The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society Ltd, Athani V. ITO, Ward - 1(3), Belgaum

MA 2/PAN/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4151 (ITAT-PANAJI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 26-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 25-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI – VIRTUAL COURT BEFORE SHRI INTURI RAMA RAO, AM AND SHRI S. S. VISWANETHRA RAVI, JM M.A. No.02/PAN/2021 (Arising out of ITA No.84/PAN/2018) िनधाᭅरण वषᭅ / Assessment Year: 2012-13 The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society, Ugar Khurd, Tal. Athani, Dist. Belgaum- 591316. PAN : AAAAT2607F Vs. ITO, Ward-1(3), Belgaum. Appellant Respondent ITA No.84/PAN/2018 िनधाᭅरण वषᭅ / Assessment Year: 2012-13 The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society, Ugar Khurd, Tal. Athani, Dist. Belgaum- 591316. PAN : AAAAT2607F Vs. ITO, Ward-1(3), Belgaum. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This Miscellaneous Application is filed by the assessee arising out in ITA No.84/PAN/2018 for the assessment year 2012-13 order dated 18.11.2021. Assessee by : Shri Pramod Vaidhya Revenue by : Shri Sourabh Nayak Date of hearing : 20.05.2022 Date of pronouncement : 27.05.2022 2 MA No.02/PAN/2021 ITA No.84/PAN/2018 2. Through the present Miscellaneous Application, the appellant submitted that the ground of appeal no.3 filed by the assessee in appeal remains un-adjudicated. 3. We have carefully gone through the grounds of appeal filed before this Tribunal and found the contention of the appellant correct that the ground of appeal no.3 relating to claim of deduction in respect of interest earned from Belagum Dist. Central Co-Operative Bank Ltd. under the provisions of section 80P(2)(d) of the Act remains un-adjudicated. The ld. Sr. DR had expressed no objection for recall the appeal for limited purpose of adjudication of ground of appeal no.3. Accordingly, we recall the appeal for limited purpose of adjudication of ground of appeal no.3 raised by the assessee in appeal. Accordingly, the Miscellaneous Application filed by the appellant is allowed. ITA No.84/PAN/2018 : 4. This is recalled matter for limited purpose of adjudicating the ground of appeal no.3 5. First, we shall reproduce the ground of appeal no.3 filed by the assessee in appeal, which reads as under :- “3. (a) The Learned CIT(A) further erred in denying the deduction of Rs. 284,574 claimed u/s. 80P (2)(d) in respect of interest received on 3 MA No.02/PAN/2021 ITA No.84/PAN/2018 the reserve fund FD kept with Belgaum Dist. Central Co-Operative Bank Ltd (BDCC Bank) (b) The Learned CIT (A) ought to have taken into consideration the fact that as per the Karnataka Co-Operative Societies Act, 1956, a society has to invest 25% of its net profit into a reserve fund. This is an obligatory regulation to be followed by a Society to carry on its activities. As such the CIT (A) should have refrained from disallowing the claim of the appellant U/s. 80P(2)(d). Alternatively, since the said interest income is attributable to carrying on the business of the appellant society, the same qualifies for deduction U/s. 80P (2)(a)(i) of the Income Tax Act, 1961. (c) The ratio of Totgar Cooperative Sales Society Ltd Vs ITO cannot be applied to the appellant’s case as the interest income derived is attributable to carrying on of business of providing credit facilities to its members whereas the business of Totgar Cooperative Sales Society didn’t include business of providing credit facilities to its members.” 6. Before us, it is submitted that the interest income was received by the assessee on the surplus deposited with BDCC Bank Ltd. and also investments of statutory reserve funds etc. The ld. AR submits that the appellant is not a cooperative bank but a cooperative society and eligible for deduction u/s 80P(2)(a)(i) of the Act. 7. On the other hand, ld. Sr. DR placed reliance on the orders of the lower authorities. 8. 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 80P(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 4 MA No.02/PAN/2021 ITA No.84/PAN/2018 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. 9. 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 5 MA No.02/PAN/2021 ITA No.84/PAN/2018 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 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 6 MA No.02/PAN/2021 ITA No.84/PAN/2018 facility to its members; running stores, rice mills, live stocks, van section, medical shops, lodging, 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.” 10. In the light of the above legal position of law and the reasoning adopted by the Assessing Officer as well as the ld. CIT(A) cannot be accepted. This ground of appeal no.3 stands allowed. 11. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 27 th day of May, 2022. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 27 th May, 2022. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), Gulbarga. 4. The Pr. CIT, Belagavi. 5. DR, ITAT, Panaji. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.