INCOME TAX OFFICER , MUMBAI vs. IDBI STAFF CO-OPERATIVE CREDIT SOCIETY LTD , MUMBAI

3 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd in Section 80P(2)(d) of the Act is sufficient to deny the claim of the assessee for deduction under Section 8UP(2)(d) of the Act."

4 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd operative bank and claimed the deduction under section 80P(2)(a)(i) amount to Rs.2,73,86,635/-. During the assessment proceedings, the Ld.AO applied section 80P(4) and rejected the deduction under section 80P(2)(a) amount to Rs.2,73,86,635/-. Aggrieved, assessee filed an appeal before Ld.CIT(A). Ld. CIT(A) rejected the findings of the Ld. AO and quashed the addition. Being aggrieved on the appeal order, the revenue has filed an appeal before us.

Thus, it is held that being a co-operative society, appellant, is not hit by the exclusion provided in section 80P(4) of the Act and is therefore, eligible to claim deduction under section 80P(2)(a)(i) of the Act, subject to fulfillment of conditions specified therein. While giving appeal-effect, income arising from loans given to members (including the nominal members) whether for agriculture or otherwise, in accordance with directions of the Hon’ble Apex Court (supra), are to be allowed. However, as clearly laid down in Mavilayi judgment by the Hon’ble Apex Court in case of co-operative societies, profits from giving

5 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd credit facilities to members/nominal members (as defined in the parent Act read with relevant Rules and By-laws), as applicable on the appellant, are only eligible under this sub-section.

6.5 Therefore, income of other nature has to be considered under the appropriate head and it has to be ascertained whether it is eligible/noneligible for deduction under other sub-sections of 80P(2) of the Act. In this context, reliance is placed upon decision of Hon’ble ITAT, Mumbai in the case of Vaibhav Co-operative Credit Society in ITA No. 1868/Mum/2013 (A.Y. 2018-19) wherein Hon’ble Tribunal while considering the exercise of jurisdiction under section 263 of the Act by the concerned PCIT had given following findings regarding treatment of appellant’s income under various provisions of Income-tax Act:

“ It was a categorical finding of AO as per para 5.2 of the assessment order that assessee deposited certain sum out of the surplus funds of the society in cooperative banks as per details in para 5.1 of the assessment order. It was also held by AO that investment of funds in bank by the assessee is in the nature of income from other sources and an addition of Rs. 2,02,25,849/- was made on account of interest income from deposit with co-op banks and loans given to non-Members and claimed exempt u/s. 80P (2) (d) of the Act.

6 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd transactions of the assessee with its members are exempted. Certainly, relying on various judicial pronouncements and principal of mutuality transactions carried out with known members and general public are not entitled for the benefit of section 80P(2)(a)(i) of the Act.

7 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd [2023] 150 taxmann.com 173 (SC) PCIT v. Annasaheb Patil MathadiKamgarSahakariPathpedi Ltd.

……………….

[2021] 123 taxmann.com 161 (SC) Mavilayi Service Co-operative Bank Ltd.V.CIT, Calicut

………………….”

6.6 In accordance with the above order, it is held that interest income earned from loans given to non-members is taxable under section 56 of the Act as ‘income from other sources’. However, only the profits of such income are taxable. Hence, this income is to be taxed on ‘net’ basis and not on ‘gross’ basis. As this is a factual issue, the Jurisdictional Assessing Officer (JAO) while giving appeal effect to this order is directed to compute ‘net’ interest income on account of loans given to non-members on income which might other-wise be eligible for deduction under section 80P(2)(a)(i) of the Act and tax it appropriately under the head ‘income from other sources’.

6.7 Appellant was not allowed deduction under section 80P(2)(d) of the Act by the Assessing Authority holding that the interest and dividend income were earned by the Co-operative society out of the funds kept with Co-operative Banks/National Banks/Other Banks, which are ineligible for this purpose, in view of exception carved out by section 80P(4) of the Act. In Written submission, appellant has claimed that the 80P(2) deduction was allowable to him under sub- section (a)(i) of the Act and in the alternative under sub-section (d) of section 80P(2) of the Act. It is pertinent to mention that deduction allowable to the co- operative societies under section 80P(2) is enumerated under different heads and all the heads of deduction are independent or are alternatively, supplementary. Therefore, if income falls under any one heads of deduction, then it would be free

8 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd from tax notwithstanding that the conditions of another head of deduction are not satisfied and such income is not free from tax under that head of deduction. In this regard, reliance is placed on decision of the Hon’ble Apex Court in the case of Kerala State Co-operative Marketing Federation Ltd. &Ors. Etc. v. CIT (1998) 231 ITR 814 (SC). The claim of the appellant is analysed keeping this position of law in perspective.

6.8 Under section 80P(2)(a)(i) of the Act: In Balance sheet, appellant has substantial quantum of ‘Assets’ in the form of ‘Investments’. These investments have been made in Fixed Deposits for statutory and other reserves, dividend equalization reserve and normal FD with Co-operative Bank/other banks. These investments have yielded significant income to the appellant during the year. In my view, the interest income earned from Savings Bank account and Fixed deposits in form of Reserve Fund made as part of the statutory reserve requirement yielding any interest or dividend income (as prescribed in the Parent Act read with the relevant Rules and By-laws) are part of the business of giving credit facilities to members. Hence, these are eligible for deduction under section 80P(2)(a)(i) of the Act. In this regard, reliance is placed upon decision of the Hon’ble ITAT, Vishakapatnam in the case of The Kakateeya Mutually Aided Thrift and Credit Co-op Society Ltd. in ITA No. 107/Viz/2022 dated 30.08.2023. The relevant portion of this judgment is extracted as under:

“1. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee has claimed deduction U/s. 80P(2)(a)(i) of the Act on the interest accrued and received by the assessee U/s. 80P(2)(a)(i) of the Act. The contention of the Ld. AO is that as per section 80P(2)(d), the assessee is eligible to claim deduction U/s. 80P(2)(a)(i) of the Act only when it is invested with any other cooperative society. The Ld. AO also placed heavy reliance in the case of M/s. Totgars Cooperative Sale Society

9 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd Ltd (supra) while disallowing the claim made by the assessee U/s. 80P(2)(a)(i) of the Act. We have perused the ratio laid down by the Hon’ble Apex Court in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) and found that in that case the society is engaged in marketing of the agricultural produce by its members as per section 80P(2)(a)(iii) while carrying on the business of banking or providing credit facilities to its members U/s. 80P(2)(a)(i) of the Act. In that case, the Society retained the sale proceeds which was otherwise payable to its members from whom the produce was bought which was invested in short term deposits / securities. It is also found that the amount payable to its members realized from sale proceeds of the agricultural produce of its members was retained by the society and was shown as liability on the balance sheet. Therefore, the Hon’ble Apex Court has held that interest earned from retaining the amount payable to its members shall not be considered as income from other sources. However, in the instant case the facts are distinguishable and hence in our view the ratio laid down in the case of M/s. Totgars Cooperative Sale Society Ltd (supra) shall not be applied. Section 80P(1) of the Act entitles the Cooperative Societies to deduct the sums specified in sub-section (2) from its gross total income while computing the total income. Sub-section (2) of section 80P, in the sub-clause (a) allows deduction to cooperative society which is engaged in the following activities:

“(a) in the case of a co-operative society engaged in—

10 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd 3. the marketing of agricultural produce grown by its members, or] the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or

“(d) in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society, the whole of such income;

e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income;

11 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd to (e) of section 80P(2) are activity based whereas clauses (d) and (e) are investment based. The distinction between clauses (a) and clauses (d) & (e) on the other hand is that the benefit under clause (a) is restricted to only into those activities of a cooperative society enlisted in sub-clause (a) whereas the benefit of clauses (d) & (e) are available to all cooperative societies without any restriction on the activities carried on by them. In simple terms, the benefit under clause (a) will be limited only to the profits & gains of the business attributable to any one or more of such activities. But in case, if the cooperative society has an income not attributable to any one or more of such activities listed in sub-clauses (i) to (vii) of clause-(a), the same may go out of the purview of clause (a) but 10 still the cooperative society may claim the benefit of clause (d) or (e) as per the conditions laid down therein. In the instant case, the original source of investments made by the assessee in Nationalized Banks is admittedly the income of the assessee derived from the activities listed in subclauses (i) to (vii) of clause (a). The character of such income must be last, especially when the statute uses the expression “attributable to” and not any one of the expressions viz., “derived from” or “directly attributable to”. The Hon’ble jurisdictional High Court of Andhra Pradesh and Telangana in the case of Vavveru Cooperative Rural Bank Ltd vs. Chief Commissioner of Income Tax and Another [2017] 396 ITR 0371 (AP) in para 34 has discussed about the decision of the Hon’ble Supreme Court in the case of Totgar’s Cooperative Sale Society Ltd (supra) and distinguished the facts while deciding the case. For the sake of brevity, we extract the relevant para 34 of the judgment of the Hon’ble Andhra Pradesh and Telangana High Court herein below:

“34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of

12 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd marketing agricultural produce of the members of the society. It is also found from paragraph-3 of the decision of the Karnataka High Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) that the business activity other than marketing of the agricultural produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly.

“35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the responde

13 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so far as it relates to treating the interest income as something not allowable as a deduction under section 80P(2)(a), is set aside.”

6.9 The component of 80P deduction pertaining to interest and dividend income arising out of deployment of idle and surplus funds in FDs is such that it falls more appropriately under section 80P(2)(d) rather than 80P(2)(a)(i) of the Act. This is amply clear upon perusal of the relevant provisions. While section 80P(2)(a)(i) applies to business income earned by the Co-operative society from extending credit facilities to its members, section 80P(2)(d) exempts interest income earned by a co-operative society from its investments with another cooperative society. In the former, principle of mutuality has application as transaction is being made with/amongst the members while in later, transaction is necessarily being made with a third party, hence a nonmember. Such interest income is taxable under section 56 of the Act as ‘income from other sources’, however, by an explicit provision in form of section 80P(2)(d) of the Act, this income has been made tax-exempt. Hence, it is held that the impugned income falls more appropriately under section 80P(2)(d) of the Act and not under 80P(2)(a)(i) of the Act.

14 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd 6.10 Now, it has to be ascertained whether the co-operative bank(s) with which appellant made the investment to earn interest income, are eligible for purposes of section 80P(2)(d) of the Act or not. Section 80P(2)(d) of the Act allows deduction in respect of whole of interest income earned by a co-operative society from its investment (the investor) with any other co-operative society (the investee). In this regard, the issue arises whether Co-operative Bank would fall within the purview of the term ‘Co- operative Society’ or not. The term 'Cooperative society' is defined in section 2(19) of the Income-tax Act, as:'(19) "Co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of cooperative societies;’. A reading of this definition would make it clear that co-operative society referred therein is only a co-operative society as defined under the Income-tax Act, be it a Co-operative society carrying on banking business or other business or is a Co-operative Bank. For purpose of 80P(2)(d) deduction, the exception carved out under section 80P(4) of the Act of making co-operative Banks ineligible for deduction under section 80P of the Act does not apply as far as the investee cooperative society is concerned. It is suffice that it fulfills the requirement of being a co-operative society as defined under the Income-tax Act, as mentioned supra.

6.11 The case-laws filed by the appellant as mentioned supra in written submission also support the above view. In addition, further reliance is placed on Pr. CIT v. Peroorkada Service Co- operative Bank Ltd. (KerHC): (2022) 442 ITR 0141 dated 01.11.2021 wherein the Hon’ble Kerala High Court has laid down that interest income earned by a co-operative society from its investments with other co-operative societies falls in the category of ‘income from other sources’ and section 80P(2)(d) deals with the eligible deduction on this behalf. Hence, such income would be eligible for deduction under section 80P(2)(d) of the Act. In addition, to further clarify the facto-legal preposition on this issue, I would like to place reliance on decision of the Hon’ble ITAT, Mumbai in the case of Amore Commercial Premises Co-op Society Ltd. In ITA

15 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd Nos. 2873 & 2874/M/2022 dated 17.01.2023. The relevant portion of the judgment is extracted as under:

“6. Undisputedly Assessee Society has invested is surplus funds with Co- Operative banks and earned the interest income to the tune of Rs. 6,96,725/- and claimed it is deduction u/s. 80P (2)(d) of the Act, which has been disallowed by Assessing Officer & confirmed by the Ld.CIT(A) by relying upon decision rendered by Hon’ble Karnataka High Court in case of principle Ld.CIT Vs. Totgar’s Co-Operative Sales Society Ltd.

"8. We have given a thoughtful consideration to the contentions advanced by the Id. Authorized representatives for both the parties in context of the aforesaid issue under consideration. As stated by the ld. A.R, and rightly so, the issue that interest received by a co-operative society on its deposits with co-operative banks would be eligible for deduction w/s 80P(2)(d) of the Act is covered in assessee'sfavour by orders of the various coordinate benches of the Tribunal in the following cases: (i). M/s Solitaire CHS Ltd. Vs. Pr.CIT-

16 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd 26, Mumbai, ITA No.3155/Mum/2019, dated 29.11.2019 (ii). Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum.) (iii). M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017. (iv). Marvwanjee Cama Park Cooperative Housing Society Ltd. V's. ITO-Range 20(2)(2), Mumbai (ITA NO. 6139/Mum/2014, dated 27.09.2017. (v). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. In the aforesaid orders, it has been held by the Tribunal that though the cooperative banks pursuant to the insertion of sub-section (4) to Sec. 80P of the Act would no more be entitled for claim of deduction u/s 80P of the Act, but as a co-operative bank continues to be a co- operative society registered under the Co- operative Societies Act, 1912 (2 of 1912) or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a cooperative society from its investments held with a cooperative bank would be entitled for claim of deduction w/s 80P(2)(d) of the Act. We find that the aforesaid issue had exhaustively been looked into by the ITAT, "G" bench, Mumbai in the case of M/s Solitaire CHS Ltd, Vs. Pr.CIT-26, Mumbai ITA No.3155/Mum/2019, dated 29.11.2019, wherein the Tribunal had observed as under:

"6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether the claim of the assessee for deduction under section. 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the

17 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr.CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2) (d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with cooperative banks, other than a Primary Agricultural Credit Society or a Primary Co- operative Agricultural and Rural Development Bank. Observing, that the co operative banks from where the assessee was in receipt of interest income were not cooperative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by thePr. CIT. Before proceeding any further, we may herein reproduce the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2) (d), as the same would have a strong bearing on the adjudication of the issue before us. "80P(2) (d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub- section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely:-

(a)......................................................................................... (b)…………………………………………………………

(c)………………………………………………………… …………………………………...

18 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd ……………………….(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co- operative society, the whole of such income;" On a perusal of Sec. 80P(2)(d), it can safely be gathered that interest income derived by an assessee co-operative society from its investments held with any other cooperative society shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co- operative society with any other co- operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income investments/deposits parked with a cooperative bank. In our considered view, as long as it is proved that the interest income is being derived by a cooperative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term cooperative society" had been defined under Sec. 2(19) of the Act, as under:- "(19) "Cooperative society" means a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of cooperative societies;" We are of the considered view, that though the cooperative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act,

19 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co- operative societies, therefore, the interest income derived by a cooperative society from its investments held with a co- operative bank would be entitled for claim of deduction under Sec.80P(2) (d) of the Act. 8. We shall now advert to the judicial pronouncements that have been relied upon by the Id. A.R. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 42 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange-20(2)(2). Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. (iv). Kaliandas Udyog Bhavan Pemises Co-op. Society Ltd. Vs. ITO, 21(2)(1), Mumbai. We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, also makes it clear beyond any scope of doubt that the purpose behind enactment of sub-section (4) of Sec. 80P was that the co-operative banks which were functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Insofar the reliance placed by the Pr. CIT on the judgment of the Hon'ble Supreme Court in the

20 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd case of Totgars Co-operative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC) is concerned, we are of the considered view that the being distinguishable on facts had wrongly been relied upon by him. The adjudication by the Hon"ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec. 80P(2) (d) on the interest income on the investments/deposits parked with a co-operative bank. Although, in all fairness, we may observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars cooperative Sale Society (2017) 395 ITR 611 (Karn), had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2) (d). At the same time, we find, that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2) (d) of the Act. We find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of nonjurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a cooperative society on its investments held with a cooperative bank would

21 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd be eligible for claim of deduction under Sec.80P(2)(d) of the Act. 9. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of deduction under Sec. 80P(2) (d) on the interest income earned on its investments/deposits with cooperative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we "set aside" his order and restore the order passed by the A.O under Sec. 143(3), date 14.09.2016." As the facts and the issue involved in the present case before us remains the same as were there before the Tribunal in the case of M/s Solitaire CHS Ltd. (supra), wherein the order passed by the Pr. CIT u/s 263 of the Act was quashed, we, thus, respectfully follow the same. Backed by our aforesaid deliberations, we are unable to uphold the view taken by the Pr. CIT that the failure on the part of the A.O to be disallow the assessee's claim for deduction u/s 80P(2)(d) had rendered the assessment order passed by him u/s 143(3) of the Act, dated 31.08.2017 as erroneous in so far it was prejudicial to the interest of the revenue. 9. Accordingly, on the basis of our aforesaid observations, we herein not finding favor with the view taken by the Pr. CIT that the order passed by the A.O u/s 143(3), dated 31.08.2017 was erroneous in so far it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act set-aside the same and restore the order passed by the A.O u/s 143(3) of the Act, dated 31.08.2017."

22 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd 8. Hon'ble High Court of Karnataka in case of Pr. CIT &Anr.Vs. Totgar's Cooperative Sale Society Ltd. (2017) 292 ITR 74 (Kar.) and Hon'ble Gujarat High Court in case of State Bank of India vs. ITA No.2873 & 2874/M/2022 AMORE COMMERCIAL PREMISES 9 CIT (2016) 389 ITR 578 (Guj.) had held that interest income earned by a co-operative society on its investment held with cooperative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act.”

Thus, income arising in the form of interest from investment by the assessee (co-operative society) with co-operative banks (being a genus of the larger specie i.e. co-operative society) would be eligible for 80P(2)(d)deduction. However, the scheduled banks have to be excluded. Thus, on basis of judicial precedents quoted supra, it is held that appellant is entitled to claim of deduction under section 80P(2)(d) on interest income earned by it from its investments with the co-operative banks while taxing interest income from scheduled banks/other banks arising out of the Fixed Deposits, if any.

6.12 The JAO is directed to compute the 80P(2) deduction allowable to the appellant as per the above findings after giving due opportunity to the appellant to file the necessary details.

(Emphasis added)

23 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd frominvestment incooperative bank is eligible for deduction U/s 80P or not. We relied on the observation of the ld. CIT(A). The ld. CIT(A) relied on the order of the Coordinate bench of ITAT- "G" bench, Mumbai in the case of M/s Solitaire CHS Ltd, Vs. Pr.CIT-26, Mumbai ITA No.3155/Mum/2019, dated 29.11.2019. We observed the order of coordinate benches, and the interest income is covered by Section 80P(2)(d) of the Act. The following orders of coordinate bench are supported the claim of the assessee related in this issue.

(i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 42 (Mum)

(ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO21(3)(2), Mumbai ITA No. 1343/Mum/2017, dated 31.03.2017

(iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange- 20(2)(2). Mumbai, ITA No. 6139/Mum/2014, dated 27.09.2017.

We follow the order Hon’ble Hon’bleHigh Court of Karnatakain the case of Principal Commissioner of Income-tax, Hubliv.Totagars Co-operative Sale Society, [2017] 78 taxmann.com 169 (Karnataka)

“8. The issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover the word "Co-operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co-Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society".

24 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd 9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co-Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'.

Now, coming to the decisions of the Hon'ble Karnataka High Court, we find that there are two decisions in case of Totagars Co-operative Sale Society and in both of these decisions, the Hon'ble Karnataka High Court has referred to the decision of the Hon'ble Supreme Court in case of Totagars Cooperative Sale Society (Supra). In case of first decision referred by the ld. AR, it was held that according to section 80P(2)(d) of the Act, the amount of interest earned from a Co-operative Society Bank would be deductible from the gross income of the Co-operative Society in order to assess its total income.

25 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd Having said that, we find that in the latter decision of Hon'ble Karnataka High Court in case of Totgars Co-operative Sale Society (Supra), the Hon'ble High Court has basically laid great emphasis on the provision of Section 80P(4) of the Act and basis interpretation of Section 80P(4) of the Act, the deduction under section 80P(2)(d) has been held to be not eligible. In this regard, we find that the Hon'ble Supreme Court in case of Mavilayi Service Cooperative Bank Ltd vs Commissioner of Income Tax, Calicut [2021] 123 taxmann.com 161 (SC)has taken the view as follows:-

“45. To sum up, therefore, the ratio decidendi of Citizen Co-operative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word "agriculture" into section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non- members, profits attributable to such loans obviously cannot be deducted.”

While analyzing the provision of Section 80P(4) of the Act has held that Section 80P(4) is a proviso to the main provision contained in Section 80P(1) and 80P(2)

26 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd and excluded only cooperative banks which are cooperative society and also possesses a licence from RBI to do banking business. The Hon'ble Supreme Court further held that the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Therefore Section 80P(2)(d) is relevant only where the assessee is a cooperative bank and who claimed the deduction under section 80P of the Act which is not the facts of the present case. Therefore, the said decision of the Hon'ble Karnataka High Court is distinguishable and, in any case, the later decision of Hon'ble Supreme Court in case of Mavilayi Service Co-operative Bank Ltd. (Supra) wherein the correct legal preposition has been laid down by the Hon'ble Supreme Court has to be followed. In our findings, section 80P(4) does not jeopardise the claim of deduction of a co-operative society under Section 80P(2)(d) in respect of its interest income on investments/deposits parked with a cooperative bank and at the same time, we relied on the said decision of Hon'ble Karnataka High Court (supra). Accordingly, we respectfully follow the dicta passed by the Hon’ble Supreme Court and Hon’ble Hon’bleHigh Court of Karnataka(supra). We cannotcircumvent the findings of Coordinate benches of ITAT-Mumbai related this issue. We are not interfering in the impugned appeal order. The assessee is eligible for deduction of interest from co-operative bank U/s 80(P)(2)(d) of the Act. The addition amount to Rs.2,73,86,635/- is quashed.

27 ITA Nos.1207 to 1209 /Mum/2024 IDBI Staff Co-operative Credit Society Ltd 8. In the result, all the appeals in ITA Nos. 1207, 1208 & 1209/Mum/2024 are dismissed. Order pronounced in the open court on 18th day of June, 2024. Sd/- sd/- (GAGAN GOYAL) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 18/06/2024 Pavanan Copy of the Order forwarded to: अपील र्थी/The Appellant , 1. प्रदिव िी/ The Respondent. 2. आयकरआयुक्त CIT 3. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, 4. Mumbai ग र्डफ इल/Guard file. 5.

BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai