ACIT, CENTRAL CIRCLE-2(3), PUNE, PUNE vs. PARSHWANATH NAGARI SAHAKARI PARSANSTHA MARYADIT, SATARA
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Income Tax Appellate Tribunal, PUNE “B” BENCH : PUNE
Before: SHRI RAMA KANTA PANDA & MS. ASTHA CHANDRA
PER RAMA KANTA PANDA, V.P. :
This appeal filed by the Revenue is directed against
the order of the learned CIT(A), Pune-12, Pune dated
15.03.2024, relating to assessment year 2020-2021.
Grounds raised by the Revenue are as under :
“On the facts and circumstances of the case and in law,
the Ld. CIT(A) has erred in holding that the assessee is
eligible for deduction u/s 80P(2)(a)(i) of the Income Tax Act,
1961 on interest earned on the deposits made with co-
operative banks and nationalized banks.
2 ITA.No.1314/PUN./2024
On the facts and circumstances of the case and in law, the
Ld. CIT(A) has erred in allowing deduction u/s.80P(2)(a)(i)
by ignoring the fact that the assessee society is engaged in
providing credit facilities to its members and therefore, the
interest earned by depositing surplus funds with banks,
not being attributable to business carried on by the
society, is not deductible under section 80P(2)(a)(i).
The Ld. CIT(A) has erred in allowing deduction
u/s.80P(2)(a)(i) by ignoring the decision of Hon'ble
Supreme Court in the case of Totgar's Co-operative Sales
Society Ltd. 322 ITR 283(SC) wherein it was held that
such interest income earned by assessee was taxable
under the head Income from Other Sources under section
56 of the Act and was not deductible from the gross total
income under section 80P(2)(a)(i).
On the facts and in the circumstances of the case and in
law, the Ld. CIT(A) has erred in holding that the assessee
is not hit by the provisions of section 80P(4) of the Act.”
Facts of the case, in brief, are that the assessee is a
cooperative credit society engaged in providing credit facilities
to it’s members. It filed it’s return of income on 25.01.2021
declaring NIL income after claiming deduction under Chapter-
VIA at Rs.3,53,40,393/- i.e., u/sec.80P(2)(a)(i) of the Act. The
case was selected for scrutiny under CASS. Accordingly
statutory notices u/sec.143(1) and 142(1) were issued and
3 ITA.No.1314/PUN./2024
served on the assessee, in response to which, the Authorised
Representative of the assessee appeared before the Assessing
Officer and filed requisite details from time to time.
3.1. During the course of assessment proceedings, the
Assessing Officer, on perusal of the return of income filed by
the assessee for the year under consideration, noted that
assessee has offered gross total income of Rs.3,53,40,393/-
and has claimed deduction under Chapter-VIA of the same
being deduction u/sec.80P(2)(a)(i) of the Act. On being asked
by the Assessing Officer to justify it’s claim of deduction with
supportive documents, the assessee mentioned that it is a
cooperative credit society engaged in the business of providing
credit facilities to it’s members; obtaining deposits from
members and giving loans and advances to it’s members. It
was submitted that the assessee-society is registered under
the Maharashtra Cooperative Societies’ Registration Act, 1969
and, therefore, it’s income qualifies for deduction u/sec.80P(2)
of the Act. The decision of the Tribunal in assessee’s own case
was relied upon. Further the assessee also relied upon various
other decisions to support it’s claim.
3.2. However, the Assessing Officer was not satisfied
with the arguments advanced by the assessee. He noted that a
plain reading of the provisions of sec.80P shows that only the
amount of profits and gains earned by carrying on the
4 ITA.No.1314/PUN./2024
business of banking or providing credit facilities to it’s
members; the assessee-society is eligible for claiming
deduction u/sec.80P(2)(a)(i) of the Act. However, in the present
case, a perusal of the financial statement from the profits and
loss account shows that assessee-society has credited certain
incomes which do not fall under the head “profits and gains of
business” of the assessee. The Assessing Officer narrated some
of the income which are as under :
a) Interest on Investments of Rs.5,20,94,764/-:
(Rs.5,16,20,864/- from Co-operative Bank and
Rs.4.73.899/- from commercial & Nationalized Bank):
Income from Other Sources(refer to the decision of Apex
Court in the case of (Totgars, Co-operative Sale Society
Ltd Vs ITO, Karnataka [2010] 188 Taxman 282 (SC)).
b) Dividend of Rs.3,000/-: Income from Other Sources.
c) MSEDCL Commission of Rs.1,45,053/-: Income from
Other Sources.
d) Office rent received of Rs.1,32,000/-: Income from House
Property.
3.3. The Assessing Officer relied on various decisions
and observed that the decision of the Tribunal in assessee’s
own case has not been accepted and appeal has already been
filed by the Revenue before the Hon’ble jurisdictional Bombay
High Court which is pending on date. The Assessing Officer,
5 ITA.No.1314/PUN./2024
therefore, denied the claim of exemption u/sec.80P(2)(a)(i) of
the Act. It is pertinent to mention herein that the Assessing
Officer at Page-35 Para-E of the order has observed as under :
“E] Moreover, the decisions of the Hon'ble ITAT for
A.Y. 2011-12 in the case of assessee, Parshwanath Nagari
Sahakari Patsantha Maryadit has not been accepted and
appeal before the Hon'ble Bombay High Court has already
been filed by the Revenue, which is pending as on date.”
In appeal, the learned CIT(A) allowed the claim of
assessee by observing as under :
“Findings :
4.2. Grounds No.1 to 3 are in respect of disallowances of
the claim of Rs.5,23,74,817/- in respect of deduction
u/s 80P(2)(a)(i) of the Act and Grounds No.4 to 6 are
additions on account of interest on investment,
dividend and MSEDCL commission and addition u/s
43B, Brief facts of the case are that the appellant is a
Co-operative Society (AOP), engaged in providing
credit facilities to its members. The appellant takes
deposits from its members and advances loans as
per the requirement of the members. The residue of
income is deposited by the appellant society in the
Nationalized/ Scheduled Banks and Co-operative
6 ITA.No.1314/PUN./2024
Banks. The AO during the course of the assessment
proceedings disallowed the claim of deduction u/s
80P(2)(a)(i) relying on the decision of Hon'ble Apex
Court in the case of Totgar's Cooperative Sales
Society Ltd Vs ITO, Karnataka [2010] 188 Taxmann
282 (SC).
4.3. The appellant submitted that the issue is covered in
favour of the appellant in its own case vide Hon'ble
ITAT, Pune's order in ITA No. 265/PUN/2019 (AY
2014-15) wherein the Hon'ble ITAT has held that the
ratio of Hon'ble Apex Court in the case of Totgar's Co-
Operative Sale Society (supra) is not applicable to the
case of the appellant. However, the AO made the
impugned additions as the department has contested
the matter before the Hon'ble Bombay High Court
and the same is pending before the Hon'ble High
Court.
4.4. The Hon'ble ITAT, Pune vide their order in ITA No.
265/PUN/2019 in the case of the appellant for AY
2014-15 has held as under :
"3. We have heard the rival submissions in Virtual
Court and gone through the relevant material on
record. The Pune Benches of the Tribunal in
Sureshdada Jain Nagari Sahakari Patsanstha
7 ITA.No.1314/PUN./2024
Maryadit Vs. The Pr.CIT (ITA No: 713/ PUN/2016)
decided the question of availability of deduction u/s
80P on interest income by noticing that the Pune ITAT
in an earlier case of Shri Laxmi Narayan Nagari
Sahakari Pat Sanstha Maryadit Vs. ITO
(ITA.No.604/PN/2014) had allowed the deduction in
similar circumstances. In the said case, the Tribunal
discussed the contrary views expressed by the
Hon'ble Karnataka High Court in Tumkur Merchants
Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230
Taxman 309 (Kar.) allowing deduction u/s.80P on
interest income and that of the Hon'ble Delhi High
Court in Mantola Cooperative Thrift Credit Society
Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing
deduction u/s.80P on interest income earned from
banks. Both the Hon'ble High Courts took into
consideration the ratio laid down in the case of
Totgar's Cooperative Sale Society Lid (supra). No
direct judgment from the Hon'ble jurisdictional High
Court on the point having been pointed out, the
Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat
Sanstha Maryadit (supra) preferred to go with the
view in favour of the assessee by the Hon'ble
Kamataka High Court in the case of Tumkur
Merchants Souharda Credit Cooperative Ltd (supra).
8 ITA.No.1314/PUN./2024
The position continues to remain the same before this
Bench also.
Reliance of the Id. DR in the case of Pr. CIT and
Another Vs. Totagars Cooperative Sales Society
(2017) 395 ITR 611 (Kar.) is not relevant. The issue in
that case was the eligibility of deduction u/s
80P(2)(d) of the Act on interest earned by the
assessee co operative society on investments made
in co- operative banks. In that case, the assessee
was engaged in the activity of marketing agricultural
produce by its members, accepting deposits from its
members and providing credit facility to its members;
running stores, rice mills, live stocks, van section,
medical shops, lodging, plying and hiring of goods
and carriage etc. It was in that background of the
facts that the Hon'ble High Court held that the
assessee could not claim deduction u/s.80P(2)(d) of
the Act. When we consider the effect of this decision,
it turns out that the same is not germane to case
under consideration in view of the position that the
primary claim of the extant assessee is directly about
the eligibility of deduction u/s.80P(2)(a)(i) of the Act.
In view of the foregoing discussion, we uphold the
conclusion drawn by the ld CIT(A) in the impugned
9 ITA.No.1314/PUN./2024
order by allowing deduction u/s 80P(2)(a)(i) of the
Act.
In the result, the appeal is dismissed."
4.5. Hence, relying on the above order of the Hon'ble
ITAT and the other judicial pronouncements relied upon by
the appellant which cover Grounds No. 1 to 6 of the appeal
under consideration in favour of the appellant, respectfully
following these binding decisions, Grounds no. 1 to 6 of
the appeal are, hereby, ALLOWED.”
Learned DR strongly opposed the order passed by
the learned CIT(A). He submitted that Assessing Officer
thoroughly discussed the issue and has given valid reasons for
not accepting the order of the tribunal in assessee’s own case
for assessment year 2011-12 and therefore, the CIT(A) should
not have deleted the additions made by the Assessing Officer.
Learned counsel for the assessee on the other hand
while supporting the order of learned CIT(A) filed a chart
showing similar claim that has been accepted by the AO. He
submitted that in assessment year 2011-12 the Tribunal has
allowed the claim of deduction u/sec.80P(2) which was denied
by the AO but allowed by CIT(A). The appeal filed by the
Revenue was dismissed. For assessment years 2012-2013 to
2016-2017, the Assessing Officer in the assessment orders
10 ITA.No.1314/PUN./2024
passed u/sec.143(3) or 154 r.w.s.153A has allowed the claim
of deduction u/sec.80P(2) of the Act. Similarly, for assessment
year 2017-18 also, the deduction u/sec.80P(2) was allowed.
For assessment years 2018-19 and 2019-2020 the learned
CIT(A) has allowed the claim of deduction u/sec.80P(2) of the
Act. Therefore, there is no error in the order of the learned
CIT(A) in allowing the claim of deduction u/sec.80P(2)(a)(i) of
the Act.
We have heard the rival arguments made by both the
parties and perused the material available on record. We find
the Assessing Officer denied the claim of deduction
u/sec.80P(2)(a)(i) of the Act on the ground that the decision of
the Tribunal in assessee’s own case was not accepted by
Revenue and an appeal is pending before the Hon’ble
jurisdictional Bombay High Court which is still pending.
Further, only the amount of profits and gains earned by
carrying on the business of banking or providing credit
facilities to it’s members; the assessee-society is eligible for
claiming deduction u/sec.80P(2)(a)(i) of the Act. However, in
the present case, the assessee-society has credited certain
incomes which do not fall under the head of “Profits and Gains
of Business” of the assessee-society.
We find that the instant issue has come-up before the
tribunal in assessee’s own case for the assessment year 2011-
11 ITA.No.1314/PUN./2024
12 and the tribunal vide order dated 27.01.2022 in
ITA.No.265/PUN./2019 has dismissed the appeal filed by the
Revenue by observing as under :
“3. We have heard the rival submissions in Virtual Court
and gone through the relevant material on record. The
Pune Benches of the Tribunal in Sureshdada Jain Nagari
Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA
No.713/PUN/2016) decided the question of availability of
deduction u/s 80P on interest income by noticing that the
Pune ITAT in an earlier case of Shri Laxmi Narayan Nagari
Sahakari Pat Sanstha Maryadit Vs. ITO (ITA
No.604/PN/2014) had allowed the deduction in similar
circumstances. In the said case, the Tribunal discussed
the contrary views expressed by the Hon’ble Karnataka
High Court in Tumkur Merchants Souharda Credit
Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.)
allowing deduction u/s. 80P on interest income and that of
the Hon’ble Delhi High Court in Mantola Cooperative Thrift
Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not
allowing deduction u/s.80P on interest income earned
from banks. Both the Hon’ble High Courts took into
consideration the ratio laid down in the case of Totgar’s
Cooperative Sale Society Ltd. (supra). No direct judgment
from the Hon’ble jurisdictional High Court on the point
having been pointed out, the Tribunal in Shri Laxmi
12 ITA.No.1314/PUN./2024
Narayan Nagari Sahakari Pat Sanstha Maryadit (supra)
preferred to go with the view in favour of the assessee by
the Hon’ble Karnataka High Court in the case of Tumkur
Merchants Souharda Credit Cooperative Ltd. (supra). The
position continues to remain the same before this Bench
also.
Reliance of the ld. DR in the case of Pr. CIT and
Another Vs. Totagars Cooperative Sales Society (2017) 395
ITR 611 (Kar.) is not relevant. The issue in that case was
the eligibility of deduction u/s.80P(2)(d) of the Act on
interest earned by the assessee co-operative society on
investments made in co-operative banks. In that case, the
assessee was engaged in the activity of marketing
agricultural produce by its members; accepting deposits
from its members and providing credit facility to its
members; running stores, rice mills, live stocks, van
section, medical shops, lodging, plying and hiring of goods
and carriage etc. It was in that background of the facts
that the Hon’ble High Court held that the assessee could
not claim deduction u/s.80P(2)(d) of the Act. When we
consider the effect of this decision, it turns out that the
same is not germane to case under consideration in view
of the position that the primary claim of the extant
assessee is directly about the eligibility of deduction
u/s.80P(2)(a)(i) of the Act. In view of the foregoing
13 ITA.No.1314/PUN./2024
discussion, we uphold the conclusion drawn by the ld
CIT(A) in the impugned order by allowing deduction
u/s.80P(2)(a)(i) of the Act.
In the result, the appeal is dismissed.”
8.1. We further find from the details furnished by the
learned counsel for the assessee that the Assessing Officer in
the order passed u/sec.143(3) for assessment years 2012-13
and 2013-14 has allowed the claim of deduction u/sec.80P(2)
of the Act. Similarly, for the assessment years 2014-15 and
2015-16 such deductions were allowed by the Assessing
Officer in the order passed u/sec.154 r.w.s.153A. For the
assessment year 2016-17 such deduction was allowed vide
order passed u/sec.143(3) r.w.s.153A. For assessment year
2017-18, although an addition has been made u/sec.68 of the
Act amounting to Rs.7,20,24,836/-, however, no disallowance
u/sec.80P(2) was made by the Assessing Officer in the order
passed u/sec.143(3) r.w.s.153A. We find for assessment year
2018-19 Assessing Officer has not disallowed the deduction
claimed u/sec.80P in the order passed u/sec.143(3). Further
for the assessment year 2019-20 an order has been passed
u/sec.143(1)(a) and the deduction claimed u/sec.80P(2) has
been allowed. Therefore, following the rule of consistency as
well as following the order of the tribunal in assessee’s own
case for assessment year 2011-12, we do not find any infirmity
14 ITA.No.1314/PUN./2024
in the order of the learned CIT(A) in allowing the claim of
deduction u/sec.80P(2)(a)(i) of the Act. Thus, the same is
upheld and the grounds raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 27.11.2024.
Sd/- Sd/- [MS. ASTHA CHANDRA] [RAMA KANTA PANDA] JUDICIAL MEMBER VICE PRESIDENT
Pune, Dated 27th November, 2024 VBP/-
Copy to 1. The appellant 2. The respondent 3. The CIT(A), Pune-11, Pune. 4. The Pr. CIT, Pune concerned 5. D.R. ITAT, “B” Bench, Pune. 6. Guard File.
//By Order//
//True Copy //
Sr. Private Secretary, ITAT, Pune Benches, Pune.
