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2024 (9) TMI 143
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....posed off by this consolidated order. 3. At the outset, of the hearing the ld. DR representing the revenue submitted as the issue in both the appeals are common on facts and in law the matter in ITA No. 645/JP/2023 may be taken as a lead case for discussions and disposal of these cases. The ld. AR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 645/JP/2023 is taken as a lead case. 4. Before moving towards the facts of the case we would like to mention that the revenue has assailed the appeal in ITA No. 645/JP/2023 on the following grounds; "(1) Whether on the facts and circumstances of the case, the learned CIT(A), NFAC, Delhi was justified in deleting the addition made by the AO in terms of disallowing the Deduction under section 80P(2)(d) of the Act, 1961 on the Interest Income deposits/investments in a Co-operative Bank. (2) Whether on the facts and circumstances of the case, the leanred CIT(A), NFAC, Delhi was justified in ignoring the finding of the Hon'ble Rajsthan High Court vide order dated 21/09/2016 in assessee's own case related to A.y 2007- 08....
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....ning surplus is deposited with co-operative banks. During assessment proceedings ld. AO noted that the assessee claimed deduction of Rs. 1,45,12,670/- under section 80P of the Act. The assessing officer is in the opinion that society was not eligible to claim deduction under section 80P on the income from other sources, which was earned in the form of interest from FDRs and deposits in Banks other than co-operative societies. Therefore, a show cause notice was issued to the assessee that "As per provisions of section 80P(2)(a)(i) cooperative societies are eligible to claim deduction for carrying on the business of banking or providing credit facility to its members. Further it is provided that deduction will be available for the whole of the amount of profit and gains of business attributable to anyone or more such activities. It is observed that the assessee society has earned interest income from banks and other institutions which is not covered under the provision of section 80P of the act and liable for taxation under section 56 of the Income Tax Act. Therefore, following the rule of principle of natural justice the assessee given an opportunity to show cause as to why the disa....
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....these grounds of appeal is denial of deduction u/s 80P by not considering the income earned by way of investment made in various institutions/societies by the appellant society and consequent determination of Rs. 1,45,12,670/- as the taxable income of the society. 4.2.2 Appellant society is registered as a credit cooperative society registered with the Registrar of Co-operative societies for Rajasthan. The primary object of the appellant society is to carry on the business of providing credit facilities to its members and to run educational institutions. In the assessment order, assessing officer initially held that the appellant is engaged in providing credit facilities to its members, society has received deposits from its members and has given loan and advances to the members as per their requirement and the remaining surplus is deposited with co-operative banks. The Assessing officer came to conclusion that appellant society was not eligible to claim deduction u/s 80P on the "income from other sources which was earned in the form of interest from FDRs and deposits in Bank other than co-operative societies and has issued the show cause notice. After the receipt of reply....
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....T(A) is under challenged by the revenue on the grounds as stated herein above mainly disputing the deletion of disallowance made by the assessing officer considering the interest received from the bank and not from the co-operative society. Apropos to the grounds so raised the ld. DR filed the following written submissions on 29.05.2024: 2. In this regard, the CBDT circular no. 06/2010 dated 20.09.2010 regarding clarification on eligibility of deduction u/s 80P to the regional rural banks is reproduced as under: "SECTION 80P OF THE INCOME-TAX ACT, 1961 - DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOCIETIES - CLARIFICATION REGARDING ELIGIBILITY OF DEDUCTION UNDER SECTION 80P TO REGIONAL RURAL BANKS CIRCULAR NO. 6/2010 [F.NO. 173(3)/44/2009-IT (A-I)], DATED 20-9-2010 Section 80P of the Income-tax Act, 1961 provides for a deduction from the income of cooperative societies referred to in that section. 2. As Regional Rural Banks (RRB) are basically corporate entities (and not cooperative societies), they were considered to be not eligible for deduction under section 80P when the section was originally introduced. However, as section 22 of the Regional Rura....
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....owed deduction u/s 80P. 2.2 Furthermore, the Ministry of Finance decided to withdraw the special status given to the RRBs vide CBDT circular dated 11.01.1982 and section 80P was amended by the Finance Act, 2006 introducing sub-section 4 to section 80P of the Act which laid down specifically that the provisions of section 80P will not apply to any cooperative bank other than a primary agricultural society or a primary cooperative agricultural and Rural Development Bank. 2.3 Furthermore, an OM dated 25.08.2006 addressed to RBI was issued by the CBDT clarifying that the RRBs would not be eligible for deduction u/s 80P of the I.T. Act from the A.Y. 2007-08 onwards. So, the condition prior to CBDT circular dated 11.01.1982 was restored. 3. Further it is submitted that the Hon'ble High court of Karnataka in the case of PCIT Hubbaali V/s Totagars Co-operative Sales Society [2017] 83 taxmann.com 140 (Karnataka) dated June 16, 2017 Karnataka mentioned categorically that the RRBs are not eligible for deduction u/s 80P. Paras 11 to para 15 of the aforesaid order are reproduced as under: "11. The Assessment Years involved in the present batch of appeals are ....
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....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 section shall not apply in relation to any co-operative bank other than a primary agricultural credit society .....". The words "in relation to" can include within its ambit and scope even the interest income earned by the respondent-assessee, a cooperative Society from a Co-operative Bank. This exclusion by Section 80P(4) of the Act even though without any amendment in Section 80P(2)(d) of the Act is sufficient to deny the cla....
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....e banks. The statute clearly mentioned the exceptions which are eligible for deduction u/s 80P. It is settled principle of law that the provisions relating to income tax will be governed by the I.T. Act, 1961 and will have an over-riding effect on other statute affected by those provisions such as RRBs Act 1976. The Hon'ble Rajasthan High Court has failed to appreciate the settled principle of law in its order. The Hon'ble ITAT Bench Jaipur has adjudicated this issue earlier placing reliance on aforesaid Rajasthan High Court order. 5. Therefore, in view of history of this provision (section 80 P) and as per the provisions of existing law (I T Act, 1961) read with the order of Hon'ble High Court of Karnataka as stated in the preceding paragraphs, the assessee is not eligible for deduction u/s 80 P and the Assessing Officer has rightfully denied the claim." 7.1 In support of the contention so raised the ld. DR relied upon the following evidence / decisions; S.No: PARTICULARS Page No. 1 CIRCULAR NO. 6/2010 [F.NO. 173(3)/44/2009-IT (A-I)], DATED 20-9-2010 1 2 CIRCULAR NO. 14/2006, DATED 28-12-2006 2-27 3 BILL FINANCE BILL, 2006 MEMORANDUM RE....
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....tfully submitted during the course of hearing (gist) that: 3.1 The judgement of the Hon'ble Rajasthan High Court in the case of PCIT Ajmer V/s M/s Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd. D.B. ITA no. 2/2019 dated 13.08.2019 is therefore not applicable in the case of the assessee as the same is with regard to RRBs and the assessee's investment are with the co-operative banks. Therefore there is no judgment of the jurisdictional High Court on this issue in favour of the assessee. Further, the adjudications of the Hon'ble Tribunals based on the above case law on this issue are therefore not applicable. 3.2 The judgment of the Hon'ble High Court of Karnataka in the case of PCIT Hubbaali V/s Totagars Co-operative Sales Society [2017] 83 taxmann.com 140 (Karnataka) dated June 16. 2017 is squarely applicable in the instant case and the issue in contention has been specifically dealt with by the Hon'ble High Court of Karnataka (emphasis supplied upon para 14 of the aforesaid order). The phrase "in relation to" appearing in section 80P(4) of the Act and its connotations has been discussed in said order. 3.3 The judgment of the Hon'b....
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....t income earned from scheduled commercial banks. 2. The Assessing Officer vide assessment order dated 20.09.2022 for A.Y. 2020-2021 assessed the Total Income of the assessee at Rs. 7,94,24,130/-. He has disallowed the benefit of deduction u/s. 80P(2)(d) of the Act on the interest earned by the assessee applicant from Cooperative Banks, i.e., A.P. Mahesh Cooperative Urban Bank Ltd., Kota Central Co-operative Bank Ltd. & Kota Nagrik Sahkari Bank Ltd. and also from scheduled commercial banks. 2.1. The CIT(A) vide its order dated 01.09.2023 has (i) allowed relief to the assessee towards interest earned by the assessee applicant from Cooperative Banks and has (ii) allowed the benefit of claim of proportionate expenses on interest income earned from scheduled commercial banks. 3. For ready reference, extracts of relevant provisions of Section 80P is reproduced hereunder: 80P Deduction in respect of income of Co-operative Societies (1) 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....
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.... with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new subsection (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The expressions 'co-operative bank', 'primary agricultural credit society' and 'primary co-operative agricultural and rural development bank' have also been defined to lend clarity to them. 6. The Co-operative Bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, however, the interest income derived by a co-operative society from its investments held with a co-operative bank, would continue to be entitled for claim of deduction under Sec.80P(2)(d) of the Act since a Co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being enforced in any state for the registration of co-operative societies. 7. We wish to refer and rely upon fo....
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....t Cooperative Society Ltd. v. PCIT {2022 (7) TMI 494 dated 08.07.2022} 381-384 18 Pune Bench Dr. Jagadale Mama Hospital Employees Coop Credit Society Ltd. v. PCIT {2022 (9) TMI 30 dated 29.08.2022} 385-390 19 Surat Bench ACIT v. Sachin Udyog Nagar Sahkari Mandli Ltd. {2022 (10) TMI 257 dated 06.10.2022} 391-393 20 Vishakhapatnam Bench Krishna District Milk Producer Mutually Aided Co-operative Union Limited v. ACIT {2021 (3) TMI 1108 dated 24.03.2021} 394-405 21 Madras Bench NLC Indcoserve v. ITO {2022 (6) TMI 936 dated 08.06.2022} 406-415 22 Raipur Bench Gramin Seva Sahakari Samiti Maryadit v. ITO {2022 (8) TMI 597 dated 04.08.2022} 416-429 23 Bangalore Bench Kanakshree House Building Co-operative Society {2022 (1) TMI 1187 dated 17.11.2021} 430-440 24 Delhi Bench ITO v. The Jwala Cooperative Urban Thrift and Credit Society Ltd. {2022 (6) TMI 74 dated 31.05.2022} 441-443 25 Mumbai Bench Avanti Niketan Cooperative Housing Society Ltd. v. CIT(A) {2022 (10) TMI 401 dated 06.10.2022} 444-449 26 Panaji Bench Belgaum Coal & Coke Consumer Cooperative Association Ltd. v. ITO {2022 (4....
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.... order dated 10.12.2010 pas ed by Hon'ble ITAT for A.Y. 2007-2008 in assessee's own case 92-110 * Copy of order dated 22.03.2013 passed by ld. CIT(A) for A.Y. 2007-2008 in assessee's own case 111-125 * Copy of order dated 09.04.2018 passed by ld. CIT(A) for A.Y. 2011-2012 in assessee's own case 126-143 * Copy of order dated 08.02.2019 passed by ld. CIT(A) for A.Y. 2013-2014 in assessee's own case 144-166 * Copy of order dated 09.02.2019 passed by ld. CIT(A) for A.Y. 2014-2015 in assessee's own case 147-190 * Copy of order dated 08.02.2019 passed by Id. CIT(A) for A.Y. 2015-2016 in assessee's own case 191-213 * Copy of order dated 01.09.2023 passed by ld. CIT(A) for A.Y. 1998-1999 in assessee's own case 214-221 * Copy of order dated 01.09.2023 passed by ld. CIT(A) for A.Y. 1999-2000 in assessee's own case 222-229 * Copy of order dated 01.09.2023 passed by ld. CIT(A) for A.Y. 2000-2001 in assessee's own case 230-237 * Copy of order dated 01.09.2023 passed by ld. CIT(A) for A.Y. 2001-2002 in assessee's own case 238-245 * Copy of order dated 01.09.2023 passed by ld. CIT(A) for A.Y. 2....
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....umer Cooperative Association Ltd. v. ITO {2022 (4) TMI 395 dated 06.04.2022} 450-456 19. Kolkata Bench Bhairabnala Samabay Krishi Unnayan Samiti Ltd. v. ITO {2022 (12) TMI 755 dated 15.12.2022} 457-461 10. The ld. AR of the assessee drawing our attention to para 4.2.2 stated that the ld. CIT(A) has given the categorical finding that the assessee is not a co-operative bank as per the banking regulation of the Act and does not have necessary license of banking company. The ld. AO nowhere held that the assessee is not credit cooperative society and co-operative bank. That finding of the ld. CIT(A) being factual in nature and the revenue has not challenged that finding the ground for disallowance of deduction has not force and is required to be dismissed even on that ground. He further, submitted that the circular referred by the ld. DR is for considering the RRBs as corporate entity of the amendment of section 80(P)(4) and board does not referred the co-operative society running a co-operative society and the assessee is not doing banking activities as permitted by the RBI. Merely it earned interest on investing its funds it cannot be considered as co-operative bank.....
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....f section 80P(2)(d) of the Act on interest received from another cooperative Societies [ Running as co-operative bank as per banking regulations ]. The similar issue has been decided by the Hon'ble Rajasthan High court, Jodhpur while dealing with the Revenue's appeal filed for the assessment year 2014-15 in the case of PCIT, Ajmer vs M/s Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd. in BD Income Tax Appeal No. 2/2019. The relevant observation made in the order by the Jurisdictional High Court has been reproduced as under: "The revenue cites a CBDT Circular (No. 6/2010 dated 20.09.2010) and contends that the Board categorically stated that interest income derived from deposits, made with non-cooperative institutions and more specifically Regional Rural Banks do not qualify for the benefit under Section 80P(2) of the Act of 1961. Section 22 of the Regional Rural Banks Act, 1976 states as follows" "22. Regional Rural Bank to be deemed to be a co- operative society for purpose of the Income Tax Act, 1961- For the purpose of the Income Tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to any tax on income, profits, or gains, a Re....
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....15 in the case of PCIT. Ajmer vs M/s Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd. in BD Income Tax Appeal No. 2/2019 vide its order dated 13.08.2019. The relevant observation made in the order by the Jurisdictional High Court has been reproduced as under:- "The revenue cites a CBDT Circular (No. 6/2010 dated 20.09.2010) and contends that the Board categorically stated that interest income derived from deposits, made with noncooperative institutions and more specifically Regional Rural Banks do not qualify for the benefit under Section 80P(2) of the Act of 1961. Section 22 of the Regional Rural Banks Act, 1976 states as follows" "22. Regional Rural Bank to be deemed to be a co- operative society for purpose of the Income Tax Act, 1961- For the purpose of the Income Tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to any tax on income, profits, or gains, a Regional Rural Bank shall be deemed to be a cooperative society. The CBDT reasoning appears to be that Section 80P was amended w.e.f. 1.4.2007 introducing specifically that the benefit of exemption would not apply to any cooperative bank other than Primary Agricul....
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....ociety Act or under, other law for the time enforce any such state for registration of Co-operative Societies. Therefore, the interest of Rx 2,09,91,701/- received on FDR was not held eligible for deduction w/s 80P(2)(d). The Id. CIT(A) confirmed the action of AO holding that Baroda Rajasthan (supra) is not a Co-operative Society registered under the Co-operative Society Act or under any law for the time enforce in any state for the registration of Co-operative Society, therefore, the interest received by assessee on FDR made with Baroda Rajasthan (supra) is not eligible for deduction w/s 80P(2)(d). 6. The ld. AR of the assessee relied upon the decision of Mumbai Tribunal in Presidency Co-operative Society (supra) and in Shree Keshorai Patan Sahakari Sugar Mill. In our considered view the facts narrative is not applicable on the facts of the present case. In both the cases the assessee, (in those cases were held entitled for exemption of interest received on deposit with Co-operative Bank which were held as Co-operative Society. However, in the present case, the assessee has claimed that Rural Bank are also Co-operative We have examined the CBDT circular No. 6/2010 dated 16.09.2010....
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....e various provisions of Regiona Rural Bank Act 1976. Baroda Rajasthan Kshetriya Gramina Bank was set up under the provisions of under the provisions of Regional Rural Bank Act. Section 22 of the Regional Rural Bank Act provides that Regional Rural Bank to be deemed to be a co-operative society for purpose of the Income-tax Act, 1961. In our considered view the the Circular of CBDT cannot override the provisions of the Act of Parliament. Even the careful reading of the Circular No. 6 of CBDT make it clear that exemption is withdrawn with respect to Regional Rural Banks are not eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards, and not the co-operative societies. The assessee before us is the cooperative society and not the Regional Rural Bank. Therefore, considering the provisions of section 22 of Regional Rural Bank Act, wherein the status of the banks established are of the co-operative societ the assessee is entitled for the exemption on the interest earned on the deposits. In the result the ground No. 1 & 2 of the appeal are allowed." As the facts of the A.Y. 2014-15 are similar to the facts of the assessment year under....