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Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI – VIRTUAL COURT
Before: SHRI INTURI RAMA RAO, AM & SHRI S. S. VISWANETHRA RAVI, JM
ORDER
PER INTURI RAMA RAO, AM:
This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals), Gulbarga (‘CIT(A)’ for short) dated 26.10.2017 for the assessment year 2013-14.
The appellant raised the following grounds of appeal :- “1. The learned A.O. and Learned CIT (A) have erred in disallowing deduction claimed under section 80P(2)(a) by treating is as income from other sources.
2. The learned A.O. has erred in treating income from business and profession as income from other sources.
3. The learned AO and Learned CIT(A) have wrongly interpreted the provisions of sec 80P(2)(d) by not treating as Co-op. Societies.
4. The learned AO has wrongly interpreted the definition of co-op society vide sec. 2(19) of the IT Act, 1961 by treating those entities which are registered under the co-op societies, 1912(2 of 1912), or under any other law for the time being in force in any state for the registration of co-op societies, as not being co-op societies.
5. The learned AO has grossly disallowed the deduction claimed u/s 80P(2)(d) without providing any proper reason and without providing any opportunities to the assessee to represent in this particular issue.
6. THAT the Learned CIT(A) has erred in deciding our case on the basis of judgment of Hon’ble Supreme Court in case of the Citizen Co-operative Society (TS-326-SC-2017) dated 16th August, 2017, facts of which are totally different from our case. 7. The AO is also not correct in initating penal provisions u/s 271(1)(c) of the IT Act, 1961 though there is no concealment /furnishing of inaccurate particulars on income. Any other grounds which may be taken up with kind permission.” 3. Briefly, the facts of the case are that the appellant is a cooperative society registered under Karnataka Cooperative Societies Act, 1959. It is engaged in the business of accepting deposits from members and lending money to its members. The return of income for the assessment year 2013-14 was filed on 08.12.2014 declaring total income of Rs.Nil. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1(4), Belagavi (‘the Assessing Officer’) vide order dated 30.12.2015 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.3,20,800/-. While doing so, the Assessing Officer denied the exemption claimed u/s 80P(2)(d) of the Act in respect of interest received from other cooperative society of Rs.3,20,800/- on the ground that the parties from whom the interest was received is a cooperative bank placing reliance on the decision of the Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO, 322 ITR 272. 4. Being aggrieved by the above action of the Assessing Officer, an appeal was preferred before the ld. CIT(A), who vide impugned order confirmed the action of the Assessing Officer placing reliance on the decision of the Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra).
Being aggrieved by the above decision of the ld. CIT(A), the assessee is in appeal before us in the present appeal.
It is submitted that the appellant is a cooperative society and received interest income of Rs.3,20,800/- from other cooperative society. The case of the assessee clearly falls under the provisions of section 80P(2)(d) of the Act. 7. On the other hand, ld. DR submits that the appellant is not entitled for deduction u/s 80P(2)(d) of the Act as the parties from whom the interest was received is a cooperative bank placing reliance on the order of the ld. CIT(A). 8. We heard the rival submissions and perused the material on record. The only issue in the present appeal is pertaining to the allowability of deduction under the provisions of section 80(2)(d) of the Act. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. In the present case, the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) of the Act is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society. This issue was considered by the Hon’ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon’ble High Court referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) held that the ratio of decision of the Hon’ble Supreme Court in the aforesaid case (supra) not to be 4 applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act.
Even the decision of Pune Bench of the Tribunal in the case of Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO, 120 taxmann.com 10 wherein the Tribunal after making reference to the decisions of the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) and having noticed the divergent views of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. vs. ITO, 55 taxmann.com 447 and the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. vs. CIT, 50 taxmann.com 278, decision of the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (supra) had not been preferred to view of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. (supra). The relevant observation of the Pune Bench of the Tribunal in the case (supra) is as under :- “9. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016, dated 9-4-2019) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014, dated 19-8-2015) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of 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. Both the Hon'ble High Courts took into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. (2010) 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 Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra).
Insofar as the reliance of the ld. DR on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is concerned, we