N.D.A. EMPLOYEES CO. OP. CREDIT SOCIETY LIMITEDS,N.D.A. CAMPUS KHADAKWASALA vs. INCOME TAX OFFICER , PMT BUILDING PUNE

PER SATBEER SINGH GODARA, J.M.

This assessee’s appeal for assessment year 2018-

2019, arises against the CIT(A)-National Faceless Appeal

Centre [in short the “NFAC”] Delhi’s Din and Order No.ITBA/

NFAC/S/250/2024-25/1065613388(1), dated 13.06.2024, in

proceedings u/s.143(3) of the Income Tax Act, 1961 (in short

“the Act”).

Heard both the parties. Case file perused.

grounds in the instant appeal :

2 ITA.No.1689/PUN./2024

Ld. Commissioner of Income Tax (Appeals), NFAC has not

justified in upholding the Assessing Officer's finding that

the interest and dividend earned from the funds invested

in Pune District Central Co- operative Bank Ltd (PDCC

Bank Ltd) was not eligible for deduction u/s 80P(a)(2)(1) of

the Income Tax Act as the said income was not business

income but was income from other sources.

learned Commissioner of Income Tax (Appeals), NFAC has

grossly erred in denying deduction u/s 80P(2)(a)(i) of the

1.T. Act 1961 to the appellant society in respect of interest

/ dividend income of Rs.26,28,087/- earned from fixed

deposits kept by it with Pune District Central cooperative

bank (PDCC Bank Ltd). The aforesaid addition being

patently illegal, bad in law, arbitrary, perverse and devoid

of merits The same may please be deleted and it may be

held that the aforesaid interest dividend income is exempt

u/s 80P(2)(i) of the L.T. Act, 1961.

learned Commissioner of Income Tax (Appeals), NFAC has

erred in upholding the Assessing Officer's finding that, the

appellant was not entitled to deduction u/s 80P(2)(d) of the

Income Tax Act as the Pune District Central Co-operative

Bank Ltd was not a Co-operative Society and furthermore

3 ITA.No.1689/PUN./2024

due to the operation of Sec 80P(4) of the Income Tax Act, a

Co-operative Bank was ineligible for deduction u/s 80P of

the Income Tax Act 1961.

learned Commissioner of Income Tax (Appeals), NFAC has

failed to appreciate the fact that the Pune District Central

Co-operative Bank Ltd was primarily a Co-operative

Society registered under the Maharashtra Co-operative

Societies Act 1960 vide certificate of registration dated

30th Dec 1995, and as such, the income from interest and

dividend earned by cooperative society from its investment

from such Co-operative Bank (cooperative society) was

eligible for deduction u/s 80P(2)(d) of the Income Tax Act,

1961, even though the said income is taxed as income

from other sources, as held by Hon'ble Apex Court of India

in the case of Totagars Co-operative Sale Society vs. ITO in

188 taxmann.com 282 (SC) instead of business income.

learned Commissioner of Income Tax (Appeals), NFAC has

erred in not following the ratio of the Hon'ble ITAT, Pune's

decision in the case of Rena Sahakari Karkhana Ltd. Vs.

Pr. Commissioner of Income Tax- 2. Aurangabad (ITA No.

1249/ PUN/2018 dated 07/01/2022) and in the case of

Sumitra Gramin Bigar Sheti Sahakari Pat Sanshta

Maryadit (ITA No.1148/PUN/2018 dated 04/11/2022), on

4 ITA.No.1689/PUN./2024

identical/similar issue when in fact the, decisions of

jurisdictional Bench of ITAT are binding in nature on all

the assessees and Authorities below working in its

jurisdiction considering judicial precedence.

modify, alter, revise, substitute, delete any or all grounds

of appeal, if deemed necessary at the time of hearing of

the appeal.”

able assistance coming from both the sides that the Assessing

Officer had declined the assessee’s claim of sec.80P deduction

representing interest income from deposit(s) made with Co-

operative/Scheduled bank(s) as well as from nominal members

in course of regular business activity. The Revenue more

particularly supported the learned CIT(A)-NFAC’s directions in

light of hon’ble apex court’s order in the case of M/s Totgars

Co-operative Sale Society Ltd. Vs ITO (2010) 322 ITR 283 (SC)

that such an interest income derived from deposits made in

scheduled or cooperative societies does not deserve any

deduction u/s.80P(2)(a)(i) r.w.s.80P(2)(d) of the Act. He

accordingly pleads that the order of the CIT(A)-NFAC be

confirmed.

vehement submissions of the Revenue and find no merit in

5 ITA.No.1689/PUN./2024

light of this tribunal’s recent order in Rena Sahakari Sakhar

Karkhana Ltd. Vs. Pr.CIT (ITA No.1249/PUN/2018) decided on

07-01-2022 as follows :

“3. After culmination of the assessment proceedings, the

Pr. CIT called for the assessment records of the assessee.

It was observed by the Pr. CIT that the assessee had

during the year shown interest income from FDs with Co-

operative Banks amounting to Rs.75,38,534/-, against

which it had claimed deduction under Sec.80P(2)(d) of the

Act. It was observed by the Pr. CIT, that the A.O while

framing the assessment had allowed the aforesaid claim

of deduction raised by the assessee. Observing, that as co-

operative banks were commercial banks and not a co-

operative society, therefore, the Pr.CIT was of the view that

the assessee was not eligible for claim of deduction under

Sec.80P(2)(d). In the backdrop of his aforesaid conviction,

the Pr. CIT was of the view that the assessment order

passed by the A.O under Sec.143(3), dated 07.03.2016,

therein allowing the assesses claim for deduction under

Sec. 80P(2)(d), had therein rendered his order as

erroneous, insofar it was prejudicial to the interest of the

revenue. Accordingly, the Pr.CIT not finding favour with

the reply of the assessee, wherein the latter had tried to

impress upon him that it was duly eligible for claim of

deduction under Sec.80P(2)(d) of the Act, therein “set

6 ITA.No.1689/PUN./2024

aside” the order of the A.O with a direction to redecide the

issue afresh and reframe the assessment.

Pr.CIT has carried the matter in appeal before us. As the

present appeal involved a delay of 52 days, therefore, the

ld. A.R took us through the reasons leading to the same. It

was submitted by the ld. A.R that as the then counsel of

the assessee society who was looking after its tax matters,

viz. Shr. Ravikiran Pandurang Todkar, Chartered

Accountant was taken unwell due to kidney failure and

had undergone kidney transplant, therefore, due to his

unavailability the appeal could not be filed within the

stipulated time period. Our attention was drawn towards the „affidavit‟ of the assessee society wherein the

aforesaid facts were deposed. On the basis of the

aforesaid facts, it was submitted by the ld. A.R that the

delay involved in filing of the present appeal in all fairness

may be condoned. Per contra, the ld. D.R did not object to

the seeking of condonation of the delay in filing of the

appeal by the assessee society. After giving a thoughtful

consideration, we are of the considered view, that as there

were justifiable reasons leading to delay on the part of the

assessee in filing of the present appeal before us,

therefore, the same merits to be condoned.

7 ITA.No.1689/PUN./2024

the A.O while framing the assessment had after making

necessary verifications taken a plausible view, therefore,

the Pr. CIT had exceeded his jurisdiction by seeking to

review the order passed by him in the garb of the

revisional powers vested with him under Sec.263 of the

Act. It was submitted by the ld. A.R, that the issue as

regards the eligibility of the assessee for claim of

deduction under Sec.80P(2)(d) on interest income derived

from investments/deposits lying with co-operative banks

was squarely covered by the various orders of the

coordinate benches of the Tribunal viz., (i). M/s Solitaire

CHS Ltd. vs. Pr. CIT, ITA No. 3155/Mum/2019; dated

29.11.2019 ( ITAT “G” Bench, Mumbai); Kaliandas Udyog

Bhavan Premises Co-op Society Ltd. Vs. ITO-21(2)(1),

Mumbai, ITA No. 6547/Mum/2017 (ITAT Mumbai); and

(iii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT,

Circle-3, Aurangabad, ITA No, 308/Pun/2018 (ITAT Pune).

On the basis of his aforesaid contentions, it was averred

by the ld. A.R that as the Pr. CIT had exceeded his

jurisdiction and had not only sought to review the

plausible view that was taken by the A.O after necessary

deliberations which was in conformity with the order of the

jurisdictional bench of the Tribunal, therefore, his order

may be vacated and that of the A.O be restored.

8 ITA.No.1689/PUN./2024

under Sec.263 of the Act. It was submitted by the ld. D.R,

that as the assessee was not eligible for claim of deduction

under Sec.80P on the interest income received on the

investments/deposits lying with the co-operative banks,

therefore, the Pr. CIT finding the assessment order passed

by the A.O under Sec.143(3), dated 07.03.2016 as

erroneous, insofar it was prejudicial to the interest of the revenue, had rightly „set aside‟ his assessment with a

direction to re-adjudicate the issue therein involved. Our

attention was also drawn by the ld. D.R to his written

submissions and certain judicial pronouncements in

support of his aforesaid contention.

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 or not 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. In our

considered view, the issue involved in the present appeal

hinges around the adjudication of the scope and gamut of

9 ITA.No.1689/PUN./2024

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 the co-operative

bank, 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.

persuade ourselves to concur with the view taken by the

Pr. CIT. Before proceeding any further, we may herein cull

out 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).

10 ITA.No.1689/PUN./2024

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 sub-

section (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).................................................................................. .......... (d) in respect of any income by way of interest or

dividends derived by the cooperative 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 co-operative 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

11 ITA.No.1689/PUN./2024

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) to Sec. 80P of the Act, 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 jeopardize

the claim of deduction of a co-operative society under

Sec. 80P(2)(d) in respect of its interest income on

investments/deposits parked with a co-operative

bank. In our considered view, as long as it is proved

that the interest income is being derived by a co-

operative 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 „co-operative society‟ had been defined under

Sec. 2(19) of the Act, as under:-

“(19) “Co-operative society” means a cooperative

society registered under the Co-operative

12 ITA.No.1689/PUN./2024

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;”

We are of the considered view, that though the co-

operative banks pursuant to the insertion of sub-

section (4) to Sec. 80P would no more be entitled for

claim of deduction under Sec. 80P of the Act, 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 co-operative 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.

relied upon by the ld. A.R are concerned, 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 co-

operative bank is covered in favour of the assessee in the

following cases:

13 ITA.No.1689/PUN./2024

(i). M/s Solitaire CHS Ltd. vs. Pr. CIT, ITA No.

3155/Mum/2019; dated 29.11.2019 ( ITAT “G”

Bench, Mumbai);

(ii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs.

ACIT, Circle-3, Aurangabad, ITA No, 308/Pun/2018

(ITAT Pune)

(iiii). 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. Although, in

14 ITA.No.1689/PUN./2024

all fairness, we may herein observe that the Hon'ble

High Court of Karnataka in the case of Pr. CIT Vs.

Totagars co-operative Sale Society (2017) 395 ITR

611 (Karn), as had been relied upon by the ld. D.R

before us, had held, that a co-operative society would

not be entitled to claim deduction under Sec.

80P(2)(d); but then, the Hon'ble High Court 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 co-operative society on its investments held with

a co-operative bank would be eligible for claim of

deduction under Sec.80P(2)(d) of the Act. Backed by

the aforesaid conflicting judicial pronouncements, we

may herein observe, 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 non-jurisdictional 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

15 ITA.No.1689/PUN./2024

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 that of the 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 co-operative society on

its investments held with a co-operative bank would

be eligible for claim of deduction under Sec.80P(2)(d)

of the Act.

while framing the assessment had taken a possible view, and allowed the assessee‟s claim for deduction under

Sec. 80P(2)(d) on the interest income earned on its

investments/deposits with co-operative banks, therefore,

the Pr. CIT was in error in exercising his revisional

jurisdiction u/s 263 of the Act for dislodging the same.

Accordingly, finding no justification on the part of the Pr.

CIT, who in exercise of his powers under Sec. 263 of the

Act, 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),

dated 07.03.2016.”

16 ITA.No.1689/PUN./2024

mutandis and the order(s) of the lower authorities stand

reversed. Ordered accordingly.

Order pronounced in the open Court on 26.09.2024.

Sd/- Sd/- [INTURI RAMA RAO] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER

Pune, Dated 26th September, 2024 VBP/- Copy to 1. The appellant 2. The respondent 3. The Pr. CIT, Pune concerned 4. D.R. ITAT, “SMC” Bench, Pune. 5. Guard File. //By Order//

//True Copy //

Sr. Private Secretary, ITAT, Pune Benches, Pune.