VISHNUANNA SAHAKARI KHAREDI VIKRI SANGH LIMITED ,SANGLI vs. ITO WARD-5, SANGLI

Facts in brief as emanating from the record are that the assessee is a Cooperative Society registered under The Maharashtra Cooperative Societies Act in the year 1962 and engaged in the business of providing fertiliser seeds, electric machinery for Agricultural purposes to its Members. In addition, it also runs Adat Shop, Cloth Shop, Grain Centre and Provision Centre. Nil income declared in the return of income for A.Y. 2020-21 filed on 15.12.2020 after claiming deduction u/s.80P(2)(d) of the Act. Case selected for Limited Scrutiny for the reason “Deduction from total income (Chapter VIA)”. From the perusal of the Expenditure Account, Ld. Assessing Officer observed that assessee has earned interest income of Rs.5,29,015/- from the investments made with banks. In response to various statutory notices issued 143(2)/142(1) of the Act, the assessee submitted its response. However, not satisfied with the explanation submitted by the assessee, ld. AO disallowed the interest income treating it as “Income from Other Sources” u/s.56 of the Act.

Aggrieved assessee preferred appeal before ld.CIT(A) with a delay of 96 days but however the assessee failed to appear on the gives dates of hearing and therefore ld.CIT(A) dismissed the appeal in limine merely confirming the addition made by the Assessing Officer by holding as under :

Aggrieved with the inaction of the First Appellate Authority, the assessee is in appeal before this Tribunal assailing the impugned order.

I have heard the rival contentions and perused the record placed before me. I note that ld. Assessing Officer while completing the assessment u/s.143(3) r.w.s.144B of the Act has denied the deduction u/s.80P of the Act for the interest income earned by the assessee at Rs.1,52,829/- and the short issue for my consideration is whether the interest amount of Rs.1,52,829/- earned by the assessee out of the investments held with Cooperative Banks is eligible for deduction u/s.80P of the Act.

Before me, ld. Counsel for the assessee claimed that alleged sum is interest earned from investments made with Cooperative banks. However, necessary details in support of this fact remains to be filed nor has been observed in the assessment order. He further submitted that the assessee’s case is squarely covered by plethora of decisions passed by this Tribunal on this very issue and therefore prayed for deleting the disallowance.

On the other hand, ld. Departmental Representative supported the orders of the lower authorities.

There is no dispute that the assessee is a registered cooperative society and is providing credit facilities to its Members and derived interest income on investments kept with Cooperative Societies/Banks. The provisions of section 80P(2)(d) of the Act, provides for deduction towards any income by way of interest or dividend derived by a co-operative society from its investment with any other co-operative society. The term Cooperative Society has been defined u/s. 2(19) of the Act, which includes a co-operative society registered under the Cooperative Societies Act, 1912 or under any other law for the time being in force in any state for the registration of co- operative societies. Perusal of the aforesaid definition would make it clear that cooperative Society means a cooperative society registered under Cooperative Societies Act, 1912 as defined under the Act, be it a co-operative society carrying on banking business or cooperative society carrying on the other business or a cooperative bank. Interest/dividend income earned from a cooperative society from its investment with other cooperative societies, whether such society is cooperative bank or not is to be considered for allowing deduction u/s.80P(2)(d) of the Act.

This issue is no longer res integra by virtue of catena of decisions passed by this Tribunal on this very issue and the assessee’s case is squarely covered in its favour. In the case of Thorapadi Urban Co-op Credit Society Ltd & Others vs ITO in W.P. Nos. 11172 and others, judgment dated 10.10.2023 which the assessee relied upon, the Hon'ble High Court of Madras following the decision of Division Bench of Hon'ble High Court of Madras in the case of CIT vs The Salem Agricultural Producers Co-operative Marketing Society Ltd in Tax Case Appeal No. 5 of 2015 held that a cooperative society is entitled to avail the benefit u/s.80P(2)(d) of the Act.

Since the quantification of interest earned from investments held with Cooperative Banks has not been provided, I deem it appropriate to remit the issue to the file of ld. Jurisdictional Assessing Officer for the limited purpose of verifying the interest income earned out of investments held with Cooperative Banks. Needless to mention that ld.JAO shall examine the details related to interest income and allow the claim of deduction made by the assessee u/s.80P(2)(d) of the Act if the details to be provided by the assessee are found to be correct. I therefore set aside the impugned order passed by the ld.CIT(A) and direct the Assessing Officer to delete the addition made towards interest income after due verification of the interst income. Grounds of appeal raised by the assessee are allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes.