TaxTMI 
TaxTMI 
2024 (9) TMI 143
X X X X Extracts X X X X
X X X X Extracts X X X X
....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, involving the claim of deduction u/s 80P(2)(d) of the Act, wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs 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 disallowance of deduction claimed by the assessee should not made. 5.3 The assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 from appellant, he has invoked provisions of Section 80P(4) to deny the deduction available u/s 80P Provisions of sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Rural Bank Act provides that a RRB shall be deemed to be cooperative society for the purposes of the Income-tax Act, 1961, in order to make such banks el....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Assessment Years 2007-2008 to 2011- 2012. The bone of contention is that the deduction under Section 80P(2) of the Act is now claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under Section 8....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 claim of the respondent assessee for deduction under Section 80P(2)(d) of the Act. The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank Limited in the present case is admittedly not s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hose 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 REGARDING DELEGATED LEGISLATION 28-60 4 [2017] 83 taxmann.com 140 (Karnataka) HIGH COURT OF KARNATAKA Principal Commissioner of Income-tax, Hubballi v. Totagars Co-operative Sale Society 61-77 5 [2016] 72 taxmann.com 64 (Gujarat) HIGH COURT OF GUJARAT State Bank of India (SBI) v. Commissioner of Incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt 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'ble Apex Court in the case of Totgars, Co-operative Sale Society Ltd. v. Income-tax Officer, Karnataka [2010] 188 Taxman 282 (SC) dated FEBRUARY 8.2010 strengthens the case of the revenue as has been mentioned in para 11 to 13 of the order 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 (Kar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....grik 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 of this section, the sum 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) ............. (ii) ............. (iii) the marketing of agricultural produce grown by its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 following authorities including Hon'ble jurisdictional Rajasthan High Court & other Hon'ble High Courts and also Hon'ble jurisdictional ITAT & other Hon'ble ITAT which have under identical factual backdrop have consistently held that benefit of deduction u/s. 80P(2)(d) ought to be given to the assessee societies wherein interest is earned from cooperative banks: SNo. High Court/ Tribunal Particulars PB 1. Rajasthan High Court PCIT v. Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd. (2019) 8 TMI 1131 dated 13.08.2019 01-02 2 Madras High Court Thorapadi Urban Co-op Credit Society Ltd. v. ITO (2023) 11....
X X X X Extracts X X X X
X X X X Extracts X X X X
....7 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) TMI 395 dated 06.04.2022} 450-456 27 Kolkata Bench Bhairabnala Samabay Krishi Unnayan Samiti Ltd. v. ITO {2022 (12) TMI 755 dated 15.12.2022} 457-461 8. In light of above-mentioned facts and orders and consistent view of various Hon'ble High Courts and Hon'ble Tribunals including jurisdictional Hon'ble High Courts and jurisdictional Hon'ble Tribunals, and also the past history of the assessee, which have considered the position of law and the issue involved in detail, the appeal of the department on both the grounds deserves to be dismissed and the order of the CIT(A) deserves to be confirmed. 9. To support the contention so raised in the written submission reliance was also placed on the following further decisions: Sno. Particulars Page 1 1.1 Copy of order passed by Hon'ble Rajasthan Hig....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 2003-2004 in assessee's own case 246-253 * Copy of order dated 01.09.2023 passed by ld. CIT(A) for A.Y. 2004- 2005 in assessee's own case 254-261 S.no. Court Particulars Page no. 1. Jaipur Bench Rajasthan Cooperative Dairy Federation Ltd. v. PCIT {ITA: 23/JP/2021 dated 09.11.2021) 262-274 2. Jaipur Bench Palsana Gram Sewa Sahkari Samiti Ltd. v. PCIT {2021 (12) TMI 635 dated 02.11.2021} 275-303 3. Jaipur Bench Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. v. PCIT {2021 (3) TMI 256 dated 01.03.2021} 304-319 4. Jaipur Bench Ajmer Zila Dugdh Utpadak Sahkari Sangh Ltd. v. PCIT {2019 (11) TMI 690 dated 28.08.2019} 320-330 5. Jaipur Bench Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. DCIT {2020 (3) TMI 631 dated 04.03.2020} 331-349 6. Jaipur Bench Shahpura Gram Seva Sahkari Samiti Ltd. v. ITO {2020 (10) TMI 715 dated 15.10.2020} 350-356 7. Jaipur Bench Jaipur Zila Dugdh Utpadak Sahkari Sangh Ltd. v. ACIT {2019 (9)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sting its funds it cannot be considered as co-operative bank. So the arguments of the ld. DR to consider the assessee being co-operative society to be considered as corporate entity is misconceived. The RRBs were registered as company and was considered for limited purpose of extending the benefit of section 80P were considered as co-operative society and that aspect was clarified in the board circular without specifying the co-operative society. Even the investment made by the assessee is not in the RRBs and therefore, the arguments advanced have no force. The ld. AR of the assessee submitted that the Department has preferred an appeal against the order in ITA No. 437/Jodh/2017 dated 31.10.2018 wherein the Hon'ble Rajasthan High court, Jodhpur Bench has considered the circular as referred by the revenue and the appeal of the revenue was dismissed vide order in appeal no. No. 2/2019. Thus, the issue is correctly decided by the ld. CIT(A) in favour of the assessee. 11. We have heard the rival contention and perused the materials placed on records by both the parties. Before us both the parties supported the orders of the lower authorities as favorable to them. In this appeal the so....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Agricultural Credit Society or a Primary Cooperative Agricultural and Rural Development Bank. The circular then stated that in the light of this inclusion - to Section 80P by way of introduction of Section 80P(4), the exemption could not be availed of by the banks invested in Regional Rural Banks. This Court is of the opinion that the revenue's contention is unsustainable. Section 22 in uncertain terms categorically deems Regional Rural Banks (of which description Baroda Rajasthan Regional Rural Banks answer to) as Cooperative Societies for the purposes of Income Tax Act. In the absence of non-obstante clause, the mere fact that a restrictive condition was imposed in relation to a Cooperative Bank for regulating the benefit of Section 80P, does not in any manner, alter the pre-existing situation. By virtue of Section 22, Regional Rural Banks continue to be deemed Cooperative Societi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Primary Agricultural Credit Society or a Primary Cooperative Agricultural and Rural Development Bank. The circular then stated that in the light of this inclusion to Section 80P by way of introduction of Section 80P(4), the exemption could not be availed of by the banks invested in Regional Rural Banks. This Court is of the opinion that the revenue's contention is unsustainable. Section 22 in uncertain terms categorically deems Regional Rural Banks (of which description Baroda Rajasthan Regional Rural Banks answer to) as Cooperative Societies for the purposes of Income Tax Act, In the absence of non-obstante clause, the mere fact that a restrictive condition was imposed in relation to a Cooperative Bank for regulating the benefit of Section 80P, does not in any manner, alter the pre-existing situation. By virtue of Section 22, Regional Rural Banks continue to be deemed Cooperative Societies and all the contingent consequences that flow from it. For the above reasons, this court is of the opinion that there is no substantial question of law involved in the present appeal. The appeal is, therefore, dismissed." Taking into consideration the present facts and circumstances ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the contents the circular it is extracted below; CIRCULAR NO. 6/2010 IF NO. 173(3)/44/2009-IT (A-1)] DATED 20-9-2010. 1. 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 Rural Bank Act provides that a RRB shall be deemed to be cooperative society for the purposes of the Income-tax Act, 1961, in order to make such banks eligible for deduction under section 80P. CBDT issued a beneficial Circular No. 319 dated 11-1-1982, which stated that for the purpose of section 80P, a Regional Rural Bank shall be deemed to be a cooperative society. 3. Section 80P was amended by the Finance Act, 2006, with effect from 1-4-2007 introducing sub-section (4), which laid down specifically that the provisions of section 80P will not apply to any cooperative bank other than a Primary Agricultural Credit Society or a Primary Cooperative Agricultural and Rural Deve....