AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 1338
X X X X Extracts X X X X
X X X X Extracts X X X X
....terest income.'' ITA No.187/JP/2019 - Revenue ''1. Whether in the facts and circumstances of the case and in law the ld. CIT(A) has erred in deleting the addition of Rs. 1,43,24,928/- on account of contribution made to ''Sparsh Trust'' without appreciating the fact that assessee failed to prove direct business nexus of the expenditure and it is not an allowable expenditure u/s 37(1) of the I.T. Act, 1961. 2. Whether in the facts and circumstances of the case and in law the ld. CIT(A) is correct in holding that the income received from investments made with Jaipur Central Cooperative Bank is eligible for deduction u/s 80P(2)(d) of the I.T. Act, 1961 and thereby justified in allowing relief of Rs. 2,76,34,807/-.'' 2.1 Brief facts of the case are that the assessee is a Cooperative Society which is engaged in the business of dealing of procurement of milk, processing to prepare its products and sale thereof. The assessee filed its return of income declaring income of Rs. 7,6,30,810/- for the Assessment Year under consideration in the status of cooperative societies on 30-09-2014. Subsequently, the case of the assessee was selected for scrutiny and after serving statutory notices....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank." 16. The Coordinate Bench in case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs Income-tax Officer-21(2)(1), Mumbai [2018] 94 Taxmann.com 15 had an occasion to examine similar contention and it was held that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, however, 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 enforced in any state for the registration of co-operative 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. We see no reason to deviate from the same and agree with the aforesaid view taken by the Co-ordinate Bench and. The relevant findings of the Co-ordinate Bench read as under: "6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from its investments with any other co-operative society, the whole of such income;" Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee co-operative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. 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 cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, 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 agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the co-operative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT (A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co-operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT "F" bench, Mumbai in the case of Vaibhav Co-operative Credit Society (supra) is also distinguishable on facts. We find that the said order was passed by the Tribunal in c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the order of the lower authorities and conclude that the interest income of Rs. 27,48,553/-earned by the assessee on the investments held with the co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d). 17. In light of above, by virtue of provisions of Section 80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) cannot be denied to the assessee society. 18. Another issue that arise for consideration is whether deduction u/s 80P(2)(d) shall be allowed on the gross interest income on FDRs or it should be allowed on the net interest income calculated after deducting the interest expenditure allocable to funds placed in form of FDR. Though the assessee has challenged the findings of the ld CIT(A) to the effect that it has not incurred any interest expenditure, we find that there is no necessity to examine the same as conceptually, the deduction under section 80P(2)(d) has to be allowed on gross and not on net interest income as held by the Hon'ble Gujarat High Court in case of Surat Vankar Sahakari Sangh Ltd vs ACIT [2016] 72 Taxmann.com 169 (Guj) wherein it was held as under: "3. In all the four appeals, the common issue is grant of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, and not from the interest received from the bank on the fixed deposits. The assessees were therefore right in the submissions which they made before the Commissioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5.' 8.1 Similarly, in the case of Doaba Co-operative Sugar Mills Ltd (supra), the Punjab & Haryana High Court has held as under: '5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of Rs. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.' 8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed under Section 12(2). The High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the ld.AR of the assessee submitted that the issue in question is covered and it has already been decided on 15-06-2016 by the Coordinate Bench in assessee's own case in ITA No. 1003/JP/2015 for the Assessment Year 2012-12. 3.3 On the other hand, the ld. DR supported the order of the AO. 3.4 We have heard the rival contentions and perused the materials available on record. It is not imperative repeat the facts of the issue in question as similar issue has already been decided on 15-06-2016 by the Coordinate Bench in ITA No. 1003/JP/2015 vide its para 2.4 to 2.5 as under:- '' 2.4 The Coordinate Bench vide its order dt. 15.03.2012 in ITA No. 820/JP/11 for A.Y. 08-09 has given its findings as under: "After considering the submissions, orders of the authorities below, we find that assessee deserve to succeed in its ground raised. It is noticed that before creating SPARSH, the assessee was doing all these expenditure itself. Just for betterment of administration services, the assessee created the Trust through whom these expenses are incurred. The Profit & Loss account of the Trust is maintained, copy of which is placed in the compilation and it is seen that whatever amount h....