THE GURDASPUR PRIMARY COOPERATIVE AGRICULTURAL DEVELOPMENT BANK LTD, CIVIL LINES GURDASPUR V. INCOME TAX OFFICER WARD-1, PATHANKOT

ITA 45/ASR/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5909 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 01-07-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 05-02-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 56; 80(P); 80P; 250; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (HYBRID COURT) BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER I.T.A. No. 45/Asr/2024 Assessment Year: 2020-21 The Gurdaspur Primary Coop. Agricultural Development Bank Ltd.,Civil Lines,Gurdaspur [PAN: AABAT 7802M] (Appellant) Vs. Income Tax Officer, Ward-1, Pathankot (Respondent) Appellant by Respondent by : : Sh. Rohit Kapoor, CA & V. S. Aggarwal, ITP Sh. Ravinder Mittal, Sr. D. R. Date of Hearing Date of Pronouncement : : 02.07.2024 09.07.2024 ORDER Per Dr. M. L. Meena, AM: The captioned appeal has been filed by the assessee against the order of the ld. National Faceless Appeal Centre [NFAC/CIT(A)], Delhi dated 12.12.2023 in respect of Assessment Year: 2020-21 wherein the appellant has raised the following grounds of appeal: 2 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO “1. That on the facts and in the circumstances of the case, Ld CIT (Appeals) has erred in confirming the addition as made by AO u/s 56 in respect of interest received from Punjab State Cooperative Agricultural Development Bank Ltd Head office of Co-operative bank amounting to Rs 1390954/-. 2. On the facts and in the circumstances of the case, the Ld CIT (Appeals) has erred in confirming addition of interest income Rs 13,90,954/ as taxable income u/s 56 disregarding the fact that appellant was eligible for deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961. That the CIT (Appeals) has failed to appreciate that the primary income of the appellant is from credit facilities extended to members. 3. That the CIT (Appeals) has failed to appreciate that the appellant was required to pay half yearly instalment to the lender Punjab State Cooperative Agricultural Development Bank Ltd, Head office. That the CIT (Appeals) has erred in appreciating the fact that the appellant had paid interest of Rs 8829819/- to the lender and had simultaneously received interest of Rs 1390954/- from the same lender on the current account maintained with them. That the addition confirmed by CIT (Appeals) is required to be quashed as no interest was received as the appellant has actually paid net interest of Rs 7438865/-.That the Ld CIT(Appeals) has erred in appreciating the fact that the alleged interest of Rs 1390954/- was on account of current account transaction with head office which requires to be netted off. 4. The Ld CIT (Appeals) has erred in not appreciating the fact that only for accounting purposes interest received of Rs 1390954 and paid of Rs 8829819 have been separately recorded in the books of account. The CIT(Appeals) has erred in confirming the addition without appreciating the fact that entry in books of accounts can't be taken as a base for making the addition. 5. Without prejudice to the above grounds, the CIT (Appeals) has erred in confirming the addition disregarding the fact that interest received at Rs 1390954/- was eligible for deduction u/s.80P(2)(d) of the Income Tax Act,1961. 6. The Id. CIT(Appeals) has grossly erred in law and on the facts of the case, by confirming the addition of Rs. 36,981 /- made by the AO on account of disallowance of payment to Gratuity Fund. The Id. CIT (Appeals) has ignored the fact that such payment of gratuity was according to the terms, conditions and directions of the Head office. 3 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO 7. That the order passed by Ld CIT (Appeals) u/s 250 of Income tax Act 1961 is bad in law as the same has been made without considering the submissions filed by the appellant. 8. The above grounds of appeal may kindly be allowed to be amended, altered and or modified in the interest of natural justice.” 2. In ground No. 1 to 5, are inter-related to teach other where the appellant has challenged that the CIT (Appeals) has erred in confirming the addition disregarding the fact that interest received at Rs 1390954/- was eligible for deduction u/s.80P(2)(d) of the Income Tax Act,1961. 3. The Ld. Counsel for the appellant submitted that the CIT(A) has erred in affirming the addition made by the Ld. AO without due consideration of the fact that the interest received amounting to Rs. 13,90,954/- was eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961. The Ld. AR contended that interest income earned by a co-operative society on deposits made out of surplus funds with co-operative banks qualifies for deduction both under section 80P(2)(a)(i) and section 80P(2)(d). The same judgement was made in the case of" IN THE ITAT PUNE BENCH 'SMC'Kolhapur District Central Co-op. Bank Kanista SevakanchiSahakar Pat Sanstha Ltd. v. lncome Tax Officer* [20241 158 taxmannn.com 322 (Pune Trib.)" where it was held that- 4 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO Section 80P of the Income-tax Act, 1961 - Deductions - Income of cooperative societies (Interest income) - Assessment year 2018-19 - Whether interest income earned by a co-operative society on deposits made out of surplus funds with co-operative banks as well as scheduled bank qualifies for deduction both under section 80P(2)(a)(i) and section 80P(2)(d) - Held, yes [Para 7] [In favour of assessee] 4. The Ld. AR argued that even if the Appellant is deemed ineligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, it unequivocally falls within the ambit of Section 80P(2)(d). This provision allows for deductions concerning any income by way of interest or dividends derived by a cooperative society from its investments with any other cooperative society. Given that the Appellant received interest from Punjab State Cooperative Agricultural Development Bank Ltd (SADB), a cooperative society, it unquestionably qualifies for deduction under Section 80P(2)(d). Therefore, the Appellant's eligibility for deduction under Section 80P remains intact, albeit under a different sub-section. 5. The AR submitted that Section 80P of the Income Tax Act provides for deductions in respect of income of cooperative societies. Specifically, 5 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO Section 80P(2)(d) allows for a deduction in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society. The relevant provisions of Section 80P is reproduced hereunder for you ready reference: - 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 subsection (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. He pleaded that the addition made by the Ld. AO may be deleted and the Appellant's ground of appeal may be allowed and the Hon’ble ITAT Amritsar Bench in the case of The Khan Khana Coop. Agri. Service Society Ltd. v. Asstt. CIT, Circle-2, Jalandhar in ITA No. 210/Asr/2024 order dated 26.06.2024 is reproduced the following relevant para is as under: 6 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO “6. In the present case, the interest income is received by the appellant from entities enjoying the status of a co-operative society as per law. The issue is settled by the principle of law laid down by the Hon'ble Supreme Court in the case of the Pr. Commissioner of Income Tax 17, Mumbai Vs. M/S. Annasaheb Patil MathadiKamgarSahakariPathpedi Limited [Civil Appeal No. 8719/20221" Annexure A"; APB, Pages 1-4] wherein their lordships have held as under :- "There are concurrent findings recorded by CITA, ITAT, and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit Society, they are entitled to exemption under section 80(P) (2) of the Income Tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. Even otherwise on merits also and taking into consideration the CBDT Circular and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be co-operative Bank/Bank and therefore, section 80(P) (4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under section 80(P) (2) of the Income Tax Act." 7. The Jurisdictional ITAT, Amritsar Bench, Amritsar in a latest judgment in the case of "The Urapar Co-op. Agri, Service Society Ltd, VPO Urapar, dated 23/05/20231 following the principle of law laid down by the Honb'le Supreme Court(Supra)/[Annexure “A” has held that the society is entitled to deduction u/s. 80-P(2)(d) for interest income earned from other Co-op. Society, in ITA No: 89/ASR/2021 [Annexure — “B”, Pages 5-141]and in the case of the Jainpur Multipurpose Coop. Society Ltd; Vs. Income Tax Officer, Nawanshahr in ITA NO: 68/Asr/2024 [Annexure —"C”, Pages 15-181] 8. Following the principle of law laid down by the Hon'ble Supreme Court (Supra) and our own judgment (Supra), we hold that the decision of the Ld. CIT(A) in denying the deduction to the assessee is perverse to the facts on record and against the spirit of law, in view of the provisions of sub section 4 of section 80(P) of the Income Tax Act. Therefore, the impugned order is annulled and accordingly, the deduction ofRs.54,00,164/- claimed by the appellant u/s 80P(2)(d) is allowed. 7 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO 6. The Ld. DR stands by the impugned order. 7. Heard both the sides, perused the record, impugned order and case law referred. We find that the appellant is a cooperative society engaged in the activity of providing credit facility to its members. The assessee is duly registered under the Punjab Societies Registration Act, 1961, with the office of The Registrar co-operative societies, Punjab (Assessment Order para 2, page 1). 8. In the present case, the interest received by the Appellant from Punjab State Cooperative Agricultural Development Bank, Chandigarh, clearly falls within the ambit of Section 80P(2)(d). It is income derived by the Appellant from its investments with another cooperative society, namely, Punjab State Cooperative Agricultural Development Bank (SADB).In our view, the statutory provision under Section 80P(2)(d) is unambiguous and explicit in its scope. It allows for a deduction in respect of interest income derived from investments with other cooperative societies. The interest received by the Appellant squarely meets this criterion and is therefore eligible for deduction under Section 80P(2)(d).Accordingly, the CIT(A) ought to have recognized the eligibility of the interest received by the Appellant for deduction under Section 80P(2)(d). 8 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO 9. The Hon’ble SUPREME COURT OF INDIA in case of Principal Commissioner of Income-tax vs. Annasaheb Patil Mathadi Kamqar Sahakari Pathpedi Ltd.150 taxmann.com 173 (2023] 150 taxmann.com 173 (SC) Held that- Section 80P of the Income-tax Act, 1961 - Deductions Income of cooperative societies (Scope of) - Whether by merely giving credit to its members only, credit society cannot be said to be co-operative banks/banks under Banking Regulation Act and that banking activities under Banking Regulation Act are altogether different activities as there is a vast difference between credit societies giving credit to their own members only and banks providing banking services including credit to public at large also - Held, yes Whether assessee, a primary agricultural credit society, could not be termed as bank/co-operative bank under Banking Regulation Act and that being a credit society, it was entitled to exemption under section 80P(2) - Held, yes [ Paras 3 to 5] [In favour of assessee] 10. In another case of Thorapadi Urban Co-op Credit Society Ltd. v. Income-tax Officer [2023] 156 taxmann.com 419 (Madras) it has been held that- 9 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO Section 80P, read with section 2(19), of the Income-tax Act, 1961 Deductions - Income of co-operative societies (Interest from co- operative banks) - Assessment years 2016-17 and 2017-18 - Whether a co-operative society referred under section 2(19) was only a co-operative society as registered under Co-operative Societies Act, be it a co-operative society carrying on banking business or co- operative society carrying on other businesses or a Co-operative bank - Held, yes - Assessee-co-operative society made investments with co-operative banks - Assessee received interest from said investments and claimed deduction under section80P(2)(d)- Assessing Officer denied said claim on ground that deduction was available only for income and interest received from co-operative society and not from co-operative bank - It was noted that assessee produced document to show that Co-operative Bank, where investments were made was registered under Tamil Nadu Co- operative Societies Act, 1983 whether since investment was made by assessee in a co-operative bank registered under Co-operative Societies, assessee would be entitled to claim benefit under section 80P(2)(d) - Held, yes [Paras9, 10 and 13] [In favour of assessee]. 10 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO 11. The Coordinate Bench in case of The Khan Khanna Cooperative Agricultural Society Ltd. Vs. Asst. Commissioner of Income Tax, Circle -2, Jalandhar decided the issue in favour of the assessee by following the principle of law laid down by the Hon'ble Supreme Court in the case of the Pr. Commissioner of Income Tax 17, Mumbai Vs. M/S. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited [Civil Appeal No. 8719/20221. 12. In another case of THE DHAMAI COOPERATIVE AGRICULTURE SERVICE SOCIETY LTD. Vs ITO HOSHIARPUR, 2023 9 TMI 1436 on denial of deduction claimed u/s 80P (2)(d) - interest earned from cooperative Banks - HELD THAT:- Section 80P(2)(d) of the Act allows whole deduction of income by way of interest or dividend derived by cooperative Society from its investments with any other co-operative society. This provision does not make any distinction with regard to the source of investment because this section envisages deduction in respect of any income derived by co-operative society from its investment with a cooperative society. So, the Revenue is not required to look another of investment whether it was formed as required within time or otherwise. As decided in The Kot Ram Dass Coop. Thrift & Credit Society Ltd. 11 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO Jalandhar [2023 (6) TMI 871 - ITAT AMRITSAR] investment of assessee in cooperative bank is eligible investment u/s 80P(2)(d) of the Act. 13. Further, the Coordinate ITAT AMRITSAR Bench in the case of THE KOT RAM DASS COOP. THRIFT AND CREDIT SOCIETY LTD. JALANDHAR Vs. ITO-WARD 2 (4) JALANDHAR2023 6 TMI 871 has observed that - As considering the case of Totagars Cooperative Sales Society Ltd. [2010] (2) TMJ 3 - SUPREME COURT] as relied by the Id. DR, we find that the Hon'ble Apex Court has dilapidated on the issue of deduction u/s 80P(2)(a)(i) but not on section 80P(2)(d) of the Act. We also observed that in the case of Totagars Cooperative Sales Society Ltd, [2017] (1) TMI 1100 - KARNATAKA HIGH COURT] itself the Hon'ble High Court of Karnataka has allowed the claim of deduction u/s 80P(2)(d). The interest from investment of assessee in cooperative bank is eligible for deduction u/s 80P(2)(d) of the Act. The interest of the said investment related to Cooperative Society; the assessee is eligible for deduction u/s 80P(2)(a)(i) Decided in favour of assessee. 12 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO 14. In the present case, the interest being received by the Appellant from Punjab State Cooperative Agricultural Development Bank, Chandigarh, which clearly falls within the ambit of Section 80P(2)(d). Thus, it is the income derived by the Appellant from its investments with another cooperative society, namely, Punjab State Cooperative Agricultural Development Bank (SADB). 15. In the above view, we accept that the grievance of the appellant is justified and accordingly following the coordinate bench and judicial precedent, we hold that appellant is eligible for deduction u/s 80P(2)(d) of the Act and therefore, the addition of Rs 13,90,954/- is deleted. 16. In the next ground of the appeal, the appellant objected to confirmation of the addition of Rs. 36,981 /- made by the AO on account of disallowance of payment to Gratuity Fund. 17. The AR submitted that Id. CIT (Appeals) has ignored the fact that such payment of gratuity was according to the terms, conditions and directions of the Head office. However, the Ld. CIT(A) has observed that Gratuity Fund allowable as per Rule at 8.33% and Excess contribution to Gratuity Fund has been disallowed amounting to Rs. 36,981/- 13 ITA No. 45/Asr/2024 The Gurdaspur Primary Coop. A. D. B. Ltd. v. ITO 18. Accordingly, we hold that since the AO disallowed the excess contribution to gratuity fund contributed by the appellant during the Assessment Year 2020-21 amounting to Rs.36,981/- and rightly added back to the total income of the appellant under the head income from other sources. We find no perversity in the order of the ld. CIT(A) on the issue of confirmation of amount of Rs.36,981/- on account of excess payment of gratuity and thus, this ground of appeal is rejected. 19. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 09.07.2024 Sd/- Sd/- (Udayan Dasgupta) (Dr. M. L. Meena) Judicial Member Accountant Member *DOC* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT concerned (4) The Sr. DR, I.T.A.T. True Copy By Order