Primary Agricultural Credit Co-operative Bank Limited, Belgavi V. Income Tax Officer, Ward - 1(4), Belgavi

ITA 193/PAN/2019

AI Insights

The case involves the Primary Agricultural Credit Co-Operative Bank Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), Belgaum, which had declined the bank's claim for a deduction under section 80P(2)(a)(i)/80P(2)(d) of the Income Tax Act, 1961. The deduction was sought for interest income of Rs.7,06,053 derived from fixed deposits. The Tribunal referenced a coordinate bench's earlier decision and various High Court judgments, particularly noting that cooperative banks, despite their banking operations, retain their identity as cooperative societies. This legal identity supports the eligibility for deductions under section 80P(2)(d).

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 136918 (ITAT-PANAJI)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: AllowedAllowed
• Bench Allotted: SMC
• Next Hearing Date: 28-11-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 22-05-2019
• Other Referred Cases: CIT vs. Totagars Cooperative Sale Society, Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO, Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO, Mantola Cooperative Thrift Credit Society Ltd. vs. CIT, Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit vs. ITO, Pr. CIT and Another vs. Totagars Cooperative Sales Society
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH “SMC” : PANAJI [THROUGH VIRTUAL HEARING] BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER I.T.A.No.193/PAN/2019 Assessment Year 2015-16 Primary Agricultural Credit Co-Operative Bank Ltd., [Prathamik Krishi Pattina Sahakari Sangh Nandagaon Ltd.] At Post : Nandagoan. Tal. Athani. Dist. Belagavi. Karnataka. PIN 591 304 PAN AAAA0238N vs The Income Tax Officer, Ward – 1 (4), Feroj Khimjibhai Complex, Opp. Civil Hospital, Dr. Ambedkar Road, Belagavi. Karnataka. PIN 590 001. Appellant Respondent Assessee by : Shri Chetan Chougule Revenue by : Smt. Neelima Nadkarni, Sr.DR Date of hearing : 29.11.2022 Date of pronouncement : 28.12.2022 ORDER This assessee’s appeal for Assessment Year 2015-16 is directed against the Commissioner of Income Tax (Appeals), Belgaum’s order dated 12.03.2019 passed in case No.CIT(A)/BGM/10162/2017-18, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short “the Act”]. 2. Heard both the parties. Case file perused. 3. The assessee’s sole substantive ground raised in the instant appeal challenges correctness of both the lower authorities action declining it’s sec.80P(2)(a)(i)/80P(2)(d) deduction claim qua interest income derived from fixed deposits of Rs.7,06,053/-. 2 ITA.No.193/PAN/2019 Primary Agricultural Credit Co-operative Bank Ltd., Belagavi, Karnataka. 4. Both the Learned representatives reiterated their respective stands, the Revenue more particularly argued that such an interest income derived from cooperative banks is not eligible for the impugned deduction. The assessee’s case on the other hand is that it had get the impugned fixed deposits as a statutory requirement under the State cooperative bank. Be that as it may, this tribunal’s recent coordinate bench’s order in ITA.No.103/PAN./ 2018 dated 17.11.2021 has rejected the department’s stand as follows : “6. We heard the rival submissions and perused the material on record. The solitary issue in the present appeal relates to the eligibility of exemption of income received from cooperative banks under the provisions of section 80P(2)(d) of the Act. The Assessing Officer as well as the ld. CIT(A) was of the opinion that the same does not call for exemption u/s 80P(2)(d) of the Act as they were received from a cooperative bank. The reasoning of the lower authorities cannot be sustained in the eyes of law as the cooperative banks also the spies of the cooperative societies and continue to be cooperative society despite the fact that they enjoy the license from Reserve Bank of India to carry out the business of the banking. Then the issue that comes up for 3 ITA.No.193/PAN/2019 Primary Agricultural Credit Co-operative Bank Ltd., Belagavi, Karnataka. consideration is that whether the cooperative banks is also cooperative society or not?. This issue was considered by the Hon’ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon’ble High Court referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) held that the exemption is not to be denied in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. Even the decision of Pune Bench of the Tribunal in the case of Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO, 120 taxmann.com 10 after making reference to the decisions of the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra), having noticed the divergent views of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO, 55 taxmann.com 447 and the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. vs. CIT, 50 taxmann.com 278, the decision of the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. 4 ITA.No.193/PAN/2019 Primary Agricultural Credit Co-operative Bank Ltd., Belagavi, Karnataka. (supra) was not preferred to the view of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. (supra) by observing as under :- “9. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016, dated 9-4-2019) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014, dated 19-8-2015) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon'ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon'ble High Courts took into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. (2010) 322 ITR 283 (SC). There being no direct judgment from the Hon'ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari 5 ITA.No.193/PAN/2019 Primary Agricultural Credit Co-operative Bank Ltd., Belagavi, Karnataka. Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). 10. Insofar as the reliance of the ld. DR on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is concerned, we find that the issue in that case was the eligibility of deduction u/s.80P(2)(d) of the Act on interest earned by the assessee co-operative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods and carriage etc. It was in that background of the facts that the Hon'ble High Court held that the assessee could not claim deduction u/s.80P(2)(d) of the Act. When we consider the impact of this decision, it turns out that the same is not germane to case under consideration in view of the position that the claim of the instant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act and not u/s.80P(2)(d). Moreover, so many decisions relied on by the ld. AR amply go to prove that the view taken by the AO, cannot by any standard, be construed as not a possible 6 ITA.No.193/PAN/2019 Primary Agricultural Credit Co-operative Bank Ltd., Belagavi, Karnataka. view. We, therefore, hold that the ld. Pr. CIT was not justified in exercising the revisional power anent to interest income of Rs.22,34,270/- earned on investments made with co-operative banks.” 1. In the light of the above legal position, we hold that the interest income earned by the appellant society on investment made with the cooperative bank which are also cooperative societies is exempt from the Income Tax Act u/s 80P(2)(d) of the Act. Therefore, we hold that the lower authorities was not justified in denying the claim of deduction u/s 80P(2)(d) of the Act. Accordingly, we direct the Assessing Officer to allow the same as deduction u/s 80P(2)(d) of the Act.” 4.1. I, therefore, accept the assessee’s impugned sec.80P deduction claim in very terms. 5. No other ground or argument has been pressed before me during the course of hearing. 6. These assessee’s appeal is allowed in above terms. Order pronounced in the open Court on 28 th December, 2022. Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Pune, Dated 28 th December, 2022 VBP/- 7 ITA.No.193/PAN/2019 Primary Agricultural Credit Co-operative Bank Ltd., Belagavi, Karnataka. Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5 . DR, ITAT, SMC Bench, Panaji, Goa. 6. Guard File. BY ORDER, // TRUE COPY // Senior Private Secretary ITAT, Pune.