Saraswati Pagardar Sevakannchi Sahakari Pat. Maryadit, Pune V. Pr. Commissioner of Income-tax -5, Pune

ITA 591/PUN/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1665 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 15-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263; 143(3); 80P; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA No.591/PUN/2019 निर्धारण वषा / Assessment Year : 2014-15 Saraswati Pagardar Sevakannchi Sahakari Patsanstha Maryadit Saraswati School, Shree Krushna Nagar, Akurdi, Pune-411035 PAN : AAIAS8438H Vs. Pr.CIT-5, Pune Appellant Respondent आदेश / ORDER PER S.S. GODARA, JM : This assessee‟s appeal for AY 2014-15 arises against the Pr.CIT, Pune-5, Pune‟s order dated 30-01-2019 passed in case No. Pn/PrCIT-5/Admn,263/SPSSPM/2018-19/3803 in proceedings under Section 263 of the Income Tax Act, 1961, in short „the Act‟. Case called twice. None appears at the assessee‟s behest. It is accordingly proceeded ex-parte. 2. The assessee‟s sole substantive ground raised in the instant appeal challenges correctness of learned PCIT‟s revision directions Assessee by None Revenue by Shri Saradar Singh Meena Date of hearing 12-07-2022 Date of pronouncement 29-07-2022 ITA No.591/PUN/2019 2 holding the corresponding regular assessment dated 04.07.2016 as an erroneous one causing prejudice to the interest of Revenue for the reason that the Assessing Officer had wrongly accepted its section 80P(2)(a) deduction claim regarding interest income of Rs.13,51,359/- derived from deposits made in the co-operative banks. 3. Learned CIT-DR vehemently supported the PCIT‟s revision directions under challenge read as under: “05. Adverting to the facts of impugned case, the assessee is a cooperative society engaged in the activity of providing credit facilities to its members. The assertion of the Addl. CIT Range-9. Pune that the interest income of the assessee society out of its "investment" with other co-operative banks is not eligible for deduction either u/s 80P(2)(a (i) or u/s 80P(2)(d) of the Act is justifiable. The Appeal No. 100069 of 2016 dated 05-01-2017 in the case of Karnataka High Court vs. The Totagars Co-Operative Sale Society, the Hon'ble Court has decided whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as Co-operative Society or not. However, the Appeal No. 100066/2016 & Connected cases dated 16-06-2017, the Hon’ble Court has discussed the provisions of Section 80P as a whole and held that - it is the character and nature of income which determines its taxability or exemption from taxability and the income which is clearly held to be not exempt and not deductible under Section 80P(2)(a) of the Act by the Hon'ble Supreme Court in the case of respondent assessee, cannot be contrarily held as exempted and deductible merely because the depository bank, with whom the investments were made by the respondent assessee happens to be a co-operative bank. The income by way of interest earned by deposit or investment of idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus, clause (d) of Section 80P(2) of the Act would not apply in the facts and circumstances of the present case. The person or body corporate from which such interest income is received will not change its character, viz. Interest ITA No.591/PUN/2019 3 income not arising from its business operations, which made it ineligible. I find that the issues are squarely covered by the Hon'ble Supreme Court of India and Hon'ble Karnataka High Court in the case of The Totagars Co-Operative Sale Society. 06. In view of the foregoing discussion, it is clear that the assessee society was not entitled to claim deduction under chapter VIA of the Act and its claim was allowed by the Assessing Officer. In view of the forgoing wrong claim u/s 80P(2)(a)(i), the assessment completed under section 143(3) of the Income Tax Act, 1961, by the Income Tax Officer, Ward - 9(4), Pune, on 04.07.2016, for Assessment Year 2014- 15, is erroneous in so far as it is prejudicial to the interest of the revenue. Therefore, the assessment made by the Assessing Officer is set aside with a direction to complete the assessment afresh after verifying the details and allowing correct amount of deduction admissible to the assessee society.” 4. Mr. Meena further quoted PCIT vs. The Totagars Co- operative Sale Society (2017) 392 ITR 74 (Kar) that such an interest income deserves to be treated as „income from other sources‟ than under regular head of business u/s 80P of the Act. 5. We have given our thoughtful consideration to the Revenue‟s foregoing arguments supporting the learned PCIT‟s revision directions and find no merit therein as this tribunal‟s recent co- ordinate bench‟s order in Rena Sahakari Sakhar Karkhana Ltd. vs. PCIT ITA No.1249/PUN/2018, 07.01.2022: “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 ITA No.591/PUN/2019 4 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. “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 ITA No.591/PUN/2019 5 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-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) (iii) Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai ITA No.591/PUN/2019 6 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 (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.” 6. Learned CIT-DR could hardly pinpoint any distinction on facts and on law regarding the instant issue of 80P deduction claim ITA No.591/PUN/2019 7 raised on interest income derived from deposits made in co- operative banks. We accordingly reverse the learned PCIT‟s revision directions in issue. Ordered accordingly. 7. This assessee‟s appeal is allowed in above terms. Order pronounced in the Open Court on 29 th July, 2022. Sd/- Sd/- (DIPAK P. RIPOTE) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER प ु णे Pune; ददिधांक Dated : 29 th July, 2022 GCVSR आदेश की प्रतिलिपि अग्रेपिि/Copy of the Order is forwarded to: 1. अपीऱधर्थी / The Appellant; 2. प्रत्यर्थी / The Respondent; 3. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, पुणे “B” / DR „B‟, ITAT, Pune 4. गार्ड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अविकरण ,पुणे / ITAT, Pune ITA No.591/PUN/2019 8 Date 1. Draft dictated on 12-07-2022 Sr.PS 2. Draft placed before author 28-07-2022 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order.