TMI Blog2022 (1) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue. - MP No.96/Bang/2021 [in ITA No.2429/Bang/2019] - - - Dated:- 17-11-2021 - Shri Chandra Poojari, Accountant Member For the Appellant : Shri Ganesh R. Ghale, Standing Counsel for the Dept. For the Respondent : Shri P.R. Suresh, CA ORDER This miscellaneous petition is filed by the department seeking rectification of certain errors in the order of the Tribunal dated 27.2.2020 and rectification of the same. 2. The ld. DR submitted that the assessee received interest of ₹ 40,30,479 from Co-operative Apex Bank and National Bank and claimed deduction u/s. 80P(2)(d) of the Income-tax Act, 1961 [the Act]. This was disallowed by the AO on the reason that the said interest income is not from investments from other co-operative societies and from cooperative banks which will not fall under the definition of co-operative society. According to the ld. DR, the co-operative society and co-operative bank is different as decided by the Hon ble High Court in the case of CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha, Bagalkot, 369 ITR 86 (Kar) . According to him, as per the Act, there is also distinction between the credit co-oper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of Jaipur Bench of the Tribunal in the case of Jaipur Zilla Dugdh Utpadak Sahakari Sangh Ltd. in ITA No.512 513/Bang/2019 dated 2.9.2019 wherein it was held as under:- 13. The aforesaid provisions have been examined at length by this Bench in case of ITO Vs. Shree Keshorai Patan Sahakari Sugar Mill (Supra) and the relevant findings are reproduced as under: 6.1 As regards the claim u/s 80P(2)(d), we find that the only condition for availing the deduction under this provision is any income by way of interest or dividend derived by the Cooperative Society from its investment with any other cooperative society, the whole of such income is allowable for deduction u/s 80P(1). Therefore, there is no condition for the assessee society to engaged in the activity of provide credits to the Members or banking business for availing the deduction u/s 80P(2)(d) read with section 80P(1) of the Act. As regards the cooperative bank shall be treated as cooperative societies for the purpose of the interest income on investment in such cooperative bank u/s 80P(2)(d) the Mumbai Bench of this Tribunal in case of Lands End Co-operative Housing Society Ltd. Vs. ITO(supra), after cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to any one or more of much attributes. (d) In respect of any income by way of interest or dividends derived by the co- operative society from its investments with any other co-operative society, the whole of such income. From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) it is clear that the former deals with deduction in respect of profits and gain of business in case of the co-operative society carrying on business of banking or providing credit facilities to its members if the said income is assessable as income from business whereas latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(i) in respect of its income assessable as business income and not as income from other sources if it carries on business of the banking or providing credit facilities to its members and has income assessable under the head business whereas for claiming u/s 80P(2)(d) it must have income of interest and dividend on investments with other Co-operative society may or may not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income in accordance with the provisions of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can only look fairly at the language used, 7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759. 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank is considered to be a Co-operative Society, then any interest earned by the Cooperative Society from a Co- operative Bank would necessarily be deductable under Section 80P(1) of the Act. 8. The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover the word Co- operative Society are the words of a large extent, and denotes a genus, whereas the word Co-operative Bank is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co-Operative Society can be of different nature, and can be involved in different activities; the Co- operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word Co-operative Society . 9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as Ms Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd., vs. DCIT, Jaipur the meaning of Co-Operative Society. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and rural development bank. 16. The Coordinate Bench in case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs Income-tax Officer-21(2)(1), Mumbai [2018] 94 Taxmann.com 15 had an occasion to examine similar contention and it was held 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, however, as a co-operative bank continues to be a cooperative 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 co-operative 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. We see no reason to deviate from the same and agree with the aforesaid view taken by the Co-ordinate Bench and. The relevant findings of the Co-ordinate Bench read as under: 6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) it can safely be gathered that income by way of interest income derived by an assessee co-operative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. We may herein observe, that what is relevant for claim of deduction under Sec. 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 Ms Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd., vs. DCIT, Jaipur cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the co- operative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT (A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co-operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT F bench, Mumbai in the case of Vaibhav Cooperative Credit Society (supra) is also distinguishable on facts. We find that the said order was passed by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s set aside the order of the lower authorities and conclude that the interest income of ₹ 27,48,553/-earned by the assessee on the investments held with the co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d). 17. In light of above, by virtue of provisions of Section 80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) cannot be denied to the assessee society. 18. Another issue that arise for consideration is whether deduction u/s 80P(2)(d) shall be allowed on the gross interest income on FDRs or it should be allowed on the net interest income calculated after deducting the interest expenditure allocable to funds placed in form of FDR. Though the assessee has challenged the findings of the ld CIT(A) to the effect that it has not incurred any interest expenditure, we find that there is no necessity to examine the same as conceptually, the deduction under section 80P(2)(d) has to be allowed on gross and not on net interest income as held by the Hon'ble Gujarat High Court in case of Surat Vankar Sahakari Sangh Ltd vs ACIT [2016] 72 Taxmann.com 169 (Guj) wherein it was held as under: 3. In all the four appeals, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income in accordance with the provisions of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom its investment with any other co-operative society. This provision does not make any distinction in regard to Ms Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd., vs. DCIT, Jaipur source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the cooperative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-opera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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