TMI Blog2021 (1) TMI 1277X X X X Extracts X X X X X X X X Extracts X X X X ..... e any legal infirmity in terms of raising the said issue by the Revenue before us by way of present misc. applications. For A.Y 2011-12 and A.Y 2012-13, the Coordinate Bench has held that there was no necessity to examine the issue as to 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 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. [ 2016 (7) TMI 1217 - GUJARAT HIGH COURT ] The Coordinate Bench therefore following the decision of Hon ble Gujarat High Court allowed the deduction on gross interest income for respective assessment years. For A.Y 2014-15, the Coordinate Bench followed the aforesaid decision for A.Y 2011-12 and A.Y 2012-13 allowed the deduction on gross interest income. In this year, we find that the ld DR brought to the notice of Coordinate Bench, the decision of Hon ble Rajasthan High Court in case of CIT vs Rajasthan Rajya Sahakari Upbhokta Sangh Ltd [ 1995 (1) TMI 33 - RAJASTHAN HIGH COURT ] and the Coordinate Bench held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue against the consolidated order passed by the Tribunal in ITA No. 633/JP/19 512/JP/19 for A.Y 2011-12 and 634/JP/19 513/JP/2019 dated 02.09.2019 and subsequent order passed by the Tribunal in ITA Nos. 187/JP/19 22/JP/19 dated 30.09.2019 for A.Y 2014-15. MA No. 64/JP/2020 for A.Y 2011-12 2. In this regard, the ld. DR submitted that the department has filed appeal before the Tribunal containing grounds of appeal (ITA. No. 633/JP/2019 for A.Y 2011-12) as under:- Whether in the facts and circumstances of the case and in law, the CIT(A) is correct in holding that the income received from investments made with Jaipur Central Co-operative Bank is eligible for deduction u/s 80-P(2)(d) of the I.T Act, 1961 and thereby justified in allowing relief of ₹ 1,49,40,834/-. 3. It was submitted that the Tribunal has passed order dated 02.09.2019 in ITA No.512/JP/2019 (Assessee's appeal) and 633/JP/2019 (Department appeal) for A.Y. 2011-12 in the case of M/s. Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd., Jaipur, which was received in the office of Pr. CIT-2, Jaipur on 25.10.2019. The Tribunal while deciding the grounds of the appeal filed by the department, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal (ITA. No. 634/JP/2019 for A.Y 2012-13) as under:- Whether in the facts and circumstances of the case and in law, the CIT(A) is correct in holding that the income received from investments made with Jaipur Central Co-operative Bank is eligible for deduction u/s 80-P(2)(d) of the 1.T Act, 1961 and thereby justified in allowing relief of ₹ 1,59,92,544/-. 7. The Tribunal had passed order dated 02.09.2019 in ITA No.513/JP/2019 (Assessee's appeal) and 634/JP/2019 (Department appeal) for A.Y. 2011-12 in the case of M/s. Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd., Jaipur, which was received in the office of Pr. CIT- 2, Jaipur on 25.10.2019. The Tribunal while deciding the grounds of the appeal filed by the department, in para 14 of the order, has decided the issue in the combined order for AY 2011-12 and 2012-13 by holding as under:- In the instant case for the purposes of section of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. 8. On the other hand, in assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law the ld. CIT(A) is correct in holding that the income received from investments made with Jaipur Central Cooperative Bank is eligible for deduction u/s 80P(2)(d) of the IT Act, 1961 and thereby justified in allowing relief of ₹ 2,76,34,807/-. 11. The Tribunal has passed order dated 02.09.2019 in ITA No. 22/JP/20 (Assessee's appeal) and 187/JP/2019(Department appeal) for A.Y. 2014-15 in the case of M/s. Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd., Jaipur, which was received in the office of Pr. CIT-2, Jaipur on 25.10.2019. The Tribunal while deciding the grounds of the appeal filed by the department, have decided the issue following the combined order of the Coordinate bench for AY 2011-12 and 2012-13 also wherein it was held that for the purposes of section 80P(2)(d) of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. It further held that :- We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal has now established in assessee's own case for A.Y. 2016-17 (ITA No. 1243/JP/2019) that the deduction u/s 80P(2)(d) can be allowed only on the net receipt after deducting the expenditure incurred for earning exempt income. This issue has not been adjudicated upon by the Honble Bench in its decision in this instant case for AY 2014-15, it is requested that the same may be taken up under section 254(2) of the I.T. Act, 1961 for adjudication by recalling and modifying the order dated 02.09.2019 in the case of DCIT, Circle-6, Jaipur vs. M/s Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd., Jaipur, in ITA No.22/JP/20 (Assessee's appeal) and 187/JP/2019(Department appeal) for A.Y. 2014-15. 14. We now refer to the contentions advanced by the ld AR. In this regard, the ld. AR submitted that the Tribunal has decided the cross appeal filed by the department and the assessee for AY 2011-12 2012- 13 vide order dt. 02.09.19 and for AY 2014-15 vide order dt. 30.09.2019 whereby the appeal of the assessee was allowed and appeal of the department was dismissed. Against the dismissal of departmental appeal, present misc. application has been filed. It may be noted that the depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative Bank and therefore deduction u/s 80P(2)(d) was disallowed to this extent. Against this finding of the CIT(A), assessee filed an appeal before the Tribunal which was allowed in favour of the assessee. 17. For AY 2016-17, the Tribunal vide order dt. 04.03.2020 while deciding the assessee s appeal at Para 13 observed that whether deduction u/s 80P(2)(d) should be allowed on gross interest income on FDR or net interest income calculated after deducting the interest expenditure, it has relied on the decision of Hon ble Gujarat High Court in earlier years but the decision of Rajasthan High Court which has been brought to its notice by Ld. CIT was not considered and this being the decision of jurisdictional High Court the same is binding on the Tribunal. Accordingly, in Para 14 it held that deduction u/s 80P(2)(d) can be allowed only on the net receipt after deducting the expenditure and according set aside this issue to the file of Ld. CIT(A) to examine the same afresh. 18. Now the department has filed an Misc. Application stating that in AY 2016-17, the Tribunal has set aside the issue of calculating of eligible deduction of interest u/s 80P(2)(d) to the society by refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s claimed it has not incurred any interest expenditure in earning such interest income but the matter require further information verification and therefore it is set aside to the file of CIT(A) to examine the afresh. 21. It was submitted that in AY 2011-12, 2012-13 2014-15, the Tribunal has allowed the appeal of assessee considering the later decision of Gujarat High Court dt. 12.07.2016. The decision of Hon ble Rajasthan High Court dt. 12.01.1995 was not on record while deciding the appeal for AY 2011-12 2012-13 but while deciding the appeal for AY 2014-15 the said decision was also considered. Further in the later decision of Hon ble Gujarat High Court, the earlier decision of Hon ble Rajasthan High Court has been referred considered. Thus when the Tribunal has relied on later decision of Hon ble Gujarat High Court and in AY 2014-15 again relied on the same decision even after taking note of the decision of Rajasthan High Court and thereafter given a finding on the issue, the same cannot be considered as a mistake apparent on record solely for the reason that in AY 2016-17, the Tribunal has set aside the matter to CIT(A) on this issue. 22. Without prejudice to abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case. The Assessing Officer allowed deduction u/s 80P(2)(d) to the extent of net interest instead of gross interest as claimed by the assessee and disallowed the excess claim of deduction in this regard for all the years under consideration. The amount disallowed by the Assessing Officer and deduction granted by the Assessing Officer is tabularized and recorded as under: Particular Assessment Years 1991-92 1992-93 1993-94 1994-95 Dividend - From co- opsocieties 9743 48000 3491 42674 Interest (As shown in the return of income) 1022699 1214259 1220756 902765 Deduction u/s 80P(2)(d) of the Act as per return 1027719 1045298 1223026 943736 Disallowed by Assessing Officer 477863 640219 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5.' 8.1 Similarly, in the case of Doaba Co-operative Sugar Mills Ltd (supra), the Punjab Haryana High Court has held as under: '5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Section 80P(2) (d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Co-operative Bank and has also received interest from the said co- operative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Section 80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under : 80P. (2)(d) in respect of any income by way of interest or dividends derived by the co-operative society from its inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed under Section 12(2). The High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the exercise of that option would come within the ambit of section 12(2) of the Indian Income-Tax Act but where the option has no connection with the carrying on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits. 9. In view of the above, the questions raised in the present appeals are answered in favour of the assessee and against the revenue. The order passed by the Tribunal is accordingly quashed and set aside. 19. In light of above discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s own case for AY 2014-15. Following the Co-ordinate Bench decision in assessee s own case for earlier years and considering the principle of consistency, we see no reason to deviate from the earlier decision and accordingly, for the purposes of section 80P(2)(d) of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act and such claim cannot be denied by virtue of provisions of Section 80P(4) of the Act. 8. However, in the aforesaid decision, on the related issue of whether deduction u/s 80P(2)(d) should be allowed on gross interest income on FDR on or net interest income calculating after deducting the interest expenditure, the Coordinate Bench has relied on the Hon ble Gujarat High Court decision in case of Surat Vankar Sahakari Sangh Ltd vs ACIT (supra) and the decision of the Hon ble Rajsthan High Court in case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra) which has been brought to our notice by the ld. CIT DR was not considered and being the decision of the Jurisdictional High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exempted income and, therefore, bifurcation made in respect of expenditure cannot be considered to be unjustified. This matter was considered in detail in the case of Kota Co-operative Marketing Society Ltd. v. CIT [1994] 207 ITR 608 (Raj.), wherein it has been held that if a co-operative society is carrying on business and earning income, part of which is exempted and part of which is not exempted, the profits and gains attributable to the exempted activity has to be arrived at on the basis of the books of account maintained by the assessee. If separate books or separate accounts of expenditure have been maintained for the exempted and non-exempted activities, there is no problem. If separate books of account have not been maintained and expenses have been incurred jointly for earning both the incomes then such expenses relatable to earn the non-exempted activities must be estimated. The income exempted under section 80P(2) has to be arrived at separately in order to determine the income under section 80P(2) and it can never be envisaged that the total income which has been so received could be allowed without deducting the expenditure incurred in earning the income. The us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment in FDRs placed with JCCB and further, a presumption would arise where both interest free funds and interest bearing funds are available, then the investment has been made out of interest free funds. It was accordingly submitted that since interest free funds were used for placing the FDRs with JCCB, no part of interest expenditure can be attributed to earning of such interest income. In our view, what is relevant to determine is at the relevant point in time, when the FDRs were placed with JCCB, what is the position of availability of funds and whether at that time, interest free surplus funds were available which were deployed in form of FDRs. However, there is nothing on record to this effect. There is no dispute on the legal proposition that where interest free funds are more than the interest bearing funds, a presumption will arise that investment has been made out of interest free funds. However, such a presumption has to be tested at the point in time when the investment was made and not at the beginning or at the end of the year. In the instant case, merely stating that the assessee has interest free funds by way of share capital and accumulated profits at the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 169 (Guj). The Coordinate Bench therefore following the decision of Hon ble Gujarat High Court allowed the deduction on gross interest income for respective assessment years. 29. For A.Y 2014-15, the Coordinate Bench followed the aforesaid decision for A.Y 2011-12 and A.Y 2012-13 and vide its order dated 30.09.2019 allowed the deduction on gross interest income. In this year, we find that the ld DR brought to the notice of Coordinate Bench, the decision of Hon ble Rajasthan High Court in case of CIT vs Rajasthan Rajya Sahakari Upbhokta Sangh Ltd [1996] 84 taxmann 33 (Raj) and the Coordinate Bench held that it has taken into consideration the decision cited by the Revenue authorities, however, given that Coordinate Bench in assessee s own case has decided the matter recently on 2.09.2019 for A.Y 2011-12 and A.Y 2012-13, it decided to follow the earlier decision and decided the matter in favour of the assessee. 30. For A.Y 2016-17, the Coordinate Bench in its order dated 4.03.2020 held that in the earlier decisions so rendered for A.Y 2011-12, AY 2012-13 and A.Y 2014-15, the Coordinate Benches have relied on the Hon ble Gujarat High Court decision in case of Surat Vank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra) which has been noted by it but apparently not considered which constitutes a mistake apparent from record rectifiable under section 254(2) of the Act. The fact that the decision of Hon ble jurisdictional High Court has not been considered in earlier two decisions and has been considered in latter decision rendered by the Coordinate Bench clearly renders the earlier two decisions amenable for rectification u/s 254(2) of the Act. The fact that the Coordinate Benches have followed the subsequent decision of the Hon ble Gujarat High Court which has in turn referred to the earlier Rajasthan High Court decision, to our mind, will not change the situation as the decision of the Hon ble jurisdictional High Court will always carry the precedence and not following the same will be a breach of judicial discipline for the Jaipur Benches of the Tribunal and the orders so passed clearly call for rectification. Therefore, in our considered view, the orders so passed by the Coordinate Benches thus need to be recalled for limited purposes of adjudication of the said matter afresh taking into consideration the decision rendered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure to the extent of ₹ 95,12,659/- is attributable to the interest income of ₹ 1,59,92,544/- earned on FDRs maintained with Jaipur Central Cooperative Bank Ltd., thereby disallowing deduction u/s 80P to this extent. 2.1 The ld. CIT(A) has erred on facts and in law in not considering that investment in FDRs is made out of own funds and borrowed funds has been utilized for business purpose and therefore, no interest expenditure can be attributed for earning the interest income. ITA. No. 22/JP/2019 (For A.Y 2014-15) 1. The Ld. CIT(A) has erred on facts and in law in holding that interest expenditure to the extent of ₹ 1,78,92,810/- is attributable to the interest income of ₹ 4,55,27,617/- earned on FDRs maintained with Jaipur Central Cooperative Bank Ltd., thereby disallowing deduction u/s 80P to this extent. 2.1 The ld. CIT(A) has erred on facts and in law in not considering that investment in FDRs is made out of own funds and borrowed funds has been utilized for business purpose and therefore, no interest expenditure can be attributed for earning the interest income. In the result, miscellaneous applications so filed by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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