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Income Tax Appellate Tribunal, BANGALORE ‘A’ BENCH, BANGALORE
Before: SHRI N.V.VASUDEVAN & SHRI ABRAHAM P GEORGE
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.
Reason for which the CIT invoked his revisionary powers under section 263 of the Act, was that assessee had claimed deduction under 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.
Now when the matter came up before us, learned counsel for the 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 Credit Co-operative Society Vs ITO (ITA No.307(B)/2014 dated 28-10- 2014)
Per contra, learned DR strongly supported the order of the CIT 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.
We have perused the orders and heard the rival contentions. A 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.
Now coming to the question as to whether the interest on 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:
“ 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 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