NMG BANK EMPLOYEES CO-OP CREDIT SOCIETY,KANNUR vs. THE ITO, KANNUR

आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee for Assessment Years (AY) 2016- 17 & 2017-18 arises out of separate orders of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] both dated 28-05-2021 in the matter of assessments framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act. At the time of hearing, none appeared for assessee and accordingly, the hearing was

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concluded with the able assistance of Ld. Sr. DR who pleaded for dismissal of the appeals. The registry has noted minor delay of 52 days in the appeal which stand condoned since the impugned order was passed during lockdown situation arising out of Covid-19 Pandemic. The facts as well as issues are stated to be identical in both the years. 2. Upon perusal of assessment order for 2016-17, it could be seen that the assessee earned interest income of Rs.1,90,986/- from Kannur District Co-operative Bank. The Ld. AO denied deduction u/s 80P(2)(d) on the ground that deduction is allowed only if the interest was received from a co-operative society and not from a bank. The Ld. CIT(A), relying on the decision of Hon’ble Karnataka High Court in the case of Pr. CIT vs. Totagars Co-operative Society (395 ITR 611) held that cooperative societies are not at par with cooperative banks. Aggrieved, the assessee is in further appeal before us. 3. We find that this issue has been decided in assessee’s favor by Pune Tribunal in the case of Rena Sahakari Sakhar Karkhana Ltd. vs. Pr. CIT (138 Taxmann.com 532). The bench, after considering contrary decisions of various High Courts, held as under: -

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(c) ………………………………... (d) in respect of any income by way of interest or dividends derived by the co- operative 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 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 1-4-2007, 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 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. 9. In so far the judicial pronouncements that have been 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: (i) Solitaire CHS Ltd. (supra) (ii) Majalgaon Sahakari Sakhar Karkhana Ltd. (supra) (iii) Kaliandas Udyog Bhavan Premises Co-op. Society Ltd. (supra) We further find that the Hon'ble High Court of Karnataka in the case of Pr. CIT v. Totagars Co-operative Sale Society [2017] 78 taxmann.com 169/392 ITR 74 and Hon'ble High Court of Gujarat in the case of State Bank of India v. CIT [2016] 72 taxmann.com 64/241 Taxman 163/389 ITR 578, had held, that the interest income earned by the assessee on its investments with a co-operative bank would be

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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 all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT v. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140/395 ITR 611,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 Totagars Co- operative Sale Society (supra) (Karn) and Hon'ble High Court of Gujarat in the case of State Bank of India (supra) 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 v. Siemens India Ltd. [1983] 15 Taxman 594/[1985] 156 ITR 11, 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 jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Totagars Co-operative Sale Society (supra) and that of the Hon'ble High Court of Gujarat in the case of State Bank of India (supra) 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. No decision of jurisdictional High Court has been shown to us. Therefore, concurring with the above decision, we direct Ld. AO to grant deduction u/s 80P(2)(d) as claimed by the assessee on its interest income in both the years. 4. Both the appeals stand allowed in terms of our above order.

Order pronounced on 30th November, 2022.

Sd/- Sd/- (SATBEER SINGH GODARA) (MANOJ KUMAR AGGARWAL) -ाियक सद. /JUDICIAL MEMBER लेखा सद. / ACCOUNTANT MEMBER

िदनांक / Dated : 30-11-2022 EDN/-

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