TaxTMI 
TaxTMI 
2025 (2) TMI 1213
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....ngaged in the activity of providing credit facilities to its members and therefore, the interest income received on funds parked/ investments made with cooperative banks constituted business income in the hands of the assessee society and hence, the deduction u/s 80P(2)(a)(i) was allowable in respect of the said income. 3. The appellant craves leave to add/ alter/ amend any of the grounds of appeal" ITA Nos. 2071/PUN/2024, AY2021-22 2.1 The assessee has raised the following grounds of appeal:- "1. The learned CIT(A) erred in confirming the disallowance of deduction u/s 80P(2)(a)(i) of Rs.10,36,508 in respect of interest earned from Co-operative /nationalized bank without appreciating that the said disallowance was not justified in law and on facts. 2. The Ld. CIT(A) failed to appreciate that the assessee society was engaged in the activity of providing credit facilities to its members and therefore, the interest income received on funds parked/ investments made with cooperative/nationalized banks constituted business income in the hands of the assessee society and hence, the deduction u/s 80P(2)(a)(i) was allowable in respect of the said income. 3. The appellant crav....
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....fy 'Deduction claimed under Chapter VI. During the assessment proceeding various notices were issued and served to the assessee. But the assessee failed to comply with these notices. Therefore, the AO completed the assessment proceeding u/s 144, assessing the income at Rs.2,59,57,890/- by disallowing the deduction claimed u/s 80P of the Act. Aggrieved by the above order of the AO, the appellant preferred the present appeal. 6.3 The appellant during the appellate proceedings submitted that the assessee is undisputedly a co-operative society registered under Maharashtra State Co-operative Act, 1960, and is engaged in the activity of providing credit facilities to it's members. This fact is evident from the copy of P&L A/c and Balance Sheet of the society, tax audit report and also registration certificate and by laws of the society. Therefore, as per provisions of section 80P(2)(a)(i), the assessee is eligible for deduction under the said section. During appellate proceedings, the appellant also relied on various decisions of Jurisdictional ITAT, Pune. In these cases decisions were made in favour of the assessee by allowing the deduction u/s 80P of the act. 6.4 The s....
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....)(i). In the light of the ratio's laid down by the aforesaid Supreme Court decision, the deduction u/s 80P(2)(a) is allowed, subject to the conditions that profits attributable to non-members (excluding Regular, Associate and nominal members) to be excluded for the purpose of the same deduction. 6.7 However the issue of the appellant also relates to disallowance of deduction u/s 80P(2)(d) of the Act. The ratio held down by the Supreme Court's decision in the case of Totagars Co-operative Sale Society vs. ITO in 188 taxmann.com 282 (SC) is applicable to decide the taxability of interest income u/s 80P(2)(d) also. i) The character or nature of interest income received on the investment or deposits from a schedule bank or co-operative bank is the same. It is not a business income taxable u/s.28, but it is taxable as income from other sources u/s 56. ii) Only on such business income or operational income, deduction u/s 80P, can be allowed. Deduction u/s 80P cannot be allowed on interest income ; which is not chargeable to tax under the head business income; but chargeable to tax under the head income from other sources. iii) Co-operative banks cannot be equated with....
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....resaid case of Mavilayi Service Co-operative Bank, has held that profits attributable to the non-member are not eligible for deduction u/s 80P(2)(a) In this context its hereby held that the Interest Income earned from Scheduled Banks & Cooperative banks are also from non-member category and hence cannot be considered for deduction u/s 80P(2)(a) nor u/s 80P(2)(d) and would be appropriate to be annexed u/s 56 only. 6.10 Thus, under these circumstances as discussed from the Supreme Court decision in the case of Totagars Co-operative Sale Society and Mavilayi Service Co-operative Bank: It is held that since the assessee is a co-operative society and deals with the members hence eligible for the deduction u/s 80P but the interest income which earned by the assessee from any scheduled banks or co-operative banks should be taxed u/s 56 as income from other sources. The AO is hereby directed to allow the deduction u/s 80P to the extent of the order of the Apex court in the above mentioned case as much applicable in this case. Hence, the relevant grounds of appeal raised in this regard are hereby partly allowed." 5. The Ld. AR submitted that the impugned issue is covered in favour of t....
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....e framing the assessment had allowed the aforesaid claim Of deduction raised by the assessee. Observing, that as co- operative banks were commercial banks and not a co- operative society, therefore, the Pr. CIT was of the view that the assessee was not eligible for claim of deduction under Sec.80P(2)(d). In the backdrop of his aforesaid conviction, the Pr. CIT was of the view that the assessment order passed by the A.O under Sec.143(3), dated 07.03.2016, therein allowing the assesses claim for deduction under Sec. 80P(2)(d), had therein rendered his order as erroneous, insofar it was prejudicial to the interest of the revenue. Accordingly, the Pr.CIT not finding favour with the reply of the assessee, wherein the latter had tried to impress upon him that it was duly eligible for claim of deduction under Sec.80P(2)(d) of the Act, therein "set aside" the order of the A.O with a direction to redecide the issue afresh and reframe the assessment. 4. The assessee being aggrieved with the order of the Pr.CIT has carried the matter in appeal before us. As the present appeal involved a delay of 52 days, therefore, the ld. A.R took us through the reasons leading to the same. It was submitt....
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....esentative (for short "D.R") relied on the order passed by the Pr. CIT under Sec.263 of the Act. It was submitted by the ld. D.R, that as the assessee was noteligible for claim of deduction under Sec.80P on the interest income received on the investments/deposits lying with the co-operative banks, therefore, the Pr. CIT finding the assessment order passed by the A.O under Sec.143(3), dated 07.03.2016 as erroneous, insofar it was prejudicial to the interest of the revenue, had rightly "set aside‟ his assessment with a direction to re-adjudicate the issue therein involved. Our attention was also drawn by the ld. D.R to his written submissions and certain judicial pronouncements in support of his aforesaid contention. 7. We have heard the ld. authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Our indulgence in the present appeal has been sought, for adjudicating, as to whether or not the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments/deposits made with the co-operative....
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....ociety shall be deducted in computing its total income. We may herein observe, that what is relevant for claim of deduction under Sec.80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co- operative society. We are in agreement with the view taken by the Pr. CIT, that with the insertion of sub- section (4) to Sec. 80P of the Act, vide the Finance Act, 2006 with effect from 01.04.2007, the provisions ofSec.80Pwouldnomorebeapplicableinrelationto any cooperative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, at the same time, we are unable to subscribe to his view that the aforesaid amendment would jeopardize the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a cooperative bank. In our considered view, as long as it is proved that the interest income is being derived by a co- operative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec....
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....her banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. Although, in all fairness, we may herein observe that the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), as had been relied upon by the ld. D.R before us, had held, thata co-operative society would not be entitled to claim deduction under Sec. 80P(2)(d); but then, the Hon'ble High Court in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by aco-operative society on its investments held with a co-operative bank would be eligible for claim of deduction under Sec.80P(2)(d) of the Act. Backed by the aforesaid conflicting judicial pronouncements, we may herein observe, that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985)156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court's, then a view ....
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....observed and held as under. "8. As regards, the issue as to the allowability of exemption under the provisions of section 80P(2)(a)(i) in respect of interest income earned by a cooperative society from the cooperative banks/commercial banks, there is a cleavage of judicial opinion among several High Courts on the issue of eligibility of this kind of income for exemption u/s. 80P(2)(a)(i) of the Act. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Punjab State Cooperative Federation of Housing Building Societies Ltd. 11 taxmann.com 448, the Hon'ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj.), the Hon'ble Delhi High Court in the case of Mantola Co-operative Thrift & Credit Society Ltd. Vs. CIT 50 taxmann.com 278, the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Punjab State Cooperative Agricultural Development Bank Ltd. 389 ITR 68 and the Hon'ble Kolkata High Court in the case of CIT Vs. Southern Eastern Employees Cooperative Credit Society Ltd. 390 ITR 524 took a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and,....