THE MES EMPLOYEES CO-OP CREDIT SOCIETY LTD.,PUNE vs. ITO WARD 6(1), PUNE

The assessee filed an appeal before the Ld. CIT(A) / NFAC who upheld the action of the Assessing Officer by observing as under: “9. This submission is also, not relevant to the facts and circumstances of this case. In order to appreciate the facts further, the TDS schedule filled up by the appellant in their ITR contains the true and correct particulars. It is evident from their own ITR that, the interest income earned from those nationalised banks were duly declared as income from other sources only. The surplus amount invested with nationalized Banks in the form of fixed deposits and the interest earned on those fixed deposits has to be assessed under the head Income from Other Sources and it cannot be treated as income from the head Business or Profession. If the appellant intended to claim any benefit of interest income, they ought to have invested the surplus with other cooperative societies and they could have claimed deduction of such interest income derived by the appellant on the investment with any other cooperative society u/s 80P(2)(d) of the IT Act. In the present case, they have invested their surplus with State Bank of India, Canara Bank and Saraswat Cooperative Bank and earned the interest income. Hence, the claim of the appellant that this interest income is eligible for deduction u/s 80P(2)(a)(i) of the IT Act is not maintainable and the relevant grounds raised by the appellant are dismissed.”

Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal.

The Ld. Counsel for the assessee at the outset filed the decision of the Co- ordinate Bench of the Tribunal in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit vs. ITO vide order dated 25.01.2019 and submitted that the Tribunal in the said decision has allowed the claim of deduction u/s 80P of the Act on account of interest received from the nationalized banks. Therefore, the issue being a covered matter, the appeal filed by the assessee should be allowed.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.

We have heard the rival arguments made by both the sides and perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC. The only dispute before the Tribunal is regarding the allowability of deduction u/s 80P(2)(a)(i) on account of interest earned on fixed deposits made with nationalized banks. We find an identical issue had come up before the Tribunal in the case of Sumitra Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit (supra). We find the Tribunal vide for assessment year 2008-09 order dated 25.01.2019 has decided the issue in favour of the assessee by observing as under: “4. With regard to ground No.1, it relates to denial of deduction u/s.80[2][a][i] of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) to the assessee in respect of interest income of Rs.71,56,584.00 earned from fixed deposits kept by it with nationalized banks. The facts in this case are that the assessee is co-operative society engaged in the business of providing credit facilities to its members. It is claimed that the necessary registration and license has been obtained by the assessee from the concerned Government authorities. The assessee has e-filed return of income on 24.08.2010 declaring total income of Rs. Nil and the total income was assessed u/s.143(3) of the Act to Rs.54,12,970/- by the Assessing Officer.

With regard to this issue, the Ld. AR of the assessee at the time of hearing submitted that ground No.1 is already decided in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal, Pune in for the assessment year 2012-13 in the case of ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha, therein, in Para 2 of the order, the issue is as under: “2. The only grievance projected by the Revenue in its appeal is against the allowing of deduction u/s.80P of the Income Tax Act, 1961 (hereinafter also called as „the Act‟) in respect of interest earned by the assessee society from State Bank of India which was denied by the Assessing Officer.” Thereafter, the Tribunal has held as follows: “4.We have heard both the sides and perused the relevant material on record. It is observed that the ld. CIT(A) allowed the claim of deduction u/s.80P by following the order passed by the Tribunal in the case of Shivneri Nagari Sahakari Patsanstha Ltd. (supra). The ld. AR placed on record a copy of the another order of the Pune Bench dated 19-08-2015 in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) (to which one of us, namely, the ld. JM is party) in which similar deduction has been allowed. The Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) has discussed the contrary views expressed by the Hon‟ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) allowing the deduction u/s. 80P on interest income and 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 under similar circumstances. Both the Hon‟ble High Courts have taken into consideration the ratio laid down in the case of Totgar‟s Cooperative Sale Society Ltd. 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 taken in favour of the assessee by the Hon‟ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). In the absence of their being any change in the legal position prevailing on this issue after the passing of the order by the Pune Bench of the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) and host of other orders reiterating the similar view, respectfully following the precedent, we uphold the impugned order in allowing deduction u/s.80P on the interest income” Respectfully, following the aforesaid decision of the Co-ordinate Bench of the Tribunal, Pune, we set aside the order of the Ld. CIT(Appeals) and allow ground No.1 of the grounds of appeal

In the result, the appeal filed by the assessee is allowed.