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TMI Blog2023 (6) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... AR has submitted that the matter pertaining to Royal Credit Co Operative Society Limited in ITA no. 221/JPR/2023 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount in other assessment year. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 221/JPR/2023 is taken as a lead. Based on the above arguments we have also seen that for both these appeals are similar facts, similar arguments and similar grounds raised, therefore, were heard together these two appeals and are disposed by taking lead case facts, grounds and arguments from the folder in ITA No. 221/JPR/2023 for the assessment year 2018-19 and the order there in passed shall mutatis mutandis apply to the ITA No. 222/JPR/2023. 4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 221/JPR/2023 on the following grounds; 1. That on the facts and in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Registrar of Co-operative Society, Rajasthan, Jaipur under Rajasthan State Co-operative Act. The assessee accepts deposits and provide credit facilities solely to its members. The assessee provides secured loans to its members by way of overdraft facility, short term, medium/long term nature out of circulating funds available with it, which are in the form of share capital, recurring deposits, fixed deposits raised from its members. 5.2 After analyzing the particulars of income disclosed by the assessee, it can be seen that the interest amount of Rs. 3,09,71,971/- received from members of the Society for providing various credit facilities were only to be treated as business receipts. The net result after deducting the expenses claimed under various heads of Rs. 3,38,76,883/- from the business receipts of Rs. 3,09,71,971/- would be loss from business of (-) Rs. 29,04,912/-. The interest received on Fixed Deposits with Malavia Urban Cooperative bank Ltd. of Rs. 60,75,056/-, being the nature of receipts from other sources, is to be treated as income from other sources but not income from business as disclosed by the assessee. Thus there was not profit or grain from the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 31,70,144/- earned from the deposit of surplus fund in the Co-operative Bank. Accordingly, the ground raised by the appellant stands dismissed. 21. In the result, the appeal is dismissed." 7. As the assessee did not found any favour from the appeal so filed before the ld. CIT(A)/NFAC, preferred this appeal on the various grounds as reproduced here in above. To support grounds so raised by the assessee the ld. AR of the assessee relied upon the following written submissions: "The above appeal has been filed by assessee against the appeal order dated 17-03-2023 passed by Ld. CIT(A), NFAC, Delhi in appeal No. NFAC/2017-18/10039767. The assessee has raised following grounds of appeal: - 1. That on the facts and in the circumstances of the case the Ld. Assessing Officer is wrong, unjust and has erred in law in holding that interest income of Rs. 6075056 earned by the appellant co-operative society on FDR(s) with the Malviya Urban Co-operative bank Ltd is not an income derived by it from its business activities and is in the nature of receipts from other sources. The assessee officer thus wrongly worked Income from business at (-) Rs. 2904912 as against income of Rs. 3170144. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by it from its business activities and is in the nature of receipts from other sources. The Ld. Assessing Officer is further opined that interest income of Rs. 6075056 derived by it from FDR(s) with the Malviya Urban Co-operative Bank is in fact income derived from a Co-operative Society within meaning of sec. 80P(2)(d) of the I.T. Act, 1961 by arbitrarily holding that income from co-operative Bank is not exempt in view of expl. To sub-section (4) of sec. 80P. 3. Order of CIT (A) The assessee filed an appeal before CIT (A) NFAC, Delhi. The Ld. CIT(A) confirmed the addition made by the Ld. A.O vide para 19 of his/her impugned order relying on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative society Ltd. Vs Income tax officer held that fund not required immediately for business of providing credit facilities and interest earned on such fund would come under the category of 'income from other sources' taxable u/s 56 of the Income-Tax Act, 1961 and the same would not qualify for deduction as business income u/s 80P(2)(a)(i) of the income tax Act, 1961. The Ground wise submissions of assessee are as under:- The ground no. 1 to 3 are interlinked h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cooperative society engaged in (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry 1, or 2[(iii) the marketing1 of agricultural produce1 grown by its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, 3[or] 3[(vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members,] The whole of the amount of profits and gains of business attributable to any one or more of such activities:" 1.3 It is submitted that section 80P(2)(a) of the Act does not make any distinction between income received by a cooperative society from statutory deposits and the income from non-statutory deposit of surplus funds. The income earned by the cooperative society either by deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nationalised bank when source of such investment was income derived from activities listed in sub-clauses (i) to (vii) of clause (a) of section 80P(2) [In favour of assessee] If there is a co-operative society, which is carrying on several activities including activities listed in sub-clauses (i) to (vii) of clause (a) of section 80P(2), the benefit under clause (a) will be limited only to the profits and gains of business attributable to any one or more of such activities. If same co-operative society has an income not attributable to any one or more of the activities listed in sub-clauses (i) to (vii) of clause (a), the same may go out of the purview of clause (a), but the co-operative society may claim the benefit of clause (d) or (e) either by investing the income in another cooperative society or investing the income in the construction of a godown or warehouse and letting out the same. In other words, the benefit conferred by clause (d) upon all types of co-operative societies is restricted only to the investments made in other co-operative societies. Such a restriction cannot be read into clause (a), as the temporary parking of the profits and gains of business in national ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 and 87/JP/2018 dated 17.06.2019 and ITO Vs Keshorai Patan Sahkari Sugar Mills, Bundi (ITA No. 418- 419/JP/2017) upheld the same view after considering the judgements of Totagar's Co-operative Sale Society Ltd. The Assessee society also relies on the following judgments: a) DCIT Vs BardoliVibhag Gram Udyog Vikas Co-op Credit Society Ltd., (2019) 102 Taxmann.Com 110, Surat b) The Jawala Cooperative Urban Thrift & Credit Society Limited Vs ACIT (ITA No. 2900-2901/Del/2015) dated 26-04-2018 c) ITO Vs M/s.Chirayinkeezhu Service Co-operative Bank Limited (ITA No. 420/Coch/2018 dated 25-10-2018) As such the interest income from FDRs is correctly declared and assessable under the Income from Business head in view of above facts and settled legal position of law also supports that deduction u/s 80P of the Act, is correctly and legally claimed by assessee society and accordingly allowable as such. 2. In the assessment order, it is alleged that assessee society is also not entitled to claim the deduction u/s 80P (2)(d) of the I.T. Act, for the interest earned of Rs. 31,70,144/- on FDs with Malviya Urban Co-Operative Bank Ltd. & M/s Jaipur Central Co-operative Bank Ltd. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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 investments with any other co- operative society, the whole of such income." 6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 : "...In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80P (2) (d) of the Income Tax Act,1961. 2.5. In para 12.0 of the assessment order amendment of section 194A(3) (v) of the Act by Finance Act, 2015 have been enumerated that w.e.f. 01.06.2015 the said section excludes the co-operative bank from the genus category of co-operative society and making it liable to make TDS on the interest paid by it to other person further indicates that the legislative intent is to exclude Co-Operative Banks from the beneficiary category of co-operative society entitled to exemption or 100% deduction of its income u/s 80P of the Act. It is kindly submitted that the said amendment can not be borrowed for interpretation of provisions of section 80P (2) (d) of the Act, as legislature was very much clear in keeping exemption or 100% deduction under Section 80P (2) (a),(b) (c) and (d) for the co-operative society. The intent of the legislature is further emphasized from the drafting of the Explanation (a) to sub-section 4 of Section 80P which in unambiguous words begins that For the purpose of this sub-section, -- (a) "Co-operative bank" and "primary agricultural credit society" shall have the meaning assigned to them in Part V of the Banking Regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cooperative society can only avail deduction u/s 80P(2)(a)(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 engaged in the banking for providing credit facilities to its members and the head under which the income is assessable is not material for the claim of deduction under this section. The Hon'ble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. (Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit facilities to its members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) is available only in respect of income which is assessable as business income and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butable to the business activity of the assessee. Though there are divergent views on this issue, however, by following the decision of Hon'ble Jurisdictional High Court as well as the decision of this Tribunal, we decide this issue in favour of the assessee and allow the deduction under section 80P/80P(2)(d) in respect of interest earned on deposits made with the banks/cooperative banks. Hence the addition made by the AO on this account for all the three years is deleted." 2.10 The Hon'ble ITAT Jaipur Bench in the recent case of M/s. Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd Vs. DCIT/ACIT Circle- 6 Jaipur in IT Appeal No. 512,513 & 22/JP/2019 Dated 09-11-2022 held that "on the issue as to whether a cooperative bank is a cooperative society or not, there are decisions of various High Courts and ITAT in favour of the assessee at the relevant point of time when notice u/s 148 was issued. Even the Coordinate Bench in case of ITO Vs. Shree Keshorai Patan Sahakari Sugar Mill (ITA No. 418 & 419/JP/2017 order dated 31.01.2018) held that co-operative bank is to be treated as co-operative society for the purpose of interest income on investment in such cooperative bank and thus, eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears that the assessee in Totgars was carrying on some of the activities listed in clause (a) alongwith other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note." 9. In the case on hand, undisputedly, the interest arose on the credit balances with reference to the regular course of business of the assessee. On this aspect, the Hon'ble jurisdiction High Court in Vavveru Cooperative Rural Bank Ltd. (supra), held that, if the original source of the investments made by the petitioners in nationalized banks is admittedly the income that the petitioners derived from the activities listed in sub clauses(i) to (vii) of clause (a), then the character of such income may not be lost, especially when the statute uses the expression "attributable to" and not any one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80P(2)(a)(i) of the I.T. Act by the Mumbai Bench. It was, therefore, held that fixed deposits placed with this Bank falls within the exemption granted by Section 80P(2)(d) of the I.T. Act and assessee was also eligible for deduction under section 80P(2)(a)(i) of the I.T. Act. The order of the Tribunal has become final because Departmental Appeal have been dismissed by the Hon'ble Delhi High Court, though, on tax effect. Thus, assessee has been able to prove that it has invested surplus fund in the FDR and earned interest which is utilised for providing credit facilities to its Members. The O.D. facility was also obtained from the same Bank which is used for providing credit facilities to its Members. The issue is, therefore, covered in favour of the assessee by the Order of ITAT, Delhi Bench, in the case of same assessee for A.Y. 20082009. Since the finding of fact has become final that Bombay Mercantile Cooperative Bank Ltd., is a Cooperative Society, therefore, there was no justification to apply Section 80P(4) of the I.T. Act against the assessee. In the same Order of the Tribunal, the decision of the Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety being deposited with Banas Bank. The Ld. CIT(A) in the case of the same assessee for A.Y. 2013-2014 vide order dated 15.02.2018 following the order of the Tribunal for A.Y. 2008-2009 allowed the claim of assessee. Therefore, there were no justification for Ld. CIT(A) in not following the order of the Tribunal in the case of same assessee for A.Y. 2008-2009. The Hon'ble Madhya Pradesh High Court in the case of Agrawal Warehousing and Leasing Ltd., 257 ITR 235 held that the Ld. CIT(A) not only committed judicial impropriety but also erred in law in refusing to follow the order of the Appellate Tribunal. The conditions of Section 80P(2)(a)(i) and also 80P(2)(d) are satisfied by assessee. 8.2. Considering the totality of the facts and circumstances, we are of the view that authorities below were not justified in refusing to grant deduction under section 80P of the I.T. Act in favour of the assessee. We, accordingly, set aside the orders of the authorities below and delete the entire addition. The appeal of assessee is allowed. 9. In the result, appeal of the assessee is allowed. 2.13 FURTHER RECENTLY HON'BLE ITAT, MUMBAI BENCH, MUMBAI IN THE CASE OF AMORE COMMERCIAL PREMISE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment order may kindly be deleted. Ground No. (4) General ground. The appellant prays accordingly." 8. In this appeal the ld. AR of the assessee submitted compilation of judgment(s), the same is reiterated here in below. S. No. Name of Case Name of Court Date of order Page No. 1 Pr. CIT vs. Gunja Samabay Krishi Unnayan Samity Ltd. High Court of Calcutta 13-01-2023 1-3 2 Income Tax Officer, Vs. Keshorai Patan Sahakari Sugar Mill, Bundi ITAT Jaipur Bench 31-01-2018 4-19 3 The Jawala Cooperative Urban Thrift & Credit Society Limited vs. ACIT, Circle-62(1), Delhi ITAT Delhi Bench 26-04-2018 20-38 4 Shiksha Vibhag Karmacharigan Sahakari Samiti Ltd. vs. Income Tax Officer, Ward 2(3), Kota ITAT Jaipur Bench 17-06-2019 39-58 5 M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd. vs. DCIT/ACIT, Circle-06, Jaipur ITAT Jaipur Bench 09-11-2022 59-70 6 Shri Madhopur Kraya Vikraya Sahkari Samiti Limited vs. Pr. CIT-2, Jaipur ITAT Jaipur Bench 15-11-2022 71-84 7 Jhunjhunu Karya Vikrya Sahakari Samiti Limited vs. Pr. CIT-2, Jaipur ITAT Jaipur Bench 15-12-2022 85-112 8 The Tirumala Tirupati Devasthanams Exployees Co-operative Society, vs. Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to cull out the provisions of section 80P(2)(a)(i) of the Act, the scope and gamut of which is the primary bone of contention before us, which reads as under : "80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) in the 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) 10.3 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit facilities to its members was also in the business of marketing of agricultural produce grown by its members, and the sale consideration of the agricultural produce due towards its members was thereafter retained and invested as a short-term deposit/security with the bank, then, the interest income therein earned to the said extent could not be said to be attributable to its activity of providing credit facilities to its members. As is discernible from the aforesaid judicial pronouncement of the Hon'ble Supreme Court, we find the Hon'ble Apex Court had clarified beyond doubt that they have confined the judgment to the facts of the case before them, and the same was not to be considered as laying down of any law. Be that as it may, the aforesaid judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) had thereafter been considered by the Hon'ble High Court of Karnataka in the case of Tumkur Merchants Souharda Cooperative Ltd. (supra), wherein the Hon'ble High Court had after exhaustive deliberations held as under : '6. From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection it may be pointed out that whenever the Legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor General it has used the expression "derived from", as for instance in s. 80J. In our view since the expression of wider import, namely, "attributable to" has been used, the Legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity. 8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A cooperative society which is carrying on the business providing credit facilities to its members, earns profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members, as there were no takers. Therefore, they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore, it is liable to be deducted in terms of section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of COMMISSIONER OF INCOME TAX III HYDERABAD v. ANDHRA PRADESH STATE COOPERATIVE BANK LTD. Reported in (2011) 200 TAXMAN 220/12. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly, it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order: Appeal is allowed. The impugned order is hereby set aside. Parties to bear their own cost.' 10.4 Recently even the honourable apex court on 20.04.2023 in the Civil Appeal NO . 8719/2022 in the case of The PR. Commissioner of Income Tax 17, Mumbai VERSUS M/S ANNASAHEB PATIL MATHADI KAMGAR SAHAKARI PATHPEDI LIMITED held that Apart from the fact that against the relied upon decision in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee. 10.5 In the backdrop of the aforesaid discussion and judicial decision discussed we are of a considered view, that as in the case of the assessee before us the surplus funds parked by way of short-term deposit with the co-operative bank, viz. Malavia Urban Co-operative Bank Limited are inextricably interlinked, or in fact interwoven with its business of providing credit facilities to its members, therefore, the same as claimed by the Ld. AR, and rightly so, would duly be eligible for deduction u/s. 80P(2)(a)(i) of the Act. We, thus, in terms of our aforesaid observations, direct the Assessing Officer to allow deduction of Rs. 31,70,144/- u/s. 80P(2)(a)(i) of the Act on the interest income earned by the assessee society on its deposits with the co-operative bank. In the results appeal of the assessee in ITA No. 221/JPR/2023 is allowed. 11. The fact of the case in ITA No. 222/JP/2023 is similar to the case in ITA No. 221/JP/2023 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issues raised by the assessee in this appeal No. 222/JP/2023 is equally similar on set of facts and grounds. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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