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Income Tax Appellate Tribunal, PUNE BENCHES “B” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This bunch of three appeals filed by the Assessee directed against the separate orders of ld.Commissioner of Income Tax(Appeals)[NFAC] under section 250 of the Income Tax Act, 1961 for A.Y.2020-21 dated 10.07.2024, A.Y.2014-15 and A.Y.2018-19 dated 09.07.2024 respectively. Since the issue involved is common and facts are identical, all the three appeals were heard together and decided by a consolidated order. We take A.Y.2020-21 as lead case. The Assessee for A.Y.2020-21 has raised the following grounds of appeal : “1. Under the facts and circumstances of the case and in law the learned CIT(A), NFAC has erred in not condoning the delay in filing appeal and dismissing the appeal in-limine without going into the merits of the case.
2. Under the facts and circumstances of the case and in law, the learned AO, NFAC has erred in disallowing the deduction claimed u/s 80P(2)(a)/(d) and making the addition of Rs.1,65,80,043/- by treating the interest income earned on deposits with co-operative banks as Income from other sources.
3. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal.” Submission of ld.AR :
2. Ld.AR submitted that Assessee is a Credit Co-operative Society. Assessee filed Return of Income for A.Y.2020-21 declaring NIL Income and claiming deduction u/sec.80P(2)(a) of the Act. Ld.AR further submitted that the Assessing Officer(AO) in the assessment order has observed that assessee has earned Interest Income of Rs.1,65,80,043/- on fixed deposits kept in Commercial Banks and Others which is not in the nature of Operational Income. Therefore, Assessing Officer(AO) disallowed the assessee’s claim of deduction under section 80P(2)(a) of the Act. Ld.AR further submitted that there was a delay in filing appeal before the ld.CIT(A) of 145 days. Ld.AR submitted that an elaborate reasoning has been given by the Assessee in Form No.35 and requested the ld.CIT(A) to condone the delay. However, ld.CIT(A) dismissed the appeal without condoning the delay. Ld.AR has submitted that assessee is eligible for deduction u/sec.80P(2)(a) of the Act. The delay was on account of non- compliance of professional appointed by the assessee. Ld.AR submitted that there was no malafide intention. Ld.AR also submitted that on merits Assessee has a strong case as in identical facts and circumstances of the case, ITAT Pune Bench has allowed the 80P deduction on Interest Income.
Submission of ld.DR : 3. The ld.DR for the Revenue relied on the order of AO and ld.CIT(A).
Findings &Analysis : 4. We have heard both the parties and perused the records. It is observed that Assessing Officer has disallowed assessee’s claim of deduction u/sec.80P(2)(a) of the Act on the Interest Income relying on decision of the Hon’ble Supreme Court in the case of Totagars Co-operative Sale Society Ltd., vs. ITO [2010] 322 ITR 283/188 Taxmann 282 (SC). It is observed from Para 3.4.17 of the Assessment Order that during the year, Assessee has earned Interest Income of Rs.1,65,80,043/- on fixed deposits/investments kept with Banks.
4.1 The Hon’ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371 analysed the provisions of Section 80P, succinctly distinguished the decision of the Hon’ble Supreme Court in the case of Totagars Cooperative Sale Society, and held as under : Quote,“8. Therefore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of sub- section (2) of section 80P or not.
While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Co- operative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. ……………………
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 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 be termed as profits and gains of business. This is why Totgar's struck a different note.
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 respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be.
The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression "attributable to" and not any one of the two expressions, namely, "derived from" or "directly attributable to".
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.”Unquote. 4.2 Thus, the Hon’ble High Court of AP &TS held that Interest Income earned by investing Income derived from Business and Profession by a Co-Operative Society was eligible for deduction u/s.80P(2)(a) of the Act.
4.3 The Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. Vs. CIT [2021] 431 ITR 1(SC) observed as under : Quote “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. ”Unquote. 4.4 No contrary decision of the Hon’ble jurisdictional High Court has been brought to our notice. Therefore, as per rule of precedence, the proposition of law laid down by the Hon’ble High Court of AP & TS (supra) are binding precedents for us.
The Hon’ble ITAT Pune Bench in the case of Kolhapur District Central Co-op. Bank Kanista SevakanchiSahakar Pat Sanstha Ltd. Vs. Income-tax Officer 158 taxmann.com 322 (Pune Tribunal) has held as under : Quote “7………………………..I am of the considered opinion that even the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted. Therefore, I direct the Assessing Officer to allow deduction u/s 80P(2)(a)(i) and 80P(2)(d) in respect of interest income earned from cooperative bank/scheduled bank. Thus, the ground of appeal filed by the assessee stands allowed.”Unquote
The Hon’ble ITAT Pune Bench in the case of Yashwant Nagari SahakariPatsansthaMaryadit Vs. ITO in dated 04.06.2024 held that the assessee was eligible for deduction u/sec.80P(2)(a) of the Act on the Interest earned by assessee.
6.1 Respectfully following the decision of the Hon’ble High Court (supra) andITAT Pune (supra), it is held that the Interest earned by the assessee is eligible for deduction u/sec.80P(2)(a) of the Act. Accordingly, Grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
and 1802/PUN/2024 (02 Appeals - Assessee) 8. Since we have decided the above appeal of the assessee i.e.1791/PUN/2024 “lead case” and the facts and issue involved is same of these two appeals are common, the decision of the same shall apply mutatis-mutandis to both these appeals also. Accordingly, grounds of appeal raised in i.e.ITA Nos.1801 & 1802/PUN/2024 are allowed.
8.1 In the result, four appeals of the assessee in & 1802/PUN/2024 are allowed.
To sum up, all three appeals of the assessee are allowed. Order pronounced in the open Court on 21st November, 2024.