BOMBAY MERCANTILE CO. OP. BANK LTD. EMPLOYEES CO-OP. CREDIT SOCIETY LTD.,MUMBAI vs. ITO 15(1)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR, AM AND SHRI AMARJIT SINGH, JM आयकर अपील सं/ I.T.A. Nos.3583/Mum/2014 & 4824/Mum/2016 (निर्धारण वर्ा / Assessment Years:2010-11 & 2012-13) Bombay Mercantile Co-op. बिधम/ ITO-15(1)(2) Bank Ltd. Room No.116, 1st Floor, Vs. Employees Co-op. Credit Matru Mandir, Grant Road, Society Ltd. Mumbai-400007. Navratan Building, 69, P. D’mello Road, Carnac Bunder, Mumbai-400009. स्थायी लेखा सं./जीआइआर सं./PAN/GIR No. :AAAJB0706E (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee by: Shri Vijay Joshi Revenue by: Ms. Kavita P. Kaushik (Sr. DR) सुनवाई की तारीख / Date of Hearing: 22/09/2020 घोषणा की तारीख /Date of Pronouncement: 27/10/2020 आदेश / O R D E R PER AMARJIT SINGH, JM: The assessee has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals) -26 & 28, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Ys. 2010-11 & 2012-13. ITA. NO.3583/Mum/2014 2. The assessee has filed the present appeal against the order dated 24.02.2014 passed by the Commissioner of Income Tax (Appeals) -26, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2010- 11.

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 3. The assessee has raised the following grounds: -

“I On the facts and circumstances of the case and in law the learned Commissioner of Income - tax (Appeals) - 26, Mumbai [Id. CIT (A)"] erred in not allowing exemption to the Appellant in respect of interest income of Rs. 86.53 lacs earned from providing credit facilities to its members on the principal of mutuality. 1.2 While doing so, the Id. CIT (A) erred in: (i) Basing his action only on surmises, suspicion and conjecture; (ii) Taking into account irrelevant and extraneous considerations: and (iii) Ignoring the thet that the said interest income is earned by the Appellant only from providing credit facilities to its members. 1.3 Meanwhile supporting the order of the Ld. CIT(A) in granting relief on the above mentioned amount u/s 8011(2)(a)(i) of the Income Tax Act, 1961 ["the Act"], it is submitted that in the facts and the circumstances of the case, and in law, the said interest should have been exempted on the principal of ci iuttialitr itself. 2.1 The Id. CIT (A) erred in not allowing deduction ti/s 80P(2)(d) of the Act in respect of Interest Income of Rs.I6.74 lacs earned by the Appellant on investment in deposits kept with Bombay Mercantile Co-operative Bank Ltd. and Maharashtra State Co- operative Bank Ltd. 2.2 While doing so, the Id. CIT (A) failed to appreciate that: (i) The deposits were made as per the regulations of Multi State Co- Operative Societies Act; (ii) Both the above-mentioned banks are Co-operative Societies within the meaning of the Co-operative Societies Act as also the Banking Regulation Act; and (iii) All the conditions required for claiming deduction u/s 80P(2)(d) have been fulfilled by the Appellant. 2.3 It is submitted that in the facts and circumstances of the case, and in law, no such disallowance was called for. 2.4 Without prejudice to the above, it is respectfully submitted that the Appellant has paid total interest of Rs.34.64 lacs to Bombay Mercantile Co-operative Bank Ltd. and Maharashtra State Co- Operative Bank Ltd and received interest of Rs.16.74 lacs from them, as such the Ld. CIT(A) should have allowed the netting off of the interest received from the above parties against the interest paid to them. 3. The Appellant craves leave to add, alter, delete or modify all or any of the above grounds at the time of hearing.” 4. The brief facts of the case are that the assessee company was a Credit Co-operative society and filed its return of income on 21.08.2010

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 declaring a total income to the tune of Rs.Nil after claiming deduction u/s 80P(2)(a)(i) of the Income tax Act, 1961 for an amount of Rs.85,63,511/-. The case was selected for scrutiny and notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The main object of the company was to enable its members to obtain loans on reasonable term, to lend money to the members of the society, to enable its member to save part of their income in a safe convenient way, etc. The paid up capital of the Pathepdhi was Rs.6,63,45,850/- as on 31.03.2010. The loans given and investments made are of Rs.10,51,95,000/- and Rs.2,00,70,433/- respectively as on 31.03.2010. The gross total income was in sum of Rs.85,63,511/-. The assessee claimed the deduction u/s 80P(2)(a)(i) of the Income tax Act, 1961 at Rs. 85,63,511/-. In support of the claim of deduction under Chapter VI-A, the assessee submitted letter dated 16.11.2012 i.e. a Registered Credit Co-operative Society with limited liability since 12th March, 1960 which was collecting contribution from its members towards share capital from their salaries and does not accept any deposits and or loans from any pension for its transaction and activities. The society was availing overdraft facility against its own deposits from the Bombay Mercantile Co-operative Bank Ltd. and paid interest on the same. The assessee by virtue of letter dated 21.11.2012 also stated that the society was eligible for deduction u/s 80P(2)(a)(i) as the society was not a Co- operative Bank as defined under Part V of the Banking Regulation Act, 1949 and the new Proviso to Section 80P(4) was applicable only to Co- operative Banks and not to Credit Co-operative Societies. The case of the assessee was examined and the claim of the assessee was declined by the AO. Feeling aggrieved, the assessee filed an appeal before the CIT(A) and the CIT(A) has held that the assessee was eligible for deduction u/s

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 80P(2)(a)(i) but was not eligible for deduction u/s 80P(2)(d) in respect of the interest income of Rs.16.74 lacs earned by the appellant on the deposits kept with Bombay Mercantile Co-operative Bank Ltd and Maharashtra State Co-operative Bank Ltd. The revenue filed an appeal against the order of the CIT(A) by virtue of ITA. No.2937/M/2014 dated 27.10.2015 and it was held that the assessee was entitled for deduction u/s 80P(2)(a)(i) of the Act. The appeal of the assessee is in connection with the disallowance of deduction u/s 80P(2)(d) in respect of in respect of the interest income of Rs.16.74 lacs earned by the appellant on the deposits kept with Bombay Mercantile Co-operative Bank Ltd and Maharashtra State Co-operative Bank Ltd.

ISSUE NOs.1.1 to 1.3 5. These issues were not pressed by the Ld. Representative of the assessee, therefore, these issues are being decided in favour of the revenue against the assessee being not pressed.

ISSUE No. 2.1 6. Under this issue the assessee has challenged the disallowance of deduction u/s 80P(2)(a)(i) in respect of interest income of Rs.16.74 lacs earned by the appellant on the deposits kept with Bombay Mercantile Co- operative Bank Ltd and Maharashtra State Co-operative Bank Ltd. At the outset, the Ld. Representative of the assessee has argued that the issue has duly been covered by the decision of Hon’ble ITAT Delhi Bench in the case of ACIT Vs. M/s. Jawala Cooperative Urban Thrift & Credit Society Ltd. bearing ITA. No.2607/Del/2012 dated 19.12.2014, therefore, the claim of the assessee is liable to be allowed in the interest of justice. It

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 is also argued that the issue has also been decided in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. Vs. ITO (2015) 55 taxmann.com 447 (kar), hence the claim of the assessee is liable to be allowed. However, on the other hand, the Ld. Representative of the Department has strongly relied upon the order passed by the CIT(A) in question. The issue is in connection with the disallowance of interest income of Rs.16.74 lacs earned by the appellant on the deposits kept with Bombay Mercantile Co-operative Bank Ltd and Maharashtra State Co-operative Bank Ltd in view of the provisions u/s 80P(2) (d) of the Act. This issue has discussed and decided by the Hon’ble ITAT Delhi Bench in the case of ACIT Vs. M/s. Jawala Cooperative Urban Thrift & Credit Society Ltd. (supra). The relevant finding is hereby reproduced as under.:-

“6. At the outset, Ld. D.R. submitted that income of interest and dividend was not eligible for deduction u/s 80P2(a)(i) of the I. T. Act, 1961 as the said section provides the deduction for cooperative societies to claim deduction on whole of the amount of profit and gain of business but the assessee has earned this income from its fixed deposits which is taxable under Section 56 of the Act. In this respect, our attention was invited to relevant provisions of Section 80P. It was further submitted that the assessee was not eligible for deduction u/s 80P(2)(d) also as the fixed deposit was not placed with a cooperative society. It was submitted that Ld. CIT(A) has passed a non speaking order and has not given any finding and after recording submissions of assessee, had deleted the additions. It was submitted that order of Ld. CIT(A) was violative of principles of natural justice. Regarding case laws relied upon by Ld. CIT(A), Ld. D.R. submitted that before Ld. CIT(A), assessee had relied upon a number of case laws which were pronounced by either Hon'ble High Court or Hon’ble ITAT whereas the case law of Totgar’s cooperative Society as relied upon by A.O. is by Hon'ble Supreme Court of India which is a final authority and, therefore, the order of A.O. should be upheld. 7. Inviting our attention to page 8 of Ld. CIT(A)’s order, Ld. D.R. submitted that Ld. CIT(A) has given wrong finding that the case of the assessee was not similar to case law of Totgar’s Cooperative Society as the ratio emanating from Totgar’s Cooperative Society has been rightly

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 applied by A.O. Ld. D.R. further submitted that alternative contention of the assessee that assessee as noted by Ld. CIT(A) that assessee had obtained credit limits against FDRs and had incurred interest expenditure on the credit limit and, therefore, income if any has to be taxed on net basis does not hold any ground as assessee’s income has to be assessed as income from other sources and only those expenses can be allowed against such income which are incurred for the purpose of earning such interest. Ld. D.R. also, later on filed written synopsis narrating his arguments. 8. Ld. A.R. on the other hand invited our attention to the provisions of Section 80P. Our specific attention was invited to sub-clause (2)(d) and it was submitted that assessee had kept the funds with Bombay Mercantile Bank which itself was a cooperative society. Therefore, interest earned by it from fixed deposits placed with cooperative societies was exempt. To support his contention, Ld. A.R. invited our attention to paper book page 30 where a copy of certificate certifying that Bombay Mercantile Cooperative Bank was a scheduled cooperative bank and was a society registered under Maharashtra State Cooperative Societies Act was placed. In support of his argument that Bombay Mercantile Cooperative Society was a society, Ld. A.R. relied upon the case law of Bombay Mercantile Bank vs. DCIT in I.T.A. No. 4128 and 4129 wherein it was held that the said bank was a society eligible for deduction u/s 80P(2)(i) of the Act. Without prejudice to the above, it was submitted that besides eligible u/s 80P(2)(d) assessee was also eligible under section 80P(2)(i) as income from funds kept as short term funds is deemed to have accrued as profits and gain of business attributable to the activities of assessee and reliance in this respect was placed on the case law of Dhan Laxmi Credit Cooperative Society Ltd. vs ITO in I.T.A. No. 2342 wherein under similar circumstances, the deduction u/s 80P(2)(i) was allowed after taking into account the case law of Totgar’s Society as decided by Hon'ble Supreme Court. The Ld. A.R. also referred to Section 80P(4) and submitted that benefit of Section 80P has been taken away from 01.04.2007 from cooperative banks but the assessee was not a cooperative bank but was a cooperative society and therefore, was eligible for deduction under that section. 9. We have heard rival parties and have gone through the material placed on record. We find that total income earned by the assessee included income on fixed deposits placed with Bombay Mercantile Bank, interest income from a scheduled bank and dividend income from Delhi Cooperative Bank. From the certificate as placed at paper book page 30, we find that Bombay Mercantile Cooperative Bank is a cooperative society registered under Maharashtra Cooperative Societies Act and we further find that the said society has been assessed u/s 143(3) as a cooperative society and its income was allowed to be exempt u/s 80P(2)(i) as held by Mumbai Tribunal in I.T.A. No. 4128 and 4129 vide its order dated 30.11.2005, for Assessment Year 1990-91 and 1991-92 and further by Mumbai Tribunal vide order dated 07.09.2011 in I.T.A. No. 5292 for Assessment Year 1997-98. Therefore it

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 is held that fixed deposits placed with Bombay Mercantile Bank falls within the exemption granted by Section 80P(2)(d) of the Act. The assessee was also eligible under the provisions of Section 80P(2)a(i) as the funds placed by assessee in the form of fixed deposits can be said to be kept for the purpose of business of the assessee as the assessee had availed credit facilities also against such fixed deposits which were again used for the purpose of business of assessee. Moreover, under similar circumstances, Chandigarh Bench in I.T.A. No. 996/2009 as noted by Ld. CIT(A) has decided in favour of assessee. The dividend income is exempt for all persons including assessee. The interest income from bank amounting to Rs.18,190/- is though not exempt u/s 80(p)(2)(d) but is exempt u/s 80P(2)(i) of the Act. The case law of Totgar’s Cooperative Society was rightly distinguished by Ld. CIT(A). Therefore, keeping in view all facts and circumstances, we do not find any infirmity in the order of Ld. CIT(A). 10. In view of above, appeal filed by revenue is dismissed. 7. The Hon’ble High Court of Karnataka has also decided the issue in favour of the assessee by virtue of judgment in the case of Tumkur Merchants Souharda Credit Co-operative Ltd. Vs. ITO (2015) 55 taxmann.com 447 (kar). The relevant finding has been given in para no. 6 to 10 mentioned below.:-

“6. From the aforesaid facts and rival contentions, the undisputed facts which emerges is, the sum of Rs. 1,77,305/- represents the interest earned from short-term deposits and from savings bank account. The assessee is a Cooperative Society providing credit facilities to its members. It is not carrying on any other business. The interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest. Therefore, whether this interest is attributable to the business of providing credit facilities to its members, is the question. In this regard, it is necessary to notice the relevant provision of law i.e., Section 80P(2)(a)(i): "Deduction in respect of income of co-operative societies: 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:

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 the whole of the amount of profits and gains of business attributable to any one or more of such activities." 7. The word 'attributable' used in the said section is of great importance. The Apex Court had an occasion to consider the meaning of the word 'attributable' as supposed to derive from its use in various other provisions of the statute in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 (SC) as under: 'As regards the aspect emerging from the expression "attributable to" occurring in the phrase "profits and gains attributable to the business of the specified industry (here generation and distribution of electricity) on which the learned Solicitor-General relied, it will be pertinent to observe that the legislature, has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have with some force been contended that a balancing charge arising from the sale of old machinery and buildings cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection, it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression ''derived from", as, for instance, in section-80J. In our view, since the expression of wider import, namely, "attributable to'', has been used, the legislature intended to cover receipts from sources other than the actual conduct of the business of generation and distribution of electricity.' 8. Therefore, the word "attributable to" is certainly wider in import than the expression "derived from". Whenever the legislature wanted to give a restricted meaning, they have used the expression "derived from". The expression "attributable to" being of wider import, the said expression is used by the legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A Cooperative Society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or providing credit facilities to its members by a co-operative society and is liable to be deducted from the gross total income under Section 80P of the Act.

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 9. In this context when we look at the judgment of the Apex Court in the case of M/s. Totgars Co-operative Sale Society Ltd., on which reliance is placed, the Supreme Court was dealing with a case where the assessee- Cooperative Society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was bought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee - Society was a liability and it was shown in the balance sheet on the liability side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in Section 80P(2)(a)(i) of the Act or under Section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the Apex Court held the assessing officer was right in taxing the interest income indicated above under Section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act. In fact similar view is taken by the Andhra Pradesh High Court in the case of CIT v. Andhra Pradesh State co-operative Bank Ltd., [2011] 200 Taxman 220/12 taxmann.com 66. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the aforesaid amount is unsustainable in law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the revenue. Hence, we pass the following order.” 8. The Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. Vs. ACIT (2016) 72 taxmann.com 169 (Guj) has also decided the issue in favour of the assessee and the relevant finding is hereby reproduced as under.:-

“7. Heard learned advocates for both the sides. So far as the contention regarding the benefit given to the assessee for earlier years is concerned, we are of the opinion that the same is required to be accepted. The Apex Court in the case of Kaira District Co-operative Milk Producers Union Ltd. (supra) has held that however wide the socpe for taking action

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 under Section 148 of the Income tax Act, 1961, it does not confer jurisdiction on a change of opinion as to the interpretation of a particular provision earlier adopted by the assessing authority. We are therefore of the opinion that the assessee when had been once granted the benefit of deduction for the earlier years, he should have been granted for the relevant assessment years also. 7.1 It is required to be noted that the Tribunal has not challenged the decision of the Tribunal rendered in the case of Petlad Taluka Purchase and Sales Union Ltd. (supra) and thereby has accepted the same. The Apex Court in the case of Kaumudini Narayan Dalal (supra) has already held that it was not open to the revenue to accept the earlier judgement in the case of one assessee and challenge its correctness without just cause in the case of other assessees. Similarly, the Tribunal failed to appreciate that the point was otherwise covered in favour of the assessee by the decision of the Ahmedabad Bench of the Tribunal in the case of Petlad Taluka Purchase and Sales Union Ltd. (Supra) and even the revenue's Reference Application against the said decision was rejected. The Revenue has not challenged the said order further thereby accepting the same. Even on the said ground, the contention of the assessee is required to be accepted. 8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar v. ITO [1993] 204 ITR 856/[1994] 72 Taxman 223 (Ker.), the Kerala High Court has held as under: '4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income "in accordance with the provisions" of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, and not from the interest received from the bank on the fixed deposits. The assessees were therefore right in the submissions which they made before the Commissioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5.' 8.1 Similarly, in the case of Doaba Co-operative Sugar Mills Ltd (supra), the Punjab & Haryana High Court has held as under: '5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Section 80P(2) (d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Co-operative Bank and has also received interest from the said co- operative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Section 80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under : "80P. (2)(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." 6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 : "...In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used," 7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759. 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society. This provision 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

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.' 8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed under Section 12(2). The High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the exercise of that option would come within the ambit of section 12(2) of the Indian Income-Tax Act but where the option has no connection with the carrying on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits. 9. In view of the above, the questions raised in the present appeals are answered in favour of the assessee and against the revenue. The order passed by the Tribunal is accordingly quashed and set aside.”

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 Bank Ltd. Accordingly, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee.

ISSUE Nos. 2.2 & 2.3 10. These issues have not been pressed by the Ld. Representative of the assessee, therefore, these issues are being decided in favour of the revenue against the assessee being not pressed.

ISSUE NO. 2.4 11. Under this issue the assessee has taken the alternate plea in connection with the set off the interest in sum of Rs.16.74 against the paid up interest in sum of Rs.34.64 lacs. Since the issue no. 2.1 has also been decided in favour of the assessee, therefore, there is no need to decide the alternate issue.

ITA. NO.4824/M/2016 12. The facts of the present case are quite similar to the fact of the case as narrated above while deciding the ITA. No.3583/M/2014, therefore, there is no need to repeat the same. However, the figure is different. The matter of controversy is also the same. The finding given above in ITA. No.3583/M/2014 is quite applicable to the facts of the present case as mutatis mutandis and accordingly we partly allowed the claim of the assessee.

ITA Nos. 3583/M/2014 & 4824/M/2016 A.Ys. 2010-11 & 2012-13 13. In the result, the appeals filed by the assessee are hereby partly allowed. Order pronounced in the open court on 27/10/2020 Sd/- Sd/- (RAJESH KUMAR) (AMARJIT SINGH) लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 27/10/2020 Vijay Pal Singh/Sr. P.S. आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदध, आयकर अपीलीय अदधकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// (Assistant Registrar) आिकर अिीलीि अनर्करण, मुंबई / ITAT, Mumbai