P P PANDURANG GRAMIN BIGARSHETI SAHAKARI PATSANSTHA MARYADIT, NASHIK V. ASSESSMENT UNIT, INCOME TAX DEPARTMENT , DELHI

ITA 854/PUN/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6297 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 21-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH BUDRUK
• Keywords: Set aside
• Section: 80P

Judgement Text

।आयकर अपीलीय अिधकरण ”एस एम सी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE MS. ASTHA CHANDRA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.854/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2020-21 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit, 1, Ramnagar, Niphad, Maharashtra – 422001. PAN: AAAAP7456J V s The Assessment Unit, Income Tax Department, Delhi. Appellant/ Assessee Respondent / Revenue Assessee by None Revenue by Shri Ganesh Budruk – DR Date of hearing 24/06/2024 Date of pronouncement 26/06/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], u/sec.250 of the Act dated 12.03.2024.The Assessee has raised following grounds of appeal : “1. On the facts and in the prevailing circumstances of the case and in law, the learned CIT Appeal, erred in disallowing the deduction of Rs.41,65,363/- on account of interest income earned out of fixed deposit with Cooperative/ Nationalised Bank and which is eligible for ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 2 deduction u/s 80P(2)(d) or 80P(2)(a)(i) of the IT Act. 2. On the facts and in the prevailing circumstances of the case and in law, the learned CIT Appeal, erred in not following the jurisdictional ITAT Pune, decision on the similar issue which is binding on the lower Authorities as per the law laid down by Hon'ble Bombay High Court in the case of Bank of Barada vs H C Srivastava (256 ITR 385) and thus the total deduction of Rs. 41,65,363/- disallowed u/s 80P(2)(a)(i) or 80P(2)(d) of the IT Act was not justified. 3. The Appellate craves the right to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.” 2. At the outset of hearing, no one appeared on behalf of the assessee. No adjournment application was filed. Brief facts of the case : 3. Assessee is a Co-operative Credit Society engaged in the business of providing credit facilities to the members by accepting deposits from members. Assessee is registered under the Maharashtra Co-operatives Act, 1960 on 29.03.2024. Assessee e- filed Return of Income claiming deduction u/sec.80P(2)(a)(i) of Rs.26,13,245/-. The assessee’s case was selected for scrutiny. Assessing Officer(AO) passed assessment order u/sec.143(3) on 26.09.2022. In the assessment order, assessee’s claim for ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 3 deduction u/sec.80P(2)(a) was rejected following decision of the Hon’ble Supreme Court in the case of Totagars Co-operative Sales Society Vs. ITO Karnataka [2010] 188 Taxman 282(SC). The AO added the amount of Rs.41,65,336/- treating as Income from Other Sources which is not eligible for deduction u/sec.80P(2)(a)(i) of the Act. Therefore, the AO held that assessee is not eligible for deduction u/sec.80P(2)(a)(i) of the Act. Aggrieved by the assessment order, assessee filed appeal before the ld.CIT(A). Ld.CIT(A) upheld the assessment order. 4. Aggrieved by the order of the Ld.CIT(A), assessee has filed appeal before the ITAT. Findings & Analysis : 5. We have heard ld.Departmental Representative(ld.DR) for the Revenue and perused the records. It is mentioned in the assessment order that the assessee is a Credit Co-operative Societyregistered under Maharashtra Co-operative Societies Act. The prime function of the society is accepting deposits and advancing loans to the members. During the A.Y.2020-21, the assessee has earned an interest income of Rs.41,65,336/- from investments with various co-operative banks/banks as under: ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 4 Sr No Particulars Amount 1 NDCC Bank FDR 1019080 2 Namco Bank FDR 22581234 3 Dena Bank FDR 2303770 4 Thane Janata Sahakari Bank FDR 10412817 5 Shamrav Vitthal Co-operative Bank FDR 10636209 6 Saraswat Co-operative Bank FDR 11529801 7 NDCC Bank FDR 1790250 5.1 Assessee claimed deduction u/sec.80P(2)(a) of the Act on the interest earned from above Co-operative Banks/Banks. 6. The assessee had claimed deduction u/sec.80P(2) for the interest earned from various Co-operative Banks / Nationalized / Scheduled Banks. In this case, the AO has ignored most important submission of the assessee that the Assessee is a Co-Operative Society registered under Maharashtra State Co-Operative Society Act and it is under the control of Registrar of Co-Operative Society Maharashtra State. The Assessee also submitted that there were no member who wanted to avail loan from society and surplus funds were invested to earn interest and such interest income is linked to business of the assessee and hence it is part of the Profit which is eligible for deduction u/sec.80P(2)(a)(i) of the Act. Thus, it is clear from the submission of the assessee that the assessee had ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 5 claimed deduction u/sec.80P(2)(a)(i) of the Act. However, the assessee without prejudice had also claimed deduction u/sec.80P(2)(d) of the Act. In these facts, we have to understand the case of the assessee. Thus, the issue before us is whether the impugned interest earned by the Assessee is eligible for deduction u/sec.80P(2)(a)(i) of the Act or u/s 80P(2)(d) of the Act. 6.1 In this case, admittedly assessee is a Co-operative Society registered under the Co-operative Societies Act, and it is engaged in providing credit facility to its members. Assessee had earned interest by depositing surplus funds which were not immediately required. 6.2 The Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371 analysed the provisions of Section 80P, succinctly distinguished the decision of the Hon’ble Supreme Court in the case of Totagar Cooperative Sale Society, and held as under : Quote,“8. Therefore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of sub- section (2) of section 80P or not. ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 6 9. While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Co- operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. ........................ 34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co-operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the society. It is also found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression "attributable to" and not any one of the two expressions, namely, "derived from" or "directly attributable to". 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 7 order of the Assessing Officer, in so far as it relates to treating the interest income as something not allowable as a deduction under section 80P(2)(a), is set aside.” Unquote. 6.3 Thus, the Hon’ble High Court of AP &TS held that Interest Income earned by investing Income derived from Business and Profession by a Co-Operative Society was eligible for deduction u/s.80P(2)(a) of the Act. 6.4 No contrary decision of Hon’ble jurisdictional High Court has been brought to our notice. Therefore, as per rule of precedence, the proposition of law laid down by the Hon’ble High Court of AP & TS (supra) are binding precedents for us. 7 The Hon’ble ITAT Pune Bench in the case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. Vs. Income-tax Officer158 taxmann.com 322 (Pune Tribunal) has held as under : Quote “7.............................I am of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Therefore, I direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative bank/scheduled bank. Thus, the ground of appeal filed by the assessee stands allowed.”Unquote ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 8 8. The Hon’ble ITAT Pune Bench in the case of Yashwant Nagari Sahakari Patsanstha Maryadit Vs. ITO in ITA No.644/PUN/2024 dated 04.06.2024 held that the assessee was eligible for deduction u/sec.80P(2)(a ) of the Act on the Interest earned by assessee. 7.1 Respectfully following the decision of the Hon’ble High Court (supra) and ITAT Pune (supra), it is held that the Interest earned by the assessee is eligible for deduction u/sec.80P(2)(a) of the Act. Accordingly, Grounds of appeal raised by the assessee are allowed. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 26 th June, 2024. Sd/- Sd/- (MS.ASTHA CHANDRA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 26 th June, 2024/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “एस एम सी” बᱶच, पुणे / DR, ITAT, “SMC” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. ITA No.854/PUN/2024 P P Pandurang Gramin Bigarsheti Sahakari Patsanstha Maryadit [A] 9 आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.