Maharashtra State Electricity Board Tantrik Kamgar Co- Operative Society Maryadit, Pune V. The Income tax Officer, Ward-6(1), Pune

ITA 729/PUN/2023

AI Insights

The case involves three appeals by the Maharashtra State Electricity Board Tantrik Kamgar Coop Society against the orders of the National Faceless Appeal Centre (NFAC), which disallowed deductions on interest income received from cooperative banks and other institutions for the assessment years 2012-2013, 2013-2014, and 2015-2016. The primary legal issue was whether the interest income qualifies for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Tribunal referenced several judicial precedents and a CBDT circular to conclude that the interest income from cooperative banks should be eligible for deduction, aligning with the provisions of Section 80P(2)(d) as long as the income is derived from investments made by the cooperative society with other cooperative societies.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 138052 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 19-06-2023
• Other Referred Cases: Collector, Land Acquisition vs. MST Katiji [1987] 167 ITR 471 (SC), Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT (ITA No.1249/PUN/2018), M/s Solitaire CHS Ltd. vs. Pr. CIT, ITA No. 3155/Mum/2019, Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO-21(2)(1), Mumbai, ITA No. 6547/Mum/2017, Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018, Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn), State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), Pr. CIT Vs. Totagars Cooperative Sale Society (2017) 395 ITR 611 (Karn), K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJKUMAR TRIPATHI
• Keywords: Assessment record; Set aside
• Section: 263; 143(3); 80P; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE “SMC” BENCH : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.Nos.729, 726 & 730/PUN./2023 Assessment Years 2012-2013, 2013-2014 & 2015-2016 Maharashtra State Electricity Board Tantrik Kamgar Coop Society Maryadit, 351 Seetaram Apartment, Kem Hospital, Rasta Peth, Pune-411 011 Maharashtra. PAN AACAM3609E vs., The Income Tax Officer, Ward – 6 (1), PMT Commercial Bldg., “C” Wing, 2 nd Floor, Sahankarsheth Road, Swargate, Pune - 411037 (Appellant) (Respondent) For Assessee : Shri Pramod Shingte For Revenue : Shri Manojkumar Tripathi Date of Hearing : 19.07.2023 Date of Pronouncement : 31.07.2023 ORDER PER SATBEER SINGH GODARA, J.M. These assessee’s three appeals ITA.Nos.729, 726 & 730/PUN./2023 arise against the National Faceless Appeal Centre [in short “NFAC”] Delhi’s separate Din and Order Nos. ITBA/NFAC/S/250/2021-22/1037888440(1), 1037888489(1) and 1037890337(1), all dated 17.12.2021, involving proceedings u/s. 143(3) [A.Y.2012-2013], 144 [A.Y.2013-2014] and 147 r.w.s. 144 [A.Y.2015-2016], of the Income Tax Act, 1961 (in short “the Act”); respectively. Heard both the parties. Case files perused. 2 ITA.Nos.729, 726 & 730/PUN./2023 2. It is noticed at the outset that the assessee’s all instant three appeals suffer from 490 days delay in filing. It has placed on record it’s condonation petition/affidavit dated 10.07.2023 inter alia stating therein that the same is attributable to Covid-2019 period up to 28.02.2022 as per hon’ble apex court’s directions in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in Cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 and 421 ITR 314, excluding the covid-19 pandemic outbreak period from 15.03.2020 to 28.02.2022 for all intents and purposes under the limitation law, various communication gaps at the auditor as well at management level etc. Learned counsel further submitted that assessee’s new Board of Directors were appointed only in March, 2023 which has followed institution of all the three instant appeals. 2.1. Learned DR has strongly contested the assessee’s condonation averments. 3. We have given our thoughtful consideration to the assessee’s instant identical three condonation petitions and find merit therein as it is evident from a perusal thereof that it has been prevented by reasonable cause owing to circumstances beyond it’s control which lead to delay of 490 days in filing these three appeals. We thus quote hon’ble apex court’s landmark decision Collector, Land Acquisition vs., MST 3 ITA.Nos.729, 726 & 730/PUN./2023 Katiji [1987] 167 ITR 471 (SC) has settling the law long back that all such technical aspects must make way for the cause of substantial justice. We, therefore, condone the impugned delay and take-up the three appeals for adjudication on merits. 4. Coming to merits, we note with the able assistance coming from both the parties that the assessee’s identical sole substantive grievance herein challenges correctness of the learned lower authorities action disallowing it’s interest income(s) received from cooperative banks and other institutions amounting to Rs.15,61,472/-; Rs.14,23,573/- and Rs.18,79,885/-; assessment year-wise, respectively, as not eligible for sec.80P(2)(a)(i) deduction. 5. Learned DR vehemently argued that both the lower authorities have been rightly rejected the assessee’s claim thereby treating the impugned interest income as income from other sources u/sec.56 of the Act. He seeks to buttress the point that the assessee’s interest income issue has nowhere been derived from carrying-out credit activities amongst it’s members. 6. All these Revenue’s arguments fail to evoke our concurrence and find merit in assessee’s arguments in light of this tribunal’s recent order in Rena Sahakari Sakhar Karkhana 4 ITA.Nos.729, 726 & 730/PUN./2023 Ltd. Vs. Pr.CIT (ITA No.1249/PUN/2018) decided on 07.01.2022 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 5 ITA.Nos.729, 726 & 730/PUN./2023 “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. 6 ITA.Nos.729, 726 & 730/PUN./2023 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 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. 7 ITA.Nos.729, 726 & 730/PUN./2023 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 8 ITA.Nos.729, 726 & 730/PUN./2023 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. 9 ITA.Nos.729, 726 & 730/PUN./2023 “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 10 ITA.Nos.729, 726 & 730/PUN./2023 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:- 11 ITA.Nos.729, 726 & 730/PUN./2023 “(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- 12 ITA.Nos.729, 726 & 730/PUN./2023 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 13 ITA.Nos.729, 726 & 730/PUN./2023 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. 14 ITA.Nos.729, 726 & 730/PUN./2023 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. 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 15 ITA.Nos.729, 726 & 730/PUN./2023 restore the order passed by the A.O under Sec. 143(3), dated 07.03.2016.” 7. We adopt the foregoing detailed discussion mutatis mutandis to accept the assessee’s arguments to hold it eligible for sec.80P(2)(a0(i) deduction. Ordered accordingly. 8. This assessee’s three appeals ITA.Nos.729, 726 & 730/PUN./2023 are allowed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 31.07.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 31 st July, 2023 VBP/- Copy to 1. The appellant 2. The respondent 3. The NFAC, Delhi 4. The Pr. CIT, Pune 5. D.R. ITAT, Pune “SMC” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches, Pune.