M/S. AJMER ZILA DUGDH UTPADAK SAHAKARI SANGH LTD.,AJMER vs. PR.CIT, AJMER

“2. On examination of the assessment record, it is noticed that you have adopted mercantile system of accounting during the year under consideration but claimed various provisions, as detailed below:-

Sr. no. Particulars Amount Remarks 1 Audit fee 5,00,000.00 2 Cess 51,00,000.00 Allowable on payment basis 3 Repairs & maintenance 4,05,600.00 4 Leave encashment 50,00,000.00 Allowable on payment basis 5 Milk DCS 7,00,000.00 6 Packing material 5,00,000.00 7 TA & other with BOB 1,35,330.00

3 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer As per Income Tax Act, 1961, the above provisions are not allowable. However, the A.O. failed to disallow the same during the assessment proceedings which makes the assessment order erroneous in so far as it is prejudicial to the interest of the revenue.

2.1 During the year under consideration, you have received interest of Rs. 46,09,729/- from Co-operative Bank which is not allowable under section 80P(2)(d) r.w.s. 80P(4) of the Income Tax Act, 1961. However, the A.O. failed to disallow the same during the assessment proceedings which makes the assessment order erroneous in so far as it is prejudicial to the interest of the revenue.

2.2 You have claimed provision for bonus of Rs. 13,00,000/- which was paid to the employees on 12.11.2012 i.e. after due date of filing of return. Such amount is not allowable as per provisions of section 43B of the Income Tax Act, 1961 as the same was paid to the employees after the due date of filing of return of income. However, the A.O. failed to disallow the same during the assessment proceedings which makes the assessment order erroneous in so far as it is prejudicial to the interest of the revenue.

3. Thus, the order passed by the A.O. on 07.12.2017 is considered erroneous in so far as it is prejudicial to the interest of the Revenue and a show-cause u/s 263 is hereby given to you to afford an opportunity of being heard before taking any such action.”

4 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer 4. Firstly, regarding, the claim of deduction u/s 80(P)(2)(d) of the Act in respect of interest received from Co-operative Society, the ld. AR submitted that the Tribunal in assessee’s own case in ITA No. 90/JP/2019 dated 28.08.2019 for A.Y 2014-15 has allowed the appeal of the assessee on the issue of claim of deduction u/s 80(P)(2)(d) of the Act. It was submitted that the said order was duly brought to the notice of ld. Pr. CIT. However, given the fact that the Revenue has not accepted the order of the Tribunal and further, an appeal has been preferred before the Hon’ble High Court, the claim of deduction u/s 80(P)(2)(d) was held not allowable. It was submitted that once a view has been taken by the higher appellate authority which has been followed by the Assessing Officer, there is no basis for ld. Pr. CIT to hold that the view taken by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In this regard, our reference was drawn to the detailed findings of the Co-ordinate Bench in ITA No. 90/JP/2019 which reads as under:-

“7. We have heard the rival contentions and perused the material available on record. The issue under consideration is whether the interest income on FDRs placed by the assessee cooperative society with Ajmer Central Cooperative Bank Ltd is eligible for deduction u/s 80P(2)(d) of the Act 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 sub-section (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.

5 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) ………….. (b) ………….. (c) ………….. (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.”

8. The aforesaid provisions have been examined at length by this Bench in case of ITO Vs. Shree Keshorai Patan Sahakari Sugar Mill (ITA No. 418 & 419/JP/2017 order dated 31.01.2018) and the relevant findings are reproduced as under:

“6.1 As regards the claim u/s 80P(2)(d), we find that the only condition for availing the deduction under this provision is any income by way of interest or dividend derived by the Cooperative Society from its investment with any other cooperative society, the whole of such income is allowable for deduction u/s 80P(1). Therefore, there is no condition for the assessee society to engaged in the activity of provide credits to the Members or banking business for availing the deduction u/s 80P(2)(d) read with section 80P(1) of the Act. As regards the cooperative bank shall be treated as cooperative societies for the purpose of the interest income on investment in such cooperative bank u/s 80P(2)(d) the Mumbai Bench of this Tribunal in case of Lands End Co-operative Housing Society Ltd. Vs. ITO(supra), after considering the decision of the Hon’ble Supreme Court in case of Totagar’s Co-operative Sale Society Ltd. Vs. ITO (supra) has considered and decided this issue in para 8.3 as under:-

6 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer “8.3 We have heard the rival submissions and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u/s 80P(2)(d) of the Act of Rs.14,88,107/- being interest on investment with other Coop. banks by following the decision in the case of Sandra Samruddihi Co-operative Housing Society Ltd. (Supra) which was passed on the basis of the decision passed by the Hon'ble Supreme Court in the case of Totagar's Co-operative Sale Society Ltd. In the case of Totagar's Co-operative Sale Society Ltd v/s ITAT (supra) the Hon'ble Supreme Court while interpreting the section 80P(2)(a)(0 of the Act held that surplus funds not immediately required in the business and invested in the short term deposit would be assessable under the head 'income from other sources" where the Co-operative society is engaged in carrying on business of banking or providing credit facilities to its members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co-operative society which has derived income on investment with cooperative banks is entitled to deduction u/s 80P(2)(d). The provisions of Section 80P(2)(d) of the Act provide deduction in respect of income by way of interest or dividend on investments made with other Cooperative society. For the purposes of better proper understanding of these two provisions the relevant extract of the section are reproduced below:

80P: Deduction in respect of income of co-operative Societies.

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-

The whole of the amount of profits and gains of business attributable to any one or more of much attributes.

(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."

From the close perusal of the provisions of u/s 80P(2)(a)(i) and 80P(2)(d) it is clear that the former deals with deduction in respect of profits and gain of business in case of the co-operative society carrying on business of banking or providing credit facilities to its members if the said income is assessable as income from business whereas latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(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. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honble 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 faculties to its members in that case the said income from short term deposits shall be treated and assessed as income from other

8 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer sources and deduction u/s 80(P)(2)(a)(0 would not be available meaning thereby that deduction u/s 80(P)(2)(a)(0 is available only in respect of income which is assessable as business income and not as income from other sources. Whereas in distinction to this , the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop. society if such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 14,88,107/-in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directly accordingly.”

6.2 We further note that the Hon’ble Jurisdictional High Court in the case of CIT vs. Rajasthan Rajya Sahakari Kray Vikray Sangh Ltd. (supra) by following the decision of Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. Vs. ACIT, 72 taxmann.com 169 has held in as under:- “8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar v. ITO [1993] 204 ITR 856/[1994] 72 Taxman 223 (Ker.), the Kerala High Court has held as under:

'4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in 9 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income "in accordance with the provisions" of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, and not from the interest received from the bank on the fixed deposits. The assessees were therefore right in the submissions which they made before the Commissioner 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:

10 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer '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 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 no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used,"

7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759.

11 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co- operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.'

8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the 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 12 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer 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.”

6. Further the Hon’ble Karnataka High Court in case of PCIT and Another vs. Totagars Co-operative Sale Society 392 ITR 0074 as relied upon by the Ld. AR of the assessee as held in para 7 to 11 as under:- “7. However, the contention being taken by the learned counsel is untenable. For the issue that was before the ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co- operative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to be a Co-operative Society, then any interest earned by the Co-operative Society from a Co-operative Bank would necessarily be deductable under Section 80P(1) of the Act.

8. The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover the word "Co- operative Society" are the words of a large extent, and denotes a genus,

13 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co- operative Societies. Co-Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society".

9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co-Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'.

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 earned from a Co- operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent.

11. The learned counsel has relied on the case of Totgars Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case.”

14 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer 6.4 Thus, the Hon’ble High Court has held that the Co-operative Bank is considered to a cooperative society for the purpose of section 80P(2)(d). Accordingly, in view of the decisions as cited (supra), we do not find any error or illegality in the orders of the ld. CIT(A) to the extent of the allowing the claim of the assessee u/s 80P(2)(d) in respect of interest income from deposits/FDRs with the Co-operative Banks.”

9. In the instance case, there is no dispute that Ajmer Central Cooperative Bank Ltd is a co-operative society. Therefore, in light of the aforesaid discussions, for the purposes of section 80P(2)(d) of the Act, it 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.

10. Now, coming to a related issue as to whether by virtue of provisions of Section 80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) can be denied to the assessee society. The relevant provisions of section 80P(4) reads as under: “(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank.”

15 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer The Coordinate Bench has held that that the assessee which is claiming deduction is the co-operative society and not the Regional Rural Bank and Baroda Rajasthan Kshetriya Gramin Bank which was set up under the provisions of Regional Rural Bank Act, section 22 of the said Act deem a regional rural bank to be a co-operative society and thus has allowed the deduction to the assessee u/s 80P(2)(d) of the Act. The relevant findings read as under:

7. We have also perused the various provisions of Regional Rural Bank Act 1976. Baroda Rajasthan Kshetriya Gramina Bank was set up under the provisions of under the provisions of Regional Rural Bank Act. Section 22 of the Regional Rural Bank Act provides that Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961. In our considered view the Circular of CBDT cannot override the provisions of the Act of Parliament. Even the careful reading of the Circular No. 6 of CBDT make it clear that exemption is withdrawn with respect to Regional Rural Banks are not eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards, and not the co-operative societies. The assessee before us is the co- operative society and not the Regional Rural Bank. Therefore, considering the provisions of section 22 of Regional Rural Bank Act, wherein the status of the banks established are of the co-operative society the assessee is entitled for the exemption on the interest earned on the deposits. In the result the ground No. 1 & 2 of the appeal are allowed.

12. In another case, the Coordinate Bench in case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs Income-tax Officer-21(2)(1), Mumbai [2018] 94 Taxmann.com 15 had an occasion to examine similar contention wherein the latter decision of the Hon’ble Karnataka High Court

16 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer in case of Totagars Co-operative Sale Society (Supra), relied upon by the ld CIT DR was also considered. It was held by the Co-ordinate Bench that though the Co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, however, as a co-operative bank continues to be a co- operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co- operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. We see no reason to deviate from the same and agree with the said view taken by the Co-ordinate Bench and the relevant findings of the Co-ordinate Bench read as under: “6. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal has been sought to adjudicate as to whether the claim of the assessee for deduction under section 80P(2)(d), in respect of interest income earned from the investments made with the co- operative banks is in order or not. We find that the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P, as had been made available on the statute by the legislature vide the Finance Act 2006, with effect from 01.04.2007. We find that the lower authorities had taken a view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) of the interest income earned on the amounts parked as investments with co-operative banks, other than a 17 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. We find that the lower authorities had observed that as the co-operative bank with which the surplus funds of the assessee were parked as investments, were neither Primary Agricultural Credit Society nor a Primary Co- operative Agricultural and Rural Development Bank, therefore, the interest income earned on such investments would not be entitled for claim of deduction under Sec. 80P(2)(d) of the Act.

18 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee co-operative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub- section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the term 'co-operative society' had been defined under Sec. 2(19) of the Act, as under:— '(19) "Co-operative society" means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under 19 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer any other law for the time being in force in any state for the registration of co-operative societies;' We are of the considered view, that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act.

8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co- operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. (supra)

(ii) Sea Green Cooperative Housing and Society Ltd. (supra)

(iii) Marwanjee Cama Park Cooperative Housing Society Ltd. (supra). We further find that the Hon'ble High Court of Karnataka in the case of Totagars Cooperative Sale Society(supra) and Hon'ble High Court of Gujarat in the case of State Bank Of India (supra), had also held that the interest income earned by the assessee on its investments held with a co-operative bank would be eligible for claim of 20 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the co-operative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT (A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co-operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT "F" bench, Mumbai in the case of Vaibhav Cooperative Credit Society (supra) is also distinguishable on facts. We find that the said order was passed by the Tribunal in context of adjudication of the entitlement of the assessee co-operative bank towards claim of deduction under Sec.80P(2)(a)(i) of the Act. We find that it was in the backdrop of the aforesaid facts that the Tribunal after carrying out a conjoint reading of Sec. 80P(2)(a)(i) r.w. Sec. 80P(4) had adjudicated the issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT 'SMC' Bench, Mumbai in the case of Shri Sai Datta

21 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer Co-operative Credit Society Ltd. (supra), would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Totagars co-operative Sale Society (supra), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian v. Siemens India Ltd. [1983] 15 Taxman 594/[1985] 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Totagars Cooperative Sale Society(supra) and Hon'ble High Court of Gujarat in the case of State Bank Of India (supra), wherein it was observed that the interest income earned by a co-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act.

SR. NO. PARTICULAR AMOUNT REMARKS 1 Audit Fee 5,00,000/- 2 Cess 51,00,000/- Allowable on payment basis 3 Repairs & 4,05,600/- Maintenance 4 Leave Encashment 50,00,000/- Allowable on payment basis 5 Milk DCS 7,00,000/- 6 Packing Material 5,00,000/- 7 TA & Other with 1,35,330/- BOB

AMOUNT DATE OF REMARKS SR.NO. PARTICULARS AMOUNT BIFURCATION PAYMENT TO CO -OPERATIVE DEPARTMENT AS 1 AUDIT FEES 500000 463936 14/09/2012 PER RULES 36064 31/03/2013 500000

2 CESS 5100000 2000000 14/06/2012 2760845 22/06/2012 339155 18/09/2012 TO RCDF 5100000 REPAIRS AND 3 MAINTENANCE 405600 148040 06/06/2012 LIABILITY 190400 03/09/2012 INCURRED PRIOR 75290 22/09/2012 TO 31/3/12 413730 LEAVE 4 ENCASHMENT 5000000 5000000 17/09/2012 FOR STAFF 5000000 INCENTIVES TO MILK DEPOSIT 5 MILK DCS 700000 700000 24/05/2012 700000 BILL NO.169 DATED 9/1/11(THE PACKING VALUE THEREOF IS 6 MATERIAL 500000 500000 22/09/2012 INCLUDED IN STOCK) 500000 TA & OTHERS 7 WITH BOB 135330 33800 19/09/2012 8400 12/11/2012 8400 16/11/2012 16800 19/11/2012 8400 12/02/2013 51400 31/03/2013 13674 31/03/2013 STAFF BILLS 140874 7. It was submitted that these are “specific provisions” based on “mercantile system of accounting” and complete proof of payments / discharge of liability on or before due date receipts were filed before A.O. during assessment proceedings u/sec. 143(3) / 147 of Act. Even Form 3CD u/sec. 44AB audit report contain these details & never denied by A.O. Thus same cannot be disallowed or wrongly allowed by A.O. It was 25 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer submitted that section 37(1) specifically allowed & provides that “if a business liability has definitely arise in an accounting year”, the deduction is to be allowed irrespective that the liability may have to be quantified and discharged at a future date.

8. Regarding payment of bonus Rs. 13,00,000 considered disallowable u/sec. 43B, it was submitted that as per AO’s order u/sec. 143(3) of Act, the same has already been considered “disallowed” in terms of section 43B of Act and therefore, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of Revenue.

9. Per contra, the ld. CIT/DR has relied on the order and finding of the ld. CIT and our reference was drawn to the relevant findings which read as under:-

“7. Regarding the claim of various provisions, the assessee has submitted that the section 37(1) of the Act allowed the business liability which has arisen in an accounting year and the deduction is to be allowed irrespective that the liability, may have to be quantified and discharged at a future date. The assessee\also furnished a chart with remarks showing analysis of specific provisions for outstanding liability as on 31.03.2012. The reply as well as the chart furnished by the assessee, has been perused and it has been observed that the allowability of expenses on account of these provisions is not clear due to non-availability of proper ledgers and other requisite details on assessment record. The AO has not verified the issue whether the business liabilities regarding these provisions were actually raised and ascertained during the year under consideration or not. Therefore, the 26 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer assessment order passed by the AO is considered as erroneous in so far as it is prejudicial to the interest of the Revenue.

8.1 Moreover, the interpretation of sec. 80(P)(4) of I.T. Act, 1961 by the assessee is misconceived as the said section only says that the provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank.

8.2. Further, it is not the case of Regional Rural Bank wherein vide CBDT Circular No. 6/2010 [F.No. 173(3)/44/2009-IT (A-1)] dated 20.09.2010, the Regional Rural Banks are not eligible for deduction under section 80P of the 1.T. Act, 1961 from the A.Y. 2007-08 onwards and also the Circular No. 319 dated 11.1.1982 deeming any Regional Rural Bank to be co- operative society stands withdrawn for application w.e.f. assessment year 2007-08.

8.3 Also, as per clause 22.2 of Circular No. 14/2006 dated 28.12.2006 on Finance Act, 2006 — Explanatory Notes on provisions relating to Direct Taxes, it has been explained that the cooperative banks are 27 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new sub- section (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural-development bank.

8.4. The assessee relied upon the decision of the Hon'ble ITAT, Jodhpur in the case of M/s Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd. in dated 31.10.2018 for AY 2014-15 whereby the Tribunal has allowed the claim u/s 80P(2)(d) of the I.T. Act, 1961. The decision of the Tribunal was not accepted by the Revenue and further appeal was preferred before the Hon'ble High Court, Jodhpur and the Hon'bie High Court vide its order dated 13.08.2019 in DBIT Appeal No. 2/2019 dismissed the appeal of the Revenue, against which the SLP has been recommended to be filed before the Hon'ble Supreme Court.

8.5 Similarly, the assessee relied upon the decision of the Hon'ble ITAT, Jaipur taken in the case of assessee itself in dated 28.08.2019 for AY 2014-15 whereby the Tribunal has allowed the appeal of the assessee on the issue of claim u/s 80P(2)(d) of the I.T. Act, 1961. The decision of the Tribunal has not been accepted by the Revenue and further appeal has been preferred before the Hon’ble High Court, Jaipur.

9. On the issue of provision of bonus, the assessee has submitted that the same has already been considered disallowed in terms of section 43B of the Act and provision made of Rs. 15,00,000/- (F.Y.

28 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer 2010-11) paid during the year and disallowed in A.Y. 2011-12, has been considered u/s 43B of the Act. The explanation of the assessee is not verifiable at this stage as during the course of assessment proceedings, the assessee had furnished the ledger of bonus ex- gratia and productivity incentives and the payment of this provision of bonus of Rs. 13,00,000/- is not clear from the ledgers.

10. In view of above discussion, the assessment order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue, hence, the same is set aside to the file of the AO to the aforesaid extent for making afresh order after carrying out enquiries in the manner as above and after giving opportunity of being heard to the assessee.”

29 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer 11. Secondly, regarding the claim of various provisions, the assessee has submitted that these relates to liabilities which have crystallized during the year though the payment have been made in the subsequent financial year and thus are allowable business expense. The assessee has also furnished a chart with remarks showing analysis of specific provisions for outstanding liability as on 31.03.2012 and date of subsequent payment. The reason why the same was not found acceptable to ld Pr CIT was that due to non-availability of proper ledgers and other requisite details on assessment record, the same cannot be verified and even the AO has not verified the issue whether the business liabilities regarding these provisions were actually raised and ascertained during the year under consideration or not. Per contra, the ld AR submitted that the requisite details are available as per the tax audit report and our reference was drawn to tax audit report available as APB page 42 as well as details of invoices/payments submitted during the course of hearing. It was further submitted that complete proof of payments/discharge of liability were filed before the AO during the assessment proceedings and therefore, where the matter has been examined by the AO, the order so passed by the AO cannot be held as erroneous and prejudicial in nature. We have given a careful consideration to rival contentions and find that though the details of various provisions and subsequent payments find mention in one of the annexures to the tax audit report, however, the context of such details available as annexure to the tax audit report is not clear and there is nothing in law that the AO cannot call for such details and seek to examine the same where the same find mention in the tax audit report. There is nothing on record that these details have been called for and examined by the AO during the assessment proceedings and are available on record as so contended by the ld AR and in absence of such 30 Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd, Ajmer Vs. Pr. CIT, Ajmer examination and relevant material on record, the assessment order passed by the AO is rightly considered as erroneous in so far as it is prejudicial to the interest of the Revenue and the findings of the ld PCIT are upheld in this regard.

12. Thirdly, regarding the issue of provision of bonus of Rs 13,00,000, the assessee has submitted that the same has already been considered disallowed in its computation of income in terms of section 43B of the Act and which has been accepted by the AO while completing the assessment proceedings. We have gone through the computation of income available as APB page 15 and find the contention so advanced by the assessee as correct as an amount of Rs 13,00,000/- towards bonus has been suo-moto disallowed by the assessee while computing its income under the head “business income”. Therefore, the order so passed by the AO accepting the suo-moto disallowance of such provision for bonus cannot by any stretch of imagination be held to be erroneous and prejudicial in nature and hence, the findings of the ld CIT to this extent are set-aside.

13. In light of aforesaid discussions, the order so passed by the ld Pr.CIT is hereby modified to exclude the examination of matter relating to claim of deduction u/s 80(P)(2)(d) and provision of bonus and is sustained to the extent of examination of allowability of various provisions as per law after providing reasonable opportunity to the assessee.

In the result, the appeal of the assessee is partly allowed.