SHRI HARIOM NAGARI SAHAKARI PATSANSTHA MARYADIT,NASHIK vs. INCOME TAX OFFICER WARD-1(1), NASHIK , NASHIK

Being aggrieved, an appeal was filed before the NFAC, who vide impugned order placing reliance on the judgments of Hon’ble Supreme Court in the case of Totgar Cooperative Sale Society Ltd. 322 ITR 283 and Mavilayi Service Cooperative Bank Ltd. Vs. CIT 123 taxmann.com 161 (SC) restricted the disallowance to Rs.24,17,446/-, partly allowing the appeal of the assessee.

Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.

The ld. AR submits that the case of the assessee is covered by virtue of decisions passed by the Pune Benches of the Tribunal allowing the deduction u/s.80P(2)(a)(i)/80P(2)(d), therefore, prayed for reversing the order of the authorities below.

On the other hand, ld. Sr. DR placing reliance on the orders of the lower authorities submits that no interference is called for.

We heard both the sides perused the material on record. The only issue in the present appeal relates to the eligibility of the assessee for exemption u/s. 80P(2)(a)(i) or u/s 80P(2)(d) of the Act in respect of interest income earned from Cooperative banks and Nationalised banks. The issue is no more res integra as the same is covered by catena of decisions passed by the Pune Benches allowing the deduction u/s.80P of the Act.

The Co-ordinate Bench of the Tribunal in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in for A.Y. 2012-13 order dated 27.05.2022 held in favour of the appellant society. The relevant paragraphs of the said order of Co-ordinate Bench of the Tribunal (supra) is reproduced herein under :- “8. We heard the rival submissions and perused the material on record. The only issue in the present appeal is pertaining to the allowability of deduction under the provisions of section 80P(2)(d) of the Act. On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. In the present case, the reasoning given by the lower authorities for denial of exemption u/s 80P(2)(d) of the Act is that interest was received from cooperative bank has no legs to stand as a cooperative bank is also a cooperative society. This issue was considered by the Hon’ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon’ble High Court referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) held that the ratio of decision of the Hon’ble Supreme Court in the aforesaid case (supra) not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act.

Insofar as the reliance of the ld. DR on the case of Pr. CIT and Another Vs. Totagars Cooperative Sales Society (2017) 395 ITR 611 (Kar.) is concerned, we find that 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 impact of this decision, it turns out that the same is not germane to case under consideration in view of the position that the claim of the instant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act and not u/s.80P(2)(d). Moreover, so many decisions relied on by the ld. AR amply go to prove that the view taken by the AO, cannot by any standard, be construed as not a possible view. We, therefore, hold that the ld. Pr. CIT was not justified in exercising the revisional power anent to interest income of Rs.22,34,270/- earned on investments made with co-operative banks.”

Following the decision of the Co-ordinate Bench of this Tribunal (supra), we are 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 banks qualify 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. Thus, we 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 banks and Nationalised banks. The grounds of appeal filed by the assessee stands allowed.

In the result, both the appeals filed by the assessee are allowed.