TaxTMI 
TaxTMI 
2020 (3) TMI 681
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....tion u/s. 80P at Rs. 19,49,051/-. The case was subject to scrutiny assessment and notice u/s. 143(2) of the act was issued on 27th July, 2016. During the course of assessment on examination of the details, the assessing officer noticed that the share capital and reserve and surplus of the assessee exceeded Rs. 1,00,000/- and it is not a Primary Agricultural Credit Society or Primary Cooperative Agricultural and Rural Development Bank and hence it has to be treated as Co-operative Bank in view of the provision of section 80P(4). In response to the show cause notice, the assesse has submitted the details of interest income as under:- i) Dena Bank - Rs. 57,31,498/- ii) Bank of Baroda - Rs. 2,91,520/- iii) KDCC Bank - Rs. 14,09,709/- iv) Interest on Advances - Rs. 70,19,387/- Total- - Rs. 1,44,52,114/- The assessee has stated that interest income of Rs. 14,09,709/- from KDCC Bank is eligible for deduction u/s. 80P(2)(d) of the Act. Regarding interest income of Rs. 57,31,498/- from Dena Bank, it was stated that overdraft facility was obtained therefore the same was eligible for deduction u/s. 80P(2)(a)(i) of the Act. The assessing officer has not accepted the submission of t....
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....y proceedings u/s. 271(l)(c) rws 274 of the Act initiated separately for furnishing inaccurate particulars of income. [Disallowance Rs. 19,49,051]" 4. The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) is reproduced as under:- "4.1.1. Since the facts are identical in the case of appellant also, 1 hold that merely because share capital and reserve exceeded Rs. 1,00,000/-, the appellant cannot be treated as co-operative bank u/s. 80P(4) unless the appellant is engaged in providing credit facility to the persons other than members and has also obtained a bank licence from Reserve Bank of India. Since the appellant was providing credit facility to its members only, it is eligible for deduction u/s. 80P(2)(a)(i) of the Act. However, deduction u/s. 80P(2)(a)(i) is not admissible on the interest income earned from Scheduled/Nationalized Banks. The Assessing Officer is accordingly directed to compute the disallowance and allow consequential relief. Thus, appellant succeeds partly in respect of Ground No. 1. 4.2. Vide Ground No. 2 the appellant has requested that the inte....
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....est income from cooperative bank, the ld. CIT(A) has held that the assessee is not entitled for deduction u/s. 80P(2)(a) holding that the Co-operative Bank are governed by the Banking Regulation Act, 1949 after placing reliance on the decision of Hon'ble High Court of Karnataka in the case of PCIT vs. Totagars Cooperative Society Ltd. 92017) 395 ITR 611 (Kar). On this issue, we observe that interest earned by deposit or investment of idle 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. The similar facts and issues are decided by the Co-ordinate Benches in the following cases:- (i) ITA Nos. 1992/Ahd/2017, 1313/Ahd/2018, 1314/Ahd/2018, 1295/Ahd/2018 & 1296/Ahd/2018 dated 29/08/2018 in the cases of The Narsanda Mercantile Co.Op. Credit Society Ltd., The Sant Taluka Teachers Co-op. Credit Society Ltd., The Satyaprakash Co-op. Credit Society Ltd., Shri Friends Coop. Credit Society Ltd. and Shri Shramjivi Nagrik Sahakari Mandli Ltd. (ii) ITA No. 98/Ahd/2017 dated 30-01-2020 (Shree Ram Co-op. Credit Society Ltd. Vs. ITO) The relevant part of the decision in the case of Shre....
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....'ble Jurisdictional High Court in the case laws cited by the assessee vide ITA No. 473 of 2014 is pertained to the the fact and issue of disallowance of claim of deduction u/s. 80P(2)(d) on the basis of attracting provision of section 14A of the Act as narrated above as per the order of ITAT Vide ITA No.2613/Ahd/2012 dated 27.09.2013 in the case of ACIT vs. Sabarkantha District Cooperative Milk Producers Union Ltd. On the other hand, the issue involved in this case of the assessee is claim of deduction of interest income u/s. 80P(2)(d) of the act earned on idle funds placed with co-operative bank. However, on the issue of earning similar nature of interest from the commercial bank the Jurisdictional Hon'ble High Court in the case of SBI vs. CIT (2016) 72 taxman.com 64 has held that interest income on deposit placed with the commercial bank is not entitled for deduction u/s. 80P(2)(a)(i) of the act. In the light of the above, we are of the view that the income by way of interest earned by deposit of idle fund does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a cooperative bank. The identical issue on the similar ....
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....ductible u/s. 80P(2)(d). We find that the Hon'ble High Court of Karnataka, in the case of (2017) 83 taxmann.com 140 (Kar) Principal CIT vs. Tatagars Cooperative Sale Society on identical issue and facts has held that it is only primary agricultural credit society with its limited work of providing credit facilities to its member which is governed by ambit and scope of deduction u/s. 80P and further stated that interest income earned from surplus deposit with co-operative bank is not entitled for deduction 80P(2)(d). The relevant part of the decision of the Hon'ble High Court of Karnataka, in the case of (2017) 83 taxmann.com 140 (Kar) Principal CIT vs. Tatagars Co-operative Sale Society on identical issue and facts is reproduced as under:- "Admittedly and undoubtedly, the assessee is a co-operative Society engaged mainly in the activity of marketing of agricultural produces grown by its members. The assessee co-operative society also accepts deposits from its members and provides credit facility to its members, runs Kirana Stores, rice mills, live stocks, van section, medical shops, lodging, plying and hiring of goods carriage, etc. [Para 10] The assessment years involved in ....
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....ted work of providing credit facility to its members continued to be governed by the ambit and scope of deduction under section 80P of the Act. [Para 13] 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 80P of the Act. The purpose of bringing on the statute book sub-section (4) in section 80P was to exclude the applicability of section 80P altogether to any co-operative bank and to exclude the normal banking business income from such exemption/deduction category. The words used in section 80P(4) are significant. They are: 'The provisions of this section shall not apply in relation to any cooperative 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 cre....
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.... may become ineligible for deduction under section 80P(2) of the Act. Hence, the income by way of interest earned by deposit or investment of idle 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) of the Act would not apply in the facts and circumstances of the present case. The person or body corporate from which such interest income is received will not change its character, viz. interest income not arising from its business operations, which made it ineligible for deduction under section 80P of the Act. [Para 23] In view of the aforesaid, the appeal filed by the revenue deserves to be allowed.:" [Para 24] In the light of the above facts and legal findings we consider that the income by way of interest earned by deposit or investment of idle or surplus does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus clause (d) of section 80P(2) of the act would not apply in the facts and the circumstances of the present case. The assessee has e....