SHAHPURA GRAM SEWA SAHAKARI SAMITI LTD., JAIPUR V. INCOME TAX OFFICER, WARD-4-1, JAIPUR

ITA 767/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4960 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 14-10-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 23-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BRIJESH AGARWAL
• Keywords: Business income; Additional evidence; Set aside
• Section: 37; 80P; 72

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH VC SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 767/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16. SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR-303103. CUKE VS. THE INCOME TAX OFFICER, WARD 4(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAAJS 1281 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI BRIJESH AGARWAL JKTLO DH VKSJ LS@ REVENUE BY : SMT. CHANCHAL MEENA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14.10.2020. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 15/10/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 25 TH MARCH, 2019 OF LD. CIT (A)-2, JAIPUR FOR THE ASSESSMENT YE AR 2015-16. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THAT THE APPELLATE ORDER DATED 25.03.2019 OF T HE LD. CIT (A)-2, JAIPUR IS UNJUSTIFIED, ARBITRARY, PREJUDGED AGAINST THE WEIGHT OF EVIDENCE ON RECORD AND BAD IN LAW. 2. THAT THE LD.CIT (A) HAS GROSSLY ERRED IN CONFIRM ING THE ORDER OF THE ASSESSING OFFICER DISALLOWING DEDUCTION U/S 80P (2)(I) ON ACCOUNT OF INTEREST RECEIVED FROM CO-OPERATIVE BANK AND HAS MADE THE ADDITION OF RS. 2,51,866/- AND INSTEAD ALL OWING A DEDUCTION OF RS. 50000.00 U/S 80P(2)(C)(II). ASSES SEE BEING THE 2 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. PRIMARY AGRICULTURAL CREDIT CO-OPERATIVE SOCIETY AN D WHOLE OF THE INCOME OF THE ASSESSEE IS EXEMPT U/S 80P(2)(A)( I). 3. THAT THE ORDER OF THE LD. CIT (A) IS BAD IN LAW AND DESERVES TO BE QUASHED. 4. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, AM END, WITHDRAW OR ALTER ANY GROUNDS OF APPEAL BEFORE THE FINALIZAT ION OF SAID APPEAL. THE HEARING OF THE APPEAL IS CONCLUDED THROUGH VIDE O CONFERENCE DUE TO PREVAILING CONDITION OF COVID 19 PANDEMIC. 2. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE LD. CIT (A) HAS CONFIRMED THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80P(2)( A)(I) ON THE GROUND THAT THE INTEREST RECEIVED BY THE ASSESSEE FROM JAIPUR CENTR AL COOPERATIVE BANK IS NOT COVERED UNDER SECTION 80P(2)(D) OF THE IT ACT AS TH E ASSESSEE HAS NOT PRODUCED ANY DOCUMENT TO PROVE THAT JAIPUR CENTRAL COOPERATIVE B ANK IS A COOPERATIVE SOCIETY. HE HAS PRODUCED A CERTIFICATE ISSUED BY THE REGISTR AR OF COOPERATIVE SOCIETIES IN RESPECT OF JAIPUR CENTRAL COOPERATIVE BANK AND SUBM ITTED THAT THE SAID COOPERATIVE BANK IS A COOPERATIVE SOCIETY REGISTERED UNDER THE COOPERATIVE SOCIETIES ACT. THUS THE LD. A/R HAS CONTENDED THAT THE INTEREST RECEIVE D BY THE ASSESSEE FROM JAIPUR CENTRAL COOPERATIVE BANK IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(D) OF THE IT ACT. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED U PON VARIOUS DECISIONS OF THIS TRIBUNAL AS RELIED UPON BEFORE THE LD. CIT (A). 3. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE CERTIFICATE ISSUED BY THE REGISTRAR, COOPERATIVE SOCIETIES, JAIPUR NOW FI LED BY THE ASSESSEE IS AN ADDITIONAL EVIDENCE WHICH CANNOT BE CONSIDERED AT THIS STAGE W HEN IT WAS NOT PRODUCED BY THE 3 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. ASSESSEE BEFORE THE AUTHORITIES BELOW. THUS THE LD. D/R HAS OBJECTED TO THE FILING OF THE REGISTRATION CERTIFICATE ISSUED BY THE REGISTRA R, COOPERATIVE SOCIETIES TO THE JAIPUR CENTRAL COOPERATIVE BANK. SHE HAS RELIED UP ON THE ORDERS OF THE AUTHORITIES BELOW. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CARE FUL PERUSAL OF THE ORDERS OF THE AO AS WELL AS THE IMPUGNED ORDER OF THE LD. CIT (A), IT IS NOTED THAT THE LD. CIT (A) HAS NOT DISPUTED THE CLAIM OF THE ASSESSEE IN R ESPECT OF THE INTEREST RECEIVED FROM JAIPUR CENTRAL COOPERATIVE BANK AS ALLOWABLE I N VIEW OF SECTION 80P(2)(D) IF THE SAID COOPERATIVE BANK IS A COOPERATIVE SOCIETY. TH E CLAIM OF THE ASSESSEE WAS DENIED BY THE LD. CIT (A) IN PARA 2.3 AND 2.3.1 AS UNDER :- 2.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. ON PERUSAL OF OV ERALL FACTS, IT IS SEEN THAT THE ASSESSING OFFICER DISALLOWED DEDUCTION UND ER SECTION 80P IN RESPECT OF INTEREST RECEIVED FROM M/S. JAIPUR CENTR AL CO-OPERATIVE BANK BY HOLDING THAT THE SAME IS NOT ALLOWABLE IN VIEW O F THE SECTION 80P(2)(D). 2.3.1. LD. AUTHORIZED REPRESENTATIVE ARGUED THAT TH IS INTEREST IS ALLOWABLE UNDER SECTION 80P(2)(A)(I). I FIND THAT UNDER SECTION 80P(2)(A)(I) ONLY INTEREST RECEIVED FROM CREDIT FAC ILITY TO ITS MEMBERS IS ALLOWED. INTEREST RECEIVED IS ON FDR WITH CO-OPERAT IVE BANK. THE APPELLANT HAS NOT PROVIDED ANY DOCUMENTS WHICH PROV E THAT M/S. JAIPUR CENTRAL COOPERATIVE BANK IS A CO-OPERATIVE S OCIETY AND THEREFORE, IN VIEW OF SECTION 80P(2)(D) DISALLOWANC E OF RS. 2,51,866/- MADE BY THE ASSESSING OFFICER UNDER SECTION 80P IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 4 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. THUS THE LD. CIT (A) HAS ALLOWED THE CLAIM OF THE A SSESSEE UNDER SECTION 80P(2)(A)(I) IN RESPECT OF THE INTEREST RECEIVED FROM THE CREDIT FACILITY TO ITS MEMBERS BUT THE CLAIM OF DEDUCTION UNDER SECTION 80P(2)(D) IS DENIE D ONLY ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENT TO PROVE THA T JAIPUR CENTRAL COOPERATIVE BANK IS A COOPERATIVE SOCIETY. NOW THE ASSESSEE HA S PRODUCED THE CERTIFICATE ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES WH EREBY JAIPUR CENTRAL COOPERATIVE BANK WAS REGISTERED AS A COOPERATIVE SOCIETY. AS R EGARDS THE OBJECTION OF THE LD. D/R REGARDING PRODUCTION OF THIS CERTIFICATE AT THI S STAGE AS AN ADDITIONAL EVIDENCE, IT IS TO BE NOTED THAT THE CERTIFICATE PRODUCED BY THE ASSESSEE IS NOT THE ASSESSEES OWN DOCUMENT BUT IT IS A DOCUMENT OTHERWISE AVAILAB LE IN PUBLIC DOMAIN AND ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES. THEREFO RE, THIS FACT CANNOT BE DISPUTED OR THE CERTIFICATE ISSUED BY THE REGISTRAR OF COOPERAT IVE SOCIETIES CANNOT BE DOUBTED. ACCORDINGLY, I DO NOT FIND ANY SUBSTANCE IN THE OBJ ECTION MADE BY THE LD. D/R AGAINST THE PRODUCTION OF THE CERTIFICATE ISSUED BY THE REGISTRAR OF COOPERATIVE SOCIETIES. ONCE JAIPUR CENTRAL COOPERATIVE BANK IS FOUND TO BE A COOPERATIVE SOCIETY, THE INTEREST RECEIVED FROM THE SAID COOPER ATIVE BANK/SOCIETY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(D). THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF ITO VS. SHREE KESHORAI PATAN SAHAKARI SUGAR MI LL, BUNDI DATED 31.01.2018 IN ITA NO. 418 & 419/JP/2017 HAS CONSIDERED THIS ISSUE AND HELD IN PARA 6.1 TO 6.4 AS UNDER :- 6.1 AS REGARDS THE CLAIM U/S 80P(2)(D), WE FIND THA T THE ONLY CONDITION FOR AVAILING THE DEDUCTION UNDER THIS PROVISION IS ANY INCOME BY WAY OF INTEREST OR DIVIDEND DERIVED BY THE COOPERATIVE SOCIETY FROM ITS INVESTM ENT WITH ANY OTHER COOPERATIVE 5 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. SOCIETY, THE WHOLE OF SUCH INCOME IS ALLOWABLE FOR DEDUCTION U/S 80P(1). THEREFORE, THERE IS NO CONDITION FOR THE ASSESSEE SOCIETY TO E NGAGED IN THE ACTIVITY OF PROVIDE CREDITS TO THE MEMBERS OR BANKING BUSINESS FOR AVAI LING THE DEDUCTION U/S 80P(2)(D) READ WITH SECTION 80P(1) OF THE ACT. AS REGARDS THE COOPERATIVE BANK SHALL BE TREATED AS COOPERATIVE SOCIETIES FOR THE PURPOSE OF THE INT EREST INCOME ON INVESTMENT IN SUCH COOPERATIVE BANK U/S 80P(2)(D) THE MUMBAI BENCH OF THIS TRIBUNAL IN CASE OF LANDS END CO-OPERATIVE HOUSING SOCIETY LTD. VS. ITO (SUPR A), AFTER CONSIDERING THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF TOTAGARS C O-OPERATIVE SALE SOCIETY LTD. VS. ITO (SUPRA) HAS CONSIDERED AND DECIDED THIS ISSUE I N PARA 8.3 AS UNDER:- 8.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. WE FIND THAT THE CIT(A) ENHANCED THE INCOME OF THE ASSESSEE BY REJECTING THE DEDUCTION U/S 80P(2)(D) OF THE ACT OF RS.14,88,107/- BEING INTEREST ON INVESTMENT WITH OTHER COOP. BANKS BY FO LLOWING THE DECISION IN THE CASE OF BANDRA SAMRUDDIHI CO-OPERATIVE HOUSING SOCIETY LTD.(SUPRA) WHICH WAS PASSED ON THE BASIS OF THE DECISION PASSE D BY THE HON'BLE SUPREME COURT IN THE CASE OF TOTAGAR'S CO-OPERATIVE SALE SOCIETY LTD. IN THE CASE OF TOTAGAR'S CO-OPERATIVE SALE SOCIETY LTD V/S ITAT (SUPRA) THE HON'BLE SUPREME COURT WHILE INTERPRETING THE SECTION 80P(2) (A)(I) OF THE ACT HELD THAT SURPLUS FUNDS NOT IMMEDIATELY REQUIRED IN THE BUSINESS AND INVESTED IN THE SHORT TERM DEPOSIT WOULD BE ASSESSABLE UNDER TH E HEAD 'INCOME FROM OTHER SOURCES' WHERE THE CO-OPERATIVE SOCIETY IS EN GAGED IN CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND CONSEQUENTLY NO DEDUCTION IS ALLOWABLE U/S 80P(2)(A )(I) OF THE ACT. WHEREAS IN THE CASE BEFORE US THE ISSUE IS WHETHER A CO-OPE RATIVE SOCIETY WHICH HAS DERIVED INCOME ON INVESTMENT WITH COOPERATIVE BANKS IS ENTITLED TO DEDUCTION U/S 80P(2)(D). THE PROVISIONS OF SECTION 80P(2)(D) OF THE ACT PROVIDE DEDUCTION IN RESPECT OF INCOME BY WAY OF IN TEREST OR DIVIDEND ON INVESTMENTS MADE WITH OTHER COOPERATIVE SOCIETY. F OR THE PURPOSES OF BETTER PROPER UNDERSTANDING OF THESE TWO PROVISIONS THE RELEVANT EXTRACT OF THE SECTION ARE REPRODUCED BELOW: 80P: DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOCIETIES. 6 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. 1. WHERE, IN THE CASE OF AN ASSESSSEE BEING A CO-OPERA TIVE SOCIETY, THE GROSS TOTAL INCOME, INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUB JECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN S UB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. 2. THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE TH E FOLLOWING, NAMELY:- (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN- (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CR EDIT FACILITIES TO ITS MEMBERS. THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF MUCH ATTRIBUTES. (D) IN RESPECT OF ANY INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE COOPERATIVE SOCIETY FROM ITS INVESTMENTS WITH ANY O THER CO-OPERATIVE SOCIETY, THE WHOLE OF SUCH INCOME.' FROM THE CLOSE PERUSAL OF THE PROVISIONS OF U/S 80P (2)(A)(I) AND 80P(2)(D) IT IS CLEAR THAT THE FORMER DEALS WITH DEDUCTION IN RESPECT OF PROFITS AND GAIN OF BUSINESS IN CASE OF THE CO-OPERATIVE SOCIETY CARRYING ON BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IF THE SAID INCOME IS ASS ESSABLE AS INCOME FROM BUSINESS WHEREAS LATTER PROVIDES FOR DEDUCTION IN RESPECT OF INCOME BY WAY INTEREST AND DIVIDEND DERIVED BY ASSESSEE FROM ITS INVESTMENTS W ITH OTHER COOPERATIVE SOCIETY. THUS IT IS AMPLY CLEAR THAT A COOPERATIVE SOCIETY C AN ONLY AVAIL DEDUCTION U/S 80P(2)(D)(I) IN RESPECT OF ITS INCOME ASSESSABLE AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES IF IT CARRIES ON BUSINESS OF THE BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND HAS INCOME ASSESSABLE UNDER THE HEAD BUSINESS WHEREAS FOR CLAIMING U/S 80P(2)(D) IT MUST HAVE INCOME OF INTER EST AND DIVIDEND ON INVESTMENTS WITH OTHER CO-OPERATIVE SOCIETY MAY OR MAY NOT BE E NGAGED IN THE BANKING FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND THE HEAD UNDER WHICH THE INCOME IS ASSESSABLE IS NOT MATERIAL FOR THE CLAIM OF DEDUCTI ON UNDER THIS SECTION. NOW WILL EVALUATE THE ASSESSEE'S CASE IN THE LIGHT OF THE DE CISION OF THE HON'BLE SUPREME COURT. THE HONBLE SUPREME COURT IN THE CASE OF TOTAGAR'S C O-OPERATIVE SALE SOCIETY LTD.(SUPRA) HELD THAT A SOCIETY HAS SURPLUS FUNDS W HICH ARE INVESTED IN SHORT TERM DEPOSITS WHERE THE SOCIETY IS ENGAGED IN THE BUSINE SS OF BANKING OR PROVIDING CREDIT 7 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. FACILITIES TO ITS MEMBERS IN THAT CASE THE SAID INC OME FROM SHORT TERM DEPOSITS SHALL BE TREATED AND ASSESSED AS INCOME FROM OTHER SOURCE S AND DEDUCTION U/S 80(P)(2)(A)(I) WOULD NOT BE AVAILABLE MEANING THERE BY THAT DEDUCTION U/S 80(P)(2)(A)(I) IS AVAILABLE ONLY IN RESPECT OF INCO ME WHICH IS ASSESSABLE AS BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES. WHEREA S IN DISTINCTION TO THIS , THE PROVISIONS OF SECTION 80(P)(2)(D) OF THE ACT PROVID ES FOR DEDUCTION IN RESPECT OF INCOME OF A COOP SOCIETY BY WAY OF INTEREST OR DIVI DEND FROM ITS INVESTMENTS WITH OTHER COOP. SOCIETY IF SUCH INCOME IS INCLUDED IN T HE GROSS TOTAL INCOME OF THE SUCH COOP SOCIETY. IN VIEW THESE FACTS AND CIRCUMSTANCES WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF R S. 14,88,107/-IN RESPECT OF INTEREST RECEIVED/DERIVED BY IT ON DEPOSITS WITH COOP. BANKS AND THEREFORE THE APPEAL OF THE ASSESSEE IS ALLOWED BY REVERSING THE ORDER OF THE C IT(A). THE AO IS DIRECTLY ACCORDINGLY. 6.2 WE FURTHER NOTE THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAJASTHAN RAJYA SAHAKARI KRAY VIKRAY SANGH LTD. (SU PRA) BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SURAT VAN KAR SAHAKARI SANGH LTD. VS. ACIT, 72 TAXMANN.COM 169 HAS HELD IN AS UNDER: 8. WE HAVE CONSIDERED THE DECISIONS CITED BY LEARN ED ADVOCATE FOR THE ASSESSEE AS WELL AS THE REVENUE. WE FEEL THAT THE D ECISIONS CITED BY THE LEARNED ADVOCATE FOR THE ASSESSEE SHALL BE APPLICAB LE ON THE FACTS OF THE PRESENT CASE. IN THE CASE OF K. NANDAKUMAR V. ITO [ 1993] 204 ITR 856/[1994] 72 TAXMAN 223 (KER.), THE KERALA HIGH COURT HAS HEL D AS UNDER: '4. THE EFFECT OF SECTION 80AB IS THAT, FOR THE PUR POSE OF COMPUTING THE DEDUCTION UNDER SECTION 80L, THE AMOUNT OF INCO ME OF THAT NATURE AS COMPUTED IN ACCORDANCE WITH THE PROVISION S OF THE ACT SHALL ALONE BE DEEMED TO BE THE AMOUNT OF INCOME OF THAT NATURE. WHAT THE SECTION MEANS IS THAT THE NET INCOME BY WA Y OF INTEREST COMPUTED IN THE MANNER PROVIDED BY THE PROVISIONS O F THE ACT SHALL ALONE BE TAKEN INTO ACCOUNT FOR COMPUTING THE BENEF IT. BUT IT MUST BE NOTED THAT PAYMENT OF INTEREST UNDER A LOAN TRAN SACTION INCURRED FOR THE PURPOSE OF DERIVING INCOME FROM BUSINESS IS NOT AN ITEM WHICH ARISES IN THE COMPUTATION OF INTEREST INCOME 'IN ACCORDANCE WITH THE PROVISIONS' OF THE ACT. THE SAID AMOUNT HA S TO BE PAID IRRESPECTIVE OF WHETHER ANY INTEREST INCOME IS OTHE RWISE RECEIVED OR NOT. THOUGH THE INTEREST IS PAYABLE TO THE SAME BAN K, THE FACT REMAINS THAT THE AMOUNT OF INCOME BY-WAY OF INTERES T IS NOT CALCULATED UNDER THE PROVISIONS OF THE ACT WITH REF ERENCE TO SUCH OUTGOINGS WHICH FALL UNDER DIFFERENT HEADS. THE ASS ESSEE IS ENTITLED 8 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. TO DEDUCTION UNDER SECTION 37 OF ALL EXPENDITURE IN CURRED FOR THE PURPOSE OF DERIVING THE BUSINESS INCOME, AND IT IS UNDER THAT HEAD THAT THE INTEREST PAID ON THE LOAN TAKEN FROM THE B ANK IS DEDUCTED. THE NET AMOUNT OF INTEREST CONTEMPLATED BY SECTION 80AB SHOULD TAKE IN THE NET AMOUNT ARRIVED AT AFTER MEETING THE EXPENSES DEDUCTIBLE FROM THAT ITEM UNDER THE PROVISIONS OF T HE ACT AS EXPLAINED ABOVE. THAT IS NOT THE CASE HERE. THEREFO RE, SECTION 80AB HAS NO APPLICATION TO THE FACTS OF THESE CASES. THE INTEREST PAID ON THE LOAN TRANSACTIONS HAS TO BE DEDUCTED FROM THE B USINESS INCOME, AND NOT FROM THE INTEREST RECEIVED FROM THE BANK ON THE FIXED DEPOSITS. THE ASSESSEES WERE THEREFORE RIGHT IN THE SUBMISSIONS WHICH THEY MADE BEFORE THE COMMISSIONER OF INCOME-T AX IN THE REVISION PETITIONS WHICH THEY FILED. THIS ASPECT OF THE MATTER HAS BEEN OVERLOOKED BY THE COMMISSIONER IN PASSING THE ORDER, EXHIBIT P-5.' 8.1 SIMILARLY, IN THE CASE OF DOABA CO-OPERATIVE SU GAR MILLS LTD (SUPRA), THE PUNJAB & HARYANA HIGH COURT HAS HELD AS UNDER: '5. THE CONTENTION OF MR. GUPTA, LEARNED COUNSEL AP PEARING FOR THE REVENUE, IS THAT THE TRIBUNAL WAS WRONG IN ALLOWING DEDUCTION UNDER SECTION 80P(2) (D) OF THE ACT BECAUSE IT IS NOT EST ABLISHED THAT THE ASSESSEE HAD DERIVED THE INTEREST BY INVESTING ALL THE AMOUNT OF SURPLUS FUNDS. IT IS FURTHER CONTENDED BY MR. GUPTA THAT THE ASSESSEE HAS PAID INTEREST TO JALANDHAR CENTRAL CO-OPERATIVE BANK AND HAS ALSO RECEIVED INTEREST FROM THE SAID CO- OPERATIVE BANK, THEREBY SHOWING THAT THE ASSESSEE HAS ON THE AGGREGATE PAID INTEREST TO THE BANK AND, THEREFORE, NO DEDUCTION UNDER SECTION 80P (2)(D) CAN BE ALLOWED. TO APPRECIATE THIS ARGUMENT, WE HAVE TO LO OK TO THE PROVISIONS OF SECTION 80P(2)(D) OF THE ACT, FOR FAC ILITY OF REFERENCE, IT IS REPRODUCED AS UNDER : '80P. (2)(D) IN RESPECT OF ANY INCOME BY WAY OF INT EREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MENTS WITH ANY OTHER CO- OPERATIVE SOCIETY, THE WHOLE OF SUCH INCO ME.' 6. SO FAR AS THE PRINCIPLE OF INTERPRETATION APPLIC ABLE TO A TAXING STATUTE IS CONCERNED, WE CAN DO NO BETTER THAN TO Q UOTE THE BY-NOW CLASSIC WORDS OF ROWLATT J., IN CAPE BRANDY SYNDICA TE V. IRC [1921] 1 KB 64, 71 : '...IN A TAXING ACT, ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQ UITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE L ANGUAGE USED,' 7. THE PRINCIPLE LAID DOWN BY ROWLATT J., HAS ALSO BEEN TIME AND AGAIN APPROVED AND APPLIED BY THE SUPREME COURT IN DIFFERENT CASES 9 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. INCLUDING THE ONE, HANSRAJ GORDHANDAS V. H. H. DAVE , ASSISTANT COLLECTOR OF CENTRAL EXCISE AND CUSTOMS, AIR 1970 S C 755, 759. 8. SECTION 80P(2)(D) OF THE ACT ALLOWS WHOLE DEDUCT ION OF AN INCOME BY WAY OF INTEREST OR DIVIDENDS DERIVED BY THE CO-O PERATIVE SOCIETY FROM ITS INVESTMENT WITH ANY OTHER CO-OPERATIVE SOC IETY. THIS PROVISION DOES NOT MAKE ANY DISTINCTION IN REGARD T O SOURCE OF THE INVESTMENT BECAUSE THIS SECTION ENVISAGES DEDUCTION IN RESPECT OF ANY INCOME DERIVED BY THE CO-OPERATIVE SOCIETY FROM ANY INVESTMENT WITH A CO-OPERATIVE SOCIETY. IT IS IMMATERIAL WHETH ER ANY INTEREST PAID TO THE CO- OPERATIVE SOCIETY EXCEEDS THE INTER EST RECEIVED FROM THE BANK ON INVESTMENTS. THE REVENUE IS NOT REQUIRE D TO LOOK TO THE NATURE OF THE INVESTMENT WHETHER IT WAS FROM ITS SU RPLUS FUNDS OR OTHERWISE. THE ACT DOES NOT SPEAK OF ANY ADJUSTMENT AS SOUGHT TO BE MADE OUT BY LEARNED COUNSEL FOR THE REVENUE. THE PROVISION DOES NOT INDICATE ANY SUCH ADJUSTMENT IN REGARD TO INTER EST DERIVED FROM THE CO-OPERATIVE SOCIETY FROM ITS INVESTMENT IN ANY OTHER CO- OPERATIVE SOCIETY. THEREFORE, WE DO NOT AGREE WITH THE ARGUMENT ADVANCED BY LEARNED COUNSEL FOR THE REVENUE. IN OUR OPINION, THE LEARNED TRIBUNAL WAS RIGHT IN LAW IN ALLOWING DEDUC TION UNDER SECTION 80P(2)(D) OF THE INCOME- TAX ACT, 1961. IN RESPECT OF INTEREST OF RS. 4,00,919 ON ACCOUNT OF INTEREST RECEIVED FRO M NAWANSHALN CENTRAL CO-OPERATIVE BANK WITHOUT ADJUSTING THE INT EREST PAID TO THE HANK. THEREFORE, THE REFERENCE IS ANSWERED AGAINST THE REVENUE IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE.' 8.2 MOREOVER, THE BOMBAY HIGH COURT IN THE CASE OF BAI BHURIBEN LALLUBHAI (SUPRA) HAS HELD THAT THE PURPOSE FOR WHI CH THE ASSESSEE BORROWED MONEY HAD NO CONNECTION WHETHER DIRECT OR INDIRECT WITH THE INCOME WHICH SHE EARNED FROM THE FIXED DEPOSIT AND THAT SHE WAS NOT ENTITLED TO THE DEDUCTION CLAIMED UNDER SEC TION 12(2). THE HIGH COURT HELD THAT IF AN ASSESSEE HAD NO OPTION E XCEPT TO INCUR AN EXPENDITURE IN ORDER TO MAKE THE EARNING OF AN INCO ME POSSIBLE, THEN UNDOUBTEDLY THE EXERCISE OF THAT OPTION IS COM PULSORY AND ANY EXPENDITURE INCURRED BY REASON OF THE EXERCISE OF T HAT OPTION WOULD COME WITHIN THE AMBIT OF SECTION 12(2) OF THE INDIA N INCOME-TAX ACT BUT WHERE THE OPTION HAS NO CONNECTION WITH THE CAR RYING ON OF THE BUSINESS OR THE EARNING OF THE INCOME AND THE OPTIO N DEPENDS UPON PERSONAL CONSIDERATIONS OR UPON MOTIVES OF THE ASSE SSEE, THAT EXPENDITURE CANNOT POSSIBLY COME WITHIN THE AMBIT O F SECTION 12(2). IN THE PRESENT CASE, THE LOAN WAS TAKEN FOR BUSINES S PURPOSE MORE PARTICULARLY PURCHASE OF YARN AND NOT FOR FIXED DEP OSITS. 9. IN VIEW OF THE ABOVE, THE QUESTIONS RAISED IN TH E PRESENT APPEALS ARE ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE ORDER PASSED BY THE TRIBUNAL IS ACCORDINGLY QUASHED AND SET ASIDE. 10 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. 6.3. FURTHER THE HONBLE KARNATAKA HIGH COURT IN CA SE OF PCIT AND ANOTHER VS. TOTAGARS CO-OPERATIVE SALE SOCIETY 392 ITR 0074 AS RELIED UPON BY THE LD. AR OF THE ASSESSEE AS HELD IN PARA 7 TO 11 AS UNDER :- 7. HOWEVER, THE CONTENTION BEING TAKEN BY THE LEAR NED COUNSEL IS UNTENABLE. FOR THE ISSUE THAT WAS BEFORE THE ITAT, WAS A LIMITED ONE, NAMELY WHETHER FOR THE PURPOSE OF SECTION 80P(2)(D) OF THE ACT, A CO-OPERATIVE BANK SHOULD BE CONSIDERED AS A CO-OPER ATIVE SOCIETY OR NOT? FOR, IF A CO OPERATIVE BANK IS CONSIDERED T O BE A CO- OPERATIVE SOCIETY, THEN ANY INTEREST EARNED BY THE COOPERATIVE SOCIETY FROM A CO-OPERATIVE BANK WOULD NECESSARILY BE DEDUCTABLE UNDER SECTION 80P(1) OF THE ACT. 8. THE ISSUE WHETHER A CO-OPERATIVE BANK IS CONSID ERED TO BE A CO- OPERATIVE SOCIETY IS NO LONGER RES INTEGRA. FOR THE SAID ISSUE HAS BEEN DECIDED BY THE ITAT ITSELF IN DIFFERENT CASES. MOREOVER THE WORD 'CO-OPERATIVE SOCIETY' ARE THE WORDS OF A LARG E EXTENT, AND DENOTES A GENUS, WHEREAS THE WORD 'COOPERATIVE BANK ' IS A WORD OF LIMITED EXTENT, WHICH MERELY DEMARCATES AND IDENTIF IES A PARTICULAR SPECIES OF THE GENUS CO-OPERATIVE SOCIETIES. COOPER ATIVE SOCIETY CAN BE OF DIFFERENT NATURE, AND CAN BE INVOLVED IN DIFF ERENT ACTIVITIES; THE CO-OPERATIVE SOCIETY BANK IS MERELY A VARIETY OF TH E COOPERATIVE SOCIETIES. THUS THE CO-OPERATIVE BANK WHICH IS A SP ECIES OF THE GENUS WOULD NECESSARILY BE COVERED BY THE WORD 'CO- OPERATIVE SOCIETY'. 9. FURTHERMORE, EVEN ACCORDING TO SECTION 56(I)(CCV ) OF THE BANKING REGULATIONS ACT, 1949, DEFINES A PRIMARY CO-OPERATI VE SOCIETY BANK AS THE MEANING OF CO-OPERATIVE SOCIETY. THEREFORE, A CO-OPERATIVE SOCIETY BANK WOULD BE INCLUDED IN THE WORDS 'CO-OPE RATIVE SOCIETY'. 10. ADMITTEDLY, THE INTEREST WHICH THE ASSESSEE RES PONDENT HAD EARNED WAS FROM A CO-OPERATIVE SOCIETY BANK. THEREF ORE, ACCORDING TO SEC. 80P(2)(D) OF THE I.T. ACT, THE SAID AMOUNT OF INTEREST EARNED FROM A CO-OPERATIVE SOCIETY BANK WOULD BE DEDUCTABL E FROM THE GROSS INCOME OF THE CO-OPERATIVE SOCIETY IN ORDER T O ASSESS ITS TOTAL INCOME. THEREFORE, THE ASSESSING OFFICER WAS NOT JU STIFIED IN DENYING THE SAID DEDUCTION TO THE ASSESSEE RESPONDENT. 11. THE LEARNED COUNSEL HAS RELIED ON THE CASE OF T HE TOTGARS CO- OPERATIVE SALE SOCIETY LTD. VS. INCOME TAX. OFFICER ,(SUPRA). HOWEVER, THE SAID CASE DEALT WITH THE INTERPRETATION, AND TH E DEDUCTION, WHICH WOULD BE APPLICABLE UNDER SECTION 80P(2)(A)(I) OF T HE I.T. ACT. FOR, IN THE PRESENT CASE THE INTERPRETATION THAT IS REQUIRE D IS OF SECTION 80P(2)(D) OF THE I.T. ACT AND NOT SECTION 80P(2)(A) (I) OF THE I.T. ACT. THEREFORE, THE SAID JUDGMENT IS INAPPLICABLE TO THE PRESENT CASE. THUS, NEITHER OF THE TWO SUBSTANTIAL QUESTIONS OF L AW CANVASSED BY THE LEARNED COUNSEL FOR THE REVENUE EVEN ARISE IN T HE PRESENT CASE. 11 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. 6.4 THUS, THE HONBLE HIGH COURT HAS HELD THAT THE CO-OPERATIVE BANK IS CONSIDERED TO A COOPERATIVE SOCIETY FOR THE PURPOSE OF SECTION 80P(2)(D). ACCORDINGLY, IN VIEW OF THE DECISIONS AS CITED (SUP RA), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDERS OF THE LD. CIT(A) TO TH E EXTENT OF THE ALLOWING THE CLAIM OF THE ASSESSEE U/S 80P(2)(D) IN RESPECT OF I NTEREST INCOME FROM DEPOSITS/FDRS WITH THE CO-OPERATIVE BANKS. THE COORDINATE BENCH OF THIS TRIBUNAL AFTER CONSIDE RING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. RAJAST HAN RAJYA SAHAKARI KRAY VIKRAY SANGH LTD. DATED 1 ST SEPTEMBER, 2016 IN DB IT APPEAL NOS. 139/2002, 20, 24 & 27/2004 HAS HELD THAT THE COOPERATIVE BANK WOULD BE CONSIDERED AS A COOPERATIVE SOCIETY FOR THE PURPOSES OF SECTION 80P(2)(D). ACC ORDINGLY, IN VIEW OF THE FACT THAT JAIPUR CENTRAL COOPERATIVE BANK IS A COOPERATIVE SO CIETY REGISTERED UNDER COOPERATIVE SOCIETIES ACT, THE INTEREST RECEIVED BY THE ASSESSEE FROM THE SAID COOPERATIVE BANK IS ELIGIBLE FOR DEDUCTION UNDER SE CTION 80P(2)(D) OF THE ACT. THE DISALLOWANCE/ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS DELETED. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 15/10/ 2020. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 15/10/2020. DAS/ 12 ITA NO. 767/JP/2019 SHAHPURA GRAM SEVA SAHAKARI SAMITI LTD., SHAHPURA, JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHAHPURA GRAM SEVA SAHAKARI SAMI TI LTD., SHAHPURA, JAIPUR. 2. THE RESPONDENT THE ITO WARD 4(1), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 767/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR