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Income Tax Appellate Tribunal, PANAJI BENCH “SMC” : PANAJI
Before: SHRI SATBEER SINGH GODARA
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH “SMC” : PANAJI [THROUGH VIRTUAL HEARING] BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER I.T.A.No.45/PAN/2019 Assessment Year 2015-16 The Sesa Goa Employees The Asst. Commissioner Coop Credit Society Ltd. of Income Tax, Circle 2(1), C/o. Sesa Goa Ltd., Aayakar Bhavan, Patto Sankhlim Mines, Goa Plaza, EDC Complex, PIN 403 505 Panaji, Goa. PAN AAAAT6226C vs PIN 403 001 Appellant Respondent
Assessee by : Shri R L Bhobe Revenue by : Shri N. Shrikanth Date of hearing : 19.12.2022 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- 1/10325/2017-18, in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short “the Act”].
Heard both the parties. Case file perused. 3. It emerges during the course of hearing that the assessee’s sole substantive ground raised in the instant appeal challenges correctness of both the lower authorities action disallowing it’s sec.80P(2)(d) deduction claim of Rs.7,06,921/- on the ground that the same represent interest income derived from property tax. The CIT(A)'s detailed discussion affirming Assessing Officer’s action to this effect reads as follows :
2 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa “7. Ground no. 1 pertains to disallowance of deduction u/s 80P(2)(d) in respect of interest on deposits with M/ s. Goa State Co-operative Bank Limited. 8. I have critically and carefully analysed the provisions of the IT Act as well as the citations relied upon by the AO as well as by the AR of the appellant. The provisions of section 80P(4) have been analysed clearly and lucidly by the Assessing Officer. The Hon'ble Court in Totgar's case (order dt. 16/06/2017) has given a clear finding that the banking business even though run by a co¬operative bank is sought to be excluded from the beneficial provision of deduction u/s 80P. It has also been observed by Hon'ble Court that "The income by way of interest earned by deposit or investment of ideal or surplus funds does not change its character. Irrespective of the fact whether such income of interest is earned from a scheduled bank or a co-operative bank, and thus clause (d) of section 80P(2) would not apply in the facts and circumstances of this case. The person or body corporate from which such income is received will not change its character viz interest income not arising from its business operations, which remain illegible of deduction u/ s BOP of the Act." Moving on, the Memorandum of Finance Bill 2015 makes it clear that the intention is to provide a level playing field to co-operative banks and other commercial banks and therefore they have amended the provisions of section l 94A(3)(v) excluding the co-operative banks from the definition of co-operative society,
3 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa On the other hand the case laws relied upon by the appellant are of much earlier date than the Totgar's case relied upon and discussed above.Presumably, in Totgar's case, the Hon'ble Court would have taken into account all the earlier judgments. The Hon'ble Court has stated as follows: “The court in the instant case observed "The banking business, even though run by a Co¬operative bank is sought to be excluded from the beneficial provisions of exemption or deduction under section SOP of the Act. The purpose of bringing on the statute book sub¬section (4) in section BOP was to exclude the applicability of section BOP altogether to any co-operative bank and to exclude the normal banking business income from such exemption/deduction category. The words used in section BOP(4) are significant. They are :
The provisions of this section shall not apply in relation to any co- operative bank other than a primary agricultural credit society . The words ‘in relation to’ can include within its ambit and scope even the interest income earned by the assessee, a co-operative society from a Co-operative Bank. This exclusion by section 80P(4) even though without any amendment in section 80P(2)(d) is sufficient to deny the claim of the assessee for deduction under section 80P(2)(d). The only exception is that of a primary agricultural credit society. The depository Kanara Di.strict Central Bank Limited in the present case is admittedly not such a primary agricultural credit society"
4 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa Respectfully following the judgment delivered in Totgar's case (supra), it is held that the claim of deduction u/s 80P(2)(d) has rightly been denied. The appeal on this issue is dismissed.”
It emerges during the course of hearing that the instant issue of sec.80P(2)(d) deduction is no more res integra so far as interest income derived from parking of surplus funds in a cooperative bank, is concerned. This tribunal’s recent coordinate bench order in ITA.No.1249/PUN./2018 dated 07.01.2022 inRena Sahakari Sakhar Karkhana Ltd., vs. Pr. CIT-2, Aurangabad has rejected the Revenue’s identical stand as follows :
-- 2. -- 3. “After culmination of the assessment proceedings, the Pr. CIT called for the assessment records of the assessee. It was observed by the Pr.CIT that the assessee had during the year shown interest income from FDs with Co-operative Banks amounting to Rs.75,38,534/-, against which it had claimed deduction under Sec.80P(2)(d) of the Act. It was observed by the Pr.CIT, that the A. O while framing the assessment had allowed the aforesaid claim of deduction raised by the assessee. Observing, that as co-operative banks were commercial banks and not a co-operative society, therefore, the Pr.CIT was of the view that the assessee was not eligible for claim of deduction under Sec.80P(2)(d). In the backdrop of his aforesaid conviction,
5 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa the Pr. CIT was of the view that the assessment order passed by the A.O under Sec.143(3), dated 07.03.2016, therein allowing the assesses claim for deduction under Sec.80P(2)(d),had therein rendered his order as erroneous, insofar it was prejudicial to the interest of the revenue. Accordingly, the Pr.CIT not finding favour with the reply of the assessee, wherein the latter had tried to impress upon him that it was duly eligible for claim of deduction under Sec.80P(2)(d) of the Act, therein “set aside” the order of the A.O with a direction to re-decide the issue afresh and reframe the assessment.
The assessee being aggrieved with the order of the Pr.CIT has carried the matter in appeal before us. As the present appeal involved a delay of 52 days, therefore, the ld. A.R took us through the reasons leading to the same. It was submitted by the ld. A.R that as the then counsel of the assessee society who was looking after its tax matters, viz. Shr.Ravikiran Pandurang Todkar, Chartered Accountant was taken unwell due to kidney failure and had undergone kidney transplant, therefore, due to his unavailability the appeal could not be filed within the stipulated time period. Our attention was drawn towards the “affidavit‟ of the assessee society wherein the aforesaid facts were deposed. On the basis of the aforesaid facts, it was submitted by the ld. A.R that the delay involved in filing of the present appeal in all fairness may be condoned. Per contra, the ld. D.R did not object to the seeking of condonation of the delay in filing of the appeal by
6 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa the assessee society. After giving a thoughtful consideration, we are of the considered view, that as there were justifiable reasons leading to delay on the part of the assessee in filing of the present appeal before us, therefore, the same merits to be condoned.
On merits, it was submitted by the ld. A.R, that as the A.O while framing the assessment had after making necessary verifications taken a plausible view, therefore, the Pr. CIT had exceeded his jurisdiction by seeking to review the order passed by him in the garb of the revisional powers vested with him under Sec.263 of the Act. It was submitted by the ld. A.R, that the issue as regards the eligibility of the assessee for claim of deduction under Sec.80P(2)(d) on interest income derived from investments/deposits lying with co-operative banks was squarely covered by the various orders of the coordinate benches of the Tribunal viz., (i).M/s Solitaire CHS Ltd.vs. Pr. CIT, ITA No. 3155/Mum/ 2019;dated 29.11.2019 (ITAT “G” Bench, Mumbai); Kaliandas Udyog Bhavan Premises Co-op Society Ltd. Vs. ITO- 21(2)(1), Mumbai, ITANo.6547/Mum/2017 (ITAT Mumbai); and (iii). Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT, Circle- 3, Aurangabad, ITA No, 308/Pun/ 2018 (ITAT Pune). On the basis of his aforesaid contentions, it was averred by the ld.A.R that as the Pr.CIT had exceeded his jurisdiction and had not only sought to review the plausible view that was taken by the A.O after necessary deliberations which was in conformity with the order of the jurisdictional bench of the Tribunal, therefore, his order may
7 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa be vacated and that of the A.O be restored.
Per contra, the ld. Departmental Representative (for short “D.R”) relied on the order passed by the Pr. CIT under Sec.263 of the Act. It was submitted by the ld. D.R, that as the assessee was not eligible for claim of deduction under Sec.80P on the interest income received on the investments /deposits lying with the co- operative banks, therefore, the Pr.CIT finding the assessment order passed by the A.O under sec.143(3), dated 07.03.2016 as erroneous, insofar it was prejudicial to the interest of the revenue, had rightly “set aside‟ his assessment with a direction to re- adjudicate the issue therein involved. Our attention was also drawn by the ld. D.R to his written submissions and certain judicial pronouncements in support of his aforesaid contention.
We have heard the ld. Authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether or not the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative banks is in order. In our considered view, the issue involved in the present appeal hinges around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007.
8 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa On a perusal of the order passed by the Pr. CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec.80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with the co-operative bank, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not co-operative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deductionunderSec.80P(2)(d)of the Act.
After necessary deliberations, we are unable to persuade ourselves to concur with the view taken by the Pr. CIT. Before proceeding any further, we may herein cull out the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us.
“80P(2)(d)
(1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums
9 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa specified in sub-section(2),in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following,namely:- (a)............................................................................................ (b)............................................................................................ (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 01.04.2007, 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
10 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa 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 been titled for claim of deduction under Sec. 80P of the Act, but as a co-operative 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
11 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa 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.
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). M/s Solitaire CHS Ltd. vs. Pr. CIT, ITANo.3155/Mum/2019; dated29.11.2019 (ITAT “G” Bench, Mumbai); (ii). Majalgaon Sahakari SAkhar Karkhana Ltd.Vs. ACIT, Circle-3, Aurangabad, ITANo, 308/Pun/ 2018 (ITAT-Pune)
(iii).Kaliandas Udyog Bhavan Premises Co-op. Society Ltd. Vs. ITO, 21(2)(1),Mumbai
We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of
12 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa India Vs. CIT (2016) 389 ITR 578 (Guj), had held, that the interest income earned by the assessee on its investments with a co-operative bank would be 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 Vs. Totagars Co-operative Sale Society (2017) 395 ITR 611 (Karn), as had been relied upon by the ld. D.R before us, had held, that a co-operative society would not been titled to claim deduction under Sec. 80P(2)(d); but then, the Hon'ble High Court in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon’ble High Court of Gujarat in the case of State Bank Of India Vs.CIT (2016) 389 ITR 578 (Guj), 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
13 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa herein observe, that as held by the Hon'ble High Court of Bombay in the case of K.Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985)156 ITR 11 (Bom), 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 Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and that of the Hon’ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), 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.
Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and allowed the assessee’s claim for deduction under Sec.80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr.CIT was in error in exercising
14 ITA.No.45/PAN/2019 The Sesa Goa Employees Coop Credit Society Ltd Sankhlim Goa his revisional jurisdiction u/s 263 of the Act for dislodging the same. Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 of the Act, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction underSec.80P(2)(d), we set-aside his order and restore the order passed by the A.O under Sec.143(3),dated07.03.2016.”
I adopt the foregoing detailed discussion mutatis mutandis to delete the impugned disallowance. The assessee succeeds in its sole substantive ground.
These assessee’s appeal is allowed in above terms. Order pronounced in the open Court on 28.12.2022.
Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Pune, Dated 28thDecember, 2022 VBP/- 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.