DTPS EMPLOYEES CO-OP CREDIT SOCIETY LIMITED DAHANU,DAHANU vs. JURISDICTION WARD 1, PALGHAR, PALGHAR

The learned Commissioner of Income Tax Appeals failed to appreciate that the interest earned from Cooperative Banks is intrinsically linked to the main activity which itself is eligible under section 80P(2)(a)(i). The learned Commissioner of Income Tax Appeals failed to consider that the interpretation of the term "attributable" being wider is an established proposition of law and needs no further elaboration as used in the last limb of section 80P(2)(a)(i). The words used are "the whole of the amount of profits and gains of business attributable to any one or more of such activities Alternatively and without prejudice to the above the learned Commissioner of Income Tax Appeals erred in not allowing the deduction under section 80P(2)(d) in respect of interest of Rs. 31,92,971/-received from Cooperative Banks, which deduction has no condition or fetter of any sort. The learned Commissioner of Income Tax - Appeals failed to appreciate that Co-operative banks are a class of Co- operative Societies which is a wider term and encompasses various categories of co-operative societies. Thus, income received from investments with co-operative banks are squarely covered by the provisions of sec. 80P(2)(d) and are eligible for 100 percent deduction, and the entire income of the appellant other than interest received from members was received from cooperative banks which are cooperative societies and thus eligible for deduction. The learned Commissioner of Income Tax Appeals failed to appreciate that the insertion of sec. 80P(4) has no effect on the applicability of sec. 80P deductions to co-operative societies. Only co-operative banks shall no longer be eligible for sec. 80P benefits. Section 80P(4) seeks to deny the exemption to income of cooperative banks and not income from cooperative banks. The learned Commissioner of Income Tax - Appeals failed to appreciate that the Honourable Income Tax Appellate Tribunal, Mumbai Bench, in catena of cases has held under similar set of facts that the appellant society is entitled to deduction under sec. 80P(2)(d) in respect of interest and dividend received from co-operative banks.

The appellant previously to add alter or amend any of the grounds of appeal prior to or at the time of hearing.

The relevant facts in brief are that for the Assessment Year 2018- 19, the Appellant had filed return of income on 25/09/2018. The case of the Appellant was selected for limited scrutiny. During the assessment proceedings, the Assessing Officer noted that the Appellant had claimed deduction under section 80(P)(2)(a)(i) of the Act amounting to INR 35,67,407/-. The Assessing Officer noted that the Appellant had received interest of INR 31,92,971/- and Dividend of INR 41,250/- from the Co-operative Banks. According to the Assessing Officer, the Appellant was not entitled to claim deduction in respect of the aforesaid interest/dividend income aggregating to INR 31,92,971/- under section 80(P)(2)(a)(i) of the Act, in view of the provisions contain in Section 80(P)(4) of the Act. Thus, the Assessing Officer made disallowance of INR 31,92,971/-, while framing the assessment vide Order dated 18/02/2021. Being aggrieved, the Appellant preferred Appeal before the CIT (A) inter-alia contending that the interest/dividend income was received from investment made in the Co-operative Bank and therefore, the Appellant was entitled to claim for the same under section 80 P(2)(d) of the Act. Even if the Appellant claimed for deduction under section 80(P)(2)(a)(i) of the Act was denied. However, the CIT was not convinced and therefore dismissed the Appeal vide Order dated 15/02/2024, by relying upon the Judgment of the Hon'ble Supreme Court in the case of Totgar's Co-operative Sale Society Ltd Vs. ITO (2010) 322 ITR 283 and Judgment of the Hon'ble Karntaka High Court in the case of Pr.CIT vs. Totagar's Co-operative Sale Society (2017) 395 ITR 611. 4. Being aggrieved, the Appellant has preferred present appeal before the Tribunal on the grounds reproduced in paragraph 2 above.

All the grounds raised in the present appeal are directed against the order of CIT(A) dismissing the appeal and thereby, confirming the disallowance of INR 31,92,971/- made in respect of deduction claimed by the Appellant in the return of income under Section 80P(2)(d) of the Act for the interest/dividend income received from investment in a co-operative banks. 6. 7.

We have considered the rival submission and perused the material on record. There is no dispute on facts. The issue that arises for consideration is whether a co-operative society is entitled to claim deduction under Section 80(P)(2)(d) of the Act in respect of interest/dividend income received from investment in a co-operative bank. We find that the aforesaid issue is no longer res-integra and stands decided in favour of the assessee. We note that while disallowing deduction claimed by the Appellant under Section 80P(2)(d) of the Act the Assessing Officer had placed reliance on the provisions contained in Section 80P(4) of the Act while the CIT(A) had relied upon the judgment of the Hon'ble Supreme Court in the case of Pr.CIT vs. Totgars Co-operative Sale Society Ltd Vs ITO (2010) 322 ITR 283 (SC) and the judgment of the Hon'ble Karnataka High Court in the case of Pr.CIT vs. Totgars Co-operative Sale Society Ltd.: 2017 395 ITR 611 (Kar). In the case of Mavilayi Services Co- operative Bank Limited Vs. CIT, Calicut: [2021] 431 ITR 1 (SC) [12/01/2021], the Hon'ble Supreme Court had, after taking into consideration the aforesaid provisions of the Act and the judgments relied upon by the Assessing Officer/CIT(A), held that the provisions of Section 80P(4) of the Act would not be attracted in case of interest/dividend income received by a co- operative society provided such co-operative society receiving dividend/interest income is not holding a banking license issued by Reserve Bank of India to lend money to public. The relevant extract of the aforesaid judgment of the Hon'ble Supreme Court reads as under: