M/s St. Milagres Credit Souhardha Co-operative Society Limited, Karwar V. Income Tax Officer, Ward - 2, Karwar

ITA 58/PAN/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1565 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: WT(D)
• Next Hearing Date: 10-06-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 03-03-2024
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P S SHIVSHANKAR
• Keywords: Deduction Disallowance
• Section: 143(3); 80P; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH : PANAJI [THROUGH VIRTUAL HEARING AT INCOME TAX APPELLATE TRIBUNAL : PUNE BENCHES : PUNE] BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER Sl. No. ITA.No. A.Y. Name of Appellant Name of Respondent NFAC, Delhi's DIN & Order no.ITBA/NFAC / S/250/2023- 24 & Dated Proceedings under section 1. 55/PAN./2024 2017-18, M/s. St. Milagres Credit Souharda Co.operative Society Limited, Bhasha Complex, Green Street, Karwar – 581 301 Karnataka PAN : AACAS0079A Income Tax Officer, Ward-2, Karwar, Karnataka. 1059420059(1) dated 05.01.2024 144 of the Income Tax Act, 1961 (in short "the Act"). 2. 56/PAN./2024 2018-19 1059499359(1) dated 09.01.2024 3. 57/PAN./2024 2018-19 1059551150(1) dated 10.01.2024 270A of the Income Tax Act, 1961 (in short "the Act"). 4. 58/PAN./2024 2020-21 1059502676(1) dated 09.01.2024 144 of the Income Tax Act, 1961 (in short "the Act"). 5. 59/PAN./2024 2017-18 Income Tax Officer, Ward-2, Karwar, Karnataka. M/s. St. Milagres Credit Souharda Co.operative Society Limited, Bhasha Complex, Green Street, Karwar – 581 301 Karnataka PAN : AACAS0079A 1059420059(1) dated 05.01.2024 6. 60/PAN./2024 2018-19 1059499359(1) dated 09.01.2024 For Assessee : -None- For Revenue : Shri P S Shivshankar, CIT-DR Date of Hearing : 11.06.2024 Date of Pronouncement : 20.06.2024 ORDER PER SATBEER SINGH GODARA, J.M. : The instant batch of six cases pertains to a single assessee herein viz., M/s. St. Milagres Credit Souhardha Co- operative Society Limited. All other details stand duly 2 ITA.Nos.55 to 60/PAN./2024 tabulated hereinabove. We proceed assessment year-wise for the sake of convenience and brevity. 2. The first and foremost assessment year 2017-2018 herein involves assessee’s and Revenue’s cross-appeals ITA.Nos.55 & 59/PAN./2024. The assessee pleads the following substantive grounds in it’s appeal ITA.No.55/PAN./ 2024 as under : 3 ITA.Nos.55 to 60/PAN./2024 3. The Revenue-s cross-appeal ITA.No.59/PAN./2024 on the other hand raises the following substantive issues : 4. It is in this factual backdrop that the first and foremost issue which arises herein is regarding eligibility of the assessee i.e., “Souhardha” co-operative society to be eligible for the impugned sec.80P deduction in principle. Suffice to say, case law [2022] 134 taxmann.com 170 (Kar.) Government of India Ministry of Finance vs. Karnataka State Souharda 4 ITA.Nos.55 to 60/PAN./2024 Federal Co-operative Ltd., has already settled the issue that such a ‘society’ is also under the state cooperative law. Faced with this situation, the learned CIT-DR argued that the said case law is indeed distinguishable on facts. We find no merit in the Revenue’s instant arguments once the issue stand settled in assessee’s favour by the hon’ble jurisdictional high court. The assessee succeeds in it’s first and foremost issue in very terms. 5. Next comes the assessee’s plea that the CIT(A) herein has erred in law and on facts in restoring this issue of sec.80P deduction back to the Assessing Officer as under : “8.22. Under the circumstances, the AO is hereby directed to examine whether in the instant case, the amount which was invested in banks to earn interest was not an amount due to any members and it was not the liability in their account. If the answer for the above question is in affirmative, the appellant is out of the harm’s way. Further, the AO is well within the ambit of law to examine the incomes which fall within or outside the ambit of Sec.80P(2)(d) of the Act and determine the eligible amounts that can be allowed as a deduction. Accordingly, the AO is directed to allow the deduction u/s.80P(2)(d) of the Act on such interest or dividends 5 ITA.Nos.55 to 60/PAN./2024 income derived, if any, from investments held by the appellant in the Co-operative Banks/Societies/ Treasuries/Federation registered under the Co- operative Societies Act, after ascertaining the claim of appellant that the appellant does not possess licence from RBI to do the business of a cooperative bank and it possesses valid Registration Certificate of being a Co-operative Society as defined in Sec. 2(19) of the Act.” 6. Learned CIT-DR herein submitted that it indeed needs to be verified whether or not the assessee is a cooperative bank than a cooperative society going by the corresponding registration under the banking regulation laws. We see no reason to affirm the learned NFAC’s directions reproduced hereinabove for the precise reason that the jurisdiction to “set-aside” in issue back to the assessing authority stands omitted by Finance Act 2001, w.e.f. 01.06.2001, u/sec.251(1)(a) of the Act. This is indeed coupled with their lordships’ decision in Mavilayi Service Co-operative Bank Ltd., vs., CIT [2021] 431 ITR 1 (SC), settled the issue that the status of a cooperative institution has to be adjudicated on the basis of the state cooperative law in such an instance of sec.80P deduction. We make it clear that the assessee’s status as a credit Souharda cooperative society limited is nowhere in dispute. We thus accept the assessee’s 6 ITA.Nos.55 to 60/PAN./2024 corresponding grounds raised in the assessee’s instant appeal in very terms. 7. Next comes the common issue between the assessee and Revenue’s appeal regarding entitlement of the former’s sec.80P(2)(a)(i) and 80P(2)(d) deduction claim(s) regarding interest income(s) derived from cooperative societie(s)/ cooperative bank(s); as the case may be. We note that this tribunal’s recent decision The Hukkeri Taluk Agri Produce Co- operative Marketing Society Ltd., Dist. Belagavi vs. ITO, Ward- 1(1), Belagavi ITA.No.30/PAN./2018 dated 16.11.2021 has already settled the issue regarding interest income(s) derived from investment(s) made in former category of cooperative institution(s) in assessee’s favour and against the department as under : “2. Briefly, the facts of the case are that the appellant is a cooperative society engaged in the business of marketing of agricultural produce, etc.. The return of income for the assessment year 2012-13 was filed on 27.09.2012 declaring total income of Rs.Nil after claiming deduction u/s 80P(2)(d) of the Income Tax Act, 1961 (‘the Act’) amounting to Rs.1,80,144/- being interest and dividend earned on Reserve Funds and Shares. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(1), Belgaum (‘the Assessing 7 ITA.Nos.55 to 60/PAN./2024 Officer’) vide order dated 24.10.2014 passed u/s 143(3) of the Act at a total income of Rs.1,81,360/- after denying the claim of deduction by holding that the provisions of section 80P(2)(d) of the Act are not applicable to the facts of the present case of the assessee. 3. Being aggrieved by the above action of the Assessing Officer, an appeal was filed before the ld. CIT(A), who vide impugned order denied the benefit of deduction u/s 80P(2)(d) of the Act placing reliance on the decision of the Hon’ble Supreme Court in the case of Totagars Co- operative Sales Society Ltd. vs. ITO, 188 taxmann.com 282 (SC) 4. Being aggrieved by the above decision of the ld. CIT(A), the assessee is in appeal before us in the present appeal. 5. The ld. AR for the assessee society submits that it is a purely cooperative credit society and not granting any bank licence to carry out any banking business. It is further submitted that the appellant is a cooperative society and received interest income of Rs.1,80,144/- from other cooperative society. The case of the assessee clearly falls under the provisions of section 80P(2)(d) of the Act. 8 ITA.Nos.55 to 60/PAN./2024 6. On the other hand, ld. DR submits that the appellant is not entitled for deduction u/s 80P(2)(d) of the Act as the parties from whom the interest was received is a cooperative bank placing reliance on the order of the ld. CIT(A). 7. We heard the rival submissions and perused the material on record. The only issue in the present appeal is pertaining to the allowability of deduction under the provisions of section 80(2)(d) of the Act. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. In the present case, the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) of the Act is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society. 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 9 ITA.Nos.55 to 60/PAN./2024 the Hon’ble Supreme Court in the case of Totgars Co- operative Sales Society Ltd. (supra) held that the ratio of decision of the Hon’ble Supreme Court in the aforesaid case (supra) not to be applicable 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. 8. 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 wherein the Tribunal after making reference to the decisions of the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) and 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, decision of the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (supra) had not been preferred to view of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. (supra). The relevant observation of the Pune Bench of the Tribunal in the case (supra) is as under :- 10 ITA.Nos.55 to 60/PAN./2024 “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 Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon'ble 11 ITA.Nos.55 to 60/PAN./2024 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, 12 ITA.Nos.55 to 60/PAN./2024 cannot by any standard, be construed as not a possible 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.” 8. The position is hardly any different regarding interest income(s) derived from investment(s) made in nationalized or public sector bank(s) wherein case law The Vaveru Co-operative Rural Bank Ltd., vs. CCIT [2017] 396 ITR 371 (AP) has already rejected the Revenue’s very stand. We accordingly accept the assessee’s foregoing substantive grounds as well as it’s appeal ITA.No.55/PAN./2024 in very terms. Necessary computation shall follow as per law after due verification of facts at the learned Assessing Officer’s end. 9. The Revenue’s cross-appeal ITA.No.59/PAN./2024 is declined in very terms. 10. We next advert to assessment year 2018-2019 involving the assessee’s and Revenue’s cross-appeals ITA.No.56 & 60/PAN./2024 raising the very issues as in the foregoing first and foremost assessment year 2017-2018. Learned CIT-DR is fair enough in not pinpointing any distinction on facts or law; as the case may be. We thus accept the assessee’s appeal ITA.No.56/PAN./2024 and reject the 13 ITA.Nos.55 to 60/PAN./2024 Revenue’s cross-appeal ITA.No.60/PAN./2024 in very terms. Ordered accordingly. 11. The assessee’s penalty appeal ITA.No.57/PAN./ 2024 for this very assessment year 2018-2019 stands allowed being consequential in nature since learned lower authorities have invoked sec.270A of the Act regarding it’s sec.80P deduction disallowance(s). Ordered accordingly. 12. Lastly comes the assessee’s appeal ITA.No.58/PAN./ 2024 for assessment year 2020-2021 raising the very substantive grounds as in the lead assessment year 2017- 2018 (supra). We afforded due opportunity to the learned CIT- DR to pinpoint any distinction of facts or law, as the case may be. He is indeed very fair in not specifying any such exception herein. We thus adopt judicial consistency to accept the assessee’s instant appeal ITA.No.58/PAN./2024. Necessary computation shall follow as per law in very terms. Ordered accordingly. 13. These assessee’s appeals ITA.Nos.55, 56, 57 & 58/PAN./2024 are allowed and Revenue’s appeals ITA.Nos.59 & 60/PAN./2024 are dismissed in above terms. A copy of this common order be placed in the respective case files. 14 ITA.Nos.55 to 60/PAN./2024 Order pronounced in the open court on 20.06.2024 Sd/- Sd/- [RAMA KANTA PANDA] [SATBEER SINGH GODARA] VICE PRESIDENT JUDICIAL MEMBER Pune, Dated 20 th June, 2024 VBP/- Copy to 1. The appellant 2. The respondent 3. The Pr. CIT, Panaji, Panaji concerned 4. D.R. ITAT, Panaji-Bench, Panaji. 5. Guard File. //By Order// //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune.