TMI Blog2019 (11) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. We thus not finding any infirmity in the order of the CIT(A), who had rightly concluded that the assesses claim for deduction under Sec. 80P(2)(a)(i) was in order, uphold his order in context of the issue under consideration. Deduction under Sec. 80P(2)(d) - Power of CIT(A) u/s 251 to bifurcate the income into Business income u/s 218 and investment income u/s 56 - HELD THAT:- the assesses claim for deduction under Sec. 80P was declined by the A.O on the standalone basis of a conjoint reading of Sec.80P(2)(a)(i) r.w.s 80P(4). In our considered view, the CIT(A) before resorting to the aforesaid fresh basis for restricting the assesses claim for deduction under Sec.80P to an amount of ₹ 52,12,193/-, in all fairness, should have afforded an opportunity of being heard to the assessee and called for his objections, if any, as regards the same. Appeal of the revenue is dismissed and the appeal the assessee is allowed for statistical purposes. - ITA No.4306/Mum/2018, ITA No.4582/Mum/2017, ITA Nos.4751 & 4752 /Mum/2017 - - - Dated:- 22-10-2019 - Shri Pramod Kumar, Vice President And Shri Ravish Sood, Judicial Member For the Appellant : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome without taking into consideration the fact that the said CIT(Appeal) , in earlier year Assessments i.e for A.Y.201112 and A.Y.2010-11, has consider whole income as business income and allowed deduction u/s 80(P)(2)(a)( i) on the said income 5. The CIT (Appeal) erred in law and in the circumstances of the case in applying section 80(P)(2)(d) on interest income earned on investment and consequently disallowing deduction of ₹ 3,13,796 on the ground that interest income is from co-operative bank and not from cooperative society. without taking into consideration the fact of the case and without giving any notice or opportunity to the Appellant of being heard and to represent its case in this regard. 6. The CIT (Appeal) erred in law and in the circumstances of the case by not treating the whole income of ₹ 55,38,329earned by the appellant society from engaging in the business of providing credit facilities to its members under section 28 and accordingly allowing deduction as per section 80P(2)(a)(i) but instead bifurcated the income of ₹ 55,38,329 into business and investment income as stated in ground 2 above, without taking int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside and that of the Assessing Officer be restored. 7. The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary. 2. Briefly stated, the assessee which is a co-operative credit society engaged in the business of collecting deposits and providing credit facilities to its members had filed its return of income for A.Y 2012-13 on 26.09.2012, declaring its income at Rs. Nil. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec.143(2) of the Act. 3. During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed deduction under Sec.80P of ₹ 55,38,329/-. Observing, that pursuant to insertion of sub-section (4) of Sec.80P, vide the Finance Act, 2006 w.e.f 01.04.2007, the assessee would no more be entitled for claim of deduction under Sec.80P(a)(i), A.O called upon the assessee to put forth an explanation justifying its aforesaid claim for deduction. As the explanation of the assessee did not find favour with the A.O, therefore, he declined to allow the claim of deduction raised by the assessee under Sec. 80P a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,400 The expenditure for interest and other income is considered on pro-rata basis On the basis of the aforesaid facts, the CIT(A) observed that the claim for deduction under Sec. 80P that was raised by the assessee was to be compartmentalised into the following two parts: (i) Deduction u/s 80P(2)(a)(i) (including other income) ₹ 52,24,593/- (ii) Deduction u/s 80P (2)(d) (on account of interest on FD) ₹ 3,13,736/- Total ₹ 55,38,329/- In the backdrop of his aforesaid observations the CIT(A) separately examined the entitlement of the assessee towards claim for deduction under the provisions of Sec.80P(2)(a)(i) and Sec.80P(2)(d). 5. Insofar, the entitlement of the assessee towards claim of deduction under Sec. 80P(2)(a)(i) was concerned, the CIT(A) was of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-operative Bank which was carrying on the business of banking and finance. The CIT(A) drawing support from the judgment of the Hon‟ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. Vs. ITO (2010) 322 ITR 283 (SC) observed, that the income earned by a co-operative credit society which was in the business of providing credit facilities to its members by investing its deposits during the time period the funds were not immediately required for its business purpose would be liable to be brought to tax under the head Income from other sources and accordingly, taxed under Sec.56 of the Act. On the basis of his aforesaid observations, the CIT(A) was of the view that the interest income earned by the assessee society from its investments with scheduled banks or co-operative banks would not be eligible for deduction under Sec 80P(2)(d) of the Act. Accordingly, the CIT(A) in the backdrop of his aforesaid deliberations concluded that the assessee would not stand entitled for deduction under Sec.80P of ₹ 3,13,736/-. To sum up, the CIT(A) concluded that the assesse‟s entitlement towards claim for deduction under Sec. 80P was to be confined to ₹ 52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in error in restoring the assesses claim for deduction under Sec.80P(2)(a)(i) to the extent of ₹ 52,12,193/-. 9. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. As observed by us hereinabove, the A.O held a conviction that as the assessee was hit by provisions of Sec. 80P(4), therefore, it was not eligible to claim deduction under Sec. 80P(2)(a)(i). The claim of the assessee that it was a cooperative credit society providing banking/credit facilities only to its members and was not a cooperative bank providing banking/credit facility to the public at large did not find favour with the A.O. As is discernible from the records, the A.O was of the view that deduction under Sec.80P (2)(a)(i) in the case of cooperative credit society engaged in carrying on the business of banking (co-operative banks) was withdrawn by the legislature, vide the Finance Act, 2006 w.e.f 01.04.2007, except for in the case of a primary agricultural credit society or a primary co-operative agricultural and rural development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other activities related to the business of banking. As to whether the assessee can be held to be a co-operative bank, the same can be answered in the backdrop of the judgment of the Hon ble High Court of Bombay in the case of Quepem Urban Credit Society Ltd. Vs. ACIT, (2015) 58 taxmann.com 113 (Bom). It was observed by the Hon‟ble High Court in its aforesaid judgment, that an assessee cannot be considered to be a co-operative bank for the purposes of Sec.80P(4) unless the following three conditions are satisfied: (i) the principal business or primary objective should be business of banking. (ii) its paid up share capital and reserves should not be less than rupee one lac. (iii) its bye laws do not permit admission of any other co-operative society as its member. In our considered view, the word banking‟ means accepting for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawal by cheque, draft, order or otherwise. As in the case of a co-operative credit society the acceptance and lending of money is only from the members and not from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had only provided financial assistance/credit to its members, therefore, it can safely be concluded that it cannot be held to be a co-operative bank. On the basis of our aforesaid deliberations, we are persuaded to be in agreement with the view taken by the CIT(A) that the assessee would not be hit by the provisions of Sec.80P(4) of the Act. Apart there from, we find that the Tribunal in the assesses own case for A.Y 2014-15 viz. ITO-21(20(2) vs. M/s Mahapalika Kshetra Madhyamik Shikshak Sahakari Patsanstha (ITA No. 928/Mum/2018, dated 25.06.2019) had concluded that the assessee society was duly entitled for claim of deduction u/s 80P(2)(a)(i) of the Act. We thus not finding any infirmity in the order of the CIT(A), who had rightly concluded that the assesses claim for deduction under Sec. 80P(2)(a)(i) was in order, uphold his order in context of the issue under consideration. 12. The appeal of the revenue is dismissed. 13. We shall now advert to the appeal of the assessee. As observed by us hereinabove, it is the claim of the ld. A.R, that as the CIT(A) had absolutely at the back of the assessee bifurcated its entitlement towards claim of deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross appeals for A.Y. 2013-14. Assessee has assailed the impugned order on the following grounds of appeal: 1. The CIT (Appeal) erred in law and in the circumstances of the case in bifurcating total deduction of ₹ 60,07,707 under section 80P(2)(a)(i) into two parts viz. section 801?(2)(a)(i) and section 80P(2)(d). 2. The CIT (Appeal) erred in law and in the circumstances of the case in treating interest earned on investment as investment income and not business income. 3. The CIT (Appeal) erred in law and in the circumstances of the case in applying section 80(P)(2)(d) on interest income earned on investment and consequently disallowing deduction on the ground that interest income is from cooperative bank and not from cooperative society. 4. The CIT (Appeal) erred in law and in the circumstances of the case by not treating the whole income of ₹ 60,07,707 earned by the appellant society from engaging in the business of providing credit facilities to its members as per section 80P(2)(a)(i) but instead bifurcated the income of ₹ 60,07, 707 into business and investment income as stated in ground 1 ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds be set aside and that of the Assessing Officer be restored. 7. The appellant craves leave to amend or to alter any ground or add a newground, which may be necessary. 17. Briefly stated, the assessee had filed its return of income for A.Y. 2013-14 on 28.09.2013, declaring its total income at Rs. Nil. Subsequently, the case of the sasessee was selected for scrutiny assessment under Sec.143(2) of the Act. 18. During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed deduction under Sec. 80P of ₹ 60,07,707/-. It was observed by the A.O, that pursuant to insertion of sub-section (4) of Sec.80P, vide the finance Act, 2006 w.e.f 07.04.2007, the provisions of Sec.80P were no more applicable to any co-operative Bank other than a Primary Agricultural Credit Society or Primary Co-operative Agricultural Rural Development Bank. On the basis of a conjoint reading of Sec.80P(2)(a)(i) r.w.s 80P(4) the A.O declined to allow the assessee claim for deductoin under Sec.80P of ₹ 60,07,707/-. In the backdrop of the aforesaid facts, the A.O after inter alia withdrawing the assesses entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards claim of deduction under Sec.80P after bifurcating the same into two parts, viz. (i) deduction under Sec.80P(2)(a)(i); and (ii) deduction uner Sec. 80P(2)(d), therefore, the assesee had remained divested of putting forth any objection as regards the same. It was averred by the ld. A.R, that insofar the declining of the assesses entitlement towards claim for deduction u/s 80P in respect of its interest income received during the year form FDs or other investments by the CIT(A), the same having been done without affording any opportunity of being heard to the assesee on the said issue, thus, in all fairness may be restored to the file of the CIT(A) with a direction to readjudicate the same after providing an opportunity of being heard to the assessee. 21. Per contra, the ld. D.R adverting to the appeal of the revenue submitted, that as the A.O on the basis of a conjoint reading of Sec.80P(2)(a)(i) r.w.s Sec.80P(4) had rightly declined the assesses claim for deduction under Sec. 80P of ₹ 60,07,707/-, therefore, the CIT(A) was in error in concluding to the contrary and dislodging the well reasoned order of the A.O. Insofar, the appeal of the assessee was c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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