INCOME TAX OFFICER vs. M/S. SHIROLI BUDRUK KRISHAK SEVA SAHAKARI PATSANSTHA MARYADIT, PUNE

All the appeals relating to different assessee on similar issue were heard on different dates and are being disposed of by this consolidated order for the sake of convenience.

First, we shall take up the appeal of Revenue in the case of M/s. Shiroli Budruk Krishak Seva Sahakari Patsanstha Maryadit in ITA No.96/PUN/2017, relating to assessment year 2012-13, wherein following grounds of appeal have been raised:-

The issue raised in all the appeals is against the claim of deduction under section 80P(2)(a) of the Act in respect of interest earned on Fixed Deposits with Nationalized Banks.

Briefly, in the facts of the case, the assessee during the year under consideration had furnished the return of income declaring Nil income. The Assessing Officer called for details during the course of assessment proceedings. The assessee had earned interest income of ₹ 35,22,862/- from its reinvestment in Bank of India. The Assessing Officer noted that as per provisions of section 80P(2)(d) of the Act, Co-operative credit society having earned interest from investments in Co-operative Banks were eligible for deduction. The Assessing Officer was of the view that interest income earned by the assessee from other than Co-operative Banks were not to be allowed for deduction under section 80P of the Act. The assessee was asked to explain the same. In reply, the assessee raised the claim under section 80P(2)(a)(i) of the Act. The Assessing Officer did not accept the plea of assessee and rejected the claim of deduction under section 80P(2)(d) of the Act.

The CIT(A) in turn, relying on the order of CIT(A) in earlier years in the case of assessee itself i.e. assessment years 2009-10 and 2010-11 allowed the claim of assessee.

The Revenue is in appeal against the order of CIT(A).

The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer.

The learned Authorized Representative for the assessee pointed out that the CIT(A) had allowed the claim of assessee in assessment years 2009-10 and 2010-11, against which the Department had not filed any appeal before the Tribunal. Another aspect which was pointed out was that Bank of India was member of assessee’s society since 29.12.1979, hence investment made by the assessee with its society and interest earned from the said Bank is exempt. The learned Authorized Representative for the assessee further placed reliance on the ratio laid down by the Pune Bench of Tribunal in Baliraja Gramin Bigarsheti Vs. ITO (2018) 52 CCH 247 (Pune – Trib.) and pointed out that the assessee was entitled to claim the deduction under section 80P(2)(a) of the Act.

Coming to the appeal of assessee in ITA No.704/PUN/2017, relating to assessment year 2008-09, where the facts are similar, wherein the assessee had claimed deduction under section 80P(2)(a) of the Act on the interest earned on fixed deposits with banks. The learned Authorized Representative for the assessee pointed out that the issue stands covered by the order of Tribunal in assessee’s own case in ITA No.992/PN/2016, relating to assessment year 2010- 11, order dated 29.07.2016. The learned Authorized Representative for the assessee pointed out that the Tribunal in the case of Baliraja Gramin Bigarsheti Sah. Patsanstha Maryadit in ITA No.1395/PUN/2015, relating to assessment year 2012-13, order dated 25.01.2018, wherein reliance of learned Departmental Representative for the Revenue was on the decision of the Hon’ble High Court of Delhi in Mantola Co-operative Thrift & Credit Society Ltd. (2014) 50 taxmann.com 278 (Del.) was also distinguished.

In the case of ITA No.705/PUN/2017, the learned Authorized Representative for the assessee pointed out that the issue is deduction under section 80P(2)(a) of the Act on interest income earned on investment on fixed deposits and same reliance as in ITA No.704/PUN/2017 is being relied upon.

In the case of ITA No.840/PUN/2017, despite service of notice, none appeared on behalf of the assessee and since the issue is covered in favour of assessee by the orders of Tribunal, the case was taken up for hearing.

On perusal of record and after hearing the learned Authorized Representatives, the issue which arises in different appeals heard on different dates is against the claim of deduction under section 80P(2)(a)(i) of the Act on interest income earned from fixed deposits with Nationalized Banks. The assessee was a Credit Co-operative Society and had made investments in fixed deposits with Nationalized Banks. The assessee was receiving advances from its members and was giving loan to its members, on which interest income was earned, against which deduction was claimed under section 80P(2)(a) of the Act. The said deduction claimed by the assessee has been allowed to the assessee. However, the authorities below had denied the deduction under section 80P(2)(a)(i) of the Act on interest income earned by the assessee with its investments in fixed deposits with Nationalized Banks. Since the investment was made with Nationalized Banks, the Assessing Officer held in ITA No.96/PUN/2017 that the assessee was not entitled to claim the deduction under section 80P(2)(d) of the Act, which was originally claimed by the assessee.

Similar issue has been elaborately considered by the Pune Bench of Tribunal in ITO Vs. M/s. Maharashtra Bank Employees Co-op. Credit Society Ltd. in ITA Nos.454 to 456/PUN/2015, relating to assessment years 2007-08, 2008-09 & 2010-11 along with CO Nos.16 & 17/PUN/2017, order dated 22.12.2017, wherein the ratio laid down by the Hon'ble Supreme Court was also taken note of and subsequent decision on the issue was also considered and it was held as under:- ―11. We have heard the rival contentions and perused the record. The limited issue which arises in the present appeal filed by the Revenue is against relief given by the CIT(A) on the claim of assessee society that interest income received on FDRs with scheduled Bank of Maharashtra is entitled to claim of deduction under section 80P(2)(a)(i) of the Act. The assessee was a Co- operative society of the employees of Bank of Maharashtra, and was engaged in the business of providing credit facilities to its members. The activities carried on by the assessee society were subject to the provisions of Maharashtra Co- operative Societies Act, 1960. Under section 66 of the said Act, every society which is making profits from its transactions shall maintain reserve fund as per clause (1) to section 66 of the said Act. Clause (2) further lays down that every society shall carry atleast one-fourth of net profits each year to the reserve fund; and such reserve fund may subject to the rules made thereunder, if any, be used in the business of society or may, subject to provisions of section 70, be invested, as the State Government may by general or special order direct or may, with the previous sanction of the State Government be used in part for some public purpose to promote the objects of the Act or some such purposes of the State Government or of the local interest. Section 70 of the said Act lays down that society shall invest or deposit its funds in one or more of the investments provided in clauses (a) to (e) thereunder. We are concerned here with clause (d) to section 70 of the said Act, which reads as under:- ―70… (a)…. (b)…. (c)… (d) in any co-operative bank (other than those referred to in clause (a) of this section) or banking company approved for this purpose by the