2022 (4) TMI 174

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....urpose of section 80P(2)(d) a Co-operative bank should be considered as a Cooperative society. 3. Without prejudice to above, the learned CIT(A) erred in not appreciating that the assessee was in the business of providing credit facilities to its member and earned entitled to deduction u/s.80P(2)(a)(i) itself of the Act. - said interest was attributable to business carried on by the assessee and there was no investment out of surplus funds generated. 4. The investments were also made as per SLR and hence, also qualifies for deduction u/s.80P(2)(a)(i) of the Act. 5. The appellant craves to add, alter, amend or modify any of the grounds of appeal." 2. Succinctly stated, the assessee which is a co-operative credit society governed by the Karnataka Co-Operative Societies Act, 1959, had filed its return of income for the assessment year 2012-13 on 21.07.2012, declaring an income of Rs. Nil. (after claiming deduction u/s.80P(2)(a)(i) of Rs. 24,99,337/-). The return of income filed by the assessee society was initially processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s 143(2) of the Act. ....

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....on subject the same to tax after allowing deduction of the corresponding expenses u/s. 57(3) of the Act. 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. Our indulgence in the present appeal has been sought by the assessee for adjudicating two issues, viz. (i) that as to whether or not the interest income earned by the assessee society on its deposits with Co-operative banks was eligible for deduction u/s.80P(2)(d) of the Act; and (ii) that as to whether or not the interest income earned by the assessee on its deposits with co-operative banks and scheduled banks was eligible for deduction u/s. 80P(2)(a)(i) of the Act. 8. Having given a thoughtful consideration to the claim of the Ld. Authorized Representative (for short 'AR') for the assessee, that both the lower authorities had erred in concluding that the interest income e....

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....d) of the Act. 7. After necessary deliberations, we are unable to persuade ourselves to be in agreement with the view taken by the Pr. CIT. Before proceeding any further, we may herein reproduce 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 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....

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....ty from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We shall now advert to the judicial pronouncements that have been relied upon by the ld. A.R. 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) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO-21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) MarvwanjeeCama Park Cooperative Housing Society Ltd. Vs. ITO-Range- 20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. (iv). KaliandasUdyog Bhavan Pemises 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 India Vs. C....

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....ken 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 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 cooperative 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. 9. Be that as it may, in our considered view, as the A.O while framing the assessment had taken a possible view, and therein concluded that the assessee would be entitled for claim of 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 his revisional jurisdiction u/s 263 for dislodging the same. In fact, as observed by us hereinabove, the aforesaid view taken by the A.O at the time of framing of the assessment was clearly supported by the order of the jurisdictional Tribunal in the case of Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum). Accordingly, finding no justification o....

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.... or not the interest income earned by the assessee society on its surplus funds, which, in the normal course of its business of providing credit facilities to its members was parked as short term deposits with the banks, i.e, at a point of time when there were no takers for the said funds, would be eligible for deduction u/s. 80P(2)(a)(i) of the Act?. We have given a thoughtful consideration to the contentions advanced by the Ld. Authorized representatives for both the parties. Before proceeding any further, we deem it fit to cull out the provisions of section 80P(2)(a)(i) of the Act, the scope and gamut of which is the primary bone of contention before us, and the same reads as under : "80P. (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 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) in the case of a co-operative society engaged in- (i).carryi....