TMI Blog2021 (2) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... esent appeal against the order dated 13/03/2019 passed by the Commissioner of Income Tax (Appeals) -32, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2014-15. 2. The revenue has raised the following grounds: - 1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the deduction u/s. 80P(2)(d) of the Income Tax Act, 1961 amounting to ₹ 97,80,230/- for without appreciating the action of the A.O. in this regard ? 2. Whether on the facts and in the circumstances of the case and in law, the Ld.ClT(A) has erred in not appreciating the fact that since the assessee fulfils the conditions laid down u/s. 56(c)(ccv) of the Part V of Banking Regulation Act, 1949, it is to be considered as a co-operative bank, and therefore under the purview of a co-operative bank, the assessee is not eligible for deduction u/s. 80P(2)(d) of the Income Tax Act, 1961? 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the deduction u/s. 80P(2)(d) of the Income Tax Act, 1961 as per the ground of appeal of the assessee, without appreciating the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital of the society as on 31/03/2013 was ₹ 3,34,30,782/-and reserves and surplus was ₹ 4,58,21,356/-. The assessee was having bank balance of ₹ 1,35,15,155/- mainly with Maharashtra District Central Co-op Bank and ICICI Bank. The investment was to the extent of ₹ 42,00,92,288/-. The loan and advances was given to the tune of ₹ 1,89,84,52,118/- by way of long term loan. The emergency loan was shown in sum of ₹ 4,89,86,982/-, hire purchase loan was shown at ₹ 84,263/- and advance to the staff was to the tune of ₹ 27,30,970/-. The assesee had also shown the total receipt sum of ₹ 23,39,63,328/- by way of interest including interest from deposit with the M.D.C. Co-op Bank of ₹ 93,26,570/-. The assessee also received the dividend income in sum of ₹ 4,53,660/- from MDC Co-op bank. The Assessee claimed the exemption in sum of ₹ 3,49,62,187/-- u/s 80P(2)(a)(i) and a sum of ₹ 97,80,230 u/s 80P(2)(d). As such the total exemption was claimed to the tune of ₹ 4,47,42,417/- u/s 80P of the I.T.Act, 1961. The show-cause notice was issued for the justification and after the reply, the claim u/s 80P of the Act,1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Feb. 1975. Further the provision of section 80P(4), inserted w.e.f. 01.04.2007, states that the provision of section SOP shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. Since the provision of section SOP allows for certain deduction in respect of income of cooperative societies, insertion of 80P(4) has excluded one category of such cooperative societies from such deduction i.e. the cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. The AO is not correct in holding that the deduction u/s 80P(2)(d), allowable to a cooperative society on the interest and dividend income earned from investment with any other cooperative society will not be an allowable deduction if such -investment has-been made with a cooperative In this regard reliance is placed on the following decisions: i) [2018] 94 taxmann.com 15 (Mumbai - Trib.) KaliandasUdyogBhavan Premises Co-op Society Ltd. v. Income-tax Officer-21(2)(1J, Mumbai for AY 2014-15 dated 25.04.2018. The facts of that case are consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d). [Para 6] From a perusal of the section 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooperative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. What is relevant for claim of deduction under section 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. Though the observations of the lower authorities are correct that with the insertion of sub-section (4) of section SOP, vide the Finance Act, 2006, with effect from 01-04-2007, the provisions of section SOP would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but their view that the same shall also jeopardise the claim of deduction of a co-operative society under section 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank cannot be accepted, As long as it is proved that the interest income is being deriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Karnataka High Court had held that the co operative banks are cooperative societies. Aggrieved, the revenue has filed these appeals. 5. The Ld D.R submitted that the Hon'ble Karnataka High had delivered the decision reported in 392 ITR 74 on January 5, 2017. However, in its subsequent decision in the case of very same assessee, the Hon'ble Karnataka High Court has taken a different view, viz., in the case of The Principal CIT Vs. The Totagars Co-operative Sale Society (Income tax Appeal No. 100066 of 2016 others dated 16-06-2017), The Hon'ble Karnataka High Court has expressed the view that the interest income earned from co-operative banks is not different from the interest earned from Scheduled bank and hence clause (d) of Section 80P(2) of the Act would not apply to interest earned from deposits kept with co-operative bank. 6. On the contrary, the Ld A.R submitted that the fact that the cooperative banks are basically co-operative societies only cannot be denied. H$ submitted that the Hon'ble High Court of Himachal Pradesh has taken the view in the case of CIT Vs. Kangra Co-operative bank Ltd (2009)(309 ITR 106) that co-operative ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter. The Hon'ble Karnataka High Court has expressed the view that the deduction u/s 80P(2)(d) would not be available in respect of interest income received from co-operative bank, whereas the Hon'ble Himachal Pradesh High Court has held mat ihs said -. -deduction would be available. The Hon'ble Supreme Court has held in the case of Vegetable Products Ltd (88 ITR 192) that if two reasonable constructions of a taxing provision are possible that construction which favours the assesses must be adopted. By applying the said principle, the view taken by Hon'ble Himachal Pradesh High Court, which is in favour of the assesses, is required to be adopted in this case. Accordingly I hold that the interest income earned by the assessee from Co-operative banks, which are basically co-operative societies carrying on banking business, is deductible u/s 80P(2)(d) of the Act. On this reasoning, I uphold the decision taken by Ld CIT(A) in both the years on this issue . 5.3.2 In view of the above discussion and following the decision of the ITAT, Mumbai in appellant's own case for A.Y. 2013-14, it is held that the appellant would be entitled for claim of deduction under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but merely to obtain deposits from its members or/and resort to borrowing from cooperative banks and lend funds to its members as per the schemes enumerated in the Registered Byelaws. Further, the appellant does not hold any banking license from RBI. Therefore, AO is not correct in holding that the appellant is a cooperative bank and not eligible for deduction on its income in view of provisions of section 80P(4) of the Act. Accordingly, it is held that the appellant is eligible for deduction u/s 80P(2)(a)(i)) in respect of the whole of the profits or gains attributable to the activities of providing credit facilities to its members . 4.3.1 For coming to the above conclusion, reliance is placed on the following decisions . . ij Order of CIT(Appeals)-33 Mumbai in appellant's own case for AY2013-14 dated 17.04.2018 wherein the addition made by the AO on account of . disallowance of deduction u/s 80P(2jfaj(i) has been deleted. ii) Hon'ble Karnataka High Court in the case of Shri Vardhaman Urban Co- operative Credit Society Ltd. vs. CommiSvSioner of income Tax (ITA no. ' 100038 of 2014 dated 21-09-2015), has held that all the Co-operative Credit Societies are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng is hereby reproduced as under:- 2.2. The facts in brief, in the present appeal, are that the assessee is a employees co-operative credit society catering to its members. The main activity carried out by the society was mainly borrowing from banks and lending of funds/providing credit facilities to its own members under various schemes formulated by it. During assessment proceedings, the Ld. Assessing Officer observed that the assessee showed total receipt of ₹ 22,21,52,042/- by way of interest including interest from deposits in MDC Co-operative bank amounting to ₹ 57,22,046/-. The Ld. Assessing Officer further observed that the assessee claimed deduction of ₹ 4,45,67,962/- u/s 80P(2)(a)(i) and ₹ 61,75,706/- u/s 80P(2)(d) of the Act. As such the assessee claimed total deduction of ₹ 5,07,43,668/- u/s 80P of the Act, which was denied by the Ld. Assessing Officer. On appeal, before the Ld. Commissioner of Income Tax (Appeal), the view taken in the assessment order was affirmed by Ld. Commissioner of Income Tax (Appeal) so far as deduction u/s 80P(2)(d) to the tune of ₹ 61,75,706/-, which is under challenge before this Tribunal. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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