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Assessee represented by Shri Akshay Mitish Kumar Modi, C.A. Department represented by Shri Vinod Kumar, Sr. DR Appeal instituted on 24/07/2023 Date of hearing 28/11/2023 Date of pronouncement 28/11/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the Revenue is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 21/07/2023 for the Assessment Year (AY) 2014-15. The revenue has raised following grounds of appeal: “1. On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in allowing deduction u/s. 80P(2)(d) of the I.T. Act of Rs. 9,56,635/-/-.
2. On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in allowing deduction u/s. 80P(2)(d) of the I.T. Act without appreciating the facts that the deposit in cooperative banks lacks the degree of proximity between the members of the society with that of cooperative bank and thus offends this sacrosanct principle of mutuality. This has been established by CIT vis Bankipur Club Ltd 226 ITR 97(SC) and CIT v/s Adarsh Hsg Coop Sty Ltd 2131 TR677(Guj).
ACIT Vs Shree Aradhna Urban Co-Op Credit Society Ltd.
On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in ignoring Hon'ble Gujarat High Court's observation in Katlary Kariyana Merchant Sahakari Sarafi Mandali in SCA No.20585 of 2019 that by virtue of amendment in section 194A(3)(v) of the Income tax act, it has also excluded the co-operative banks from the definition of "co-operative society" by the Finance Act, 2015.
On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in allowing deduction u/s. 80P(2)(d) of the I.T. Act without appreciating the facts that the co-operative banks are entirely different species than those of co-operative societies, the income must have been earned by way of interest or dividends and the income must be derived from investment with any other co- operative society only, as held by the Hon'ble Karnataka High Court in the case of Principal Commissioner of Income-tax, Hubballi vs. Totagars Co-operative Sale Society.
On the basis of the facts and circumstances of the case and -in law, the Id. CIT(A) ought to have upheld the order of the Assessing Officer.
It is therefore prayed that the order of Id. CIT(A) may kindly be set aside that of the Assessing Officer be restored.
The appellant craves leave to add, alter, amend and/or withdraw any ground of appeal
either before or during the course of hearing of the appeal.”
2. Rival submissions of both the parties have been heard and record perused. The learned Senior Departmental Representative (ld. Sr. DR) for the revenue submit that the tax effect in this appeal in less than the threshold limit of tax effect of Rs. 50.00 lacs, however, the case of assessee is reopened on the basis of audit objection, therefore, the appeal filed by the Revenue is covered by exception clause 10(c) of CBDT Circular No.3 of 2018. On merit, the ld. Sr. DR for the revenue submits that he fully supports the order of Assessing Officer in bringing the interest income earned from cooperative bank is not eligible for ACIT Vs Shree Aradhna Urban Co-Op Credit Society Ltd. deduction under section 80P(2)(d) as the cooperative banks are not primarily the cooperative societies.
3. On the other hand, the learned Authorised Representative (ld. AR) of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee submits that the Assessing Officer passed the order under Section 144 of the Act despite the fact that the assessee has made compliance in response to show cause notice dated 06/10/2019. Such fact is duly recorded in last column of table in para 4 of assessment order. From the details furnished by assessee, the Assessing Officer derived the figure of interest income of Rs. 9,56,635/- earned on fixed deposit with Surat District Cooperative Bank which is exempt under Section 80P(2)(d) of the Act. The ld. AR of the assessee further submits that it is settled position of law that the cooperative banks are primarily cooperative societies as has been held in a series of decisions. The ld. AR of the assessee has filed copy of decisions of such fifteen case laws announced by various tribunal, High Court and Hon’ble Apex Court.
4. I have considered the rival submissions of both the parties and have gone through the orders of the authorities below. I find that the Assessing Officer made addition of Rs. 9,56,635/- by disallowing the deduction under Section 80P(2)(d) of the Act. Such income was earned by the assessee on fixed deposit with Surat District ACIT Vs Shree Aradhna Urban Co-Op Credit Society Ltd. Cooperative Bank. I further find that before the ld. CIT(A), the assessee filed detailed written submissions as has been recorded in para 4.1 of his order. The ld. CIT(A) by following the decision of Hon'ble Gujarat High Court in Sabarkantha District Co-operative Milk Producers Union Ltd. Vs CIT in Tax Appeal no. 473 of 2014 and other decisions of Ahmedabad Tribunal, allowed relief to the assessee. The ld. CIT(A) held that the assessee has furnished evidence that Surat District Cooperative Bank is a cooperative society registered under Gujarat State Cooperative Societies Act. I find that in a series of decisions, the various Benches of the Tribunals held that the cooperative banks are primarily cooperative societies and interest earned on deposits with such cooperative bank is exempt under Section 80P(2)(d) of the Act. The Hon'ble Jurisdictional High court in the case of Surat Vankar Sahakari Sangh Ltd. Vs ACIT (2016) 72 taxmann.com 169 (Guj) also held that the assessee cooperative society was eligible for deduction under section 80P(2)(d) in respect of gross interest received from cooperative bank without adjusting interest paid to said bank. I further find that such decision of Hon'ble High Court in Surat Vankar Sahakari Sangh Ltd. Vs ACIT (supra) has been followed in a serious of decisions by me or by the Division Bench of Surat Tribunal. Therefore, in view of the aforesaid factual and legal discussion, I do not find merit in the grounds of appeal
raised by the ACIT Vs Shree Aradhna Urban Co-Op Credit Society Ltd. revenue and I affirm the order of ld. CIT(A). Considering the facts that the appeal of the revenue is dismissed on merit, therefore, the issue of tax effect involve in the present appeal have become academic.
5. In the result, this appeal of revenue is dismissed. Order announced in open court on 28th November, 2023.