INCOME TAX OFFICER vs. SHRI LAXMI NARAYAN NAGARI SAHAKARI PAT SANSTHA, KOLHAPUR

आदेश / ORDER आदेश आदेश आदेश

PER D. KARUNAKARA RAO, AM :

This appeal is filed by the Revenue against the order of CIT(A)-1, Kolhapur, dated 25-10-2016 for the Assessment Year 2013-14.

succeeding paragraphs.

“1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in holding that the assessee Society was eligible for deduction u/s.80P (2)(a)(i) of the Income Tax Act, 1961, in respect of interest income on bank deposits with banks other than co- operative banks/societies, ignoring the provisions of section 80P(2) (d) of the Income Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in distinguishing the Hon'ble Apex Court's decision in Totgars Co-op Sale Society Ltd Vs. ITO reported as 322 ITR 283 (SC), ignoring the clear provisions of section 80P(2) (d) of the Income Tax Act, 1961, wherein income by way of interest or dividend derived by Co- operative Society from its investment with any other Co-operative Society is eligible for deduction and not income by way of interest from banks other than Co-operative banks/societies? 3. The appellant craves leave to add, alter, amend, substitute or delete any of the grounds urged herein above as and when found necessary.”

a Co-operative credit society engaged in the business of providing

banking or credit facilities to its members. Assessee filed its return of

income for assessment year under appeal on 27.09.2013 declaring total

income at ‘Nil’. In the Assessment u/s.143(3) of the Act, the AO assessed

the total income of assessee at Rs.66,88,243/- by way of interest from

the bank other than from other co-operative societies or with other Co-

op. AO opined that the assessee, being a Pat Sanstha, is required to

invest its funds in specified ones to be eligible for deduction

u/s.80P(2)(a)(i) of the Act. Thus, AO disallowed the claim of deduction

u/s.80P(2)(a)(i) of the Act.

the decisions of the Tribunal in assessee’s own cases for A.Y. 2010-11 as

well as another decision of the Tribunal in ITA No.257/PUN/2016 for the A.Y. 2012-13, allowed the claim of the assessee for the year under

consideration. Aggrieved with the order of CIT(A), the Revenue filed the

present appeal before the Tribunal raising the grounds extracted above.

further submitted that while dealing with the issue, CIT(A) ignored the

provisions of section 80P(2)(d) of the Act wherein it has been held that

income by way of interest or dividend derived by Co-operative Society

from its investment with any other co-operative Society is eligible for

deduction and not income by way of interest from banks other than Co-

operative banks/societies. Ld. DR has placed reliance on the decision of

Hon’ble Apex Court in the case of Totgar’s Co-op. Sale Society Ltd. Vs.

ITO, reported as 322 ITR 283(SC).

of the Revenue and the material available on record, we find the core

issue raised in the appeal relates to taxation of interest income earned

from the fixed deposits kept with the banks (Bank of India and HDFC

Bank) other than co-operative banks/societies. AO is of the opinion that

the said income is taxable and the exemption u/s.80P(2)(a)(i) of the Act is

not available to such receipts. CIT(A) granted relief to the assessee

relying on the decision of the Tribunal in the assessee’s own case in ITA

No.604/PUN/2014, dated 16-08-2015 read with the judgment of Hon’ble

Supreme Court in the case of CIT Vs. Vegetable Products 88 ITR 192.

Contents of Para No.7 of the order of CIT(A) are relevant. Further, we

have also perused the contents of Para No. 7 of the order of CIT(A) and

find the issue now stands covered in favour of the assessee. For the sake

of completeness, we find it relevant to extract the said operational para

and the same reads as under:

“7. I have considered the submissions of the appellant. An identical issue was dealt with by the Hon'ble ITAT, B Bench, Pune in appellant's own case for assessment year 2010-11 in ITA No.604/PN/2014 dated 19/08/2015. While deciding the issue, the Hon'ble Tribunal relied on the judgment of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products reported in 88 ITR 192 and held that the interest income earned on short term deposits kept with banks has to be allowed as deduction under section 80P(2)(a)(i). Further, I have also perused the order of the honourable ITAT, SMC Bench, Pune in appellant's case for assessment year 2012-13 wherein the Department was in appeal against the decision of CIT(A)-I, Kolhapur allowing appellant's claim of deduction under section 80P(2)(a)(i). I find that the Hon'ble Tribunal vide its order in ITA No.257 /PN /2016 has upheld the order of the CIT(A)-I, Kolhapur following the ITAT, B Bench, Pune's order cited supra. Therefore, respectfully following the decision of the jurisdictional Tribunal, in appellant's own case for assessment years 2010-11 and 2012-13, I hold that the assessing officer was not justified in denying the appellant's claim of deduction u/s 80P(2)(a)(i) of the Act. In the result, the claim of the appellant u/s 80P(2)(a)(i) of the Act for the year under consideration is allowed.”

Considering the precedent on the same issue by the Co-ordinate

Bench of the Tribunal, we are of the opinion that the assessee is entitled

to deduction u/s.80P(2)(a)(i) in respect of the interest income earned on

fixed deposits kept with the Nationalized Banks/Scheduled Banks and

the same constitute as ‘business income’ of the assessee. We therefore

uphold the order of CIT(A) and direct the AO to allow the claim of

assessee. Accordingly, the grounds raised by the Revenue are dismissed

and in favour of the assessee.

Order pronounced on this 19th day of September, 2018.

Sd/- Sd/-

(VIKAS AWASTHY) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER

पुणे / Pune; �दनांक Dated : 19th September, 2018. Satish

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Kolhapur. 3. आयकर आयु� / The Pr. CIT-1, Kolhapur. 4. 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “बी बी बी” / DR ‘B’, बी ITAT, Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार आदेशानुसार

// True Copy //

Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune.