Income Tax Officer, Ward -1, Satara V. M/s Mahila Marchant Nagari Sah Patsanstha Ltd., Karad

ITA 961/PUN/2022

AI Insights

The case involves an appeal by the Revenue against the order of the National Faceless Appeal Centre, which had upheld the deduction claimed by M/s. Mahila Merchant Nagari Sah Patsanstha Ltd. under section 80P of the Income Tax Act, 1961 for the assessment year 2018-19. The primary issue was whether the interest income earned from deposits in cooperative banks qualifies for deduction under section 80P(2)(a)(i). The Assessing Officer had initially disallowed this, considering cooperative banks as not falling under the definition of cooperative societies as per section 80P(4). However, the CIT(A) reversed this decision, leading to the Revenue's appeal. The Tribunal, referencing several judicial precedents, particularly the decision in Nashik Road Nagari Sahkari Patsanstha Limited vs. ITO, affirmed the CIT(A)'s decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137078 (ITAT-PUNE)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-02-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 27-12-2022
• Other Referred Cases: ACIT vs. Buldana Urban Coop Credit Society Ltd., Nashik Road Nagari Sahkari Patsanstha Limited vs. ITO, CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd., State Bank of India Vs. CIT, Mantola Cooperative Thrift & Credit Society Ltd. Vs. CIT, CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd., CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd., Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO, Vaveru Cooperative Rural Bank Ltd. v CIT, M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO
• Laws Referred To: Income Tax Act, 1961, Maharashtra Co-operative Societies Act, 1960
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.961/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2018-19 ITO, Ward-1, Satara. Vs. M/s. Mahila Merchant Nagari Sah Patsanstha Ltd., Datta Chowk, Surya Complex, Shaniwar Peth, Karad, Tal.- Karad, Dist.- Satara- 415510. PAN : AAAAM0473E Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the Revenue directed against the order of the National Faceless Appeal Centre, Delhi [‘NFAC’] dated 07.11.2022 for the assessment year 2018-19. 2. Briefly, the facts of the case are that the respondent-assessee is duly registered under the Maharashtra Co-operative Societies Act, 1960. It is formed with the object of accepting deposits and lending money to its members. The Return of Income for the assessment year 2018-19 was filed 04.10.2018 after claiming exemption of Revenue by : Shri Ramnath P. Murkunde Assessee by : Smt. Deepa Khare. Date of hearing : 13.02.2023 Date of pronouncement : 14.02.2023 ITA No.961/PUN/2022 2 income of Rs.3,24,61,570/- u/s 80P of the Income Tax Act, 1961 (‘the Act’). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1, Satara (‘the Assessing Officer’) vide order dated 25.01.2021 passed u/s 143(3) r.w. sections 143(3A) & 143(3B) of the Act at total income of Rs.4,57,39,193/-. While doing so, the Assessing Officer had brought to tax interest income of Rs.4,54,87,831/- being interest income received from the cooperative banks by holding that the cooperative banks are not cooperative societies, hit by the provisions of sub-section (4) of section 80P of the Act. 3. Being aggrieved by the above order of assessment, an appeal was filed before the ld. CIT(A), who vide impugned order held that the interest earned on the deposits made out of the surplus business receipts is eligible for deduction u/s 80P(2) of the Act following the decision of Co-ordinate Bench of the Tribunal in the case of ACIT vs. Buldana Urban Coop Credit Society Ltd., 32 Taxman 69 (Nagpur – Trib.). 4. Being aggrieved by the decision of the ld. CIT(A), the Revenue is in appeal before us in the present appeal. 5. The ld. Sr. DR submits that the ld. CIT(A) ought not to have held that the cooperative banks are cooperative societies, the interest ITA No.961/PUN/2022 3 earned from the cooperative bank does not satisfy the ingredient of mutuality, as the income was earned from the non-members. 6. On the other hand, ld. AR submits that the income earned on the surplus deposited in the Fixed Deposits with the cooperative banks is also assessable as business income and qualifies for deduction u/s 80P(2)(a)(i) placing reliance on the Co-ordinate Bench of this Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited vs. ITO vide ITA No.1700/PUN/2017 for A.Y. 2013-14 dated 27.12.2021. 7. We heard the rival submissions and perused the material on record. Admittedly, the respondent-assessee is a cooperative society formed under the provisions of Maharashtra Cooperative Societies Act, 1960 with the objects of accepting the deposits and lending money to its members. The money which is not immediately required for the purpose of lending money to the members was deposited with the HDFC Bank in the form of Fixed Deposits. The question is whether the interest so earned qualify for exemption u/s 80P(2)(a)(i) of the Act. The Assessing Officer was of the opinion that the cooperative banks were not cooperative societies, which are not eligible for exemption of income by virtue of sub-section (4) of section 80P of the Act. However, the ld. CIT(A) placing reliance on the decision of the Co-ordinate Bench of ITA No.961/PUN/2022 4 the Tribunal in the case of Buldana Urban Coop Credit Society Ltd. (supra) allowed the deduction u/s 80P(2)(a)(i) of the Act. Even the Co-ordinate Bench of this Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited (supra) on an identical issue held as under :- “9. .......... There is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon’ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon’ble Delhi High Court in the case of Mantola Co- operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon’ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) and the Hon’ble Telangana and Hon’ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [(2017) 396 ITR took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s.80P(2)(a)(i) of the Act. The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12- 2018) has taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Respectfully following the decision of the Coordinate Bench, we hold that the interest income earned on the investment of surplus money with banks is also eligible for exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal No. 1 & 2 stands allowed.” 8. Respectfully following the above decision of the Co-ordinate Bench of this Tribunal in the case of Nashik Road Nagari Sahkari Patsanstha Limited (supra), we are of the opinion that the interest ITA No.961/PUN/2022 5 income earned on deposits made out of surplus income, is assessable as business income of co-operative society, qualifying for exemption from tax under provisions of section 80P(2)(a)(i) of Act. Thus, we do not find any reason to interfere with the order of the ld. CIT(A). Accordingly, the grounds of appeal filed by the Revenue stand dismissed. 9. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced on this 14 th day of February, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 14 th February, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 4. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.