MHASIMATA MAHILA GRAMIN BIGAR SHETI SAHAKARI PATHSANSTHA LTD, DHULE V. ITO, WARD1, DHULE, DHULE

ITA 881/PUN/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1545 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 24-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Co-operative Credit Society; Set aside
• Section: 80P; 250; 208

Judgement Text

।आयकर अपीलीय अिधकरण ”एस एम सी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “SMC” :: PUNE BEFORE DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.881/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited, Nizampur Sakri, Dhule- 424305. PAN: AAEAM9576E V s The Income Tax Officer, Ward-1, Dhule. Appellant / Assessee Respondent / Revenue Assessee by Shri Hemant Shah – AR Revenue by Shri Rajesh Gawali – Addl.CIT(DR) Date of hearing 19/06/2024 Date of pronouncement 20/06/2024 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(ADDL/JCIT)(A)-5, Kolkata u/sec.250 of the Act dated 27.02.2024. The Assessee has raised following grounds of appeal : “1. The learned A.O has grossly erred in disallowing the deduction claimed u/s.80P(2)(a)(i) of Income Tax Act, 1961 in respect of interest received of Rs. 4,12,160/ from Central Bank of India, and Dena Bank, which is a attributed to the part of business income and hence appellant is eligible for the deduction. Therefore, finding of the learned A.O be vacated and due deduction u/s. 80P(2)(a)(i) of the I T Act may please be allowed. ITA No.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 2 2. The learned A.O. has grossly erred in charging the Interest of Rs.29,822/-, u/s.234 B of the I T Act, even though appellant society is not liable to pay the Advance Tax as per provisions of section 208 of the I T Act. Therefore, Interest charged at Rs.29,822/-, u/s.234 B of the IT Act, may please be deleted. 3. The Appellate craves the permission 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, Shri Hemant Shah attended appeared on behalf of the assessee. Brief facts of the case : 2.1 In the assessment order it is mentioned that the assessee society has received interest of Rs.4,12,160/- on investment made with Nationalized Banks i.e.Rs.1,98,510/- from Central Bank of India, Rs.1,99,606/- and Rs.14,044/- from Dena Bank. The Assessing Officer denied assessee’s claim for deduction u/sec.80P(2)(A) following the decision of Totgars’ Co-operative Sale Society Ltd., Vs. ITO. Findings &Analysis : 4. The Assessing Officer(AO) in the assessment order denied assessee deduction u/sec.80P(2) of the Act relying on the decision of the Hon’ble Karnataka High Court in the case of PCIT Vs. Totagars Co-operative Sale Society [2017] 83 taxmann.com ITA No.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 3 140(KAR). The AO in the Assessment Order observed that the Banks in which the assessee has deposited / invested funds such as Central Bank of India & Dena Bank are not Co-operative Societies. 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) confirmed addition made by the AO. Aggrieved by the order of the Ld.CIT(A), assessee has filed appeal before the ITAT. 5. The assessee had claimed deduction u/sec.80P(2) for the interest earned from Central Bank of India and Dena Bank. 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 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 claimed deduction u/sec.80P(2)(a)(i) of the Act. However, the ITA No.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 4 assessee without prejudice had also claimed deduction u/s 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/s 80P(2)(a)(i) of the Act or u/s 80P(2)(d) of the Act!. 6. 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 as under: “5.4 Thus, a Co-Operative Society will be treated as a Co-Operative Bank only if it has received License from RBI. In the case of the Assessee neither the AO nor the CIT(A) has stated that the Assessee is in receipt of License from RBI. Therefore, in the absence of Banking License, respectfully following the Hon’ble Supreme Court (Supra), it is held that the assessee is not a Co-Operative Bank as envisaged in section 80P(4) of the Income Tax Act. Hence, provisions of Section 80P(4) will not be applicable in the case of the Assessee. 5.5 It is specifically mentioned in the Assessment Order that Assessee has invested ‘Surplus funds’ in the PDCC and other banks and earned Interest Income. Thus, it is an admitted fact by the Assessing officer that the investment is of the income derived from the Business of the assessee. As per para 7.1 of the Assessment Order the main object of the assessee society is to provide credit facility to its members and also accept deposits from members. Thus, admittedly the assessee is providing credit facility to its members. Thus, the investments made by the assessee are from the Surplus generated by assessee during the course of providing credit facility to its members and the assessee has earned Interest Income by investing these surplus funds in PDCC Bank. Therefore, the section 80P(2)(a) is applicable in the case of the assessee. 5.6 The Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371analyzed the provisions of Section 80P, succinctly distinguished the decision of Hon’ble Supreme Court in the case of Totagar Cooperative Sale Society, and held as under : ITA No.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 5 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. 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". ITA No.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 6 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the 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. 5.6.1 Thus, Hon’ble High Courts of AP & TS (supra) held that Interest Income earned by investing Income derived from Business of providing credit facility by a Co-Operative Society was eligible for deduction u/sec.80P(2)(a) of the Act. 5.7 The ITAT Pune Bench in the decision of Ajayshree Gramin Bigar Sheti Sahakari Patasanstha Maryadit in ITA No.1427/PUN/2023 order dated 08.03.2024 held as under : “3.1 We observed that the issue is covered by ITAT Pune Bench’s order in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit Mahaveer Path for A.Y.2008-09 which has decided the same issue in favour of assessee in ITA No.2476/PUN/2016. In that case assessee had received interest income from fixed deposits kept with Nationalized Banks. The ITAT Pune Bench in para 5 has held as under : “5. With regard to this issue, the Ld. AR of the assessee at the time of hearing submitted that ground No.1 is already decided in favour of the assessee by the decision of the Co- ordinate Bench of the Tribunal, Pune in ITA No.589/PUN/2016 for the assessment year 2012-13 in the case of ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha, therein, in Para 2 of the order, the issue is as under: “2. The only grievance projected by the Revenue in its appeal is against the allowing of deduction u/s.80P of the Income Tax Act, 1961 (hereinafter also called as ‘the Act’) in respect of interest earned by the assessee society from State Bank of India which was denied by the Assessing Officer.” Thereafter, the Tribunal has held as follows: “4.We have heard both the sides and perused the relevant material on record. It is observed that the ld. CIT(A) allowed the claim of deduction u/s.80P by following the order passed by the Tribunal in the case of Shivneri Nagari SahakariPatsanstha Ltd. (supra). The ld. AR placed on record a copy of the another order of the Pune Bench dated 19-08-2015 in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) (to which one of us, namely, the ITA No.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 7 ld. JM is party) in which similar deduction has been allowed. The Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) has discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) allowing the deduction u/s. 80P on interest income and 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 under similar circumstances. Both the Hon’ble High Courts have taken into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. 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 taken in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). In the absence of their being any change in the legal position prevailing on this issue after the passing of the order by the Pune Bench of the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) and host of other orders reiterating the similar view, respectfully following the precedent, we uphold the impugned order in allowing deduction u/s.80P on the interest income” Respectfully, following the aforesaid decision of the Co- ordinate Bench of the Tribunal, Pune, we set aside the order of the Ld. CIT(Appeals) and allow ground No.1 of the grounds of appeal of the assessee.” 4. The issue before us is identical to the issue decided by ITAT Pune Bench in Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit Mahaveer Path(supra) in ITA No.2476/PUN/2016 for A.Y. 2008-09(supra) i.e. interest income earned on fixed deposits. The Hon'ble Madras High Court in the case of Thorapadi Urban Co-operative Credit Society Ltd., Vs. ITO 296 Taxman 250 (Madras) vide order dated 10.10.2023 held that the assessee was eligible for deduction under section 80P(2)(d) of the Act on the Interest Received from Co-operative Banks. No direct decision of the Hon'ble Jurisdictional High Court has been brought to our notice. Therefore, respectfully following the above precedent and adopting the detailed reasoning above, we direct the Assessing Officer to allow deduction under section 80P(2) of the Act for the impugned ITA No.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 8 income discussed in earlier para. Accordingly, grounds of appeal raised by the assessee are allowed.” 6. Ld.DR has not brought to our notice any direct decision of the Hon’ble Jurisdictional High Court. Therefore, respectfully applying the proposition of law laid down by Hon’ble High Court of Andra Pradesh and Telangana (supra) and ITAT Pune (supra) to the facts of the present case, we are of the considered view that the Interest earned by the assessee is eligible for deduction u/s 80P(2) of the Act. Accordingly, the AO is directed to delete the addition made by AO of the Interest Income.” 6.1 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. 7. In the result, appeal of the Assessee is Allowed. Order pronounced in the open Court on 20 th June, 2024. Sd/- Sd/- (VINAY BHAMORE) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 20 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.881/PUN/2024 Mhasimata Mahila Gramin Bigar Sheti Sahakari Pathsanstha Limited [A] 9 आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.