Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI GIRISH AGRAWAL
आदेश /O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals), Puducherry in ITA No. 439/CIT(A)-PDY/2018-19 dated 27.08.2020 against the assessment order passed by ITO, Ward-2, Cuddalore u/s. 143(3) of the Income- tax Act, 1961 (herein after referred to as “the Act”) dated 27.12.2018.
2 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 2. The grounds of appeal taken by the assessee are reproduced as here under: 1. “The order of the Learned Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case. 2. For that the Learned Commissioner of Income Tax (Appeals) while deleting the addition made in the assessment u/s 80P(a)(vi) erred in enhancing the assessment by disallowing Rs.68,45,885/- being interest received from TAICO Bank claimed as deduction u/s 80P(2)(d) of the Act. 3. For that the Learned Commissioner of Income Tax (Appeals) erred in not considering the provisions of Section 80P(2)(a)vi) of the income Tax Act, 1961 which provides for deduction of the whole amount of profit and gains of business attributable to the collective disposal of the labour of its members 4. For that the Learned Commissioner of Income Tax (Appeals) committed a grave error in not appreciating that the word "attributable" used in Section 80P(2)(a)(vi) has a wider scope than the expression "derived from " and the legislature intended to covers all receipts from sources other than the actual conduct of business as held by the Apex Court in the case of Cambay Electric Supply Vs. CIT 113 ITR 84 and hence the interest received from TAICO Bank was eligible for deduction u/s 80P(2)(a)(vi). Without Prejudice to the above grounds that the receipts from TAICO Bank is eligible for deduction u/s 80P(2)(vi), it is submitted that the said receipts are also eligible for deduction u/s 80P(2)( d) 5. For that the Learned Commissioner of income Tax (Appeals) erred relying on the decision in the case of Pr.CIT Vs. Totgars Co-operative Sale Society [2017] 395 ITR 74 (Karnataka) in disallowing the claim of deduction u/s 80P(2)(d). 6. For that the Learned Commissioner of Income Tax (Appeals) failed to note that the facts of the appellant's case are completely in contrast to that of the case of Pr.CIT Vs. Totgars Co-operative Sale Society [2017] 395 ITR 74 (Karnataka) as in that case the surplus funds were invested, however in the appellant's case 20% of the net profit was invested in TAICO Bank as per the requirement of Section 72 of the Tamil Nadu Cooperative Societies Act, 1983.
3 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 7. For that the Learned Commissioner of Income Tax (Appeals) ought to have appreciated that the appellant had satisfied all the conditions u/s 80P(2)(d) to claim the deduction. 8. For that the Learned Commissioner of Income Tax (Appeals) failed to appreciate that TAICO Bank was a Co-operative Society and not a Co- operative Bank as alleged. For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that this Hon'ble Tribunal may be pleased to delete the disallowance of deduction claimed u/s 80P(2)(d) and/or pass such other orders as this Hon'ble Tribunal may deem fit.”
Before us none appeared on behalf of the assessee and Department was represented by Mr. AR V Sreenivasan, Addl. CIT. However, there is a written submission dated 26.05.2022 placed on record, filed by the assessee. Considering the written submissions placed on record by the assessee and by taking assistance from the ld. SR. DR, we are inclined to adjudicate upon the matter.
Brief facts of the case are that the assessee society, NLC Industrial Co-operative society, which otherwise is called as NLC Indcoserve is registered as a co-operative society under Tamil Nadu Co-operative Act, 1983. The assessee filed its return of income on 19.07.2017 reporting nil total income after claiming deduction under Chapter VI-A of Rs. 5,51,96,055/-. The assessee had claimed deduction of Rs. 4,83,48,171/- u/s. 80P(2)(a)(vi) of the Act in respect of income earned by the assessee from its activities and further
4 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 deduction of Rs. 68,47,885/- u/s. 80P(2)(d) of the Act in respect of interest income received from TAICO Bank. In the course of assessment proceedings, the assessee was directed to explain fulfillment of conditions and eligibility of deduction claimed u/s. 80P(2)(a)(vi) of the Act. The Ld. AO did not deal anything in respect of claim made by the assessee u/s. 80P(2)(d) of the Act and assessment was completed by disallowing claim of deduction u/s. 80P(2)(a)(vi) of the Act. Aggrieved, assessee went into appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition in respect of disallowance made by the Ld. AO u/s. 80P(2)(a)(vi) of the Act.
However, in the course of first appellate proceedings, ld. CIT(A) took up the matter relating to claim of deduction made by the assessee u/s. 80P(2)(d) of the Act of Rs. 68,47,885/-, as the eligibility of this claim was not discussed by the Ld. AO in the assessment order. Accordingly, Ld. CIT(A) issued a show cause notice u/s. 250(2) of the Act dated 26.02.2020. The Ld. CIT(A) while issuing this letter was of the view that this deduction pertained to interest received from TAICO Bank which is a Co-operative bank and according to the provisions of section 80P(2)(d) of the Act, dividend or interest received by a Co- operative society from its investment in any other Co-operative society is only exempted from tax. By applying the provisions of section
5 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 80P(2)(4) of the Act and the decision of Hon’ble Karnataka High Court in the case of PCIT vs Totgars Co-operative Sale Society (2017) 395 ITR 74 (Kar), the Ld. CIT(A) was of the view that assessee is not eligible for deduction u/s. 80P(2)(d) of the Act in respect of interest income received from TAICO Bank. In the course of first appellate proceedings, the assessee submitted that TAICO bank is a Co- operative society which stands for “the Tamilnadu Industrial Co- operative Bank Ltd” popularly known as TAICO Bank which is the first of its kind in the Co-operative sector in the country for catering the needs of industrial Co-operatives. It is a unique Co-operative Bank with state wide jurisdiction, to develop the Industrial Co-operative Societies in the state of Tamilnadu. In respect of the objects carried on by the Tamilnadu Industrial Co-operative Bank Ltd (TAICO Bank), it was submitted that the object is to provide financial assistance to the Industrial Co-operative societies working under the administrative controls of Industrial Commissioner and Director of Industries and Commerce and other types of Co-operative societies other than Industrial Co-operative with the prior permission of the Industrial Commissioner and Director of Industries and Commerce.
While disposing the appeal, ld. CIT(A) did not find favour with the submissions made by the assessee and proceeded for the
6 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 enhancement of making disallowance of Rs. 68,47,885/- claimed as deduction u/s. 80P(2)(d) of the Act by the assessee. The findings given by the Ld. CIT(A) is reproduced as under: “5.2.1 Second line of argument is that TAICO Bank is not a Co- operative Bank and that it is a Co-operative Society only and that the decision in case of Totgar Co-operative Sale Society (supra) is not applicable in case of assessee. The contention of assessee that TAICO Bank is a Co-operative Society is not contested. But a Co-operative Society can also be Co-operative Bank. On examination of official website of TAICO Bank, it is seen that it was engaged mainly in giving loans and cash credits facilities to industrial Co-operative Societies. But in the past ten years, it had diversified into issuing of loans and advances like jewel loans, ssi loan, loan against Government Securities, personal loan, HML and Regular overdraft loan etc. It is also seen that the bank, like any other commercial, scheduled and Private banks accepted deposits from public as well as from industrial Co-operative Societies, Government Institutions etc. It also has RTGS, core and NEFT facilities. It has 47 branches in different parts of the state of Tamil Nadu. TAICO Bank is included in list of Co-operative banks in Tamil Nadu. Therefore, the contention that TAICO Bank is not a cooperative Bank is not acceptable.”
Aggrieved, the assessee is in appeal before this Tribunal.
At the outset, Ld. CIT(A) allowed the claim of the assessee u/s. 80P(2)(a)(vi) of the Act for which Department came into appeal before the Tribunal. This issue was squarely covered by the decision of this Tribunal in assessee’s own case in favour of the assessee in ITA No. 2539/Chny/2017 which has been dealt separately in ITA No. 934/Chny/2020 in respect of which a separate order has been passed. The present appeal before us is only in respect of enhancement made by Ld. CIT(A) in respect of claim made by the assessee u/s. 80P(2)(d)
7 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 of the Act of Rs. 68,47,885/-. There is a written submissions placed on record by the assessee dated 26.05.2022 wherein it is submitted that TAICO Bank is not a scheduled bank and first of its kind in Co- operative sector in the country for catering to the needs of the industrial co-operatives and thus submitted that it is eligible for claim made u/s. 80P(2)(d) of the Act.
Before adverting on the issue in hand, let us refer to the law applicable in the instant case u/s. 80P(2)(d) of the Act which is reproduced 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. (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;”
From the bare perusal of the provisions of section 80P(2)(d) of the Act, it is noted that it uses expression “any income by way of interest or dividend” for the purpose of granting benefit of deduction under the said section. In this context what is relevant is that the
8 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 income should be by way of interest/dividend and that the same should have been derived by Co-operative society from investment in another Co-operative society. The fact that such interest income is in the nature of ‘profit and gains’ or “income from other sources” is not relevant for the purpose of granting benefit of deduction u/s. 80P(2)(d) of the Act.
9.1. Provisions of section 80P(4) of the Act relevant to the issue in hand are reproduced for ease of reference: “80P(1) …… (2)…….. (3) …… (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. Explanation.—For the purposes of this sub-section,— (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.”
9.2 Further, the term Co-operative society is defined u/s. 2(19) of the Act which is as under: “(19) “Co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912(2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;”
9 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 10. We note that Ld. CIT(A) has passed his decision of making enhancement in respect of claim made u/s. 80P(2)(d) of the Act by placing reliance on the decision of Hon’ble Karnataka High Court in the case of PCIT vs Totgars Co-operative Sale Society (supra). The jurisprudence available on the issue in hand is available from various Hon’ble courts and coordinate benches of ITAT which are discussed to arrive at a judicious conclusion.
The coordinate bench of Mumbai ITAT in the case of Lands End Co-operative Housing Society Ltd vs ITO, in ITA No. 3566/Mum/2014 dated 15.01.2016 held as under: ““8.3. We have heard…………. xx xx From the close perusal of the provisions of…………………………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 facilities to its members in that case the said income from short term deposits shall be treated and assessed as income from other sources and deduction u/s 80(P)(2)(a)(i) would not be available meaning thereby that deduction u/s 80(P)(2)(a)(i) 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
10 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 the gross total income of 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 directed accordingly.” (Emphasis supplied)”
11.1 After examining the above said judgments and taking into account the insertion of 80P(4) vide the Finance Act, 2006, the Mumbai Bench of the Tribunal in the case of Kaliandas Udyog Bhavan Premises vs. ITO: ITA No. 6547/Mum/2017, dated 24.04.2018, while deciding the issue in favour of the assessee, held as under: “7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further we may herein reproduce the relevant extract of the said statutory provision, viz Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. “80P(2)(d) (1) Where in the case of an assessee being a co- operativesociety, 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. (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
11 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 society, the whole of such income” 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 cooperative 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 any other law for the time being in force in any state for the registration of cooperative 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 cooperative 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 shall now advert to the judicial pronouncements that 8. had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that
12 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 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. Vs. ITO (2017) 46 CCH 32 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), 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 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 cooperative 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 Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283(S.C.) 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 M/s Vaibhav Cooperative Credit Society Vs. ITO-15(3)(4) (ITA No. 5819/Mum/2014, dated 17.03.2017 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
13 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 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 Co-operative Credit Society Ltd. Vs. ITO (ITA No. 2379/Mum/2015, dated 15.01.2016, 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 Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Section 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (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 Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), 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. 9. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income on the investments made with the co-operative bank. We thus set aside the order of the lower authorities and conclude that the interest income of Rs.27,48,553/- earned by the assessee on the investments held with the co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d).” (Emphasis supplied)”
14 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 11.2 The Hon’ble Gujarat High Court has in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj) held as under: “14. Thus, in the light of the principles enunciated by the Supreme Court in Totgars Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co-operative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co- operative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co- operative society, is not deductible under section 80P(2)(d) of the Act.”
11.3 Similar view was taken by the Hon‟ble Karnataka High Court in the case of Pr. CIT Vs. Totagars co-operative Sale Society [2017] 392 ITR 74 (Karnataka) wherein it was held as under: “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 deductible 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 ITR283/188 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.
15 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case.”
11.4 The judgment of Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society vs ITO (2010) 322 ITR 283 (SC) was rendered in the context of section 80P(2)(a)(vi) of the Act, wherein expression “profit and gain of business” has been used is distinguishable on facts. The aforesaid judgment is not applicable to the facts of the present case as deduction has been claimed u/s. 80P(2)(d) of the Act, wherein expression “any income” has been used.
Importantly, there is a decision of the Hon’ble Jurisdictional High Court of Madras which carries a force of binding nature in Tax Case Appeal no. 05/2015 in CIT vs The Salem Agricultural Producers Co- operative Marketing Society Ltd dated 10.08.2016. The substantial question of law dealt by the Hon’ble High Court of Madras in respect of deduction u/s. 80P(2)(d) of the Act is reproduced as under: 4. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the interest earned from the Salem District Central Co-operative Bank is entitled for deduction under Section 80 P (2) (d)?
12.1 While answering the substantial question of law, Hon’ble High Court of Madras referred to the observations and findings of the coordinate bench of ITAT, Chennai as under:
16 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 “5. The next issue raised in the assessment year 2010-11 in I.T.A. No. 732/Mds/2014 is with respect to the claim of deduction under section 80P(2)(d) of the Income Tax Act. The assessee has submitted that the income by way of interest and dividend earned by the assessee society are from investments made in Salem District Central Cooperative Bank, which is also admittedly, a co-operative society. However, the Assessing Officer has held that the assessee has made only with Salem District Central Cooperative Bank and therefore, the income from investment with the Bank is not entitled for deduction under section 80P(2)(d) of the Act, which was confirmed by the ld. CIT(Appeals). The assessee has raised this ground before the ld. CIT(Appeals) by raising additional an ground and the ld. CIT(Appeals) simply rejected the claim of the assessee by observing that deposits made in the Co-operative Bank and not qualify for deduction under section 80P(2)(d) of the Act. 6. Before us, ld. Counsel for the assessee, while relying on the decision of Hon’ble Himachal Pradesh High Court in the case of CIT v. Kangra Co- operative Bank Ltd. [2009] 309 ITR 106 (HP), prayed that the claim of deduction under section 80P(2)(d) should also be allowed. 7. On the other hand, the ld. DR relied on the orders of authorities below. 8. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The case of the assessee is that the income by way of interest and dividend earned by the assessee society are from investments made in Salem District Central Cooperative Bank, which is also admittedly, a co-operative society and are allowable deduction. The Assessing Officer has held that the assessee has made only with Salem District Central Cooperative Bank and therefore, the income from investment with the Bank is not entitled for deduction under section 80P(2)(d) of the Act. On appeal, the ld. CIT(Appeals confirmed the order passed by the ld. CIT(Appeals). We find that in the case of CIT v. Kangra Co-operative Bank Ltd. [2009] 309 ITR 106 (HP), the Hon’ble Himachal Pradesh High Court has considered section 80P(2)(d) of the Act. The interest earned by the assessee co-operative bank on fixed deposits with Himachal Pradesh State Co-operative Bank in compliance with the provisions of section 57 of the Himachal Pradesh Co-operative Societies Act, 1968, the income derived from banking business is eligible for deduction under section 80P(2)(a)(i) of the Act. Exemption is also available under section 80P(2)(d) of the Act. In the present case, the assessee is an Agricultural Producers Co-operative Marketing Society Ltd., registered under Tamilnadu Co-operative Societies Act and established for the benefit of the agricultural producers and the interest or dividend earned by the assessee will be beneficial to the members alone. Therefore, keeping in view of the decision in the case of CIT v. Kangra Co-operative Bank Ltd. (supra), we hold that the assessee is eligible for benefit under section 80P(2)(d) of the Act and also this being a beneficial section to the co- operative societies.”
17 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17
12.2 While adverting on the substantial question of law, Hon’ble High Court of Madras referred to Para 12 of the judgment of Division bench of Hon’ble Himachal Pradesh in the case of CIT vs Kangra Co-operative Bank Ltd (2009) 309 ITR 106 (HP) which is reproduced as under: “At para 12 of the judgment, further reiterated that “….... Furthermore, the investments have been made in the H.P.State Co-operative Bank which is also a co-operative Society and, therefore, even under Section 80 P (2) (d) of the Act, interest income from investments made in any co-operative Society would also be entitled for deduction.”
12.3 Concluding its finding in favour of the assessee and confirming the view taken by the coordinate bench of ITAT Chennai, Hon’ble High Court of Madras answered the substantial question of law as under: “For the reason that a District Central Co-operative Bank, is also a Society, in which event, the income by way of interest and dividend earned by the assessee/respondent Society from the investments made in Salem District Central Co-operative Bank, which is also a Co-operative Society is entitled for deduction under Section 80 P (2) (a) (i) of the Income Tax Act. Decision relied on by the assessee and considered by the Tribunal squarely applies to the facts on hand. Question of law, figuring as 4, is negatived as against the appellant. 10. In the result, the Tax Case Appeal is dismissed. No costs.”
12.4 From the findings given in the concluding para of Hon’ble High Court of Madras it appears that inadvertently the section referred is 80P(2)(a)(vi) of the Act, though the question of law answered is in
18 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 respect of question no. 4 (supra) which is in respect of section 80P(2)(d) of the Act.
In conclusion, there is a judicial precedence by the Hon’ble High Court of Madras carrying force of binding nature covering the case of the assessee in its favour on the issue of claim of deduction u/s. 80P(2)(d) of the Act, affirming the decision of the coordinate bench of ITAT, Chennai. Reliance placed by the Ld. CIT(A) on the decision of Hon’ble High Court of Karnataka in the case of PCIT vs Totgars Co- operative Sale Society (supra) is not a jurisdictional court and possibly the judgment of Hon’ble Jurisdictional High Court of Madras (supra) was not placed before him. Considering the aspect of judicial discipline and hierarchy, respectfully following the decision of the Hon’ble Jurisdictional High Court of Madras in the case of CIT vs The Salem Agricultural Producers Co-operative Marketing Society Ltd (supra), we are of the view that the assessee is entitled to claim deduction u/s. 80P(2)(d) of the Act in respect of interest received from Co-operative bank at Rs. 68,47,885/- derived from The Tamilnadu Industrial Co- operative Bank Ltd (TAICO Bank) which is also a co-operative society. Accordingly, the grounds of appeal are allowed.
In the result, the appeal filed by the assessee is allowed.
19 M/s. NLC Indcoserve ITA No. 900/Chny/2020 AY: 2016-17 Order pronounced on 08th June, 2022 at Chennai. Sd/- Sd/- (िगरीश अ�वाल) (महावीर �सह ) (GIRISH AGRAWAL) (MAHAVIR SINGH) लेखा सद�य /ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT
चे�ई/Chennai, �दनांक/Dated, the 08th June, 2022 JPV आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.