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2023 (4) TMI 480
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....e on 19.2.2023 while paying TDS amount and found in the 'Promotions Category' of the emails. The appeal was immediately prepared and filed on 21.2.2023 before the Tribunal causing a delay of 57 days. It is submitted that the delay is unintentional since the assessee was not able to access the mail in the Promotions Category and prayed for condonation of delay. 3. We have heard both the sides on the condonation of delay of 57 days in filing the appeal before the Tribunal. We have considered the explanation of the assessee for the delay and are of the view that there is sufficient and reasonable cause for the delay in filing the appeal. Respectfully following the Hon'ble Apex Court judgment in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471, we condone the delay. 4. The brief facts of the case are that the assessee is a cooperative society registered under the provisions of Karnataka State Co-operative Societies Act., in the business of forming, developing and distributing residential sites to its members. The assessee filed its return of income on 24.3.2018 declaring NIL income after claiming deduction under section 80P of the Income T....
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....perative society is eligible for deduction and not from co-operative/nationalized banks. He noted that Punjab National Bank and The Mysore and Chamarajanagar District Co-op. Central Bank Ltd. are not co-operative societies, but these are functioning under the Banking Regulation Act, 1949. He observed that co-operative banks carry on the banking business which normally incudes all the activities of a banking business with the public at large, whereas the co-operative societies carry on the business activity of providing credit facility only to its members. Hence he sustained the disallowance made by the AO. Aggrieved by the order of the CIT(Appeals), the assessee is in appeal before the Tribunal. 6. The ld. AR reiterated the submissions made before the lower authorities and submitted the Statement of Facts, the relevant parts of the same are as under:- 12. "The Appellant submits that the above Co-operative Bank is also a part of Co-Operative Society and interest received on deposits made with it qualifies to be "income by way of interest or dividends derived by the co-operative society from its investments with any other cooperative society" as specified in Sec. 80P(2)(d....
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....ount is a surplus fund invested and hence, it is a case of investment by an ordinary investor; (iii) That interest on such investment is taxable under the head "Income From Other Sources" under Sec. 56 and not under Sec.28; (iv) That the Hon'ble Supreme Court in the case of Totagars, Cooperative Sale Society Ltd reported in [2010] 188 Taxman 282 (SC) has stated that the income in respect of which deduction is sought must constitute the "Operational Income" and not "Other Income". In this case, the assessee earned interest on funds which are not required for business purpose and hence, interest income falls in the category of Sec.56. (v) That the Appellant (Assessee) has shown interest income under the head "Other Sources" under Sec.56, but claimed deduction. 14. It is respectfully submitted that the Learned ITO ignored that the Hon'ble Supreme Court in the above case was considering the deduction under Sec. 80P (2) (a) (i) [and not under Sec. 80P (2) (d)]. The Hon'ble Supreme Court, in that case, held that interest on surplus funds invested in short-term deposits is not the surplus required for "Business Purpose" and such interest is ....
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....AND UPHOLDS THE FIRST DECISION (FAVOURABLE). (d). Decision of The Honorable ITAT of PUNE BENCH 'B' in the case of Rena Sahakari Sakhar Karkhana Ltd. v. Principal Commissioner of Income-tax reported in [2022] 138 taxmann.com 532 (Pune - Trib.) -ANNEXURE- 12 which states that cooperative bank is part of Cooperative society." 7. In addition, the ld. AR submitted that The Mysore and Chamarajanagar District Co-op. Central Bank Ltd. was initially registered under the Co-operative Societies Act and produced a copy of the Certificate of Registration dated 15.2.1955 and later it was granted licence from RBI to commence and carry on banking business (copy of licence dated 26.12.2011 issued by RBI is placed on record). He accordingly submitted that it was a co-operative society and relied on the decision of the coordinate Bench of the Tribunal in ITA Nos. 581 to 583/Bang/2022 dated 19.10.2022 wherein similar issue was decided by the Tribunal. He also relied on the following judgments:- (i) PCIT v. Totagars Co-operative Sale Society {2017] 78 taxmann.com 169 (Karnataka) (ii) Karnataka State Co-operative Federation Ltd. v. ACIT, [2021] 121 taxmann.com 399 (....
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....rming, developing and distributing residential sites to its members and has claimed deduction u/s. 80P(2)(d) of the Act on the interest received on Fixed Deposits from The Mysore and Chamarajanagar District Co-op. Central Bank Ltd. and Punjab National Bank. It is clear from the facts of the case as observed by the AO that the surplus funds were invested in Fixed Deposits as investments in Co-operative Bank & Nationalised Bank. The ld. AR has relied on the judgment dated 05.01.2017 of the Hon'ble jurisdictional High Court in the case of PCIT v. Totagars Co-operative Sale Society {2017] 78 taxmann.com 169 (Karnataka). However, the Hon'ble jurisdictional High Court in the later judgment dated 16.6.2017 in the case of PCIT v. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140 (Karnataka) for AYs 2007-08 to 2011-12 has decided in the issue in favour of the revenue by observing as under for claiming deduction u/s 80P(2)(d) on interest received from Cooperative bank:- 9. We have heard the learned counsels at length and perused the record and the judgments cited at the Bar. 10. Admittedly and undoubtedly, the respondent assessee is a Co-operative Society engaged....
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....tive society should be out of the investments with any other co-operative society. The words 'Co-operative Banks' are missing in clause (d) of subsection (2) of Section 80P of the Act. Even though a co- operative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the Primary Agricultural Credit Societies with their limited 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. 14. 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 of the Act was to exclude the applicability of Section 80P of the Act 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 s....
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.... apply the binding precedent of the Hon'ble Supreme Court for subsequent years merely on account of the change of the Bank where such deposits were made by the respondent assessee, all other facts remaining the same, particularly the nature and character of the income earned by it. The interest income of assessee continues to be not attributable to its business operations even in these subsequent years. 18. The contention of the learned counsel for the assessee that a coordinate bench of this Court dismissed the Revenue's appeals by referring, but not applying the decision of the Hon'ble Supreme Court, we observe with greatest respects that we do not find any detailed discussion of the facts and law pronounced by the Hon'ble Supreme Court in the case of the respondent assessee in the said order passed by the co-ordinate Bench and therefore, we are unable to follow the same in the face of the binding precedent laid by the Hon'ble Supreme Court. We find in paragraph 8 of the said order passed by a co- ordinate bench that the learned Judges have observed that "the issue whether a co-operative bank is considered to be a co- operative society is no longer re....
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.... only where the purpose of letting was storage, processing or facilitating the marketing of commodities. If the godown was let out (including user) for any purpose besides storing, processing or facilitating the marketing of commodities, then the assessee was not entitled to such exemption. Any income derived by the society unconnected with such letting or use of the godown would not fall under clause (e). The High Court was right in coming to the conclusion that the assessee was storing the commodities in question in its godowns as part of its own trading stock and hence, it was not entitled to claim the deduction under Section 80P(2)(e). In this case, the issue price was set off against the sale price which clearly indicated that the netting/difference between the two prices constituted receipt on a commercial basis or net profit. A. Venkata Subbarao v. State of Andhra Pradesh AIR 1965 SC 1773 applied. CIT v. South Arcot District Co-operative Marketing Society Ltd. [1989] 176 ITR 117 (SC) distinguished. Surath Venkar Sahakari Sangh Ltd v. CIT [1971] 79 ITR 722 (Guj) approved. Decision of the Rajsthan High Court in CIT v. Udaipur Shahakari Upbho....
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....s enunciated by the Supreme Court in Totgar's Co-operative Sale Society (supra), in case of a society engaged in providing credit facilities to its members, income from investments made in banks does not fall within any of the categories mentioned in section 80P(2)(a) of the Act. However, section 80P(2)(d) of the Act specifically exempts interest earned from funds invested in co- operative societies. Therefore, to the extent of the interest earned from investments made by it with any co-operative society, a co-operative society is entitled to deduction of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a co-operative society, is not deductible under section 80P(2)(d) of the Act." 22. Again, the Division Bench of Punjab and Haryana High Court in still a later decision reported in the same volume of ITR in the case of CIT v. Punjab State Co-operative Agricultural Development Bank Ltd. [2016] 389 ITR 607/76 taxmann.com 307 (Punj. & Har.) concurred with the aforesaid view of the Gujarat High Court, distinguishing the view taken by the Andhra Pradesh High Court and Karnataka High Court, held ....
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.... Therefore, the word 'attributable to' is certainly wider in import than the expression 'derived from'. Whenever the Legislature wanted to give a restricted meaning, they have used the expression 'derived from'. The expression 'attributable to' being of wider import, the said expression is used by the Legislature whenever they intended to gather receipts from sources other than the actual conduct of the business. A co-operative society which is carrying on the business of providing credit facilities to its members, earns profits and gains of business by providing credit facilities to its members. The interest income so derived or the capital, if not immediately required to be lent to the members, they cannot keep the said amount idle. If they deposit this amount in bank so as to earn interest, the said interest income is attributable to the profits and gains of the business of providing credit facilities to its members only. The society is not carrying on any separate business for earning such interest income. The income so derived is the amount of profits and gains of business attributable to the activity of carrying on the business of banking or pr....
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....n law. Accordingly it is hereby set aside. The substantial question of law is answered in favour of the assessee and against the Revenue. Hence, we pass the following order. Appeal is allowed." (The reproduction is from the original website of the Karnataka High Court). There is an important distinction. The Division Bench expressly held in paragraph 10 that interest income was attributable to the business of banking and, therefore, liable to be deducted under section 80P(2)(a)(i) of the Act. At the cost of repetition, we have not considered whether the assessee carries on the business of banking. If it is established upon remand that the assessee carries on the business of banking the result may be different. In any event assuming that the judgment is not distinguishable on this ground, we would with respect disagree with the same in view of the judgments that we have already referred to and on the basis of our interpretation of Totgar's case. In any event, we are with respect unable to agree with the observations that the Supreme Court in Totgar's case (supra) did not lay down any law. 33. For the same reason, the judgment of the Karnataka High ....