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TMI Blog2024 (6) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... h relevant provisions and the Id. CIT A erred in confirming the same. 3. The Id. CIT A has erred in holding that assessee is not entitled to the benefit of deduction u/s 80P(2)(d) of the Act in respect of interest income earned out of investments made with nationalised and cooperative Banks. 4. The Id. CIT A has erred in directing the AO not to allow the deduction u/s 80P(2)(d) on the interest earned from cooperative banks and nationalised banks. 5. The CIT A has erred in directing the AO not to allow the deduction u/s 80P(2)(a)(i) on the interest earned from non-members despite that the AO has not pointed out / brought on record any such instance of having non-member in the assessment order. Such general direction may kindly be set aside or withdrawn. 6. The assessee hereby requests for allowing any other relief as available under the law. 7. The assessee craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal." Brief facts of the case : 2. In this case, assessee is a Co-operative Society engaged in the business of providing credit facilities to its members. Assessee is registered under Maharashtra State Co-Op Society Act, 1960, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that the issue of bank interest from coop banks and its taxation, deduction, etc. is squarely covered by judgement of the Hon'ble Supreme Court of India and Hon'ble Karnataka High Court in the case of The Totagars Co-Operative Sale Society. 5. Further the CIT A while deciding appeal has relied on the Supreme Court's decision in the case of Totagars Co-operative Sale Society vs. ITO in 188 taxmann.com 282 (SC) and is of the view that the said judgement is applicable to decide the taxability of interest income u/s 80P(2)(d) also. 6. The CIT A states that as discussed from the Supreme Court decision in the case of Totagars Co-operative Sale Society and Mavilayi Service Cooperative Bank; it is hereby held that the interest income from deposits kept with Schedule Banks and Cooperative Banks are to be taxed under the head income from other sources and their nature of income cannot be changed to business income. 7. However, the Pune ITAT is consistently deciding and holding the issue of deduction of bank interest from coop banks and scheduled banks in assessee's favour. It has been held by Pune ITAT in a number of cases that interest income earned by a co-operativesocie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom RBI under the Banking Regulation Act. 5.3 The Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT [2021] 431 ITR 1(SC) observed as under : Quote "Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are cooperative -societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. " Unquote 5.4 Thus, a Co-Operative Society will be treated as a CoOperative Bank only if it has received License from RBI. In the case of the Assessee neither the AO nor the CIT(A) has stated that the Assessee is in receipt of License from RBI. Therefore, in the absence of Banking License, respectfully following the Hon'ble Supreme Court (Supra), it is held that the assessee is not a Co- Operative Bank as envisaged in section 80P(4) of the Income Tax Act. Hence, provisions of Section 80P(4) will not be applicable in the case of the Assessee. 5.5 It is specifically mentioned in the Assessment Order that Assessee has invested 'Surplus funds' in the PDCC and other banks and earned Interest Income. Thus, it is an admitted fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thanmarketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. Thisis perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, butinvested the same in banks. As a consequence, the investments were shown as liabilities, as they representedthe money belonging to the members. The income derived from the investments made by retaining the moniesbelonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by thepetitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had investedthose amounts in fixed deposits in other co-operative societies or in the construction of godowns andwarehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the casemay be. 36. The original source of the investments made by the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Tribunal in the case of Shivneri Nagari SahakariPatsanstha Ltd. (supra). The ld. AR placed on record a copy of the another order of the Pune Bench dated 19-08-2015 in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) (to which one of us, namely, the ld. JM is party) in which similar deduction has been allowed. The Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) has discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) allowing the deduction u/s. 80P on interest income and the Hon'ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income, earned from banks under similar circumstances. Both the Hon'ble High Courts have taken into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. 322 ITR 283 (SC). There being no direct judgment from the Hon'ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Saha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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