TaxTMI 
TaxTMI 
2024 (6) TMI 1223
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is observed that there are sufficient reasons for the delay and following the judgment of the Hon'ble Apex Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 167 ITR 471, delay in filing the appeal before the Tribunal is condoned. 4. The issues raised in the grounds of appeal are deduction of interest income received from banks u/s. 80P(2)(a)(i) and considering the interest income as income from other sources u/s. 56 of the Act. 5. The brief facts of the case are that assessee filed its return of income on 29.09.2018 declaring gross total income of Rs. 1,44,42,327 and claimed deduction of Rs. 144,09,287 u/s. 80P of the Act. The case was selected for scrutiny and statutory notices were issued to the assessee. The assessee filed reply. The AO noted that the assessee is not eligible for deduction u/s. 80P since it is not registered under the Karnataka Co-operative Societies Act, 1959 and assessee has wrongly represented as a co-operative society in the return of income filed. Accordingly show cause notice was issued to the assessee on 18.02.2021, however the assessee did not reply within the stipulated time. The AO also noted that the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on merit. Accordingly, order of the CIT(A) is set aside and matter is restored to the AO for adjudication of the impugned issue in terms indicated above. 14. In the result, appeal of the assessee stands allowed for statistical purposes. 4. In the case of UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD very recently Honourable High court has come with the judgement and Honourable High court has the opinion that 33. The provision of section 80P offers tax deduction in respect of income of co-operative societies which is enacted with a laudable object of promoting co-operating movement. Such benefit cannot be denied to so called cooperative under the Souharda Act merely on hyper technicalities. The interpretation given by the revenue to section 2(19) of the Act is untenable. A harmonious reading of said provisions would indicate that co-operative society registered the Co Operative Society Act 1959 alone is not the Co- Operative society for the purposes of Income Tax Act as the phrase "or" employed with the following words 'under any other law for the time being in force in state for the registration of Co-operative society'. If properly read, Co-operative So....
X X X X Extracts X X X X
X X X X Extracts X X X X
....taka for registration of cooperative societies. Therefore the conclusion of the revenue authorities that co-operative societies and co-operatives are different and that co-operative registered as Souharda Sahakari cannot be regarded as co-operative societies is unsustainable. We therefore hold that the Assessee should be allowed deduction u/s.80P(2)(a)(i) of the Act, as the ground on which the same was denied to the Assessee is held to be incorrect. 12. In the result, appeal by the Assessee is allowed for statistical purposes 8. Very recently, the Hon'ble High Court of Karnataka has given the judgment in the case of Swabhimani Souharda Co-operative Ltd, Bengaluru V/s the State of Karnataka pronounced on 16-01-2020 where in the judgment all the confusions are put to rest by stating that (b) the object of enacting sec.80P of the 1961 Act may be defeated if a restrictive meaning is assigned to the definition for "Cooperative Society" as given u/s 2(19) in as much as the invokability of the provision of sec 80 P is dependent upon the entity seeking the benefit thereunder being a Co-operative society; going by the text and context of these provisions, one can ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 7 Interest apportionable to business income 82,90,021 8 Interest to be claimed u/s 80P2(a)(i) 82,90,021 13. Total investment made by the society in order to comply with the statutory requirements as under Sl no Particular Nature of deposit Amount Interest Earned 01 Karnataka Bank Investments to meet the 25,17,772 2,13,584 02 DCC Bank 3,52,76,090 39,17,751 03 Canara Bank statutory requirements 13,48,987 1,17,987 04 Karnataka Gramina Bank 2,60,13,267 32,07,036 05 State Bank Of India 83,64,737 5,62,933 06 Interest received from Saving Bank Account 45,47,403 2,70,730 07 Other Investments 21,62,914 -Nil- Total 8,02,31,170 82,90,021 14. Hence Appellant has invested 8,02,31,170 in Banks and on which it has earned 82,90,021 in total as interest as explained above. This amount does not represent any excess money not in immediate requirements of the society and hence it is a bonafide business investment done in the ordinary course of the business to meet the statutory requirements and therefore the income earned thereon is business in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... said case, the Apex court held the assessing officer was right in taxing the interest income indicated above u/s 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear: supreme court was not laying down any law. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profit and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest the said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of section 80P(1) of the Act. In fact similar view is taken by Andhra Pradesh High Court in the case of Commissioner of income Tax III, Hyderabad Vs Andhra Pradesh State co-operative bank Ltd., reported in (2011) 200 TAXMAN 220/12. In that view of the matter, the order passed by the appellate authorities denying the benefit of deduction of the afo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rda Sahakari Niyamita, has come up with the opinion that The jurisdictional High Court in the case of PCIT Vs. Totgars Sales Society (supra) had categorically held that the interest income received from Scheduled Banks / Co-operative Banks are not entitled to deduction under section 80P(2)(a)(i) or under section 80P(2)(d) of the Act. However, the latest judgment of the Hon'ble Apex Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd., Vs. AO reported in 458 ITR 384 (SC) had categorized various co-operative banks as co-operative societies thereby granting the benefit of deduction under section 80P of the Act to the said co-operative banks. Though the Hon'ble Apex Court was considering the interpretation of section 80P(4) of the Act, when a cooperative bank is deemed to be considered as a co-operative society, the necessary corollary has to follow. Thereby meaning when interest income is received from such co-operative bank which are deemed to be considered as co-operative society, then the assessee would be entitled to deduction under section 80P(2)(d) of the Act. Since AO did not have the benefit of examining the dictum laid down by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... substantiate its claim and avoid seeking unnecessary adjournment for early disposal of the case. This issue is allowed for statistical purposes. 24. In addition to this We would like to quote the case law which is recently ordered by Income tax Appellate Tribunal Banglore -C bench in the case of Siddhi Vinayaka Souhardha Pattina Sahakari Niyamita Kalaburagi., has come up with the opinion that the assessee is eligible for claim of its cost of funds on the entire interest income The assessee has relied on the judgment of Co-ordinate Bench of the Tribunal in case of The West Coast Paper Mill Employees Souhardha Credit Co-op. Ltd.. Accordingly, the assessee is directed to provide the details of cost of funds before the assessing officer. Therefore for allowing cost of funds, we are remitting this issue to the assessing officer for determining the cost of funds for earning interest income 25. As per the CBDT Circular, having Circular No.18/2015 dated 02.11.2015. interest earned from the investments made for the purpose of comply with the Act and relevant Rules are taxable u/s 28 of the Income tax Act and not under 56 of the said act 26. We request yo....