TaxTMI 
TaxTMI 
2023 (2) TMI 572
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....rs and that the Hon'ble Tribunal in Assesee's own case in IT A No. 586 / Chny/2021 dated 18.07.2022 has allowed the claim of deduction u/s 80P(2)(a)(i) in regard to interest income earned from Associate Members also. 3. The CIT(A) ought to have seen that the ratio descending in the case of Citizen Cooperative Society Ltd .v. ACIT, [2017] 397 ITR 1 (SC) is that Section 80P of the Act, being a benevolent provision to encourage and promote the credit of the co-operative sector in general, must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. 4. The CIT(A) failed to see that the total amount claimed u/s BOP includes both interest earned from members as well as interest on bank deposit, and that the assessing officer erred in holding that the assessee has not made a claim regarding interest earned from members, instead of bifurcating the amount and giving relief accordingly. Interest Income not eligible u/s 80P 5. The Respondent ought to have seen that Section 80P(2)(d) of the Act envisages that a co- operative society can claim deduction towards income by way of interest or dividends derived by the co-op....
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....perative Society. Keeping in view of the decision of the l1on'ble Supreme Court in the case of M/s Goetzze of India vs CIT and facts of the case, the contention of the assessee is not acceptable. 5. In view of the above facts and relying on the provisions of section 80P(2)(d) of the Act, the interest income earned by the assessee amounting to Rs. 72,58,525/- is hereby held to be not eligible for deduction u/s. 80P(2)(d) of the Act. The Income of the assessee is modified by disallowing the claim of deduction u/s. 80P(2)(d) of the IT Act. Penalty proceedings u/s. 270A is initiated for under reporting of income as discussed above." 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld. CIT(A), the assessee reiterated its arguments before the AO and submitted that although, the assessee has not bifurcated deduction claimed u/s. 80P of the Act into deduction u/s. 80P(2)(a)(i) of the Act and deduction u/s. 80P(2)(d) of the Act, but the entire interest income disallowed by the AO is earned from loan given to associate members and also deposits with District central Co-operative Bank, which is eligible for deduction u/....
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.... connection, we may analyze Section 80P of the Act. This section comes in Chapter VI-A, which, in turn, deals with "Deductions in respect of certain Incomes". The Headnote to Section 80P indicates that the said section deals with deductions in respect of income of cooperative Societies. Section 80P(1), inter alia, states that where the gross total income of a cooperative Society includes any income from one or more specified activities, then such income shall be deducted from the gross total income in computing the total taxable income of the assessee- Society. An income, which is attributable to any of the specified activities in Section 80P(2) of the Act, would be eligible for deduction. The word "income" has been defined under Section 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically "business profits" into the definition of the word "income". Therefore, we are required to give a precise meaning to the words "profits and gains of business" mentioned in Section 80P(2) of the Act. In the present case, as stated above, assessee-Society regularly invests funds not immediately required for business p....
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....ategory of persons who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum returns. A portion of these deposits is utilised to advance gold loans, etc. to the members of the first category. It is found, as a matter of fact, that he depositors and borrowers are quiet distinct. In reality, such activity of the appellant is that of finance business and cannot be termed as co-operative society. It is also found that the appellant is engaged in the activity of granting loans to general public as well. All this is done without any approval from the Registrar of the Societies. With indulgence in such kind of activity by the appellant, it is remarked by the Assessing Officer that the activity of the appellant is in violation of the Co-operative Societies Act. Moreover, it is a co-operative credit society which is not entitled to deduction under Section 80P(2)(a)(i) of the Act. 26) It is in this background, a specific finding is also rendered that the principle of mutuality is missing in the instant case. Though there is a detailed discussion in this behalf in the order of the Assessing Officer, our purpose would be served by taking note of the ....
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.... 6.7 The relevant portion of Section 80P reads as follows: - [Deduction in respect of income of co-operative societies]. "8OP. (1) Where, in the case of an assessee being a cooperative 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) carrying on the business of bankíng or providing credit facilities to its members, or the whole of the amount of profits and gains of business attributable to any one or more of such activities" 6.8 In this regard, the provisions with regard to allowing deduction in respect of interest of income earned by a cooperative society are contained in section 80P(2)(d), which read as under: "in respect of any income by way of interest or dividends derived by the co-operative society from its investment with any other co-operative society, the whole of such income" ....
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....the assessee by the decision of ITAT, Chennai in assessee's own case for assessment year 2017-18 in ITA No. 586/Chny/2021, where the Tribunal under identical set of facts and also by following the decision of Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. CIT, Calicut reported in [2021] 123 Taxmann.com 161, held that the assessee is entitled for deduction towards interest income earned from loans given to associate members. She further submitted that, as regards interest income earned from other Co:- operative Banks, the issue has been set aside to the file of the AO with the directions to verify as to whether the assessee has earned interest from the Co-operative Banks governed by the Reserve Bank of India holding banking license under the Banking Regulations Act, 1949 or as to whether it is governed by the Tamilnadu Co-operative Societies Act, 1983 and to decide the issue of taxability of interest income u/s. 80P(2)(d) of the Act. She further referring to the paper book filed by the assessee submitted that, for this year although the assessee has claimed deduction u/s. 80P of the Act in total, but while filing the return of income, it has subs....
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.... "45. To sum up, therefore, the ratio dividend of Citizen Co-operative Society Limited (supra), must be given effect to Section 80P of the Income Tax Act, being a benevolent provision enacted by the Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the Assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the world "agriculture" into Section 80P(2)(a)(i) when it is not there. Further, Section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench Judgement is wholly incorrect in its reading of Citizen Co-operative Society Limited (supra). Clearly, therefore, once Section 80P(4) is out of harm's way, all the Assessees in the present case are enti....
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....issue is squarely covered with the facts of the decision of the Hon'ble Madras High Court in the case of The Principal Commissioner of Income Tax, Salem Vs. M/s.S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd., (supra) and in the decision of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Limited vs. Commissioner of Income Tax, Calicut (supra). Respectfully following the same, we direct the Assessing Officer to allow the claim of deduction u/s.80P(2)(a)(i) of the Act on the interest income amounting to Rs.68,79,255/- from the Associated Members. Thus, this issue in the Assessee's appeal is allowed." 8. Considering facts and circumstances of the case and also by following the decision of the Tribunal in assessee's own case for assessment year 2017-18, we are of the considered view that the AO is erred in disallowing deduction claimed u/s. 80P(2)(a)(i) of the Act, in respect of interest income earned from loans given to associate members and thus, we direct the AO to allow deduction as claimed by the assessee. 9. In so far as interest income earned from deposits made with other Co-operative Banks including District Central Cooperative Bank....