Sampada Nagari Sahakari Pathsanstha Maryadit, Pune V. The Principal Commissioner Of Income Tax-4, Pune

ITA 416/PUN/2022

AI Insights

The case involves Sampada Nagari Sahakari Patsanstha Maryadit, a cooperative credit society, which appealed against the revision order of the Principal Commissioner of Income-tax, Pune-4. The revision order challenged the original assessment that allowed a deduction under section 80P for interest income from investments in cooperative banks. The Tribunal examined whether the interest income qualified for deduction under section 80P(2)(d) despite the investments being with cooperative banks, not cooperative societies. The Tribunal's decision was influenced by precedents and interpretations of section 80P, particularly focusing on the principle of mutuality and the nature of cooperative banks as entities under the Cooperative Societies Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135556 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-12-2022
• Assessment Year: misc
• Appeal Filed On: 25-05-2022
• Other Referred Cases: Mahavir Nagari Sahakari Pathsanstha Co Op Society Limited Vs. DCIT, Tumkur Merchants Souharda Credit Co-op Society Ltd V CIT, State Bank Of India Vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Assessment record; Set aside
• Section: 143(3); 80P; 143(2); 43; 2(19)

Judgement Text

आयकर अपीलीय अिधकरण“B” ायपीठ पुणे म । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND Dr.DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकरअपीलसं . / ITA No.416/PUN/2022 िनधा रणवष / Assessment Year: 2017-18 Sampada Nagari Sahakari Patsanstha Maryadit, Ist Floor, Old Market Yard, Main Gate, Shirur, Pune -412210 PAN : AACAS7512A Vs Pr.CIT, Pune-4. Appellant/ Assessee Respondent /Revenue Assessee by Shri Kishor Phadke Revenue by Shri Rajeev Kumar Date of hearing 20-12-2022 Date of pronouncement 05-01-2023 आदेश / ORDER Per S.S.Godara, JM: This assessee’s appeal for AY 2017-18 arises against the Principal Commissioner of Income-tax, Pune-4’s order dated 28.03.2022 passed in case No. ITBA/REV/F/REV5/2021- 22/1041788594(1) involving proceedings under 263 of the Income Tax Act, 1961 in short ‘the Act’. 2. It emerges during the course of hearing that the learned Pr.CIT’s impugned revision directions term the Assessing Officer’s regular assessment dated 30-11-2019 as an erroneous one causing ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 2 prejudice to interest of the Revenue for having accepted the assessee’s claim involving interest amount of Rs.1,07,27,570/- derived from parking of funds in various cooperative banks involving varying sums, as eligible for the section 80P deduction. 3. Learned counsel has submitted that the assessing authority had indeed carried out detailed inquiries before accepting assessee’s section 80P deduction in issue, and therefore, the impugned revision proceedings u/s.263 need to be vacated. 4. The Revenue has drawn strong support from the Pr.CIT’s detailed revision discussion reading as follows : “2. On examination of assessment records, It is seen that the assesses has made investments with Co-operative Banks. Further, it is seen that the assesses has earned interest income of Rs. 1,07,27,570/- on this investment. As this interest income earned by the assessee society from its investments with the co- operative banks do not constitute operational income or business income of the assessee society it should be taxed under the head “Income from Other Sources”. What is allowed to be eligible for deduction u/s 80P(2)(a) is the “business income” which arises from the assessee’s business of banking or providing credit facilities to its members, wherein the principle of mutuality is fulfilled. The interest income from investment earned by the assessee society is out of its surplus funds, not immediately required for its business, and that which is parked as “investment”. Thus, the interest income earned by the assessee society from its investments with other Co-operative banks, not being operational income, do not qualify for deduction u/s 80P(2)(a) of the I.T. Act, 1961. This component of Income earned by the assessee society takes the character of “other Income” and should be taxed as Income from Other Sources. Further, it is to be mentioned here that the interest income earned by the assessee society in the instant case, cannot be held eligible for deduction u/s 80P (2)(d) as the previsions of sec.80P(2)(d) specifies that the interest income earned by the Co-operative societies from its investment with any other Co- operative Society would be eligible for deduction under the said section. ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 3 Interest income earned from investment with Co-operative Banks do not qualify for deduction u/s 80P of the I.T. Act, 1961. Hence, It is clear that the interest income earned by the assessee society amounting to Rs. 1,07,27,570/- on its investment with co-operative banks, not being a co-operative society, is not eligible for deduction u/s 80P(2)(a) and 80P(2)(d) of the I.T. Act, 1961 and is required to be treated as Income from Other sources and taxed accordingly. 3. Failure on the part of the Assessing Officer in examining the above issue (as discussed in preceding Para) has rendered the assessment order dated 30/11/2019 erroneous in so far as it is prejudicial to the interest of the revenue. 4. in view of the above, the assessment order dated 30.11.2019 was considered erroneous in so far as it is prejudicial to the interest of the revenue in as much as patent error as mentioned supra had crept in. Accordingly, a show-cause notice was issued to the assessee on 05.03.2022 u/s 263 of the Income-tax Act, 1961 calling upon the assessee to explain as to why the assessment order dated 30.11.2019 should not be set aside u/s 263 of the Income Tax Act, 1961. 5. The assessee has submitted its submission electronically on 22/03/2022. In the written submission, the assessee contended as under:- “Assessee Sampada Nagari Sahakari Pathsanstha Maryadit having Pan Number AACAS7512A is in receipts of your honour notice no. ITBA/REV/F/REVI/2021 - 22/1040391348(1) dated 05/03/2022 where in your honour proposed to revise the assessment made by the AO for the Assessment Year 2017-18 in respect of the following matters:- That the assessee is a co-operative credit society engaged in the business of providing credit facilities to its members and on perusal of case it is notice that the assessment order passed by the Assessing Officer Ward -ITO 13(4) Pune under section 143(3) of the Income Tax Act, 1961 for A.Y. 2017-18 appears to be erroneous in so far as it is prejudicial to the interest of Revenue for the following reasons- 1. It is seen that assessee has made investments with Co-operative banks. Further it is seen that the assessee has earned interest income of Rs.1,07,27,570/- on this investment with Co-operative banks do not constitute operational income or business income of the assessee society it should be taxed under the head income from other sources. What is allowed to be eligible for deduction u/s 80P (2) (a) is the business income which arise from the assessee’s business of banking or providing credit facility to its members, where in the principal of mutuality is fulfilled. The interest income from investment earned by the assessee society is out of its surplus funds, not immediately required for its business, and that which is parked as investment. Thus the interest income earned by the assessee society from its investments with other co- operative banks, not being operational income, do not qualify for deduction u/s 80P (2) (a) of the Income Tax Act, 1961. This component of income earned by the assessee society takes the character of "other income) and should be taxed as income from other sources. 2. Further it is to be mentioned here that the interest income earned by the assessee society in the instant case, cannot be held eligible for deduction u/s ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 4 80P(2)(d) as the provisions of section 80P(2)(d) specifies that the interest earned by the co-operative society from its investment with any other co - operative society would be eligible for deduction under the said section. Interest income earned from investment with cooperative banks do not qualify for deduction u/s 80P(2)(d) of the Income Tax Act, 1961 In view of the elaborate discussion made above it is clear that the interest income earned by the assessee society amounting to Rs. 1, 07, 27,570/- on its investment with cooperative banks not being co-operative societies is not eligible for deduction u/s 80P [2) (a) and 80P (2] (d) of the Income Tax Act, 1961 and is required to be treated as Income from Other Sources and taxed accordingly. In Keeping with the above notice in this connection assessee society have make the following Submission- Background of the assessee Assessee is the co- operative credit society registered under the Co – Operative Society Act, 1912 read with Maharashtra Co Operative Society Act. 1960. The main object of the society is accepting various types of Deposits and providing Credit Facilities/ Advances / Loans to its members. Assesses had filed its Return of Income for the Assessment Year 2017-18 on 26.10.2017 declaring total income of Rs. 1,69,940/-, The case was selected for 'Scrutiny' and accordingly a notice under section 143(2) of the I. T. Act 1961 was issued online through ITBA System on 09.08.2018 which was duly served on the assesses along with questionnaire. The Assessing Officer completed the assessment & Passed his Assessment Order under section 143(3) on 30 th November, 2019 determining the total income of the Assesses at Rs. 1,69,940/-. For the reference purpose assesses society reproduce the section 80 Provision of Section SOP reads as under: Deduction in respect of income of co-operative societies. 80P. (1) Where, in the case of an assesses 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 subsection (2), in computing the total income of the assesses. (2) The sums referred to in sub-section (1) shall be the following, namely:— (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) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 5 (vi) the collective disposal of the labour of its members, or (vi) ‘fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its the whole of the amount of profits and gains of business attributable to any one or more of such activities: Provided that in the case of a co-operative society falling under sub-clause (vi), or subclause (v/i), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:— 1. the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities: 2. the co-operative credit societies which provide financial assistance to the society; 3. the State Government; (b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to— (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or (ii) the Government or a local authority; or [iii] a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business; 1. in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,— where such co-operative society is a consumers' co-operative society, one hundred thousand rupees; and in any other case, fifty thousand rupees. Explanation— In this clause, "consumers' co-operative society" means a society for the benefit of the consumers; 1. 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; 2. in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (i) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 6 property chargeable under section 22. Explanation— For the purposes of this section, an "urban consumers' co- operative society" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. A) For explanation purpose assessee society reproduce Para 3.1 of the notice as below- Para 3.1 - It is seen that assessee has made investments with Co-operative banks. Further it is seen that the assessee has earned interest income of Rs. 1,07,27,570/- on this investment with Co-operative banks do not constitute operational income or business income of the assessee society it should be taxed under the head income from other sources. What is allowed to be eligible for deduction u/s 80P (2) (a) is the business income which arise from the assessee's business of banking or providing credit facility to its members, where in the principal of mutuality is fulfilled. The interest income from investment earned by the assessee society is out of its surplus funds, not immediately required for its business, and that which is parked as investment. Thus the interest income earned by the assessee society from its investments with other co- operative banks, not being operational income, do not qualify for deduction u/s 80P (2) (a] of the Income Tax Act, 1961. This component of income earned by the assessee society takes the character of "other income) and should be taxed as income from other sources. 1. With respect to para 3.1 of the notice assessee society submit that your honour in para 2 of the notice admitted that the assessee society is the co- operative society engaged in the business of providing credit facility to its members means assessee society fall in the limbs of section 80P (1) and later part of section 80P (2) (a)[i) and has not considered earlier part of section 80P (2) (a) (i) i.e. income of co-operative society engaged in the banking business. 2). The assessee society at the time of Assessment Proceedings before Assessing officer of ward 13(5) Pune had made submission that it has doing business of accepting deposit from members and lending loans or advances or credit facility to its members. The section 43 of The Maharashtra Co-Operative Society Act, 1960 and clause 5 of the Bye- laws of the assessee society as approved by the Assistant Registrar of Co-Operative Society, Shirur, Dist-Pune empower the assessee society to accept deposits or loans from members and other persons and section 44 of the said act and clause 53 of the byelaws of the assessee society not only empower but also restrict the society for lending credit facility to its members. The copy of the above sections of the act and byelaws of the society marked and attached In Annexure-2 The above fact elaborate as assessee society is not the co-operative bank but its nature of business was coupled with banking with its members as it accepts deposits from and lends the same to its members. To meet any eventuality the assessee was required to maintain some liquid fund as mentioned in clause 52 of ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 7 the byelaws of the society i.e. 20% to 30% (approx.} of the deposits accepted by the assessee society. That's why assessee society submitted that it had invested in co-operative banks in manner mentioned in the section 70 of The Maharashtra Co-Operative Society Act, 1960 and clause 52 of the byelaws of the society, the copy of the section 70 of the MCS,Act,1960 is attached in vide annexure-3 for your kind reference 3). The 1TAT, Pune Bench in the case of Mahavir Nagari Sahakari Pathsanstha Co Op Society Limited Vs. DCIT(2002) 74 TJ 793(Pune) held that credit society is carrying on business of banking and providing credit facility to its members is eligible for deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961. In said decision in para 29 Hon'ble IT AT has termed the credit society i.e. Patsanstha as banking concern. 4) In regards to further part of the Para3.1 of the notice assessee society submit that if we look at the Balance Sheet of the assessee as on 31.03.2017 and profit and loss account for the period ended on 31.03.2017 enclosed in annexure -4 for your kind reference, it clearly state that assessee society was engaged in the business of providing credit facility to its members out of loan received from members itself as interest bearing deposits are the operational fund for the society. No any other funds are available with the society. The surplus amount which on account of amount received from its members only which had not been advanced to any of the members was investment in the banks as takers not available was invested in the bank, against which said investment was made out of surplus fund available with the assessee society, which in turn were amounts advanced by the members itself. Said parking of the fund with the co-operative bank is the requirement of Maharashtra Co- Operative Society Act, 1960, that the 20 to 30% the total deposits are to be parked in investment with co- operative Banks., 5. It is further submitted by the assessee society that investment of surplus fund (Deposit) with co-operative banks is the specific requirement of the statute in force in area of operation of the society, i.e. Maharashtra Co-operative Society Act, 1960 and is itself in nature of business activity carried on by the society and income earned by the society from the above investment with other cooperative banks is the income from the operational activity / business activity and qualify for deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 6} There are plethora of judgements of Pune ITAT on this issue in favour of the assesse. Some of the judgements are enlisted below as attached in annexure-5 i] ITO Vs. Niphad Nagari Sahakari Pathsanstha Ltd. - ITA No.l336/Pn/2011 ii) ITO Vs. Ambad Taluka Prathmik Shikshak Sahakari Pathsanstha Maryadit- ITA No. 1459/PN/2015 B) For explanation purpose assessee society reproduce Para 3.2 of the notice as below- ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 8 Para 3.2 - It is seen that assessee has made investments with Co-operative banks. Further it is Further it is to be mentioned here that the interest income earned by the assessee society in the instant case, cannot be held eligible for deduction u/s 80P (2)(d) as the provisions of section 80P(2)(d) specifies that the interest earned by the co-operative society from its investment with any other co -operative society would be eligible for deduction under the said section. Interest income epmbiijrom 1 investment with co-operative banks do not qualify for deduction u/s 80P (2)(d) of the Income Tax Act, 1961. In view of the elaborate discussion made above it is clear that the interest income earned by the assessee society amounting to Rs. 1,07, 27,570/- on its investment with co-operative banks not being co-operative societies is not eligible for deduction u/s 80P (2) (a) and 80P (2) (d) of the Income Tax Act, 1961 and is required to be treated as Income from Other Sources and taxed accordingly. 1. With respect to para 3.2 assessee society submitted that it is a co-operative society registered under The Maharashtra Co-operative Society Act, 1960. 2. As per Section 2(19) of the Co-operative Society Act, 1912 term co- operative society has been defined as under Section 2(19) "Co-Operative Society Means a co- operative society registered under the co - operative Society Act, 1912( 2of 1912) or under any other law for the time being in force in any state for the registration of co- operative society." As per the above definition/term co- operative bank continue to be co- operative society form by birth of itself and due registration under any law for the time being in force in any state. 1. On perusal of section 80P (2)(d), it can be safely be gathered that interest income derived by an assessee co-operative society from its investment held with any other co-operative society shall be deducted in its total income. And Assessee society reliance on that income should be derived from the investment held with other cooperative society (Co-operative Banks) has eligible for deduction u/s 80P (2) (d) of the Income Tax Act, 1961. 2. During the period under assessment proceedings assessee society earned interest income on the investment from the Pune District Central Co- Operative Bank Ltd. And GS Mahahanagar Co- operative Bank Ltd. (Formerly Known as Mahanagar Co - operative Bank Ltd.) for the purpose of your reference assessee society enclose herewith details of interest income i.e. Interest Certificate from PDCC Bank Ltd in Annexure 6 and registration certificate of Pune District Central Co Operative Bank Ltd. Under The Maharashtra Co-Operative Society Act, I960 in Annexure-7. 3. Assessee society would like to bring your honors attention to the fact that in some cases Hon'ble 1TAT Pune Bench has passed the order in favor of the assessee. Copies of such order is attached herewith in Annexure 8. ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 9 In view of the above, we hereby request Your Honor to take a lenient view and kindly drop the revision proceedings u/s 263 and oblige.” 6. I have examined the submission made by the assessee and issues involved. I have also gone through various case laws filed and relied upon by the assessee in support of claim u/s 80P(2)(a)(i) or 80P(2)(d) of the Act. It is found that Assessing officer has arrived at decision without properly examining the eligibility of assessee to claim deduction u/s 80P of the Act. As per provisions of section 80P(2)(a)(i), the Society is required to substantiate the principle of mutuality with respect to the loans taken from members to loan advanced/ investment made by it. To come to a conclusive discussion, the AO should have verified whether the loans/ deposit taken are given back to the members as loans/ advances or not. The assessment order does not indicate whether this exercise has been done or not. The non-verification of principle of mutuality by the Assessing Officer has rendered the view taken by him regarding allowability of deduction u/s 80P of the Act is legally unsustainable. Since the view taken by the Assessing Officer is unsustainable, the assessment order passed by the Assessing Officer is liable for revision u/s 263 of the Act. 7. As per the Balance Sheet, assessee has received deposits from members of Rs. 38.87 Cr, Share Capital Rs. 2.42 Cr, Reserve Fund Rs. 5.41 Cr and provisions including interest payable to members of Rs. 2.76 Cr.. Against the same, the assessee has advanced Rs. 30.59 Cr. only to its members. Thus, around Rs. 18.87 Cr. have not been utilized for the activity of lending to the members by the assessee and have been invested in time deposits with various banks. The Investment made with the bank in the form of FDs/Shares are at Rs. 14.50 Cr. Thus the deposits with Banks are made out of deposits received from the members or the surplus fund available with the society has not been verified. This aspect clearly has not been verified by the AO. The interest income of Rs. Rs. 1,07,27,570/- shown in the Profit & Loss account, has been received by way of interest on investments with banks. Thus, in the assessee’s case, a considerable portion of its income is earned by way of interest on deposits made with other nationalized/co-operative banks. As has been held by the Hon’ble Supreme Court in the case of Totgar’s Cooperative Sale Society Ltd. Vs. ITO (supra) and also by Hon’ble Karnataka High Court in the case of Pr. Commissioner of Income Tax, Hubali Vs. Totgars Cooperative Sale Society (supra) this act of making deposits out of-the deposits received from members cannot be considered to be attributable to the business of carrying on of the business of providing credit facilities to its members. In view of the aforesaid decisions of the Hon’ble Supreme Court & Karnataka High Court, Interest earned on such deposits kept with Scheduled Bank/Cooperative Bank cannot be allowed as deduction under section 80P of the Act and such interest should be brought to tax. a. In this regard, the Assessment record has been verified in detail. The submissions made before the Assessing Officer regarding the deposits made with different bank/institution are seen to have been given without details as to when they were made and whether they were made out of the Deposits of the members or otherwise from out of the surplus generated. 8. Since the case was selected under Complete Scrutiny and one of the reason was assessee’s large claim of deduction under chapter VI-A; the Assessing Officer was required to conduct in-depth verification of the ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 10 assessee’s claim. Since the above mentioned bank is not a cooperative society, the interest earned is not eligible for deduction under Section 80P(2)(a)(i) or 80P(2)(d). Hence, allowing of the deduction by the Assessing Officer under section 80P for the above amount is not as per the provisions of the Income Tax Act, 1961. In Para 10 of the Hon’ble Karnataka High Court decision in the case of Tumkur Merchants Souharda Credit Co-op Society Ltd V CIT (2017) 396 ITR, the Hon’ble Court has held that ” the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account." In the case of the present assessee, it was stated that the society accepts deposits only from its members which means deposits in banks are made out of deposits made by members. These deposits are liable to be returned back to the members and hence, are to be shown as liability in the balance sheet. These deposits from members are invested in the fixed deposits and interest income is earned from them. As mentioned in Para 7, the assessee received deposits from members of Rs, 38.87 Cr, Share Capital Rs. 2.42 Cr, Reserve Fund Rs. 5.41 Cr and provisions including interest payable to members of Rs. 2.76 Cr.. Against the same, the assessee has advanced Rs. 30.59 Cr. only to its members. Thus, around Rs. 18.87 Cr. have not been utilized for the activity. Loans/Advances/Deposits received from members by the society including paid up capital, reserve fund & interest payable to assessee 49.46 Cr. Loans/Advances given to members by the society 30.59 Cr Excess of Loans/Advances/Deposits from members available with the society 18.87 Cr. It implies that the deposits accepted from the members were not used by the society in its business of providing credit facilities to its members. Instead they are put in to deposits to earn interest. Investments made in FDs with institutions by the 14.50 Cr. society out of Loans/Advances made by members This act of making deposits out of the deposits received from members cannot be considered to be attributable to the business of providing credit facilities to its members. Thus, making deposits to the bank out of the deposits received from Members is not in accordance to the principles of mutuality. ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 11 9. In the light of these facts, the Assessment Order dt 30/11/2019 is hereby set aside to the Assessing Officer for proper verification of facts and to re-examine the assessee’s claim of deduction under section 80P of the Income-tax Act, 1961. However, before arriving at any conclusion, the Assessing Officer shall give reasonable opportunity to the assessee to adduce the evidence and information with regard to: a. the Source of deposits made with all institutions from which interest income is earned with specific details and nexus as to whether those deposits are made from the deposits received from the members which are returnable to the members or from out of the surplus funds arising from profits and gains. b. Whether the deposits are made with institutions which are registered with RBI for carrying out business of Banking. c. Whether the Principle of Mutuality is satisfied to allow deduction u/s 80P in respect of income earned from deposits made with Co-op Banks. d. Based on the evidence, decide the allowability of deduction u/s 80P. The Assessing Officer shall, accordingly, re-frame the assessment in the assessee’s case in due compliance with the above directions. 10. The Assessment is set aside u/s 263 in terms of para 9 Supra.” 5. We have given our thoughtful consideration to vehement rival stands and find no merit in the Revenue’s arguments. We make it clear that the sole reason what has made the ld. Pr.CIT to exercise his section 263 revision jurisdiction is that the assessee is not eligible for claiming 80P deduction regarding its interest income derived from cooperative banks etc. We note in this factual backdrop that this tribunal’s recent coordinate bench order in ITA No.1249/PUN/2018 in Rena Sahakari Sakhar Karkhana Ltd., vs. Pr. CIT-2, Aurangabad ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 12 dated 07-01-2022 has declined the Revenue’s identical stand as follows : “3. After culmination of the assessment proceedings, the Pr. CIT called for the assessment records of the assessee. It was observed by the Pr. CIT 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 Sec.80P(2)(d) of the Act. It was observed by the Pr. CIT, that the A.O 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 Pr.CIT was of the view that the assessee was not eligible for claim of deduction under Sec.80P(2)(d). In the backdrop of his aforesaid conviction, the Pr. CIT was of the view that the assessment order passed by the A.O under Sec.143(3), dated 07.03.2016, therein allowing the assesses claim for deduction under Sec. 80P(2)(d), had therein rendered his order as erroneous, insofar it was prejudicial to the interest of the revenue. Accordingly, the Pr.CIT 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 Sec.80P(2)(d) of the Act, therein “set aside” the order of the A.O with a direction to redecide the issue afresh and reframe the assessment. 4. The assessee being aggrieved with the order of the Pr.CIT has carried the matter in appeal before us. As the present appeal involved a delay of 52 days, therefore, the ld. A.R took us through the reasons leading to the same. It was submitted by the ld. A.R 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 ld. A.R that the delay involved in filing of the present appeal in all fairness may be condoned. Per contra, the ld. D.R 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 ld. A.R, that as the A.O while framing the assessment had after making necessary verifications taken a plausible view, therefore, the Pr. CIT had exceeded his jurisdiction by seeking to review the order passed by him in the garb of the revisional powers vested with him under Sec.263 of the Act. It was submitted by the ld. A.R, that the issue as regards the eligibility of the assessee for claim of deduction under Sec.80P(2)(d) on interest income derived from investments/deposits lying with co-operative banks was squarely ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 13 covered by the various orders of the coordinate benches of the Tribunal viz., (i). M/s Solitaire CHS Ltd. vs. Pr. CIT, ITA No. 3155/Mum/2019; dated 29.11.2019 ( ITAT “G” Bench, Mumbai); Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO-21(2)(1), Mumbai, ITA No. 6547/Mum/2017 (ITAT Mumbai); and (iii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune). On the basis of his aforesaid contentions, it was averred by the ld. A.R that as the Pr. CIT had exceeded his jurisdiction and had not only sought to review the plausible view that was taken by the A.O 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 A.O be restored. 6. Per contra, the ld. Departmental Representative (for short „D.R‟) relied on the order passed by the Pr. CIT under Sec.263 of the Act. It was submitted by the ld. D.R, that as the assessee was not eligible for claim of deduction under Sec.80P on the interest income received on the investments/deposits lying with the co-operative banks, therefore, the Pr. CIT finding the assessment order passed by the A.O under Sec.143(3), dated 07.03.2016 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 ld. D.R to his written submissions and certain judicial pronouncements in support of his aforesaid contention. 7. We have heard the ld. 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 Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with the co-operative 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 Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 8. After necessary deliberations, we are unable to persuade ourselves to concur with the view taken by the Pr. CIT. Before proceeding any further, we may herein cull out the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 14 “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 Sec. 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 co-operative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 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 Pr. CIT, that with the insertion of sub-section (4) to Sec. 80P of the Act, vide the Finance Act, 2006 with effect from 01.04.2007, the provisions of Sec. 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 Sec. 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. Sec. 80P(2)(d) would be duly available. We find that the term „co-operative society‟ had been defined under Sec. 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 co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 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- ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 15 operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 9. In so far the judicial pronouncements that have been relied upon by the ld. A.R are concerned, we find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 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. vs. Pr. CIT, ITA No. 3155/Mum/2019; dated 29.11.2019 ( ITAT “G” Bench, Mumbai); (ii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune) (iiii). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. 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. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), 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 Sec. 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 Sec. 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 Sec. 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 Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), as had been relied upon by the ld. D.R before us, had held, that a co- operative society would not be entitled to claim deduction under Sec. 80P(2)(d); but then, the Hon'ble High Court in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), 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 Sec.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. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), 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. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and that of the Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 16 (Guj), 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 Sec.80P(2)(d) of the Act. 10. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and allowed the assessee‟s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 of the Act for dislodging the same. Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 of the Act, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set-aside his order and restore the order passed by the A.O under Sec. 143(3), dated 07.03.2016.” 6. We adopt the foregoing detailed reasoning mutatis mutandis to reverse the ld. Pr.CIT’s impugned revision directions. The Assessing Officer’s corresponding regular assessment stands restored as the necessary corollary. 7. This assessee’s appeal is allowed in above terms. Order pronounced in the open Court on 05 th January, 2023. Sd/- Sd/- (Dr. DIPAK P. RIPOTE) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; दनांक / Dated : 05 th January, 2023 Satish ITA No.416/PUN/2022 Sampada Nagari Sahakari Patsanstha Maryadit 17 आदेश क ितिलिप अ ेिषत / Copy of the Order forwarded to : 1. अपीलाथ / The Appellant. 2. यथ / The Respondent. 3. The CIT(A) concerned 4. The CIT concerned 5. िवभागीय ितिनिध,आयकर अपीलीय अिधकरण, “B” ब च, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाड फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune. S.No Details Date Initials Designation 1 Draft dictated on 28-12-2022 Sr. PS/PS 2 Draft placed before author 30-12-2022 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order