TMI Blog2018 (4) TMI 1678X X X X Extracts X X X X X X X X Extracts X X X X ..... (Asst. Year: 2014-15) - - - Dated:- 25-4-2018 - Shri G.S. Pannu And Shri Ravish Sood, JJ. Assessee by: Shri Deepak P. Rikekar Shri Ajit Gupte, CAs. Department By: Ms. N. Hemalatha Sr. DR ORDER Ravish Sood, The present appeal filed by the assessee is directed against the order passed by the CIT(A)-33, Mumbai, dated 08/08/2017, which in itself arises from the order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (for short, Act ), dated 28/10/2016. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal:- 1. On facts, in circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance of deduction under section 80P(2)(d) amounting to ₹ 27,48,553/- in respect of interest received by the appellant from co-operative banks. 2. The appellant craves leave to add, alter, modify or delete the above ground of appeal. 2. Briefly stated, the facts of the case are that the assessee which is a co-operative society had filed its return of income on 23/09/2014, declaring total income of ₹ 10,87,320/- after claiming deduction of ₹ 50, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the cooperative banks, other than the co-operative agriculture society or a primary co-operative agricultural and rural development bank. The CIT(A) was of the view that since the amendment, Explanation (a) below subsection(4) provided that Co-operative bank and Primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949. The CIT(A) further deliberating on the definition of Primary Cooperative Agricultural and Rural Development Bank , referred to Bxplanation (b) below sub-section (4) of section 80P of the Act, which defined the same as a society having its area of operation confined to a Taluk and the principal objective of which is to provide long term credit for agricultural and rural development activity. It was thus, observed by the CIT(A) that w.e.f 01.04.2007 deduction under section 80P was not available to a co-operative bank which was carrying on banking and financial business. The CIT(A) in order to fortify his aforesaid view, relied on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283(S.C), wherein the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression profits and gains of business . Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members. When the assessee- Society provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under Section 80P(2)(a)(i) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s) for its business purposes and which have been only invested in specified securities as investment . Further, as stated above, assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this retained amount which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities. Such an amount, which was retained by the assessee-Society, was a liability and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0P(2)(d), relied on the following orders of the coordinate benches of the Tribunal:- (i) Lands End Co-operative Housing Society Ltd. vs. ITO [(2016) 46 CCH 52 (Mum) (ii) M/s. Sea Grean Co-operative Housing Society Ltd. vs. ITO-21(3)(2) [ITA No. 1343/MUM/2017, dated 31/03/2017]. (iii) Merwanjee Cama Park Co-operative Housing Society vs. ITO, Range- 20(2)(2) [ITA No. 6139/MUM/2014, dated 27/09/2017]. The ld. A.R further in order to support his claim that the interest income earned by deposit or investment of surplus funds would not change the character of the income, whether such interest income was received from scheduled bank or a co-operative bank, as a result whereof, in both the situations, the assessee would be entitled for claim of deduction under section 80P(2)(d), relied on the judgment of the Hon'ble High Court of Karnataka in the case of Pr.CIT vs. Totgars Co-operative Sale Society Ltd. (2017) 392 ITR 74(Kar).The ld. A.R further took support of the judgment of the Hon'ble High Court of Guajrat in the case of State Bank of India (SBI) vs. CIT (2016) 389 ITR 578 (Guj) and the CBDT Circular No. 14, dated 28/12/2006, wherein the issue as regards withdrawal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned on the amounts parked as investments with co-operative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. We find that the lower authorities had observed that as the co-operative bank with which the surplus funds of the assessee were parked as investments, were neither Primary Agricultural Credit Society nor a Primary Co-operative Agricultural and Rural Development Bank, therefore, the interest income earned on such investments would not be entitled for claim of deduction under Sec. 80P(2)(d) of the Act. 7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further, we may herein reproduce the relevant extract of the said statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. 80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of cooperative societies; We are of the considered view, that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank is covered in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT SMC‟ Bench, Mumbai in the case of Shri Sai Datta Co-operative Credit Society Ltd. Vs. ITO (ITA No. 2379/Mum/2015, dated 15.01.2016, would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court s, then a view which is in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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