TaxTMI 
TaxTMI 
2021 (1) TMI 1277
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....s eligible for deduction u/s 80-P(2)(d) of the I.T Act, 1961 and thereby justified in allowing relief of Rs. 1,49,40,834/-." 3. It was submitted that the Tribunal has passed order dated 02.09.2019 in ITA No.512/JP/2019 (Assessee's appeal) and 633/JP/2019 (Department appeal) for A.Y. 2011-12 in the case of M/s. Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd., Jaipur, which was received in the office of Pr. CIT-2, Jaipur on 25.10.2019. The Tribunal while deciding the grounds of the appeal filed by the department, in para 14 of the order, has decided the issue in the combined order for AY 2011-12 and 2012-13 by holding as under:- "In the instant case for the purposes of section of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as a cooperative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act." 4. It was further submitted that in assessee's own case for A.Y. 2016-17 (ITA No. 1243/JP/2019 dated 4.03.2020), the Tribunal has set aside the issue of calculating interest u/s 80P(2)(d) to the CIT(A) stating that it needs to be determined whether the assessee has in....
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....he appeal filed by the department, in para 14 of the order, has decided the issue in the combined order for AY 2011-12 and 2012-13 by holding as under:- "In the instant case for the purposes of section of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act." 8. On the other hand, in assessee's own case for A.Y. 2016-17 (ITA No. 1243/JP/2019) the Tribunal has set aside the issue of calculating interest u/s 80P(2)(d) to the CIT(A) stating that it needs to be determined whether the assessee has incurred any interest expenditure in earning the interest income. The Tribunal in this case stated that: "14. The legal proposition thus laid down by the Hon'ble High Court is that the income exempted under section 80P(2) has to be arrived at separately in order to determine the income under section 80P(2) and it can never be envisaged that the total income which has been so received could be allowed without deducting the expenditure incurred in earning the income. In light of the same, the deduction u....
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....as held that for the purposes of section 80P(2)(d) of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. It further held that :- " We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income on the investments made with the co-operative bank. We thus set aside 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 ....
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.... In this regard, the ld. AR submitted that the Tribunal has decided the cross appeal filed by the department and the assessee for AY 2011-12 & 2012- 13 vide order dt. 02.09.19 and for AY 2014-15 vide order dt. 30.09.2019 whereby the appeal of the assessee was allowed and appeal of the department was dismissed. Against the dismissal of departmental appeal, present misc. application has been filed. It may be noted that the department has filed appeal before ITAT for these years by taking the following Grounds of Appeal: Asstt. Year 2011-12: "Whether in the facts & circumstances of the case and in law, the CIT(A) is correct in holding that the income received from investment made with Jaipur Central Co-Operative Bank is eligible for deduction u/s 80P(2)(d) of the Income tax Act, 1961 and thereby justified in allowing relief of Rs. 1,49,40,834/-" Asstt. Year 2012-13 "Whether in the facts & circumstances of the case and in law, the CIT(A) is correct in holding that the income received from investment made with Jaipur Central Co-Operative Bank is eligible for deduction u/s 80P(2)(d) of the Income tax Act, 1961 and thereby justified in allowing relief of Rs. 1,59,92,544/-" Asstt....
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....n u/s 80P(2)(d) can be allowed only on the net receipt after deducting the expenditure and according set aside this issue to the file of Ld. CIT(A) to examine the same afresh. 18. Now the department has filed an Misc. Application stating that in AY 2016-17, the Tribunal has set aside the issue of calculating of eligible deduction of interest u/s 80P(2)(d) to the society by referring para 14 of the order dt. 04.03.2020 in ITA No. 1243/JP/2019 (Departmental Appeal) where it was held that deduction can be allowed only on the net receipt after deducting the expenditure incurred for earning exempt interest income but the same is not adjudicated upon by the Tribunal for AY 2011-12, 2012-13 & 2014-15 and thus there is mistake apparent on record. 19. In this regard, it was submitted that the issue raised in the Misc. Application filed by the department is not arising from the ground taken by it before the Tribunal in as much as department has filed the appeal challenging the finding of CIT(A) that the assessee is eligible to claim deduction u/s 80P(2)(d) on the income received from investment made with Jaipur Central Co-operative Bank. The quantum of deduction allowed by CIT(A) was not d....
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....at High Court and in AY 2014-15 again relied on the same decision even after taking note of the decision of Rajasthan High Court and thereafter given a finding on the issue, the same cannot be considered as a mistake apparent on record solely for the reason that in AY 2016-17, the Tribunal has set aside the matter to CIT(A) on this issue. 22. Without prejudice to above, it was submitted that in AY 2011-12 & 2012-13, the assessee has also challenged the validity of the order passed by AO u/s 147 of the Act. However in para 20 of the order, it is observed since the revenue appeal is dismissed and the ground no. 2 of the assessee's cross appeal is allowed, legal ground raised by the assessee challenging the validity of the proceeding u/s 147 has become infructuous and is dismissed. Therefore, in case the Misc. Application of the department is allowed (though not arising from the ground of the department), the legal ground raised by the assessee be also recalled and decided independently. 23. It was accordingly submitted that from the above facts on record, MA filed by the department on the ground that there is a mistake apparent on record is not maintainable and is only an applicati....
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....9 581753 867618 8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar v. ITO [1993] 204 ITR 856/[1994] 72 Taxman 223 (Ker.), the Kerala High Court has held as under: '4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income "in accordance with the provisions" of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest....
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....latt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 : "...In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used," 7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759. 8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the cooperative society from its investment with any other cooperative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to t....
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....sole ground of Revenue's appeal is dismissed and ground no. 2 in assessee's cross appeal is allowed. Having decided the matter on merits, the legal ground raised by the assessee challenging the validity of the proceedings u/s 147 has become infructous and is dismissed." 25. For A.Y 2014-15 (in ITA no. 22 & 187/JP/2019 dated 30.09.2019), the relevant findings of the Tribunal read as under: "2.5 At the outset of the hearing, the ld. AR of the assessee submitted that the Ground No. 1 & 1.1 of the assessee and Ground No. 2 of the Revenue raised in the respective appeals are squarely covered by the decision dated 2.09.2019 of Coordinate Bench in assessee's own case in ITA No. 512 & 513/JP/2015 for the Assessment Year 2011-12 and 2012-13 and Revenue's appeal in ITA No. 633 & 634/JP/2019 for the Assessment Year 2011-12 and 2012-13 for which the ld. AR of the assessee relied on para 15 to 20 of the tribunal order." 2.6 During the course of hearing, the ld. DR supported the order of the AO and also filed following case laws to this effect. 1. PCIT vs. Toagars Cooperatives Sale Society [2017] taxmann.com 140 (Karnataka) 2. CIT vs. Rajasthan Rajya Sahakari Upbhokta Sangh Ltd [1996]....
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....dered the arguments of the learned counsel for the revenue. The provisions of section 80P contemplate the deduction of income of co-operative societies. It is provided under sub-section (1) that where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of that section, the sums specified in sub-section (2) in computing the total income of the assessee. Sub-section (2)(d) refers to the sum in respect of income by way of interest or dividends derived by the cooperative society from its investments with any other cooperative society, the whole of such income. So far as determining the eligibility for exemption is concerned, it is not in dispute that the expenses pertain to income which is taxable and non-taxable. A composite account has been maintained by the assessee and a separate account with regard to expenditure and income on both types of income has not been maintained. It was in these circumstances that the ITO has determined the total income after apportioning the expenses to both sources of income. The words 'total incom....
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....profit, the expenses incurred in earning the said income has to be deducted. In the present case, the Tribunal has found that allowing the deduction for commission at 50 per cent of the receipts is justified. The Tribunal has relied upon the decision in the case of Cloth Traders (P.) Ltd. v. Addl CIT [1979] 118 ITR 243 (SC), which was overruled by the Apex Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120. Following the decision of this Court in the case of CIT v. Loonkar Tools (P.) Ltd. [1995] 213 ITR 721, DBITR Application No. 1 of 1987, decided at Jodhpur on 21-7-1994, we are of the view that the Tribunal was not justified in holding that the assessee is entitled to deduction under section 80P(2)(d) of the entire interest and not the net receipts. We are also of the opinion that the Tribunal was not justified in granting the exemption of Rs. 2,49,948 to the assessee." 8. The legal proposition thus laid down by the Hon'ble High Court is that the income exempted under section 80P(2) has to be arrived at separately in order to determine the income under section 80P(2) and it can never be envisaged that the total income which has been so rec....
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....s. In case, there are no liquid funds and all the funds are deployed in fixed and current assets, then the said theory of interest free funds doesn't support the case of the assessee. Though the ld AR has submitted some figures, however, we find that the matter require further information and verification and in absence of findings of the lower authorities, for the limited purposes of verification of the aforesaid contention, the matter is set-aside to the file of the ld CIT(A) to examine the same afresh. In the result, the respective grounds of appeal are disposed off." 27. We therefore find that the issue of quantum of deduction u/s 80P(2)(d) i.e, whether the deduction to be allowed on gross or net interest income was under consideration by the Tribunal in each of the aforesaid three assessment years for which misc. application has been filed by the Revenue. In each of these years, the Revenue has challenged the eligibility of the assessee for claim of whole of the deduction u/s 80P(2)(d) whereas the assessee in its cross appeal has challenged the action of the ld CIT(A) in restricting the quantum of deduction eligible for deduction u/s 80P(2)(d) of the Act. Therefore, the i....
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....to this extent the decision rendered by the Co-ordinate Bench for earlier years stand distinguishable. And following the decision of the Hon'ble Rajasthan High Court in case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra), it held as under: "14. The legal proposition thus laid down by the Hon'ble High Court is that the income exempted under section 80P(2) has to be arrived at separately in order to determine the income under section 80P(2) and it can never be envisaged that the total income which has been so received could be allowed without deducting the expenditure incurred in earning the income. In light of the same, the deduction u/s 80P(2)(d) can be allowed only on the net receipt after deducting the expenditure incurred for earning exempt income. Therefore, in the instant case, it needs to be determined whether the assessee has incurred any interest expenditure in earning the interest income." 31. We therefore find that in its latest decision rendered on 4.03.2020, the Coordinate Bench has followed the dictum laid down by the Hon'ble Jurisdictional High Court, however, in earlier two decisions rendered on 2.09.2019 as well as 30.09.2019, the dictum laid down by the H....
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....only decided on merits and the same should be also be recalled and decided afresh. 33. In the entirety of facts and circumstances of the case, we hereby recall the earlier orders so passed by the Coordinate Benches in ITA No. 633/JP/19 & 512/JP/19 for A.Y 2011-12 and 634/JP/19 & 513/JP/2019 dated 02.09.2019 and subsequent order passed by the Tribunal in ITA Nos. 187/JP/19 & 22/JP/19 dated 30.09.2019 for A.Y 2014-15 for the limited purposes of adjudication of matter relating to quantum of deduction eligible for deduction u/s 80P(2)(d) as to whether the deduction should be allowed on gross interest or net interest income afresh taking into consideration the decision of the Hon'ble Jurisdictional High Court in case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra) as well as adjudication of following grounds of appeal afresh as raised by the assessee in its respective cross-appeals: ITA. No. 512/JP/2019 (For A.Y 2011-12) "1. The ld. CIT(A) has erred on facts and in law in upholding validity of order passed by AO u/s 147 of IT Act, 1961. 2. The ld. CIT(A) has erred on facts and in law in holding that interest expenditure to the extent of Rs. 87,91,593/- is attributable to th....