GRAMEENA VYAVASAYA SEVA SAHAKARI SANGHA LIMITED VALAGALLI, Kumta V. Income Tax Officer ward -2, Karwar, Karwar

ITA 89/PAN/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5538 (ITAT-PANAJI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 07-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N SHRIKANTH
• Assessee Lawyers: SUBRAHMANYA BHAT
• Section: 143(3); 234B; 80P; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH : PANAJI [THROUGH VIRTUAL HEARING AT ITAT : PUNE] BEFORE SHRI RAMA KANTA PANDA, VICE PRESIDENT AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER ITA.No.89/PAN./2024 [E-APPEAL] Assessment Year 2016-2017 Grameena Vyavasaya Seva Sahakari Sangha Limited, Valagalli, KUMTA – 581 332 PAN AABAG3323Q Karnataka. vs. The Income Tax Officer, Ward-2, Santani Krupa, Kavger Road, Habbuwada, Karwar – 581 307. Karnataka. (Appellant) (Respondent) For Assessee : Shri Subrahmanya Bhat For Revenue : Shri N Shrikanth Date of Hearing : 20.06.2024 Date of Pronouncement : 29.07.2024 ORDER PER SATBEER SINGH GODARA, J.M. : This assessee’s appeal for assessment year 2016-17, arises against the National Faceless Appeal Centre [in short the “NFAC”) Delhi’s Din and Order No.ITBA/NFAC/S/250/ 2023-24/10563383088(1), dated 26.03.2024, in proceedings u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act”). Heard both the parties. Case file perused. 2. The assessee pleads the following substantive grounds in the instant appeal : 2 ITA No.89/PAN./2024 1) “The order of the learned Commissioner of income tax (Appeal), passed under section 250 of the Act in so far as it is against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case. 2) The Appellant denies itself liable to be assessed total income of Rs.26,84,480/- against the Nil return of Income. 3) The learned CIT(A) failed to appreciate that claim of expenditure of in respect of the interest income earned from a Co-operative Bank of Rs.5,19,719/- on the facts and circumstances of the case. 4) The learned CIT(A) failed to appreciate that proportionate overhead administrative expenditure in connection with interest income is allowable u/s 57 of the Act on the facts and circumstances of the case. 5) The learned CIT(A) failed to appreciate that the interest expenditure on deposits was always higher than the interest earned from banks, on the facts and circumstances of the case. 6) The learned CIT(A) failed to appreciate that there is no violation of the principal of mutuality and eligible to claim deduction of Rs.21,64,761/- under section 80P(2)(a)(i) of the income tax Act on the facts and circumstance of the case. 3 ITA No.89/PAN./2024 7) The learned CIT(A) failed to appreciate that the appellant have all type of members and the inference that the appellant has provided credit facility to nominal members which is violation of mutuality, it demonstrates the lack of appreciation of record and application of mind by the CIT(A), on the facts and circumstances of the case. 8) Without prejudice, the disallowance of deduction claim under section 80P(2)(a)(i) of the Act restricts profit pertains to the nominal members on the facts and circumstances of the case. 9) The learned Assessing officer is not justified in holding that the appellant is not a co-operative society registered under the Co-operative Societies Act 1959, hence was not eligible for the claim under section 80P of the Act, on the facts and circumstance of the case. 10) Without prejudice, the contention of the AO that the deduction was claimed illegally was bad in law, when various High Courts have held that the Appellant was eligible to the claim of deduction under section 80P of the Act on the facts and circumstance of the case. 11) Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon’ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies herself liable to be charged to interest under section 234 of the Income Tax Act under the facts 4 ITA No.89/PAN./2024 and circumstances of the case. The appellant contends that the levy of interest under section 234A, 234B and 234C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted by the learned assessing officer on which interest is levied are not discernible and are wrong on the facts of the case. 12) The appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal.” 3. Suffice to say, the assessee’s sole substantive ground raised herein challenges correctness of both the lower authorities action disallowing it’s sec.80P deduction claim representing interest income derived from investments made in cooperative societies/cooperative banks etc., as well as from the alleged nominal/associate members; as the case may be. There is hardly any dispute between the parties that both the learned lower authorities quote case law Citizen Cooperative Society Ltd vs. CIT (2017) 84 Taxmann. Com 114 (SC) and Totagars Co-operative Sales Society Ltd. vs. ITO, 188 taxmann.com 282 (SC); to conclude that such a deduction claim is not allowable in a instance involving any of the foregoing eventualities. 4. Faced with this situation, we note that this tribunal in The Hukkeri Taluk Agri Produce Co-operative Marketing 5 ITA No.89/PAN./2024 Society Ltd., Dist. Belagavi vs. ITO, Ward-1(1), Belagavi in ITA.No.30/PAN./2018 vide order dated 16.11.2021 has rejected Revenue’s very stand regarding the issue of sec.80P deduction of interest income derived from investment(s) made in cooperative societies/cooperative banks as under : “2. Briefly, the facts of the case are that the appellant is a cooperative society engaged in the business of marketing of agricultural produce, etc.. The return of income for the assessment year 2012-13 was filed on 27.09.2012 declaring total income of Rs.Nil after claiming deduction u/s 80P(2)(d) of the Income Tax Act, 1961 (‘the Act’) amounting to Rs.1,80,144/- being interest and dividend earned on Reserve Funds and Shares. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(1), Belgaum (‘the Assessing Officer’) vide order dated 24.10.2014 passed u/s 143(3) of the Act at a total income of Rs.1,81,360/- after denying the claim of deduction by holding that the provisions of section 80P(2)(d) of the Act are not applicable to the facts of the present case of the assessee. 3. Being aggrieved by the above action of the Assessing Officer, an appeal was filed before the ld. CIT(A), who vide impugned order denied the benefit of deduction u/s 80P(2)(d) of the Act placing reliance on the decision of the 6 ITA No.89/PAN./2024 Hon’ble Supreme Court in the case of Totagars Co- operative Sales Society Ltd. vs. ITO, 188 taxmann.com 282 (SC) 4. Being aggrieved by the above decision of the ld. CIT(A), the assessee is in appeal before us in the present appeal. 5. The ld. AR for the assessee society submits that it is a purely cooperative credit society and not granting any bank licence to carry out any banking business. It is further submitted that the appellant is a cooperative society and received interest income of Rs.1,80,144/- from other cooperative society. The case of the assessee clearly falls under the provisions of section 80P(2)(d) of the Act. 6. On the other hand, ld. DR submits that the appellant is not entitled for deduction u/s 80P(2)(d) of the Act as the parties from whom the interest was received is a cooperative bank placing reliance on the order of the ld. CIT(A). 7. We heard the rival submissions and perused the material on record. The only issue in the present appeal is pertaining to the allowability of deduction under the provisions of section 80(2)(d) of the Act. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held 7 ITA No.89/PAN./2024 with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. In the present case, the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) of the Act is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society. This issue was considered by the Hon’ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon’ble High Court referring to the Hon’ble Supreme Court in the case of Totgars Co- operative Sales Society Ltd. (supra) held that the ratio of decision of the Hon’ble Supreme Court in the aforesaid case (supra) not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. 8. Even the decision of Pune Bench of the Tribunal in the case of Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO, 120 taxmann.com 10 wherein the Tribunal after making reference to the decisions of the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) and having noticed the divergent 8 ITA No.89/PAN./2024 views of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO, 55 taxmann.com 447 and the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. vs. CIT, 50 taxmann.com 278, decision of the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (supra) had not been preferred to view of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. (supra). The relevant observation of the Pune Bench of the Tribunal in the case (supra) is as under :- “9. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016, dated 9-4-2019) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014, dated 19-8-2015) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon'ble 9 ITA No.89/PAN./2024 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. Both the Hon'ble High Courts took into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. (2010) 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 in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). 10. Insofar as the reliance of the ld. DR on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is concerned, we find that the issue in that case was the eligibility of deduction u/s.80P(2)(d) of the Act on interest earned by the assessee co-operative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, rice mills, live stocks, van section, medical shops, lodging, 10 ITA No.89/PAN./2024 plying and hiring of goods and carriage etc. It was in that background of the facts that the Hon'ble High Court held that the assessee could not claim deduction u/s.80P(2)(d) of the Act. When we consider the impact of this decision, it turns out that the same is not germane to case under consideration in view of the position that the claim of the instant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act and not u/s.80P(2)(d). Moreover, so many decisions relied on by the ld. AR amply go to prove that the view taken by the AO, cannot by any standard, be construed as not a possible view. We, therefore, hold that the ld. Pr. CIT was not justified in exercising the revisional power anent to interest income of Rs.22,34,270/- earned on investments made with co-operative banks.” 5. So far as the issue of assessee’s nominal/associate member(s) is concerned (supra), hon’ble apex court’s recent landmark decision in Mavilayi Service Co-operative Bank Ltd., vs., CIT [2021] 431 ITR 1 (SC) holds that such a distinction of nominal/associate members would not bar an assessee from claiming sec.80P deduction. We accordingly hold that assessee is eligible for sec.80P deduction in very terms. 11 ITA No.89/PAN./2024 6. Learned DR vehemently argued before parting that the assessee is not a cooperative society but a cooperative bank. He could hardly rebut the fact that assessee has been registered as a cooperative society under the state cooperative law which has already been decided in it’s favour in Mavilayi Service Co-operative Bank Ltd., vs., CIT (supra). We thus accept the assessee’s instant sole substantive grievance in very terms. Ordered accordingly. 7. This assessee’s appeal is allowed in above terms. Order pronounced in the open Court on 29.07.2024 Sd/- Sd/- [RAMA KANTA PANDA] [SATBEER SINGH GODARA] VICE PRESIDENT JUDICIAL MEMBER Pune, Dated 29 th July, 2024 VBP/- Copy to 1. The applicant 2. The respondent 3. The Pr. CIT, Panaji concerned 4. D.R. ITAT, Panaji-Bench, Panaji. 5. Guard File. //By Order// //True Copy // Sr. Private Secretary, ITAT, Pune Benches, Pune. 12 ITA No.89/PAN./2024