KONKAN EDUCATION SOC. SEVAKSHAKARI PATPEDHI LTD,RAIGARH vs. INCOME TAX OFFICER, WARD-3, PANVEL, PANVEL

During the course of hybrid hearing, a common threadbare issue of disallowance u/s 80P(2) of the Act in these twin appeals brought to the attention of the bench. On rival parties’ request, these are taken up together for the sake of brevity and for a common & consolidated order. In adjudicating these matters together, first appeal is taken as lead case; resultantly adjudication laid in succeeding paragraphs shall mutatis-mutandis apply to ITA No 047/PUN/2024.

Concisely stated common facts born out of case records are; 3.1 The appellant assessee is a credit co-operative society registered under the provisions of Maharashtra State Co-op. Societies Act and is engaged in the business of providing credit facilitates to its members. For the year under consideration the assessee earned net profit of ₹23,97,862/- from its business activities of providing credit facilities to its member and ₹15,98,301/- as interest and dividend from investment made with RDCC bank against which it has claimed a deduction u/s 80P(2)(a)(i) & 80P(2)(d) of the Act respectively. Accordingly the society filed its return of income [‘ITR’ hereinafter] declaring NIL income after claiming a deduction of ₹39,96,163/- u/c VI-A of the Act.

At the hybrid hearing, Ld. AR appearing virtually reiterated appellant’s version of submission as was laid before tax authorities and adverting paper book vehemently submitted that, no portion of interest is earned from nationalised bank but from RDCC banks which is registered credit co- operative societies. In the facts and circumstances, the assessee is entitled to 100% deduction of u/s 80P(2)(d) of the Act. Per Contra, the Ld. DR could hardly controvert the factual position and judicial precedents relied upon by the appellant, however strongly relied on orders of tax authorities below.

Heard rival common contentions; and subject to provision of rule 18 of ITAT-Rules, 1963 perused material placed on record, case laws relied upon by both the rival parties and considered the facts in light of settled legal position which are forewarned to parties present.

The solitary issue in these appeals hinges around allowability of deduction u/s 80P(2)(d) of the Act. On perusal of section 80P(2)(d), it is ostensibly clear that interest & dividend income derived by one cooperative society from its investment held with other cooperative societies is eligible for deduction u/s 80P(2)(d) of the Act. For the purpose the chief determinant factor entitling a claim of deduction u/s 80P(2)(d) in the hands of assessee society is that, interest & dividend income should have been earned by it from an investment made with any other cooperative society registered under the provisions of law, irrespective of its nomenclature with which such paying society i.e. the payer is known for.

In the present case, the reasoning given by the lower tax authorities in denying the claim for deduction u/s 80P(2)(d) of the Act is that interest and dividend was received from RDCC a cooperative bank, however this reasoning has no legs to stand as a cooperative bank is principally a cooperative society and holds a banking license to operate on a larger scale under the guidelines of RBI. This issue was came to consider by Hon’ble Karnataka High Court in ‘CIT Vs Totagars Cooperative Sale Society’, finds reported in 392 ITR 74 wherein their lordships referring to the decision of Hon’ble Apex 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 applied in respect of interest income on investment as same falls u/s 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. We further note that, the co-ordinate bench in ‘Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO’, reported in 120 taxmann.com 10, after making reference to the decisions of the Hon’ble Supreme Court in the case of Totgars Cooperative Sales Society Ltd. (supra) and having noticed the divergent views of the Hon’ble Karnataka High Court in the case of ‘Tumkur Merchants Souharda Credit Co-op. Ltd. Vs ITO’, 55 taxmann.com 447 and decision of Hon’ble Delhi High Court in ‘Mantola Cooperative Thrift Credit Society Ltd. Vs CIT’, reported at 50 taxmann.com 278, the decision rendered in ‘Mantola Cooperative Thrift Credit Society Ltd. (supra) had not been preferred to ratio laid in ‘Tumkur Merchants Souharda ITAT-Pune Page 5 of 7

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 cooperative 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 ITAT-Pune Page 6 of 7

Without multiplying judicial precedents on the aforestated issue, maintaining same parity we adopt equi reasoning and hold that, the interest and dividend earned by the appellant society from its investment held with co-operative banks namely RDCC, being a registered co-operative society under respective state laws, qualifies for deductions u/s 80P(2)(d) of the Act. Consequently the views adopted by the tax authorities below are not in conformity with legal position and binding judicial precedents, hence deserves to be vacated. Resultantly, we set-aside the impugned order and reverse the denial of deduction.

In result, both the appeals of the assessee are ALLOWED. In terms of rule 34 of ITAT Rules, order pronounced in open court on this Tuesday 20th day of February, 2024.