Shantika Souharda Sahakari Sangha Niyamit, Ankola V. Assistant Commissioner of Income Tax, NFAC, Assessment Centre, Delhi

ITA 9/PAN/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1566 (ITAT-PANAJI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: WT(D)
• Next Hearing Date: 10-06-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 11-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 80P

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.9/PAN/2024 Assessment Year 2014-2015 Shantika Souharda Sahakari Sangha Niyamita/Association of Person (Society), Karwar Road, ANKOLA – 581 314. Uttara Kannada. Karnataka. PAN AABAS7017B vs. The Assistant Commissioner of Income Tax, National Faceless Assessment Centre, [“NFAC”], Delhi (Appellant) (Respondent) For Assessee : -None- For Revenue : Shri N. Shrikanth Date of Hearing : 11.06.2024 Date of Pronouncement : 11.06.2024 ORDER PER SATBEER SINGH GODARA, J.M.: This assessee’s appeal for assessment year 2014-15 arises against the National Faceless Appeal Centre [in short the “NFAC”] Delhi’s Din and Order No. ITBA/NFAC/S/250/2023-24/1055305054(1), dated 22.08.2023, involving proceedings u/s.147 of the Income Tax Act, 1961 (in short “the Act”). Case called twice. None appears at assessee’s behest. It is accordingly proceeded ex-parte. 2 ITA No.9/PAN/2024 2. The assessee pleads the following substantive grounds in the instant appeal : 1. “That the learned AO and the learned CIT(A) has erred in law and on facts, in denying the deduction claimed by appellant u/s 80P and making an addition of Rs.16,97,700/- to the returned income of the appellant. 2. The learned AO ought to have extended the benefit of section 80P to the interest income on investments in bank since the investment were made out of own funds. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon’ble Tribunal to decide on the appeal in accordance with the law.” 3. It emerges during the course of hearing with the able assistance coming from the Revenue side that both the learned lower authorities have disallowed the assessee’s sec.80P deduction claim of Rs.16,97,704/- representing interest income from cooperative society(ies)/cooperative bank(s) and public sector undertaking bank(s). The Revenue vehemently argued that not only the assessee is a “Souharda” cooperative society but also it had derived it’s impugned interest income from associate/nominal members carrying not voting rights 3 ITA No.9/PAN/2024 and therefore, case law Citizen Coopetative Society Ltd vs. CIT (2017) 84 Taxmann. Com 114 (SC) bars such a relief. 4. We find no merit in the Revenue’s submissions supporting the impugned disallowance(s). We wish to make it clear first of all that case law [2022] 134 taxmann.com 170 (Kar.) Government of India Ministry of Finance vs. Karnataka State Souharda Federal Co-operative Ltd., has already held that “Souhardha” society is indeed a cooperative society within the meaning of sec.2(19) of the Act. Their lordships’ in Mavilayi Service Co-operative Bank Ltd., vs., CIT [2021] 431 ITR 1 (SC) also held that such a distinction of nominal/associate members would not bar an assessee from claiming sec.80P deduction. 5. So far as the Revenue’s endeavour to highlight the assessee’s interest income derived from the foregoing institutions is concerned, this tribunal in The Hukkeri Taluk Agri Produce Co-operative Marketing Society Ltd., Dist. Belagavi vs. ITO, Ward-1(1), Belagavi ITA.No.30/PAN./2018 dated 16.11.2021 has already settled the issue regarding interest income(s) derived from investment(s) made in former category of cooperative institution(s) in assessee’s favour and against the department as under : 4 ITA No.9/PAN/2024 “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 Hon’ble Supreme Court in the case of Totagars Co- operative Sales Society Ltd. vs. ITO, 188 taxmann.com 282 (SC) 5 ITA No.9/PAN/2024 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 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 6 ITA No.9/PAN/2024 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 views of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO, 55 7 ITA No.9/PAN/2024 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 Delhi High Court in Mantola Cooperative Thrift Credit 8 ITA No.9/PAN/2024 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, 9 ITA No.9/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.” 6. The outcome would hardly any different regarding interest income derived from nationalized bank(s) in light of The Vaveru Co-operative Rural Bank Ltd., vs. CCIT [2017] 396 ITR 371 (AP) has already rejected the Revenue’s very stand. We accordingly accept the assessee’s finstant sole substantive ground in principle and leave it open for the learned Assessing Officer to frame his consequential computation as per law. Ordered accordingly. 10 ITA No.9/PAN/2024 7. Delay of 83 days in filing the instant appeal is condoned as per assessee’s solemn averments in light of Collector, Land Acquisition vs., MST Katiji [1987] 167 ITR 471 (SC) having settled the law long back that all such technical aspects must make a way for the cause of substantial justice. 8. This assessee’s appeal is allowed in above terms. Order pronounced in the open Court on 11.06.2024. Sd/- Sd/- [RAMA KANTA PANDA] [SATBEER SINGH GODARA] VICE PRESIDENT JUDICIAL MEMBER Pune, Dated 11 th June 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 // Senior Private Secretary, ITAT, Pune Benches, Pune.