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Facts
The assessee, a Co-operative Credit Society, claimed deduction under Section 80P for AY 2018-19 on interest income earned from investments. The Assessing Officer disallowed the deduction. The assessee's appeal to the CIT(A) was dismissed on the ground of delay.
Held
The Tribunal held that interest income earned by a co-operative society from its surplus funds invested in co-operative banks and scheduled banks is eligible for deduction under Section 80P(2)(a) and 80P(2)(d). The delay in filing the appeal before the CIT(A) was condoned.
Key Issues
Whether interest income earned by a co-operative society from investments in banks is eligible for deduction under Section 80P, and whether the delay in filing appeal before CIT(A) should be condoned.
Sections Cited
80P, 80P(2)(d), 80P(2)(a), 250, 139(1)
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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the Assessee is against the order of ld.Commssioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Act, 1961, for the A.Y.2018-19, dated 06.02.2025. The Assessee has raised the following grounds of appeal : “1. On the facts and in the circumstances of the case and in law, the Id. NFAC-CIT (A), Delhi, has erred in confirming the action of Ld. Assessing officer (A.O.) in making addition of Rs. 93,91,184/- on [A] account of disallowance of deduction under section 80P to the total income of the assessee. The Ld. A.O has failed to appreciate that interest and dividend received on investment with other co-operative banks is a business income of the appellant society and is eligible for deduction under section 80P of the Income Tax Act, 1961
2. Without prejudice to the claim in Ground No. 1, the appellant humbly submits that the interest received by the appellant from Co-operative banks is also otherwise eligible for deduction under section 80P(2)(d) of The Income Tax Act, 1961 and the Ld. CIT (A) erred in confirming the action of Ld. A.O. by denying the same. Alternatively, deduction under section 80P(2)(d) of The Act should be allowed to interest income on investments in co-operative banks.
3. The Id. CIT(A) has erred in law as well as on facts in dismissing the appeal as non-maintainable without condoning the delay in filing the appeal. Ld. CIT(A) erred to reject the petition to condone the delay on technical ground that the appellant failed to provide any supporting documentary evidence or any admissible reason to substantiate the claim of sufficient cause, though, it was very well explained before Id. CIT (A) and there is a resonable cause which has prevented in filing the appeal belatedly, thus the delay was not deliberate or as result of negligence on the part of the appellant, and hence ought to have been decided on merit as the issue under consideration has been consistently decided in favour of the assessee by this Honb'le Bench in numerous cases
4. That the appellant craves leave to add to, alter, amend, modify, substitute, delete and for rescind all or any of the grounds of appeal on or before the final necessity, so arises.” Submission of ld.AR :
2. Ms.Renuka Arunrao Ghatge,FCA-Ld.AR for the Assessee filed a paper book along with copies of the Maharashtra Co- operative Societies Act. Ld.AR submitted that assessee is a Co- operative Credit Society, carrying on business of providing credit facilities to its members. It is registered under Maharashtra Co- operative Societies Act. Its members are mainly employees of the [A] Satara District Cooperative Bank. For A.Y.2018-19, Assessee had filed Return of Income under section 139(1) of the Income Tax Act, 1961 claiming deduction u/s.80P of the Act. Assessing Officer rejected assessee’s claim on account of interest earned from Satara District Cooperative Bank. Ld.AR submitted that as per Maharashtra Cooperative Societies Act, Assessee has to maintain certain balance with District Cooperative Bank. Ld.AR took us through the various provisions of the Maharashtra Cooperative Societies Act. Ld.AR pleaded that the interest earned is eligible for deduction u/s 80P of the Act. Ld.AR submitted that the issue is covered in favour of the assessee. Ld.AR relied on the following decisions: Hon’ble Pune ITAT in the case of The ACIT v. Pune Vibhag Madhyamik Shikshan Patsanstha Ltd. [ITA No.181/PUN/2023 dated 05.04.2023]; The Pr.CIT3 v. Pune Vibhag Madhyamik Shikshan Patsanstha Ltd. [ITA No.377/PUN/2023 dated 25.05.2023]; ITO V. Shri Lakshmi Narayan Nagari Sahakari Pat Sanstha [ITA No.604/PUN/2014 dated 16.08.2015] & [ITA No.2827/PUN/2016] dated 10.09.2018. Pune Tribunal in the case of Shri APD Jain Pathashala Sevakanchi sahakari Patsanstha Limited Vs. Pr.CIT (ITA No.228/PUN/2022) dated 06.12.2022; Rena Sahakari Sakhar Karkhana Ltd. Vs. Pr.CIT (ITA No.1249/PUN/2018) dated 07.01.2022. [A] 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. The Assessee is a Co-operative Credit Society registered under Maharashtra Co-operative Societies Act.
4.1 Assessee filed Return of Income for A.Y.2018-19 claiming deduction u/s.80P of the Act. The Assessing Officer disallowed assessee’s claim of deduction u/s.80P of the Act. Assessing Officer noted that Assessee has earned interest income from Satara District Cooperative Bank Ltd. Therefore, Assessing Officer disallowed the assessee’s claim for deduction u/s.80P following the Hon’ble Karnataka High Court’s decision in the case of PCIT Vs. Totagars Cooperative Sale Society.
4.2 Aggrieved by the same, assessee filed appeal before the ld.CIT(A) with a delay of 381 days. The ld.CIT(A) has dismissed the appeal on the ground of delay.
4.3 We have perused the Affidavit filed by the assessee and it is observed that there was sufficient cause for delay in filing appeal before the ld.CIT(A). Even otherwise substantial justice is more important than procedural delay.
4.4 In this case, it is an admitted fact that assessee is a Co- operative Credit Society. As per the Assessment Order, Assessee’s Net Profit was Rs.93,91,184/-. Assessee had claimed deduction u/s.80P of the Act, of Rs.93,91,184/-. Assessing Officer has disallowed the entire deduction claimed by assessee u/s.80P of Rs.93,91,184/-. It is also observed from the assessment order and the submission of the Assessee that Assessee has earned interest income and dividend as under : Particulars of Income Amount(Rs.) Interest on advances given to members 1,78,42,907 Interest on fixed deposits given to members 19,78,460 Interest on advances given against fixed 2,77,576 deposits to members Dividend from investment in Co-operative 9,80,000 shares Total 2,10,78,943 4.4.1 Thus, Assessee had earned interest income from loan given to members and from Satara District Co-operative Bank Limited.
4.5 Thus, the issue before us is whether assessee is eligible for deduction under section 80P(2)(a) of the Act or not! 4.6 This issue has been dealt in various decisions of ITAT Pune in favour of assessee.
The Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371 analysed the provisions of Section 80P, succinctly distinguished the decision of Hon’ble Supreme Court in the case of Totagars Cooperative Sale Society, and held as under : Quote,“8. Therefore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of sub-section (2) of section 80P or not. 9. While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Co- operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. ……………………
The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co-operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the society. It is also [A] found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note.
But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression "attributable to" and not any one of the two expressions, namely, "derived from" or "directly attributable to". 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates to treating the interest income as something not allowable as a deduction under section 80P(2)(a), is set aside.”Unquote. 5.1 Thus, the Hon’ble High Court of AP &TS held that Interest Income earned by investing Income attributable to Business and Profession by a Co-Operative Society was eligible for deduction u/sec.80P(2)(a) of the Act.
5.2 No contrary decision of the Hon’ble jurisdictional High Court has been brought to our notice. Therefore, as per rule of precedence, the proposition of law laid down by the Hon’ble High Court of AP & TS (supra) are binding precedents for us.
The Hon’ble ITAT Pune Bench in the case of Kolhapur District Central Co-op. Bank Kanista SevakanchiSahakar Pat Sanstha Ltd. Vs. Income-tax Officer 158 taxmann.com 322 (Pune Tribunal) has held as under : Quote “7………………………..I am of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Therefore, I direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative bank/scheduled bank. Thus, the ground of appeal
filed by the assessee stands allowed.”Unquote
7. The Hon’ble ITAT Pune Bench in the case of Yashwant Nagari SahakariPatsansthaMaryadit Vs. ITO in dated 04.06.2024 held that the assessee was eligible for deduction u/sec.80P(2)(a) of the Act on the Interest earned by assessee.
The Assessee has earned Dividend Income from The Satara District Co-operative Bank Limited. Since Cooperative Banks are Co-operative Societies, the Dividend received by assessee from them will be eligible for deduction u/s.80P(2)(d) of the Act. Therefore,the dividend income earned by the assessee is eligible for deduction u/s 80P(2)(d) of the Act.
Respectfully following the judicial precedent, we direct the Assessing Officer to allow deduction u/sec.80P(2)(a) of the Act as claimed by the assessee. Accordingly, Grounds of appeal raised by the assessee are allowed.