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Income Tax Appellate Tribunal, ‘B’ BENCH, PUNE
Consolidated Appeals (2)
IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, PUNE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER
Sr. ITA No. A.Y. Appellant Respondent No. 1. 74/PUN/2021 2017-18 The I.T.O Ward Vasantrao Naik Nagari 10(1), Pune Sah.Patsanstha Maryadit, Vadgaon Anand, At & Post: Alephata, Tal. Junnar, Pune-412 411 PAN: AAABV0102A 2. 75/PUN/2021 2017-18 -do- Shri Sainath Nagari Sah. Patsanstha Maryadit 01Manchar Bazarpeth, Ambegaon, Pune-410 503 PAN: AABAS7127E
Appellant by : Shri M.G. Jasnani Respondent by : None
Date of Hearing : 15-06-2022 Date of Pronouncement : 15-06-2022
ORDER PER PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER Both these appeals preferred by the Revenue emanates from separate orders of the ld. Commissioner of Income Tax (Appeals)- 6, Pune, dated 17-08- 2020 and 11-09-2020 for A.Y. 2017-18 as per the following common grounds of appeal.
Vasantrao Naik Nagari Sahakari Patsanstha Maryadit : 1. The CIT (A) erred both on facts and in law in passing the order. 2. The CIT(A) erred in deleting the disallowance uls 80P of the Income Tax Act, 1961 of Rs. 1,51,97,388/- representing interest income of the assessee society out of its "investments with other co-operative banks is not eligible for deduction either uls 80P(2)(a)(i) or uls 80P(2)(d) of the Act. 3. In the case of Karnataka High Court vs. The Totagars Co-Operative Sale Society", in Appeal No. 100069 of 2016 dated 05-01-2017, the Hon'ble High Court has decided whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as a Co-operative Society or not. However, the Appeal No. 100066/2016 & Connected cases dated 16-06-2017, the Hon'ble Court has discussed the provisions of Section 80P as a whole and held that it is the character and nature of income which determines its taxability or exemption from taxability and the income which is clearly held to be not exempt and not deductible under Section 80P(2)(a) of the Act.
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For these and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 5. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal.”
Shri Saianath Nagari Sashakari Patsanstha Maryadit
The CIT (A) erred both on facts and in law in passing the order. 2. The CIT(A) erred in deleting the disallowance uls 80P of the Income Tax Act, 1961 of Rs. 1,90,96,332/- representing interest income of the assessee society out of its "investments with other co-operative banks is not eligible for deduction either uls 80P(2)(a)(i) or uls 80P(2)(d) of the Act. 3. In the case of Karnataka High Court vs. The Totagars Co-Operative Sale Society", in Appeal No. 100069 of 2016 dated 05-01-2017, the Hon'ble High Court has decided whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as a Co-operative Society or not. However, the Appeal No. 100066/2016 & Connected cases dated 16-06-2017, the Hon'ble Court has discussed the provisions of Section 80P as a whole and held that it is the character and nature of income which determines its taxability or exemption from taxability and the income which is clearly held to be not exempt and not deductible under Section 80P(2)(a) of the Act. 4. For these and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 5. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal.”
At the very outset we find that the facts and issues in both these appeals are identical and similar and therefore, these cases were heard together and are disposed of by this consolidated order.
It is observed that Appeal in ITA No. 74/PUN/2021 in the case of Vasantrao Naik Nagari Sashakari Patsanstha Maryadit is barred by 150 days whereas appeal in ITA No. 75/PUN/2021 the case of Shri Sainath Nagari Sahakari Patsanstha Maryadit is barred by 127 days. The ld. D.R sought condonation of delay in filing these appeals in view of outbreak of Covid 19 at the relevant time. Taking into consideration the outbreak of Covid 19, at the
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relevant time, the said delay is condoned and the instant appeals are admitted for disposal on merits by virtue of judgment of the Hon‟ble Supreme Court in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in Cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 and 421 ITR 314.
That so far as the merits are concerned, the only grievance of the Revenue is the deletion of disallowance u/s 80P of the Income-tax Act, 1961 (hereinafter referred to as “the Act” by the ld. CIT(A).
Taking ITA No. 75/PUN/2021 for A.Y. 2017-18 in the case of Shri Sainath Nagari Sahakari Patsnastha Maryadit as a lead case, we find that the facts are that the A.O while denying the claim of the assessee has held that the assessee has to be treated as a Co-operative Bank looking at the nature of its activities vis-à-vis new members and nominal members and also because it has invested its surplus funds in Co-operative Bank which do not fall u/s 80P(2)(d) of the Act. The ld. CIT(A) on the other hand vide para 5 of his order placed reliance in various cases as mentioned and has held that the assessee is eligible for deduction u/s 80P of the Act. The ld. D.R conceded to the facts in the present case that the issue is covered by various decisions of Pune Tribunal whereby in the given facts and circumstances deduction u/s 80P of the Act has been allowed.
We find in a recent decision of Pune Tribunal in ITA No. 589/PUN/2016 for A.Y. 2012-1`3, order dated 28-11-2018 has observed and held as follows:
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
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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.” 7. Similarly, in another decision of Pune Tribunal in ITA No. 713/PUN/2016 for A.Y. 2011-12, order dated 09-04-2019, it was observed and held as follows:
We have heard both the sides and perused the relevant material on record. It is observed that the ld. CIT’s entire order is premised on the proposition that the assessee is not eligible for deduction u/s.80P on the amount of interest on FDRs earned from nationalized banks. The decision that a higher amount ought to have been taxed by the AO is a consequence of the above view. The ld. AR placed on record a copy of an order of the Pune Bench dated 28-11-2018 in the case of ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha (ITA No.589/PN/2016) wherein the decision of ld. CIT(A) allowing deduction u/s.80P was approved by the Pune Tribunal. It is further noticed that the Pune Bench of the Tribunal in the case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) has allowed similar deduction. In the said case, the Tribunal 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 that of 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 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 there being any change in the legal position prevailing on this issue and respectfully following the view taken by the Pune Bench of the Tribunal in ITO Vs. Sureshdada Jain Nagri Sahakari Patsanstha (supra) and host of other orders reiterating the similar view, we hold, in principle, that interest income earned on Fixed Deposits kept with Nationalized banks qualifies for deduction u/s.80P of the Act. 4. Adverting to the facts of the instant case, it is seen that the assessee requested the AO to finalize the assessment even by including net interest income of Rs.2,46,208/- earned from bank FDRs after reduction of OD interest and interest paid on members deposits, which the AO eventually did. This emerges from page 30 of the paper book, which is a letter written by the assessee to the AO urging to: “please accept the above calculation and co-op. for finalization of the case”. It is the above net figure of Rs.2,46,208/- which has been considered by the ld. CIT for treating the assessment order as erroneous and prejudicial to the interest of the Revenue by holding that the gross amount of interest of Rs.76,93,470/- should have been charged to tax and not net interest of Rs.2,46,208/-. In our considered opinion, when the interest itself is eligible for deduction u/s.80P of the Act, the compulsion of the assessee to offer certain
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amount in order to enable the completion of the assessment, cannot be stretched so far so as to bring the entire amount of interest received from bank to tax which is otherwise deductible in view of various decisions discussed in the preceding para. Once we hold that the entire amount of interest is eligible for deduction u/s.80P of the Act, the order of the ld. CIT directing the AO to charge to tax the full amount of interest and not its part, becomes automatically unsustainable. We, therefore, vacate the impugned order.” 8. Further on the same facts and circumstances, and on an identical issue in another decision of Pune Tri8bunal in ITA 265/PUN/2019 for A.Y. 2011-12, order dated 27-01-2022, the matter was decided in favour of the assessee with the following observations. 3. We have heard the rival submissions in Virtual Court and gone through the relevant material on record. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune ITAT in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014) had allowed the deduction in similar circumstances. In the said case, the Tribunal discussed the contrary views expressed by the Hon’ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of 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. Both the Hon’ble High Courts took into consideration the ratio laid down in the case of Totgar’s Cooperative Sale Society Ltd. (supra). No direct judgment from the Hon’ble jurisdictional High Court on the point having been pointed out, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view in favour of the assessee by the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). The position continues to remain the same before this Bench also. 4. Reliance of the ld. DR in the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is not relevant. The issue in that case was the eligibility of deduction u/s.80P(2)(d) of the Act on interest earned by the assessee cooperative society on investments made in co-operative banks. In that case, the assessee was engaged in the activity of marketing agricultural produce by its members; accepting deposits from its members and providing credit facility to its members; running stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods and carriage etc. It was in that background of the facts that the Hon’ble High Court held that the assessee could not claim deduction u/s.80P(2)(d) of the Act. When we consider the effect of this decision, it turns out that the same is not germane to case under consideration in view of the position that the primary claim of the extant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act. In view of the foregoing discussion, we uphold the conclusion drawn by the ld CIT(A) in the impugned order by allowing deduction u/s.80P(2)(a)(i) of the Act.”
Respectfully following all the aforestated judicial pronouncements on the same parity of reasons and facts and circumstances, we are of the considered
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view that there is no reason to interfere with the findings of the ld. CIT(A) and the relief provided to the assessee is sustained. 10. In the result, the grounds raised by the Revenue in ITA No. 75/PUN/2021 are dismissed. 11. We find that in ITA No. 74/PUN/2021 for A.Y. 2017-18 the facts and circumstances are absolutely identical and similar for this year also. Therefore, our decision in ITA No. 75/PUN/2021 for A.Y. 2017-18 shall apply mutatis mutandis to ITA No. 74/PUN/2021 for A.Y. 2017-18.
In the combined result, both the appeals of the Revenue are dismissed. Order pronounced in the open Court on this 15th day of June 2022
Sd/- sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Pune; Dated, the 15th day of June 2022 Ankam
Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT 5, Pune 4. The CIT(A)- 6 Pune 5. D.R. ITAT „B‟ Bench 5. Guard File BY ORDER,
/// TRUE COPY /// Sr. Private Secretary ITAT, Pune.
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1 Draft dictated on 15-06-2022 Sr.PS/PS 2 Draft placed before author 15-06-2022 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr. Sr.PS/PS PS/PS 6 Kept for pronouncement on 15-06-2022 Sr.PS/PS 7 Date of uploading of order 15-06-2022 Sr.PS/PS 8 File sent to Bench Clerk 15-06-2022 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order