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Facts
The assessee, a cooperative society, claimed deduction under Section 80P for interest income earned from fixed deposits and advances given to member societies. The Assessing Officer disallowed the claim, and the CIT(A) upheld the disallowance, treating the claim for deduction under Section 80P(2)(d) as a fresh claim not made during assessment proceedings.
Held
The Tribunal held that the CIT(A) erred in treating the claim under Section 80P(2)(d) as a fresh claim, as it was made in the computation of income and audit report. Following judicial precedents, the Tribunal allowed the deduction for interest income derived from investments with other cooperative societies.
Key Issues
Whether interest income earned by a cooperative society from investments in other cooperative societies is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, and if a claim made during appellate proceedings for the first time can be considered.
Sections Cited
80P(2)(a)(vi), 80P(2)(d), 250, 80P(2)(c)(ii), 80P
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the assessee directed against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] under section 250 of the Income Tax Act, 1961 dated 23.12.2024 for the A.Y.2018-19. The Assessee has raised the following grounds of appeal :
“1. The learned CIT(A) erred in holding that the appellant is not eligible to claim the deduction u/s 80P(2)(a)(vi) of the Income tax Act, 1961 in respect of Income derived from the activities carried out by the appellant 2. The learned CIT(A) failed to appreciate the fact that advances were given to the member societies for execution of contracts awarded by the Government Department, these advances were given out of the funds generated from the activities carried out by the appellant and hence the entire interest income of Rs. 17,78,232/- is eligible for deduction u/s 80P(2)(a)(vi) of the Income tax Act 1961 3. Without prejudice to the above grounds, the appellant submits that The Jalgaon District Central Cooperative Bank Ltd and Shri Gulabrao Devkar Nagari Sahakari Patsanstha Ltd are registered under the Maharashtra Co-op Societies Act 1960 and hence the income derived by way of interest received from Fixed Deposits with The Jalgaon District Central Cooperative Bank Ltd Rs. 9,08,442/-and Shri Gulabrao Devkar Nagari Sahakari Patsanstha Ltd Rs. 18.93,530/- totaling to Rs. 28.01,972/-which is credited to the Profit & Loss Account as fixed Deposit interest is eligible as a deduction u/s 80P(2)(d) of the Act.
Without prejudice to the above the appellant submits that alternatively the Interest Received on Advances given to the Member Societies of Rs. 17,78,232/- which are Primary Labour Cooperative Societies may be allowed as deduction u/s 80P(2)(d) of the Act 5 The appellant craves leave to add, alter, delete, and modify all or any of the grounds of appeal
6. The appellant prays leave to adduce such further evidence to substantiate its case as the occasion may demand.” Submission of ld.AR :
2. Advocate Smt.Deepa Khare - Ld.AR for the assessee filed a paper book. She explained that assessee is a Registered Co- operative Society under Maharashtra Co-operative Societies Act. Copy of the Registration Certificate was at Page No.118 of the paper book. The relevant paragraph of the written submission is reproduced as under : “During the financial year under consideration, the appellant has received Interest Income from the Co-operative Bank and Co-operative Credit Society totaling to Rs.28,01,972/-. Break-up of the same is as under :
Name of the Bank Rs. Investment in Fixed Deposits with Jalgaon District Central Cooperative Bank Ltd. 9,08,442 Shri Gulabrao Devkar Nagari Sahakari 18,93,530 Patstanstha Ltd. Total (A) 28,01,972
Alternatively, assuming without admitting, if the Interest Income Received from Co-operative Bank and Co-operative Societies is not allowable as deduction per Sec 80P(2)(a)(vi), then as per Sec 80P(2)(d) of the Act, interest and dividend income received by a cooperative society from its investment with any other cooperative society is eligible for deduction.
Without prejudice to whatever has been stated above, the appellant prays that it is eligible for deduction u/s 80P(2)(d) of the Act in respect of Interest Income Received from Co-operative Bank and Co-operative Societies.”
2.1 The ld.AR further submitted as under : “On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by the appellant from the investments held with any other co-operative society shall be deducted in computing total income.
It can be observed 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 with any other co-operative society.
Sec 80P(2)(d) 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. The provision does not indicate any adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society.
The appellant submits that there are various Decisions of the Jurisdictional Tribunals wherein it has been held that Interest income earned from investment of surplus funds with Co-operative Bank is eligible for deduction under s. 80P(2)(d) or 80P(2)(a)(i).
Decisions relied upon by the appellant are as under which are directly relevant to facts before your honour:
Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. Vs. Income tax officer, ITAT, PUNE 'B' BENCH, Asst. yr. 2014-15 Date of Decision 23rd September, 2020, (2021) 186 ITD 220 (Pune)
Income Tax Officer vs. Maharashtra Bank Employees Co-operative Credit Society Ltd, ITAT, PUNE 'A' BENCH, to [A] 456/Pn/2015, (2018) 193 TTJ (Pune) 736, Date of decision 22nd December, 2017 Borivali Jankalyan Sahakari Patpedhi Ltd. Vs. Income Tax Officer, ITAT, MUMBAI 'SMC' BENCH, ITA No. 5230/Mum/2019, Date of Decision 30th March, 2021, (2021) 35 NYPTTJ 222 (Mumbai)
Navbharat Urban Co-operative Credit Society Ltd. Vs. Commissioner of Income Tax, ITAT, MUMBAI 'SMC' BENCH, & 5289/Mumbai/2018, Date of Decision 25th November, 2021, (2021) 35 NYPTTJ 1107 (Mumbai)
Income Tax Officer vs. Kundalika Nagari Sahakari Patsanstha Maryadit, ITAT, PUNE 'A' BENCH, Date of decision 29th January, 2016, (2016) 178 TTJ (Pune) 381.”
Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of the Assessing Officer and Ld.CIT(A).
Findings & Analysis : 4. We have heard both the parties and perused the records. Assessee had filed Return of Income for A.Y.2018-19 on 22.10.2018 claiming deduction under section 80P of the Act. Assessee’s case was selected for scrutiny. In the assessment order, the Assessing Officer has held as under :
“2.3.6 The following amounts earned by the assessee can not be considered to be attributable to the activity of the collective disposal of the labour of its members and hence are not liable to be allowed as deduction u/s 80(2)(a)(vi) of the Act.
Earnings as per the Profit & Loss A/c Amount Interest received on FDR Rs.28,01,972/- Interest received on society Advance Rs.17,78,232/- Total Rs.45,80,204
Aggrieved by the assessment order, Assessee filed appeal before the ld.CIT(A). Relevant paragraph of ld.CIT(A)’s order is reproduced here as under : “The ground No's. 06, 07. 08 & 09 are inter connected to each other as such. they are adjudicated as under Ground No.6. Without prejudice to the above grounds the appellant submits that The Jalgaon District Central Cooperative Bank Ltd and Shri Gulabrao Devkar Nagan Sahakari Patsanstha Ltd was registered under the Maharashtra Coop. Societies Act 1960 and hence the income derived by way of interest received from Fixed Deposits with The Jalgaon District Central Cooperative Bank Ltd Rs. 908442 and Shri Gulabrao Devkar Nagari Sahakari Patsanstha Ltd Rs.18,93,530 totaling to Rs. 2801972 which is credited to the Profit and Loss Account as Fixed Deposit Interest was eligible as a deduction u/s 80P(2)(d) of the Act.
Ground No.7 Without prejudice to the above grounds the appellant submits that Shri Gulabrao Devkar Nagari Sahakari Patsantha Ltd was registered under the Maharashtra Coop. Societies Act 1960 and hence the income derived by way of interest received on Saving Account with Shri Gulabrao Devkar Nagari Sahakari Patsanstha Ltd Rs. 381743 which is included in Bank Interest credited to the Profit and Loss Account Rs.5,55,435 was eligible as a deduction us 80P(2)(d) of the Act.
Ground No.8 Without prejudice to the above grounds theappellant submits that The Jalgaon District Central Cooperative Bank Ltd was registered under the Maharashtra Co-op. Societies Act 1960 and hence the income derived by way of interest received on Saving Account with The Jalgaon District Central Cooperative Bank Ltd Rs.1.73.692 which is included in Bank Interest credited to the Profit and Loss Account Rs. 5.55.435 was eligible as a deduction us 80P(2)(d) of the Act.
Ground No.9 Without prejudice to the above the appellant submits that alternatively the Interest Received on Advances given to the Member Societies of Rs.17,78,232 which are Primary Labour Co-operative Societies may be allowed as deduction us 80P(2)(d) of the Act.
The grounds raised have been carefully examined and found that during the course of assessment proceedings, the AO has examined the claim of deduction made u/s 80P(2)(c) (ii) and 80P(2)(a)(vi) and the same were disallowed. It is observed that there was no claim of deduction u/s 80P(2)(d). This is the fresh claim made by the appellant which was not made either in the return of income, nor before the Assessing Authority Thus, a fresh deduction cannot be considered during the course of appellate proceedings. Therefore, the grounds raised are treated as dismissed.”
5.1 Aggrieved by the order of the ld.CIT(A), Assessee filed appeal before this Tribunal
Admittedly, Assessee is a Co-operative Society registered under the Maharashtra State Cooperative Societies Act 1960. The appellant is an apex Cooperative Society of the Primary Labour Cooperative Societies who are engaged in the collective disposal of the labour of its members The Membership is restricted to only Primary Labour Cooperative Societies located at various villages and Taluka Places in Jalgaon District only. The appellant collects 1 percent from the contracts awarded to the members i.e. Primary Labour Cooperative Societies by the State Government Zilla Parishad etc. The amount so collected is commonly called as Vargani or the Subscription. This amount of Vargani is directly deducted from the Payments made by the respective Government Departments who has awarded the Work under a Tender to the concerned Primary Labour Cooperative Societies. The amount of Vargani is directly deposited in the Saving Account of the Appellant Cooperative Society with the Jalgaon District Central Coop Bank Ltd. The appellant is authorized by the