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Income Tax Appellate Tribunal, PANAJI ‘SMC’ BENCH : PANAJI
Before: SHRI SATBEER SINGH GODARA
IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI ‘SMC’ BENCH : PANAJI (THROUGH VIRTUAL HEARING) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER
ITA.No.140/PAN/2019 Assessment Year 2015-2016
The Keri Urban Co-operative The Income Tax Officer, Credit Society Limited, Keri, Ward-2(3), Aaykar Sattari, Ponda – Goa. vs. Bhavan, Pato Plaza, PIN 403 505 Panaji, Goa – 403 001. PAN AAAJT0830D (Appellant) (Respondent) For Assessee : Shri S.J. Kamat For Revenue : Smt. Neelima Nadkarni, Sr.DR Date of Hearing : 29.11.2022 Date of Pronouncement : 19.12.2022 ORDER
This assessee’s appeal for assessment year 2015-16, arises against the CIT(A), Panaji-1, Panaji’s order dated 10.01.2019, passed in case No.CIT(A), PNJ-1/10422/2017-18, 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 three folded issues that arise for this tribunal’s apt adjudication herein are that - assessee’s eligibility to claim sec.80P(2)(a)(i) deduction of Rs.25,52,223/-; 80P(2)(b) claim of Rs.8,05,267/- representing interest income from co-operative banks and sec.40(a)(ia) disallowance of Rs.13,89,783/-, respectively.
2 ITA.No.140/PAN/2019 4. Both the learned representatives rebutted their respective stand’s regarding the assessee’s status as an eligible co-operative credit society. The Revenue’s case is that this assessee is in fact a co-operative bank not entitled for the impugned deduction. I find that the 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 in assessee’s favour and against the department that it is the concerned taxpayer’s registration as an eligible co- operative credit society which forms the decisive factor. The assessee succeeds in its instant first and foremost argument therefore.
Next comes the second issue of interest income derived from deposits made in co-operative banks. This tribunal’s recent co- ordinate 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 received from a cooperative bank. The reasoning of the lower authorities cannot be sustained in the eyes of law
3 ITA.No.140/PAN/2019 as the cooperative banks also the spies of the cooperative societies and continue to be cooperative society despite the fact that they enjoy the licence 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 Credit Society Ltd. vs. CIT, 50 taxmann.com 278, the decision of the Hon’ble Delhi High Court in the case of
4 ITA.No.140/PAN/2019 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 view in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra).
5 ITA.No.140/PAN/2019 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.”
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
6 ITA.No.140/PAN/2019 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.”
5.1. I thus accept the assessee’s instant second substantive ground as well.
Lastly comes sec.40(a)(ia) deduction of Rs.13,89,783/- on account of the assessee having not deducted TDS on payments made to members. The Revenue’s case is that the assessee has both nominal as well as regular members. I find that such a distinction at the Revenue’s behest already stands rejected by the hon'ble apex court’s recent landmark decision in Mavilayi Service Co-operative Bank Ltd., vs., CIT (supra). This is further coupled with the CBDT’s circular No.37/2016 dated 02.11.2016 that such a disallowance indeed increases an assessee’s income eligible for chapter-VI deduction only. I thus accept the assessee’s instant last substantive ground as well in very terms.
No other ground or argument has been pressed before me.
These assessee’s appeal is allowed in above terms.
7 ITA.No.140/PAN/2019
Order pronounced in the open court on 19.12.2022.
Sd/- [SATBEER SINGH GODARA] JUDICIAL MEMBER
Pune, Dated 19th December, 2022
VBP/- Copy to
The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Panaji ‘SMC’ Bench, Panaji 6. Guard File. //By Order//
Assistant Registrar, ITAT, Pune Benches, Pune.