.2 BEFORE WE PROCEED TO DEAL WITH THE ISSUE IN HAN D, IT WOULD BE APT TO QUOTE THE RELEVANT PROVISIONS GOVERNING THE CONT ROVERSY IN HAND. 9.2.1 SECTION 2(19) DEFINES THE MEANING OF EXPRESSI ON CO-OP SOCIETY AS UNDER: 'CO-OPERATIVE SOCIETY' MEANS A CO-OPERATIVE SOCIETY REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT, 1912 (2 OF 19 12 ), OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE IN ANY ST ATE FOR THE REGISTRATION OF CO-OPERATIVE SOCIETIES; 9.2.2 INCOME UNDER S. 2(24) OF THE ACT ALSO INCLUDE S: THE PROFITS AND GAINS OF ANY BUSINESS OF BANKING (I NCLUDING PROVIDING CREDIT FACILITIES) CARRIED ON BY A CO-OPE RATIVE SOCIETY WITH ITS MEMBERS 9.2.3 THE RELEVANT PORTION OF S. 80-P GOVERNING DED UCTION AVAILABLE TO CO-OPERATIVE SOCIETIES IS ALSO QUOTED HEREUNDER: DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SO CIETIES. 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERAT IVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACC ORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME O F THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL B E THE FOLLOWING, NAMELY : ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 6 - (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS; OR (II) A COTTAGE INDUSTRY ; OR (III) --- (IV) -- (V) --- (VI) --- (VII) ---- THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES : (B) ----------- (C) ----------- (D) IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVI DENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MEN TS WITH ANY OTHER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME ; (E) (F) ----------- (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 SO CIETY' SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO TH EM 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 CONFIN ED TO A TALUK AND THE PRINCIPAL OBJECT OF WHICH IS TO PROVIDE FOR LONG- TERM CREDIT FOR AGRICULTURAL AND RURAL DEVELOPMENT ACTIV ITIES. 9.2.4 PART V OF BANKING REGULATION ACT, 1949 DEFINE S CO-OPERATIVE BANK IN SECTION 5(CCI) AS UNDER: CO-OPERATIVE BANK MEANS A STATE CO-OPERATIVE BAN K, A CENTRAL CO-OPERATIVE BANK AND A PRIMARY CO-OPERATIVE BANK; 9.2.5 A PRIMARY CO-OPERATIVE BANK AS PER SECTION N 5(CCV) OF PART V OF BANKING REGULATION ACT, 1949 READS TO MEAN: ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 7 - (CCV) PRIMARY CO-OPERATIVE BANK MEANS A CO-OPERA TIVE SOCIETY, OTHER THAN A PRIMARY AGRICULTURAL CREDIT S OCIETY,- . 9.2.6 AS PER CLAUSE (CCVII) OF SECTION 5, HOWEVER, CENTRAL CO-OP BANK AND STATE CO-OP BANK SHALL HAVE THE SAME ME ANINGS RESPECTIVELY ASSIGNED TO THEM IN THE NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD) ACT, 1981. NABARD, IN TU RN DEFINES THESE TWO TERMS AS UNDER: SECTION 2(D) OF NABARD DEFINES CENTRAL CO-OPERATIV E BANK MEANS THE D. 'CENTRAL CO-OPERATIVE BANK' MEANS THE PRINCIPAL CO- OPERATIVE SOCIETY IN A DISTRICT IN A STATE, THE PRIMARY OBJEC T OF WHICH IS THE FINANCING OF OTHER CO-OPERATIVE SOCIETIES IN THAT D ISTRICT:. U. 'STATE CO-OPERATIVE BANK' MEANS THE PRINCIPAL C O- OPERATIVE SOCIETY IN A STATE, THE PRIMARY OBJECT OF WHICH IS THE FINANCING OF OTHER CO-OPERATIVE SOCIETIES IN THE STATE: 9.3 HAVING NOTED THE RELEVANT PROVISIONS IN EARLIER PARA, IT WOULD BE EXPEDIENT TO FIRSTLY REFER TO THE DECISION OF THE C ITIZEN CO-OPERATIVE SOCIETY LTD. (SUPRA) TO GATHER THE RULES OF INTERPR ETATION OF VARIOUS SUB- SECTIONS OF THE BENEFICIAL PROVISION OF S. 80P. TH E HONBLE SUPREME COURT INTER ALIA HAS OBSERVED THAT DIFFERENT HEADS OF EXEMPTION ENUMERATED IN THE SECTION 80P OF THE ACT SHOULD BE TREATED AS SEPARATE AND DISTINCT HEAD OF EXEMPTION. IF ANY PARTICULAR CATEGORY OF AN INCOME FALLS WITHIN ANY ONE HEAD OF EXEMPTION, TH E ASSESSEE WOULD BE FREE FROM TAX NOTWITHSTANDING THAT THE CONDITIONS O F OTHER HEAD OF EXEMPTION ARE NOT SATISFIED AND SUCH INCOME IS NOT FREE FROM TAX UNDER OTHER HEAD OF EXEMPTION. THUS, IN VIEW OF THE EXP RESS JUDICIAL DICTA, PROVISIONS OF SECTION 80P(2)(A) AND 80P(2)(D) ARE M UTUALLY EXCLUSIVE AND ARE TO BE READ INDEPENDENT OF EACH OTHER. 9.4 WE ARE PRESENTLY CONCERNED WITH THE AVAILABILIT Y OF DEDUCTION TO A CO-OP SOCIETY WITHIN THE REALM OF SECTION 80P(2)( D) OF THE ACT. TWO THINGS NEED TO BE NOTED IN THIS REGARD; FIRSTLY, UN LIKE SECTION 80P(2)(A) OR (B) OR (C) OF THE ACT WHERE THE ASSESSEE IS QUAL IFIED FOR DEDUCTION OF PROFITS & GAINS OF BUSINESS ATTRIBUTABLE TO ONE O R MORE OF ACTIVITIES ENUMERATED IN THESE SUB-SECTIONS, SECTION 80P(2)(D) OF THE ACT, IN SHARP DEPARTURE, PROVIDES FOR DEDUCTION OF WHOLE OF SUCH INCOME [WITHOUT ANY DISTINCTION ON NATURE OF INCOME] AS DERIVED BY A CO-OPERATIVE SOCIETY FROM ITS INVESTMENT WITH ANY OTHER CO-OPERA TIVE SOCIETY. NEEDLESS TO SAY, IN A TAXING ACT, ONE HAS TO LOOK M ERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT AND ONE HAS TO LOOK FAIRLY AT THE LANGUAGE USED. THUS, SCOPE OF BENEFIT UNDER S.80P(2)(D) IS NOT RESTRICTED TO BUSINESS INCOME ALONE BUT ALSO EXTENDS TO INCOME DERIVED FROM INVESTMENTS ORDINARILY FALLING UNDER T HE HEAD INCOME FROM OTHER SOURCES AS WELL ; SECONDLY DOCTRINE OF MUTUALITY IS NOT NECESSARILY A PRE-CONDITION IN APPROPRIATE CIRCUMST ANCES, FOR INSTANCE 80P(2)(A(II); AND THIRDLY AND QUITE SIGNIFICANTLY ; THE INVESTMENT BY A CO-OP SOCIETY IN A CO-OP SOCIETY SHOULD RESULT IN I NTEREST OR DIVIDEND INCOME FROM ITS INVESTMENT. THUS WHAT IS PERTINENT IS THAT THE INVESTMENT BY THE ASSESSEE SOCIETY SHOULD BE PARKED IN ANOTHER CO-OP SOCIETY FOR THE PURPOSES OF SUB-CLAUSE 2(D) OF S. 80P. THE MOOT ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 8 - QUESTION THUS NATURALLY EMERGES IS; WHETHER THE INV ESTMENT IN A CO-OP BANK IS TO BE REGARDED AS INVESTMENT IN-EFFECT IN A CO-OP SOCIETY OR NOT? 9.5 AT THIS JUNCTURE, WE ALSO TAKE SIMULTANEOUS NOT E OF SUCH SECTION 80P(4) OF THE ACT INSERTED BY FINANCE ACT, 2006 WHE REBY A CO-OPERATIVE BANK HAS BEEN DEPRIVED OF DEDUCTION UNDER S.80P OF THE ACT. TO PUT IT SLIGHTLY DIFFERENTLY, WITH ADVENT OF SECTION 80P(4) , CO-OP BANKS HAVE BEEN BROUGHT TO TAX BY DENYING THEM THE BENEFIT OF SECTION 80P OF THE ACT. 9.6 THE INSERTION OF SECTION 80P(4) OF THE ACT HAS PURPORTEDLY ALSO OBFUSCATED AND CAST ASPERSION ON THE DEDUCTIBILITY OF INCOME DERIVED BY A CO-OPERATIVE SOCIETY FROM INVESTMENTS PLACED WITH CO-OPERATIVE BANK UNDER S. 80P(2)(D) OF THE ACT. IN THIS CONTEXT, IT WOULD BE INTERESTING TO NOTE THAT THE AFORESAID CLAUSE 80P(4) ITSELF HOLDS THAT A CO-OPERATIVE BANK MAY ALSO POSSIBLY INCLUDE A CREDIT SOCIETY; FOR INSTANCE, A PRIMARY AGRICULTURAL CREDIT SOCIETY. THEREFORE, ON AN INCISIVE READING OF SECTION 80P(4) OF THE ACT, IT APPEARS THAT CO-OP ERATIVE BANKS CAN ALSO BE CO-OPERATIVE SOCIETY FOR THE PURPOSES OF SE CTION 80P(2)(D) OF THE ACT. THUS, ON A CONJOINT READING OF SECTION 80 P(2)(D) AND 80P(4), IT WOULD APPEAR THAT WHILE THE CO-OPERATIVE BANKS I N CERTAIN CASES [AS SPECIFIED IN SECTION 80P(4)] MAY NOT QUALIFY FOR D EDUCTION UNDER S.80P OF THE ACT, A CO-OPERATIVE SOCIETY PER SE WOULD NOT COME WITHIN THE MISCHIEF OF SUB-SECTION 4 OF THE ACT OF SECTION 80P OF THE ACT AND WOULD CONTINUE TO AVAIL THE BENEFIT OF SECTION 80P(2)(D) OF THE ACT. THUS, SIMPLY PUT, WHILE A CO-OPERATIVE BANK HAS BEEN STRI PPED OF THE BENEFIT OF SECTION 80P OF THE ACT ON ITS VARIOUS INCOME BY INSERTION OF S. 80P(4), THE INVESTMENT IN SUCH CO-OPERATIVE BANK [ BEARING THE LEGAL TRAPPINGS OF A CO-OP SOCIETY ] BY A CO-OP SOCIETY A S ENVISAGED IN SECTION 80P(1) OF THE ACT IS NOT DIVESTED OF SUCH B ENEFIT. 9.7 JOINING THE ISSUE IN HAND, AS PER SECTION 80P(2 )(D) OF THE ACT, THE ONLY REQUIREMENT IS THAT THE INCOME SHOULD BE R ECEIVED FROM INVESTMENT BY A CO-OPERATIVE SOCIETY IN OTHER CO-OP ERATIVE SOCIETY AND IT IS CLAIMED THAT CO-OPERATIVE BANK NAMELY AHMEDA BAD DISTRICT CO- OPERATIVE BANK, IN THE PRESENT CASE, IS NOTHING BU T A CO-OPERATIVE SOCIETY RECOGNISED BY THE COMPETENT AUTHORITY OF TH E STATE AS CONTEMPLATED UNDER SECTION 2(19) OF THE ACT. ON THE SE FACTS, THE ELIGIBILITY OF DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT IS REQUIRED TO BE EVALUATED INDEPENDENT OF MUTUALITY DOCTRINE T AKEN AWAY BY INSERTION OF S. 2(24)(VIIA). THE ASSESSEE SOCIETY WOULD THUS BE ENTITLED TO BENEFIT OF SECTION 80P(2)(D) ON INTEREST INCOME FROM INVESTMENT IN CO-OP BANK. AS NOTICED FROM THE DEFINITION OF CO-O P BANK WITH REFERENCE TO BANKING REGULATION ACT, 1949; READ WIT H NABARD ACT, IT IS OSTENSIBLE THAT THE CO-OP BANKS OF VARIOUS TYPES ARE ESSENTIALLY CO- OP. SOCIETIES. HENCE, THE CLAIM OF DEDUCTION MADE U NDER S. 80P(2)(D) BY A CO-OP SOCIETY IN SUCH CO-OP BANKS CAN NOT BE DENI ED NOTWITHSTANDING THAT SOME THESE CO-OP BANKS ARE NOT ELIGIBLE FOR 80 P BENEFITS DESPITE BEING CO-OP SOCIETIES. 9.8 COUPLED WITH THIS, CERTAIN OBSERVATIONS MADE BY THE HONBLE GUJARAT HIGH COURT IN STATE BANK OF INDIA (SUPRA) A ND IN SABARKANTHA DISTRICT (SUPRA) ALSO REINFORCES THAT INTEREST EARN ED ON FIXED DEPOSIT WITH CO-OPERATIVE BANK CAN BE SAID TO BE QUALIFIED FOR DEDUCTION UNDER ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 9 - S.80P OF THE ACT NOTWITHSTANDING THAT SUCH OBSERVAT IONS APPEAR TO BE IN THE NATURE OF AN OBITER IN THE CONTEXT OF THOSE CAS ES. 9.9 AT THIS STAGE, IT WOULD ALSO BE PERTINENT TO AG AIN RESTATE THAT FOR THE PURPOSES OF SECTION 80P OF THE ACT, THE PRINCIP LE OF MUTUALITY HAS BEEN OBLITERATED IN VIEW OF INSERTION OF SECTION 2( 24) (VIIA) OF THE ACT BY FINANCE ACT, 2006 AND SUCH PRINCIPLES THUS NO LO NGER SERVE AS STRICT GUIDING PRINCIPLE TO TEST THE RELIEF ELIGIBLE UNDER S. 80P(2)(D) OF THE ACT. THEREFORE, THE PLEA RAISED ON BEHALF OF THE RE VENUE TOWARDS ABSENCE OF PRINCIPLE OF MUTUALITY IN SUCH DEPOSITS WITH CO-OPERATIVE BANKS IS A DAMP SQUIB. THUS, THE ASSESSEE BEING A C O-OPERATIVE SOCIETY AS CONTEMPLATED UNDER S. 80P(1) OF THE ACT, CANNOT BE DEPRIVED OF BENEFIT OF S.80P(2) (D) DESPITE PURPORTED ABSENCE O F MUTUALITY IN INVESTMENT WITH A CO-OP BANK. WE, THUS, CONCUR WITH PLEA OF ASSESSEE FOR ALLOWABILITY OF DEDUCTION ON INTEREST INCOME DE RIVED FROM CO- OPERATIVE SOCIETY IN THE FORM OF CO-OPERATIVE BANK ON FIRST PRINCIPLES. THE ISSUE IS ACCORDINGLY RESOLVED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9.10 WE ARE CONSCIOUS OF THE DECISION OF THE HONBL E KARNATKA HIGH COURT IN PR.CIT VS. TOTAGARS CO.OPERATIVE SALES SOC IETY (2018) 395 ITR 611 (KARN) WHEREIN IT WAS HELD THAT INTEREST INCOME NOT ARISING FROM BUSINESS OPERATIONS IS NOT ELIGIBLE FOR DEDUCTION U NDER S.80P OF THE ACT. A READING OF THE JUDGMENT OF THE HONBLE HIGH COURT SHOWS THAT IT WAS GUIDED BY NATURE OF ACTIVITY TO DETERMINE THE CHARA CTER OF INCOME FOR THE PURPOSES OF SECTION 80P(2)(D) OF THE ACT. PLAC ING RELIANCE UPON THE JUDGMENTS RENDERED IN THE CONTEXT OF 80P(2)(A)(I) O F THE ACT, THE HONBLE HIGH COURT CONCLUDED THAT THE DEDUCTION OF INTEREST INCOME IS NOT PERMISSIBLE UNLESS IT ARISES FROM BUSINESS OPER ATIONS. CLEARLY, THE DISTINCTION BETWEEN SECTION 80P(2)(A) AND 80P(2)(D) OF THE ACT OF SUBSTANTIAL NATURE (AS DISCUSSED IN PARA 9.4 OF THI S ORDER) WAS NOT BROUGHT TO THE NOTICE OF HONBLE HIGH COURT. THE D EDUCTION UNDER S. 80P(2)(A) OR (B) OR (C) OF THE ACT IS AVAILABLE ONL Y ON ACCOUNT OF INCOME/PROFITS ARISING FROM BUSINESS ACTIVITY. HOW EVER, THIS REQUIREMENT IS NOT APPLICABLE UNDER S.80P(2)(D) OF THE ACT WHERE WHOLE OF THE INCOME ARISING FROM INTEREST OR DIVIDEND ETC . IS ALLOWABLE WITHOUT SUCH LIMITATION OF BUSINESS ACTIVITY. THIS CARDINA L DIFFERENCE OF OVERWHELMING NATURE WAS NOT BROUGHT TO THE NOTICE O F THE HONBLE HIGH COURT. CONSEQUENTLY, THE DECISION RENDERED BY THE HONBLE HIGH COURT APPEARS TO BE SUBSILENTIO. THUS, GOVERNED BY THE O BSERVATIONS OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SABARKANT HA DISTRICT (SUPRA) AND STATE BANK OF INDIA (SUPRA), WE HAVE NOT HESITA TION TO AFFIRM THE PLEA OF THE ASSESSEE FOR ALLOWABILITY OF DEDUCTION. 7.3 THUS, IN THE LIGHT OF REASONING OF THE TRIBUNAL IN FAVOUR OF ASSESSEE ON ELIGIBILITY OF DEDUCTION UNDER S.80P OF THE ACT ON INTEREST EARNED FROM DEPOSITS PLACED WITH CO-OPERATIVE BANKS , THE ISSUE CANNOT BE REGARDED TO BE FREE OF ANY DEBATE TO THE LEAST. IN THE CIRCUMSTANCES, THE ACTION OF THE AO IN GRANTING RELIEF UNDER S.80P OF THE ACT CANNOT BE DUBBED AS ERRONEOUS PER SE. THEREFORE, THE TWIN CONDITIONS FOR INVOKING PROVISIONS OF SECTION 263 OF THE ACT ARE CLEARLY NO T SATISFIED. THUS, THE ITA NOS. 1429 & 1430/AHD/18 [SHREE VIVEKANAND CO.OP . CREDIT SOCIETY LTD. VS. ITO] A.YS. 2013-14 & 2014-1 5 - 10 - REVISIONAL ACTION OF THE CIT CANNOT BE REGARDED TO BE WITHIN THE SPHERES OF JURISDICTION AVAILABLE UNDER S.263 OF THE ACT. HENCE, THE ORDER OF THE CIT UNDER S.263 OF THE ACT IS REQUIRED TO BE SET AS IDE AND CANCELLED. 7.4 IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE BEARING SIMILAR GRIEVANCES, ARE REQUIRED TO BE ALLOWED FOR THE REAS ONS NOTED ABOVE. 8. IN THE RESULT, BOTH APPEALS FILED BY THE ASSESSE E ARE ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMAR KE DIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 27/01/2020 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 27/01/202 0
