TMI Blog2022 (4) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of its business of providing credit facilities to its members was parked as short term deposits with the banks, i.e, at a point of time when there were no takers for the said funds, would be eligible for deduction u/s. 80P(2)(a)(i) of the Act? - We are of the considered view that as the amount deposited by the assessee society for a short term with the banks, i.e, Co-operative banks or nationalized banks in the course of its business of providing credit facilities to its members, was in the nature of a simplicitor parking of its surplus/excess idle funds for which there were no takers at the relevant point of time, therefore, the same, as stated by the ld. A.R, and rightly so, was inextricably inter-linked, or, in fact interwoven with its aforesaid primary activity, i.e, of providing credit facilities to its members. We are of the considered view, that as held in the case of Guttigedarara Credit Co-operative Society Ltd. [ 2015 (7) TMI 874 - KARNATAKA HIGH COURT] and Tumkur Merchants Souharda Cooperative Ltd. [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] the interest income earned by the assessee society on the surplus amount that was parked by it as short term deposits with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income filed by the assessee society was initially processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. 3. During the course of the assessment proceedings, it was observed by the Assessing Officer that the assessee had during the year under consideration derived income from two streams of its business activities, viz. (i) business of providing credit facilities to its members; and (ii) business of purchase/sale of milk inter-se the members of the society. It was observed by the Assessing Officer that the assessee society had in its return of income raised a claim for deduction of ₹ 24,99,337/- u/s. 80P(2)(a)(i) of the Act. Observing, that as per Section 80P(4) r.w.s. 2(24)(viia) of the Act AND Part V of the Banking Regulation Act the assessee would fall within the meaning of a primary co-operative bank and, thus, not eligible for deduction u/s.80P of the Act, the Assessing Officer declined its claim for deduction under the said statutory provision. Backed by his aforesaid observations the Assessing Officer vide his order u/s.143(3) of the Act, dated 21.08.2014 assessed the total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given a thoughtful consideration to the claim of the Ld. Authorized Representative (for short AR ) for the assessee, that both the lower authorities had erred in concluding that the interest income earned by the assessee society on its deposits with the co-operative banks would not be eligible for deduction u/s 80(2)(d) of the Act, we find substantial force in the same. We are of the considered view that as co-operative banks falls within the realm of the definition of Cooperative Society as contemplated in Section 2(19) of the Act, therefore, the view taken by lower authorities that the interest income earned by the assessee on its deposits with the co-operative banks would not be eligible for deduction u/s 80P(2)(d) of the Act cannot be sustained. Our aforesaid view is fortified by the order of a coordinate bench of the Tribunal, i.e, the ITAT, Mumbai in the case of M/s Solitaire CHS Ltd Vs. Principal Commissioner of Income Tax-26, ITA No.3155/Mum/2019, dated 29.11.2019 (one of us, i.e, the JM was a party), wherein after exhaustive deliberations had held as under: 6. We have heard the authorised representatives for both the parties, perused the orders of the lower authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........................................................................ (d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income; On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. 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 cooperative society. We are in agreement with the view taken by the Pr. CIT, 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 co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 392 ITR 74 (Karn) and Hon ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT 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 (SC) is concerned, we are of the considered view that the same being distinguishable on facts 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/deposits parked with a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set aside‟ his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016. 10. Resultantly, the appeal filed by the assessee is allowed. 9. We, thus, not being able to persuade ourselves to subscribe to the view taken by the lower authorities, that, the interest income received by the assessee society from its short term deposits with cooperative banks is not to be construed as income from its investments with any other co-operative society, conclude, that the interest income received by the assessee society on its investments/deposits with the Co-operative Banks would be eligible for deduction u/s 80P(2)(d) of the Act. Thus, the Grounds of appeal No.(s) 1 and 2 are allowed in terms of our aforesaid observations. 10. Adverting to his claim that the interest income earned by the assessee society on its deposits with the banks is eligible for dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of a co-operative society engaged in- (i).carrying on the business of banking or providing credit facilities to its members, or (ii) to (iii) (Emphasis by underlining supplied by us) On a perusal of the aforesaid statutory provision, we find that the same, contemplates, that the income of a co-operative society from its business of banking or providing credit facilities to its members is eligible for deduction u/s. 80P(2)(a)(i) of the Act. Our indulgence in the present appeal is confined to the limited aspect, i.e, as to whether or not the interest income earned by the assessee-society by depositing its surplus funds with a bank can be brought within the meaning of .income from carrying on the business of banking or providing credit facilities to its members , and thus, would fall within the realm of the deduction contemplated in Section 80P(2)(a)(i) of the Act. At this stage, we may herein observe, that it is the claim of the assessee that as depositing of its surplus funds, i.e, the funds for which there were no takers at the relevant point of time, in the course of its business of providing credit facilities to its members is inex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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