TMI Blog2022 (8) TMI 1016X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the CIT. The A.O. is directed to follow the dictum laid down by the Hon ble Apex Court in framing the fresh assessment. Thus, this issue is remitted to the files of the A.O. for fresh consideration in the light of our above observation. Interest income earned from other sources from deposits with banks are not entitled to deduction u/s 80P(2)(a)(i) - HELD THAT:- As the assessment year involved in the present appeal is A.Y. 2017-2018 and the judgment of the Hon ble Kerala High Court in the case of Chirakkal Service Cooperative Bank Ltd. v. CIT [ 2016 (4) TMI 826 - KERALA HIGH COURT] is directly on the issue. Being so, the judgment of the Hon ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Limited [ 2021 (4) TMI 1169 - MADRAS HIGH COURT] which is relating to assessment year 2018-2019, cannot be applied to the present case, and accordingly, the argument put forth by the learned DR is rejected. Unexplained cash deposit u/s 69A - HELD THAT:- As in the interest of justice and equity, we remit the matter to the files of the A.O. to give directions to the assessee to furnish PAN and name and address of the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P(2)(a)(i) of the Act to the extent of Rs.2,99,011/- holding that the interests earned by the Appellant on the deposits with the other banks do not qualify for such deduction, disregarding the facts of the case, the law relevant and the decision of the jurisdictional High Court of Karnataka and as such the impugned additions made to that extent are liable to deletion. 6. The learned Appellate Commissioner erred in upholding the impugned addition of Rs.29,63,000/- made by the AO u/s 69A of the Act even when the provisions thereof do not apply in the case of the Appellant and as such the same is liable to set aside. 7. The learned Appellate Commissioner erred in upholding the impugned addition of Rs.29,63,000/- made by the AO u/s 69A of the Act even when the sources of the alleged deposits from members were identified and explained by the Appellant and as such the same is liable to deletion. 8 The learned Appellate Commissioner erred in upholding the impugned addition of Rs.29,63,000/- made u/s 69A of the Act with complete disregard to the facts of the case and as such the same is liable to deletion. 9. That the impugned order is liable to set aside in so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d `income from other sources and would not be eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. It was further held by the Tribunal insofar as deduction u/s 80P(2)(d) of the I.T.Act is concerned, only those interest received from investments with cooperative societies alone would be entitled to deduction. The relevant finding of the Tribunal reads as follows:- 9. The Hon ble Supreme Court in the case of the The Totgars Co-operative Sale Society Ltd. Vs. ITO 322 ITR 283 (SC) held that Income from utilisation of surplus funds was taxable under the head income from other sources, and therefore not eligible for deduction u/s 80P. The Hon ble Karnataka High Court in case of Tumkur Merchants Souharda Credit Cooperative Ltd. vs. ITO (230 Taxman 309), was dealing with a case where deduction u/s.80P(2)(a)(i) of the Act was claimed on interest from the deposits made in a nationalized bank out of the amounts which was used by the assessee for providing credit facilities to its members. The Assessee claimed that the said interest amount is attributable to the business of providing credit facilities by the assessee and forms part of profits and gains of business. The Hon ble Karnata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme made it clear that they are confining the said judgment to the facts of that case. The Court therefore concluded that Hon ble Supreme Court was not laying down any law. Similar view taken in Guttigedarara Credit Cooperative Society Ltd. vs. ITO [2015] 377 ITR 464 (Karnataka). In the case of PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER vs. TOTAGARS CO-OPERATIVE SALE SOCIETY 392 ITR 0074 (Karn) in the context of deduction u/s.80P(2)(d) of the Act, it was held that Sec.80P(2)(d) of the Act allows deduction in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society, the whole of such income. The Hon ble Court held that that the aforesaid Supreme Court's decision in the case of Totgars (supra), was not applicable to deduction u/s.80P(2)(d) of the Act, because the said decision was rendered with regard to deduction under Section 80P(2)(a)(i) of the Act and not under Section 80P(2)(d) of the Act. 10. However, the Hon ble Karnataka High Court in the case of PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER vs. TOTAGARS CO-OPERATIVE SALE SOCIETY 395 ITR 0611 (Karn) took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and canvassed before the Hon'ble Supreme Court, envisages is that such interest or dividend earned by an assessee co-operative society should be out of the investments with any other co-operative society. The words 'Co-operative Banks' are missing in clause (d) of subsection (2) of Section 80P of the Act. Even though a co-operative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the Primary Agricultural Credit Societies with their limited work of providing credit facility to its members continued to be governed by the ambit and scope of deduction under Section 80P of the Act. (Paragraph 13 of the Judgment). 2. The banking business, even though run by a Cooperative bank is sought to be excluded from the beneficial provisions of exemption or deduction under Section 80P of the Act. The purpose of bringing on the statute book subsection (4) in Section 80P of the Act was to exclude the applicability of Section 80P of the Act altogether to any co-operative bank and to exclude the nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be a co- operative society is no longer res integra, for the said issue has been decided by the Income Tax Appellate Tribunal itself in different cases .. . No other binding precedent was discussed in the said judgment. Of course, the Bench has observed that a Cooperative Bank is a specie of the genus co- operative Society, with which we agree, but as far as applicability of Section 80P(2) of the Act is concerned, the applicability of the Supreme Court's decision cannot be restricted only if the income was to fall under Section 80P(2)(a) of the Act and not under Section 80P(2)(d) of the Act.(Paragraph-18 of the Judgment) 6. The Court finally concluded that it would not make a difference, whether the interest income is earned from investments/deposits made in a Scheduled Bank or in a Co-operative Bank. Therefore, the said decision of the Coordinate Bench is distinguishable and cannot be applied in the present appeals, in view of the binding precedent from the Hon'ble Supreme Court. (Paragraph 19 of the Judgment) 12. The Hon ble Karantaka High Court in the aforesaid decision also placed reliance on a decision of the Hon ble Gujarat High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt has held that when the assessee society provides credit facilities to its members, it earns interest income. The interest which accrues on funds not immediately required by the assessee for its business purposes and which has been invested in specified securities as investment are ineligible for deduction under section 80P(2)(a)(i) of the Act. (Paragraph-13 of the Judgment) 13. It can thus be seen that the ratio laid down by the Hon ble Karnataka High Court in the case of Totalgars Cooperative Sales Society in 395 ITR 611 (Karn) is that in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in cooperative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a cooperative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding credit facilities to the members and accordingly, ought to have held that the Income Tax Officer rightly allowed deduction thereof under section 80-P(2)(a)(i) of the Income Tax Act, 1961. 6. Without prejudice to the above, the learned Principal Commissioner ought to have taken note of the submissions made by the appellant that interest received by it amounting to Rs. 1,32,726 from deposits with Mysore Chamarajanagar District Central Co-operative Bank made in compliance with section 58 of the Karnataka Co-operative Societies Act, 1959 constituted its income from the business of providing credit facilities to the members and accordingly, ought to have held that the deduction under section 80- P(2)(a)(i) of the Income Tax Act, 1961 in respect thereof was rightly allowed by the Income Tax Officer. 7. Without prejudice to the above, the learned Principal Commissioner ought to have considered the submissions of the appellant to the effect that the interest received by it amounting to Rs. 1,32,726 from deposits with Mysore Chamarajanagar District Central Co-operative Bank made in compliance with rule 28 of the Karnataka Co-operative Societies Rules, 1960 constituted its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per se would not disentitle a co-operative society from claiming the deduction under the section. If the state Act (the Co-operative Law) provides for enrollment of 'nominal members', the loans given to such nominal members would qualify for the purpose of deduction u/s 80P(2)(a)(i). (Para 30 to 46 of the Judgment) (iii) Under clause (d) of section 80P(2), the interest or dividend income derived by a co-operative society from investments with other co-operative society is also eligible for the deduction whole of such income. (Para 35 of the Judgment) (iv) The restrictive clause in sub-section (4) of section 80P applies only a co-operative bank and not to cooperative societies or to co-operative societies extending credit facilities to its members. Further, only a bank having obtained the license under the Banking Regulation Act, 1949, shall be covered under the said restrictive clause u/s 80P(4). The Hon'ble Court has also elaborately explained the correct meaning scope of the Proviso under the said sub-section (4) of section 80P declaring that the proviso carves out an exception to the exclusion in sub-section (4). 9. In the light of the above judgment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and upon a perusal https./ /www.mhc.tn.gov.in/judis/ W.P. Nos.7038 of 2020 and batch thereof, it would be clear as to whether the return is a valid return, having been filed within the statutory time limit, or a belated one. This is mechanical exercise and one that can be carried out by the CPC, very much within the scope of Section 143 (1) (a) (ii) of the Act. 10.2 On the other hand, the learned AR submitted that the judgment relied on by the learned DR is applicable for and from the assessment year 2018-2019 and the assessment involved in the present is A.Y. 2017-2018. In support of his contention, the learned AR placed reliance on the judgment of the Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd. v. CIT [(2016) 384 ITR 490 (Ker.)], wherein the Hon ble Court held as under:- 19. Section 80A(5) provides that where the assessee fails to make a claim in his return of income for any deduction, inter alia, under any provision of Chapter VI-A under the heading C.-Deductions in respect of certain incomes , no deduction shall be allowed to him thereunder. Therefore, in cases where no returns have been filed for a particular assessment year, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed by the assessee beyond the period stipulated under section 139(1) or 139(4) or under section 142(1) or section 148 can also be accepted and acted upon provided further proceedings in relation to such assessments are pending in the statutory hierarchy of adjudication in terms of the provisions of the Income-tax Act. In all such situations, it cannot be treated that a return filed at any stage of such proceedings could be treated as non est in law and invalid for the purpose of deciding exemption under section 80P of the Income-tax Act. We thus answer substantial questions of law B and C formulated and enumerated above. 10.3 I have gone through the judgments relied upon by both the parties. In my opinion, the assessment year involved in the present appeal is A.Y. 2017-2018 and the judgment of the Hon ble Kerala High Court in the case of Chirakkal Service Cooperative Bank Ltd. v. CIT (supra) is directly on the issue. Being so, the judgment of the Hon ble Madras High Court in the case of Veerappampalayam Primary Agricultural Cooperative Credit Society Limited v. DCIT Ors. (supra), which is relating to assessment year 2018-2019, cannot be applied to the present case, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been duly recorded in the books of account. Hence, the above said deposits cannot be considered as unexplained money in the hands of the assessee. 15. The case of the A.O is that the assessee has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBI. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assessee. I am unable to understand the rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec.68 of the Act for making this addition. I also noticed that the assessee has also complied with the requirements of sec.68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec.68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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