MENASI SEEMEYA GROUP,SIRSI vs. CIT, HUBLI

PER SHRI ABRAHAM P GEORGE, AM;

Assessee, in these appeals assails the orders of the CIT under

section 263 of the Income-tax Act, 1961 ( in short ‘The Act’) whereby he

held the assessments done on the assessee under section 143(3) of the

Act, to be erroneous in so far as it was prejudicial to the interest of

revenue.

section 263 of the Act, was that assessee had claimed deduction under

2 ITA Nos. 609 & 610(B)/14

section 80P(2)(d) on interest received by it on its deposits with Co-

operative Banks. As for the learned CIT this claim ought not have been

accepted. Learned CIT held that Section 80P(2)(d) could not be so

liberally interpreted so as to construe a Co-operative bank also as a Co-

operative Society. Though the assessee argued that M/s Kanara District

Co-operative Bank, wherein it had placed its deposits was registered as a

Co-operative Society under section 9 of the Co-operative Societies Act,

1912 (Act No.2 of 1912) it did not find favour with the CIT. He held the

assessments done to be erroneous and prejudicial to the interest of the

revenue, on this count.

assessee, submitted that the Tribunal in the case of Bagalkot District

Central Co-operative Bank Vs JCIT (ITA No.1572/Bang/2013 dated 30-

05-2014) had unequivocally held that it was not possible to exclude a Co-

operative Society engaged in business of banking from being considered

as a Co-operative Society, perse. As per the learned AR, though the said

decision was given in the context of section 194A(3)(v) it would squarely

apply here also. Reliance was also placed on judgment of Hon’ble

jurisdictional High Court in the case of Tumkur Merchants’s Souharda

3 ITA Nos. 609 & 610(B)/14

Credit Co-operative Society Vs ITO (ITA No.307(B)/2014 dated 28-10-

2014)

and also submitted that the AO had not applied or considered section

80P(2)(d), in accordance with the wordings of the said section. Hence,

according to him there was an error which was prejudicial to the interest

of the revenue.

reading of the computation part of the assessment, do show that AO had

considered the claim of deduction made by the assessee u/s 80P(2)(d) of

the Act. Out of the total claim of Rs.9,77,821/- AO had disallowed

Rs.4,770/- being interest of TDS for the assessment year 2009-10.

Therefore, it is not a case where AO failed to apply his mind at all.

deposits earned by a Co-operative Society, where such deposits were with

a Co-operative Bank, we are of the opinion that restrictive interpretation

given by the learned CIT(A) to section 80P(2)(d) was not warranted by it

wordings. Section 80P(2)(d) is reproduced hereunder:

4 ITA Nos. 609 & 610(B)/14

“ in respect of any income by way of interest or dividends derived by the C-operative Society from its investments with any other Co-operative society, the whole of such income’.

This Tribunal in the case of Bagalkot District Central Co-operative Bank

had held that a Co-operative bank which is also a Co-operative Society

cannot be excluded from the purview of benefits available to a Co-

operative Society , unless the provisions of the Act so stipulate. No doubt

in the said decision, the Tribunal was considering the application of

Section 194A(3)(v) of the Act, wherein it was mandated that a Co-

operative Society was not required to deduct tax at source if the interest

credit were paid to any Co-operative Society. It had unequivocally held

that the said provision applied to all Co-operative Society including a Co-

operative Society engaged in the business of the bank or in other words, a

Co-operative Bank. Therefore, the view taken by the AO that income by

way of interest or dividends earned by the assessee society from the Co-

operative bank namely Kanara Dist.Central Co-operative bank which was

also a Co-operative Society was eligible for deduction cannot be faulted.

We cannot say that the order of the AO was erroneous and prejudicial to

5 ITA Nos. 609 & 610(B)/14

the interest of the revenue. Order of the learned CIT, therefore, stand

quashed and appeals of the assessee are allowed.

Order pronounced in the open Court on the

(N.V.VASUDEVAN) (ABRAHAM P GEORGE) JUDICIAL MEMER ACCOUNTANT MEMBER Bangalore: D a t e d : 06-02-2015 am Copy to :

Appellant Respondent CIT(A)-IV, Bangalore. CIT DR, ITAT, Bangalore. Guard file (1+1) Asst. Registrar

ITAT, Bangalore