UGAT VIBHAG VIVIDH KARYAKARI SAHKARI MANDLI LIMITED,NA vs. ARIVS.INCOME TAX OFFICER, NAVSARI CIRCLE , NAVSARI

The assessee has raised the following grounds of appeal: “1. In finance Act, 2006, section 80P(4) inserted to withdraw exemption U/s 80P to tax co- operative bank. There is no-amendment in finance act 2006 or then after to withdraw exemption U/s 80P which exempt dividend and interest income of co-operative society from other co-operative societies (where co-operative bank is one kind of co-operative society only). 2. On facts and circumstances of the case as also law on subject, the learned AO as well as CIT(A)/NFAC has erred in making addition of income Of Rs.4,83,278/-which was eligible for deduction u/s. 80P(2)(d) of the act, which is unjustified, bad in law. Hence, requires to be deleted. 3. The learned CIT(A) erred in law and on facts in confirming the disallowance of Rs.4,83,278 under section 80P(2)(d), by wrongly holding that interest and dividend income earned from a co-operative bank is not eligible for deduction, ignoring that a co-operative bank is also a co-operative society registered under the Co-operative Societies Act. 4. The authorities below erred in applying section 80P(4) to deny deduction to the assessee-society, whereas section 80P(4) only withdraws deduction from co-operative banks themselves and does not curtail deduction available to a co-operative society earning income from investments with another co-operative society. 5. The reliance placed on Totagars Co-operative Sale Society (322 ITR 283) is misplaced, as the said judgment dealt with section 80P(2)(a)(i) and not with section 80P(2)(d), a distinction repeatedly recognised by courts and tribunals. 6. That the learned CIT(A) erred in law and on facts in confirming the disallowance of deduction under section 80P(2)(d) of the Act in respect of interest/dividend income earned from investments with a Co-operative Bank, ignoring the binding judgment of the Hon'ble Gujarat High Court in PCIT v. Ashwinkumar Arban Co-operative Society Ltd. (Tax Appeal No. 538 of 2024 and connected matters, judgment dated 24.09.2024), wherein it has been conclusively held that interest earned by a co-operative society from a co-operative bank is eligible for deduction under section 80P(2)(d) and that section 80P(4) does not disentitle such deduction. 7. The finding that a co-operative bank ceases to be a co-operative society merely because it is governed by the Banking Regulation Act is legally untenable and contrary to the statutory definition under section 2(19) of the Income-tax Act. 8. The provisions of section 80P being a beneficial provision intended to promote the co- operative movement, the same ought to have been interpreted liberally in favour of the assessee, which the authorities failed to do. 9. The Appellant craved leave to add, alter, delete, amend or rescind any of the above grounds of appeal as and when necessary, with the permission of ITAT.” 3. The assessee society is engaged in the business of providing credit facility to members and supplying agricultural implements, pooling of crops of members and consumer activities. The assessee society has filed its return of income for A.Y. 2017-18 on 12.10.2017 declaring total income at Rs.2,760/- after claiming deduction under Chapter VIA of Rs. 17,01,563/-. The case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 09.08.2018. Subsequently, a notice u/s 142(1) of the Act was issued and the assessee society filed the details and submissions accordingly. The Assessing Officer observed that the assessee society has claimed deduction in respect of dividend received of Rs. 49,807/- and net interest income of Rs. 4,33,471/- received from co- operative bank, viz. Valsad District Central Co-Operative Bank. The Assessing Officer held that the claim of deduction u/s 80P(2)(d) of the Act made by the assessee society in respect of dividend of Rs. 49,807/- and net interest of Rs. 4,33,471/- received from co-operative bank, viz. Valsad District Co-operative Bank is not allowable and disallowed the same.

Being aggrieved by the Assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

The Ld. AR submitted that the assessee society received the interest and the dividend from the Valsad District Co-operative Bank only and the Hon’ble jurisdictional High Court in case of Surat Vankar Sahkari Sangh Vs. ACIT (2016) 72 taxmann.com 169 (Gujarat) as well as PCIT vs. Ashwinkumar Arban Co- operative Society Ltd. (Tax Appeal No. 538 of 2024 order dated 24.09.2024) has categorically held that interest income earned by a cooperative Society on its investments held with the co-operative bank would be eligible for claim of deduction u/s 80P(2)(d) of the Act. The Ld. AR relied upon various cases laws of jurisdictional High Court as well as various other High Court.

The Ld. DR relied upon the assessment order and the order of the CIT(A).

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee society is registered society under Co-operative Society Act and is providing credit facility to its members only. Besides this, the assessee society is earning interest income from the Valsad District Co-operative Bank which is also registered under Co- operative Society Act. The interest income earned from Co-operative Society cannot be equated with the interest earned from Commercial Bank. The Hon’ble Jurisdictional High Court in various decisions including that of Surat Vankar Sahakari Sangh (Supra) held the same. Therefore, the Assessing Officer as well as CIT(A) was not right in disallowing the deduction under Section 80P(2)(d) of the Act to the assessee society.

In result, appeal of the assessee is allowed.