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TMI Blog2024 (7) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble CIT-(A), NFAC has aggrieved your appellant by drawing the conclusion that the appellant co-operative society is not entitle for deduction u/s 80P(2)(d) of The Income Tax Act, 1961 in respect of interest earned on the investment made in nationalized and co-operative banks. 3. The Hon'ble CIT-(A), NFAC has aggrieved your appellant by directing the Ld. AO to not to allow the deduction u/s 80P(2)(d) and u/s 80P(2)(a)(i) on the interest earned from co-operative for Rs. 2,24,44,754/- (Including Calculation error of Rs. 25,119/-). 4. Hon'ble CIT-(A), NFAC has erroneously passed the order with pre-conceived notion and overlooking the various judgments of Hon'ble High Courts & ITAT benches wherein deduction u/s 80P(2)(d) of The Income Tax Act, 1961 is allowed to credit societies in respect of interest earned on the investment made in co-operative banks on the grounds that Co-operative bank is a species of cooperative credit society. 5. Alternatively, on the facts and in law, the Hon'ble CIT-(A), NFAC and the learned A.O. erred in not appreciating that the appellant is entitled for deduction u/s SOP (2) (d) of The IT Act 1961, in respect of Rs. 2,24,44,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal High Court. The interest earned by the assessee from investment to cooperative bank is liable for exemption U/s 80P of the Act. 5. The Ld.AR further placed that the issue is squarely covered by the order of the co-ordinate bench of ITAT, Mumbai Bench "G" in assessee's own case bearing ITAT No. 56 & 57/Mum/2024 date of pronouncement- 22/05/2024 where the appellant is held to be eligible for deduction under section 80P(2)(d) on the interest earned from cooperative bank and the Ld.AR also placed reliance in assessee's own case and stated the case of the assessee is fully covered by the above decision. The Ld.AR placed a chart and the order of Hon'ble Apex Court, different Hon'ble High Courts and Jurisdictional Tribunals related to allowability of interest earned by the co-operative bank from co-operative society or bank and the observation. The details are as under: - 5.1. Hon'ble Supreme Court of India Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer, [2023] 154 taxmann.com 305 (SC) "15.13 Further, under the provisions of the State Act, 1984, 'agricultural and rural development bank' means the Kerala Co-operative Central Land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P was allowed. It is settled law that if a query is raised during the assessment proceedings and the assessee submits a reply thereto, leading to the passing of the order of assessment, a reopening in the absence of any new tangible material would be nothing but a change of opinion, which would not furnish to the A.O. a basis for his 'reasons to believe' that income chargeable to tax had escaped assessment. 13. Be that as it may, we are of the opinion that the impugned notice is unsustainable on account of these jurisdictional errors committed by the A.O. Consequently, the petition is allowed. The impugned notice dated 30th March, 2021 under section 148 of the Act and the impugned order dated 10th March, 2022 are held to be unsustainable and are accordingly quashed. The writ petition is disposed of accordingly. 5.3. Hon'ble High Court of Karnataka Principal Commissioner of Income-tax, Hubli v. Totagars Co-operative Sale Society, [2017] 78 taxmann.com 169 (Karnataka) "10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the cooperative societies and co-operative banks not holding the license issued by the RBI. He further held that if the interest is earned from the co-operative banks holding license issued by RBI same should be chargeable to tax under the head income from other sources. Therefore, assessee is aggrieved and is in appeal before us. We on the merits already dealt with the issue in appeal of the assessee for A.Y. 2013-14 and therefore, directed the learned Assessing Officer to grant deduction under Section 80P(2)(d) of the Act to the assessee on the bank interest received from co-operative banks. Accordingly, the appeal of the assessee for A.Y. 2017-18 is allowed. 014. The appeals of the assessee for A.Y. 2018-19 also involved identical issue, wherein the interest income earned by the assessee from co-operative bank amounting to Rs.1,39,30,075/- for A.Y. 2018-19 and Rs.7,56,84,273/- for A.Y. 2020-21 are denied deduction under Section 80P(2)(d) of the Act. As we have already held that interest received by the assessee from the co-operative banks is eligible for deduction under Section 80P(2)(d) of the Act, on the same reasoning, we also allow the appeal of the assessee for A.Y. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. In the given case, the assessment has been reopened within a period of 4 years and therefore, the proviso to section 147 has no application. This Court finds that the reasons recorded by the Assessing Officer which led to the formation of the belief contemplated by the proviso to section 147 of the Act has material bearing on the question of escapement of income of the assessee from the assessment because of failure of the assessee or omission to disclose the fully and truly all material facts. We are of the view that though the material was available on record, at the time of first assessment, when no conscious consideration of the material is made and a mistake has been committed, it would not, in any case create an embargo on the power of the Assessing Officer to exercise powers under amended section 147 of the Income-tax Act, 1961, as there could not be "change of opinion", in the factual scenario. The only requirement is to see that the escapement of income which the Court finds in the given case and therefore, we hold that the notice issued under section 148 is a valid notice. 7. Considering the order of the Hon'ble Gujarat High Court, the Ld.DR further relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-member". Further, it mentions: "9. We have deposit more than 30% of the deposit accepted from the members wit h the other banks according to Co Operative society Act. We accepted deposit of Rs. 7,94,71,817 from the members. We have to maintain fix deposit of Rs. 2,38,41, 545 with other banks. As against we deposited Rs. 2,96,63,500/-. Difference of Rs. 58,21,955 is deposited against reserve Rs. 1,04,75,974.So, we deposited less amount of Rs. 46,54.019 as per requirement under the Co operative Society Act. In other words no interest received from the surplus deposit with the banks FDR." Further, vide letter dated 13.07.2017, the assessee- writ applicant has claimed such FDR of Banks as part of business activity and had prayed for deductions under section 80P (2) of the Income Tax Act. 13. Similar issue arose for consideration before the Hon'ble High Court of Karnataka (Dharwad Bench) in the case of Principal Commissioner of Income Tax and ors. Vs. Totagars co-operative sale Society, reported in (2017) 395 ITR 611(KAR). The substantial questions of law which arose for consideration as recorded in Para 1 are reproduced as under: "(I) Whether the assessee, Totagar Co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of the society is limited to providing credit to its members and the income that is earned from providing such credit facilities to its members is deductible under section 80P(2)(a)(i) of the Act. However, investing its surplus funds with the State Bank of India is no part of the business of the appellant of providing credit to its members and hence, it cannot be said that the interest income derived from depositing surplus funds with the State Bank of India is profits and gains of business attributable to the activities of the appellant society. The character of the interest is different from the income attributable to the business of the society of providing credit facilities to its members. The interest in- come derived from investing surplus funds with the State Bank of India must be closely linked with the business of providing credit facilities for it to be held that it is attributable to the business of the assessee. Therefore, the profits and gains can be said to be directly attributable to the business of providing credit facilities to its members if there is a direct and proximate connection between the profits gains and the business of the appellant. In the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment explicitly makes clear intention of legislation that co-operative banks are not specie of genus co-operative society, which would entitled to exemption or deduction under the special provisions of Chapter VI-A in the form of section 80P of the Act. 15. In view of aforesaid settled legal position, and having held that the allowance of deduction of the income derived by way of interest from the investment in the form of FDR's with other banks was incorrect ... " 6. After considering the Jurisdictional High Court judgements, we do not find any infirmity in the Revision order passed by the Ld. PCIT which does not warrant any interference. Thus the grounds raised by the assessee is devoid of merits liable to be rejected." 8. We heard the rival submissions and considered the documents available in the record. We respectfully considered the order of the Hon'ble High Court of Gujarat, where the Court clearly distinguished the co-operative bank and cooperative society and held that cooperative societies are different entities. The issue was followed by the ITAT, Rajkot Bench. We respectfully relied on the order of Hon'ble Supreme Court in the case of Kerala State Co-Opera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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