THE PONDA EDUCATION SOCIETY EMPLOYEE CO-OPERATIVE CREDIT SOCIETY LIMITED,PONDA vs. INCOME TAX OFFICER, WARD - 2(2), PANAJI

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH “SMC” : PANAJI [THROUGH VIRTUAL HEARING] BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER I.T.A.No.132/PAN/2019 Assessment Year 2015-16 The Ponda Education The Income Tax Officer, Society Employee Co-operative Credit Society Ward – 2 (2), Aaykar vs Ltd., Farmgudi, Near PES Bhavan, Pato Plaza, College, Ponda Goa. Panaji, Goa. Goa – 403 401 PIN 403 001 PAN AABAT4583D Appellant Respondent

Assessee by : Shri S.J. Kamat Revenue by : Smt. Neelima Nadkarni, Sr.DR Date of hearing : 29.11.2022 Date of pronouncement : 28.12.2022

ORDER This assessee’s appeal for Assessment Year 2015-16 is directed against the Commissioner of Income Tax (Appeals), Panaji- 1, Panaji’s order dated 10.01.2019 passed in case No.CIT(A), PNJ- 1/10437/2017-18, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short “the Act”].

2 ITA.No.132/PAN/2019 The Ponda Education Society Employee Co-operative Credit Society Ltd., Ponda Goa. 4. I have given my thoughtful consideration to vehement rival submissions. The first and foremost issue between the parties is that of assessee’s status as to whether it is a cooperative bank or a credit cooperative society as per the Revenue’s and assessee’s arguments, respectively. 5. There could be hardly any dispute that hon’ble apex court’s recent landmark decision in Mavilayi Service Co-operative Bank Ltd., vs., CIT [2021] 431 ITR 1 (SC) has settled the issue that assessee’s registration under the respective cooperative law itself forms the decisive factor. This assessee is further found registered as credit cooperative society only. I thus reject the Revenue’s instant arguments to this effect. 6. Learned DR next argued that the assessee had deposited its surplus in cooperative banks and derived interest therefrom which has been claimed as eligible for section 80P deduction. This tribunal’s recent coordinate bench’s order in ITA.No.103/PAN./ 2018 dated 17.11.2021 has rejected the department’s stand as follows : “6. We heard the rival submissions and perused the material on record. The solitary issue in the present appeal relates to the eligibility of exemption of income received from cooperative banks under the provisions of section 80P(2)(d) of the Act. The Assessing Officer as well as the ld. CIT(A) was of the opinion that the same does not call for exemption u/s 80P(2)(d) of the Act as they were

3 ITA.No.132/PAN/2019 The Ponda Education Society Employee Co-operative Credit Society Ltd., Ponda Goa. received from a cooperative bank. The reasoning of the lower authorities cannot be sustained in the eyes of law as the cooperative banks also the spies of the cooperative societies and continue to be cooperative society despite the fact that they enjoy the license from Reserve Bank of India to carry out the business of the banking. Then the issue that comes up for consideration is that whether the cooperative banks is also cooperative society or not?. This issue was considered by the Hon’ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society, 392 ITR 74 (Karn) wherein the Hon’ble High Court referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra) held that the exemption is not to be denied in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. Even the decision of Pune Bench of the Tribunal in the case of Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. vs. ITO, 120 taxmann.com 10 after making reference to the decisions of the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. (supra), 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 the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift

4 ITA.No.132/PAN/2019 The Ponda Education Society Employee Co-operative Credit Society Ltd., Ponda Goa. Credit Society Ltd. vs. CIT, 50 taxmann.com 278, the decision of the Hon’ble Delhi High Court in the case of Mantola Cooperative Thrift Credit Society Ltd. (supra) was not preferred to the view of the Hon’ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Co-op. Ltd. (supra) by observing as under :-

“9. The Pune Benches of the Tribunal in Sureshdada Jain Nagari Sahakari Patsanstha Maryadit Vs. The Pr.CIT (ITA No.713/PUN/2016, dated 9-4-2019) decided the question of availability of deduction u/s 80P on interest income by noticing that the Pune Bench in an earlier case of Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit Vs. ITO (ITA No.604/PN/2014, dated 19-8-2015) has allowed similar deduction. In the said case, the Tribunal discussed the contrary views expressed by the Hon'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 Taxman 309 (Kar.) allowing deduction u/s. 80P on interest income and that of the Hon'ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income earned from banks. Both the Hon'ble High Courts took into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. (2010) 322 ITR 283 (SC). There being no direct judgment from the Hon'ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the

5 ITA.No.132/PAN/2019 The Ponda Education Society Employee Co-operative Credit Society Ltd., Ponda Goa. view in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). 10. 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 co-operative 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 germane to case under consideration in view of the position that the claim of the instant assessee is directly about the eligibility of deduction u/s.80P(2)(a)(i) of the Act and not u/s.80P(2)(d). Moreover, so many decisions relied on by the ld. AR amply go to prove that the view taken by the AO, cannot by any standard, be construed as not a possible view. We, therefore, hold that the ld. Pr. CIT was not justified in exercising the revisional power anent to interest income of Rs.22,34,270/- earned on investments made with co-operative banks.”

6 ITA.No.132/PAN/2019 The Ponda Education Society Employee Co-operative Credit Society Ltd., Ponda Goa. 1. In the light of the above legal position, we hold that the interest income earned by the appellant society on investment made with the cooperative bank which are also cooperative societies is exempt from the Income Tax Act u/s 80P(2)(d) of the Act. Therefore, we hold that the lower authorities was not justified in denying the claim of deduction u/s 80P(2)(d) of the Act. Accordingly, we direct the Assessing Officer to allow the same as deduction u/s 80P(2)(d) of the Act.”

6.1. I, therefore, reject Revenue’s latter arguments as well. The Assessing Officer shall frame necessary computation as per law after treating the assessee as an eligible society for the impugned deduction(s).

Order pronounced in the open Court on 28th December, 2022.

Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Pune, Dated 28th December, 2022 VBP/-

7 ITA.No.132/PAN/2019 The Ponda Education Society Employee Co-operative Credit Society Ltd., Ponda Goa.

Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5 . DR, ITAT, SMC Bench, Panaji, Goa. 6. Guard File. BY ORDER, // TRUE COPY // Senior Private Secretary ITAT, Pune.