TMI Blog2022 (9) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Revenue : Shri Naveen Gupta ORDER PER S.S. GODARA, JM : This assessee s appeal for AY 2017-18 arises against the Pr.CIT, Pune-4, Pune s order dated 25-03-2022 passed in case No. ITBA/REV/F/REV5/2021-22/1041544329(1) in proceedings under Section 263 of the Income Tax Act, 1961, in short the Act‟. Heard both the parties. Case file perused. 2. The assessee s sole substantive ground raised in the instant appeal challenges correctness of learned PCIT s revision directions holding the corresponding regular assessment dated 09.12.2019 as an erroneous one causing prejudice to the interest of Revenue for the reason that the Assessing Officer had wrongly accepted its section 80P(2)(a) deduction claim regarding interest income of Rs.14,04,405/- derived from deposits made in the co-operative banks. 3. Learned CIT-DR vehemently supported the PCIT s revision directions under challenge read as under: 6. I have examined the submission made by the assessee and issues involved. I have also gone through various, case laws filed and relied upon by the assessee in support of claim u/s 80P(2)(a)(i) or 80P(2)(d) of the Act. It is the submission of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by way of interest on deposits with banks. Thus, in the assessee's case, a considerable portion of its income is earned by way of interest on deposits made with other nationalized/co-operative banks. As has been held by the Hon'ble Supreme Court in the case of Totgar s Cooperative Sale Society Ltd. Vs. ITO (supra) and also by Hon ble Karnataka High Court in the case of Pr. Commissioner of Income Tax, Hubali Vs. Totgars Cooperative Sale Society (supra) this act of making deposits out of the deposits received from members cannot be considered to be attributable to the business of carrying on of the business of providing credit facilities to its members. In view of the aforesaid decisions of the Hon'ble Supreme Court Karnataka High Court, Interest earned on such deposits kept with Scheduled Bank/Cooperative Bank cannot be allowed as deduction under section 80P of the Act and such interest should be brought to tax. a. In this regard, the Assessment record has been verified in detail. The submissions made before the Assessing Officer regarding the deposits made with different bank/institution are seen to have been given without details as to when they were made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Loans/Advances/Deposits received from members by the society including share capital from members, reserve fund interest payable 3.48 Cr Loans/Advances given to members by the society 1.94 Cr Excess of Loan/Advances/Deposits from members available with the society 1.54 Cr It implies that the deposits accepted from the members were not used by the society in its business of providing credit facilities to its members. Instead they are put in to deposits to earn interest. Investments made in fixed deposits with institutions by the society out of Loans/Advances made by members 1.32 Cr This act of making deposits out of the deposits received from members cannot be considered to be attributable to the business of providing credit facilities to its members. Thus, making deposits to the bank out of the deposits received from Members is not in accordance to the principles of mutuality. 10. In the light of these facts, the Assessment Order dt 09.12.2019 is hereby set aside to the Assessing Officer for pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with the co-operative bank, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not cooperative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 8. After necessary deliberations, we are unable to persuade ourselves to concur with the view taken by the Pr. CIT. Before proceeding any further, we may herein cull out the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. 80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies; We are of the considered view, that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force 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. 9. In so far the judicial pronouncements that have been relied upon by the ld. A.R are concerned, we find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its investments held with a co-operative bank is covered in favour of the assessee in the following cases: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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