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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI INTURI RAMA RAO & SHRI VINAY BHAMORE
order of National Faceless Appeal Centre, Delhi (NFAC) dated 08.11.2023 for the assessment year 2020-21.
Brief facts of the case are that the appellant is a Co-operative credit society engaged in providing credit facilities to its members.
The Return of Income for the assessment year 2020-21 was filed on 11.02.2021 declaring total income of Rs.Nil after claiming deduction under u/s.80P at Rs.1,16,19,383/-. The return was processed u/s.143(1) and the case was selected for scrutiny under CASS. On verification of the record, the AO noticed that the appellant earned interest & dividend income of Rs.23,42,047/-. He was of the opinion that said income earned by the appellant is not income from the regular course of business and is to be assessed as income from other sources. Accordingly, the assessment was completed by the Assessing Officer u/s.143(3) r.w.s.144B of the Act vide order dated 19.09.2022 disallowing assessee’s entire claim of deduction of Rs.1,16,19,383/- on the ground that interest income earned from deposits kept with Cooperative Bank is not eligible for deduction u/s.80P of the Act.
Being aggrieved, an appeal was filed before the NFAC, who vide impugned order restricted the disallowance to the tune of Rs.23,42,047/- as against the entire disallowance of Rs.1,16,19,383/- made by the AO.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
The ld. AR submitted before us that the issue no more res integra by virtue of several decisions passed by the Pune Benches of the Tribunal in favour of the appellant(s).
On the other hand, ld. Sr. DR placing reliance on the orders of the lower authorities submits that no interference is called for.
Heard the rival submissions and perused the material on record. The 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. It is an admitted fact that the appellant is a cooperative society engaged in the business of providing credit facilities. It does not enjoy any license to carry on the business of banking from Reserve Bank of India. Therefore, as held by the Hon’ble Supreme Court in the case of PCIT vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd., 454 ITR 117 (SC) that the assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act. Reliance in this regard can also be placed on the decision of the Hon’ble Bombay High Court in the case of PCIT vs. Quepem Urban Co-operative Credit Society Ltd., 438 ITR 631 (Bom.).
As regards, the issue as to the allowability of exemption under the provisions of section 80P(2)(a)(i) in respect of interest income earned by a cooperative society from the scheduled banks, there is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon’ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon’ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon’ble Delhi High Court in the case of Mantola Co- operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon’ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, not eligible for exemption u/s.80P(2)(a)(i) of the Act. However, the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann.com 309 (Kar.) and the Hon’ble Telangana and Hon’ble Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [(2017) 396 ITR 371 took a view that such interest income is attributable to the activities of the society and, therefore, eligible for exemption u/s 80P(2)(a)(i) of the Act. Similar view has been taken by the Hon’ble Calcutta High Court in the case of PCIT vs. Gunja Samabay Krishi Unnayan Samity Ltd., 147 taxmann.com 518 (Calcutta) and the Hon’ble Madras High Court in the case of Chennai Central Co- operative Bank Ltd. vs. ITO, 148 taxmann.com 17 (Madras). The Coordinate Bench of Pune Benches in the case of M/s. Ratnatray Gramin Bigar Sheti Sah. Pat Sanstha Maryadit Vs. ITO (ITA Nos.559/560/PUN/2018, dated 11-12-2018) taken view in favour of the assessee following the judgment of Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). Following the decision of the Coordinate Bench of the Tribunal, we of the considered opinion that the interest income earned on fixed deposits with cooperative bank/scheduled bank partakes character of the business income, which is eligible for deduction u/s 80P(2)(a)(i) of the Act. Therefore, we vacate the order passed by the CIT(A)/NFAC and direct the Assessing Officer to allow the exemption u/s.80P(2)(a)(i) of the Act. Thus, the grounds of appeal filed by the assessee stand allowed.
In the result, the appeal of the assessee is allowed. Order pronounced on this 25th day of April, 2024.