TaxTMI 
TaxTMI 
2025 (2) TMI 1678
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....,54,04,835/-. Subsequently, the case of the assessee was reopened and notice u/s 148 of the Act was issued and duly served upon the assessee on 25.07.2022. The assessee failed to file its return of income in response to the notice u/s 148 of the Act. However, in response to the notice u/s 142(1) of the Act, the assessee furnished its reply on 19.01.2023 submitting that the assessee is eligible for deduction u/s 80P(2)(d) of the Act relying on the decision of the Tribunal in assessee's own case for earlier year which has been decided in favour of the assessee and also the decision of the Mumbai Tribunal in support of the said claim. The assessee also furnished various details/documents as stated in para 3.1 of the assessment order. After considering the assessee's submissions/details/documents furnished, the Ld. Assessing Officer ("AO") observed that during the relevant AY the assessee had earned interest from investments in the form of deposits held in 12 Co-operative Banks/Co- operative Societies. Out of total claim of Rs. 5,54,04,835/- u/s 80P(2)(d) of the Act, the Ld. AO observed that the interest income earned from the five Co- operative Banks amounted to Rs. 3,29,38,312/- whic....
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....nor prejudicial to the interest of the revenue. In the light of these observations, the Ld. CIT(A) allowed the appeal of the assessee and directed the Jurisdictional AO to allow the claim of deduction u/s 80P(2)(d) of the Act in respect of the interest income earned from the Co-operative Banks, to the assessee. The relevant observations and findings of the Ld. CIT(A) are reproduced below : "5.5 Therefore, the solitary issue of intrigue in the case under consideration relates to the denial of benefit of deduction u/s.80P(2)(d) based on the nature of interest income earned, when all the 12 Co-operative Banks are found to be registered under the Co-operative Societies Act, either under the Central Act or State Act. 5.6 As per the provisions of S.80P(2)(d), any income derived by a Co-operative Society by way of interest or dividends from its investments in any other Co- operative Society, the whole of such income is allowable as deduction. In the case under consideration, the disputed amounts covered under the claim of deduction u/s 80P(2)(d) have all been derived out of investments made with Co-operative Banks only and not with any Nationalised Banks. 5.7 Th....
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.... a Cooperative bank is also entitled to deduction under Section 80P(2)(d) of the Income Tax Act 1961" 5.11 Furthermore, in the appellant's own case, the order passed u/s 263 for the AY 2017-18, which had directed the AO to disentitle the claim of deduction u/s 80P(2)(d) was quashed by the Hon'ble ITAT at Pune in its order in ITA No.1273/PUN/2023 A.Y. 2017-18 in its order dated 25.01.2024 on a finding that the original order passed by the AO, Circle 12, Pune for the AY 2017-18 on 14.11.2019 which allowed the claim of deduction u/s 80P(2)(d) in respect of interest earned from Co-operative Banks is neither erroneous nor prejudicial to the interests of revenue. 5.12 Therefore, the Jurisdictional Assessing Officer is directed to allow deduction 80P(2)(d) in respect of interest income earned from cooperative banks and grant relief to the appellant. Thus, the grounds of appeal filed by the assessee stands allowed." 4. The Revenue is aggrieved by the impugned order of the Ld. CIT(A) and is in appeal before the Tribunal raising the following grounds of appeal: "A. Whether in the facts and circumstances of the case, the Ld. CIT (A) has erred in allowing ....
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....of the case are not disputed. We observe that the Ld. CIT(A) has categorically recorded a finding that the assessee has earned interest income from 12 Co-operative Banks and all the banks are registered banks/societies. The Ld. Counsel for the assessee also stated at the Bar that all the 12 Co-operative Banks are registered Co-operative Banks. We observe that the impugned issue is no more res integra and is covered in favour of the assessee by various judicial precedents on the subject. The Revenue is aggrieved by the order of the Ld. CIT(A) on the ground that the Ld. CIT(A) has allowed the claim of the assessee u/s 80P(2)(d) of the Act in respect of interest income earned from Co-operative Banks during the relevant AY ignoring the decision of the Hon'ble Supreme Court in the case of Totagars Co-operative Sale Society Ltd. Vs. ITO 322 ITR 283. In our considered view, the case of Totagars Co-operative Sale Society Ltd. (supra) is distinguishable on facts and therefore not be applied in the instant case of the assessee. In that case the society was also marketing the agricultural produce of its members and hence was engaged in carrying on the business of marketing agricultural produc....
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....The withdrawal of deduction by insertion of Sub-section (4) of Sec. SOP does not change "status" of Aurangabad District Central Co-operative Bank "as a co-operative society which is contemplated in Sec. 80P(1) of the Act. We, therefore, hold that the interest received on the deposit with the Aurangabad District Central Co-operative Bank by the assessee on the deposits are squarely covered u/s. 80P(l)(d) and the interest received on deposit kept with the Aurangabad District Central Cooperative Bank is an allowable deduction. So far as the finding of the Ld. CIT(A) that the provisions of Sec. 80P(2)(a)(i), in our opinion the decision of the Hon'ble Supreme Court in the case of Totagars Cooperative Vs. ITO (supra) is against the assessee as interest received on deposits with Aurangabad District Central Co-operative Bank cannot be said to be the income derived from providing credit facilities to its members. We, accordingly, answer the ground taken by the revenue. But, finally we have confirmed order of Ld. CIT(A) giving relief to the assessee u/s. 80P(2)(d)." 2.1 Facts being similar, so following the same reasoning, the assessee is entitled to deduction u/s.80P(2)(d). In ....
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....ety Ltd, the Hon'ble Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) of the Act wherein the cooperative bank is excluded from the applicability of tax to be deducted at source. However, it appears that the interpretation made by the Hon'ble Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the cooperative societies by Finance Act,2015 by amending section 194A(3)(v) of the Act is concerned, on perusal of section 194A(3) of the Act, it appears that it provides for exemption from deducting Tax Deducted at Source ["TDS" for short] from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to deduct TDS from the interest other than interest on securities. Therefore it cannot be said that cooperative banks are excluded from the definition of cooperative societies by such an amendment. 30. Moreover, as reliance placed on the aforesaid decision for applicability of section 80P(4) of the Act in the facts of the case is also not possible to accept as section 80P(4) of....
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.... Section 56 (cci) read with (ccvii) read with the provisions of the NABARD Act, 1981. Thus, it is only these three banks which are co-operative banks which require a licence under the BR Act, 1949 to engage in banking business. If any bank does not fall within the nomenclature of the aforesaid three banks as defined under the NABARD Act, 1981, it would not be a co-operative bank within the meaning of Section 56 of BR Act, 1949 irrespective of whatever nomenclature it may have or structure it may possess or incorporated under any Act. It was further stated that if a bank has to be a state co- operative bank, there has to be a declaration made by the State Government in terms of Section 2(u) of NABARD Act, 1981. Hence, it is necessary to go into the question as to, whether, the appellant herein has been so declared as a state cooperative bank. This question would need not detain us for long as the Kerala High Court in A.P. Varghese had categorically stated that the "Kerala State Co- operative Bank" is a "state co-operative bank" as defined under the NABARD Act, 1981. Therefore, the appellant bank has not been declared as a state co- operative bank under the provisions of NABARD Act, ....
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....providing credit facilities to its members. v) Fifthly, the burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under Section 80P. vi) Sixthly, the expression "providing credit facilities to its members" does not necessarily mean agricultural credit alone. It was highlighted that the distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non- members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. vii) Seventhly, under Section 80P(1)(c), the co-operative societies must be registered either under Cooperative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). viii) Eighthly, sub-clause (d) ....
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.... considered we are of the opinion that the provisions of section 80P(2)(d) would be applicable in the facts of the case and the PCIT was not justified in invoking revisional powers under section 263 of the Act which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) of the Act which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled." 7.4. On the facts and in the circumstances of the case and legal position enumerated above, we do not find any infirmity in the order of the Ld. CIT(A). Accordingly, the grounds No. 1 and 2 raised by the Revenue are hereby dismissed. 8. In the result, the appeal of the Revenue in ITA No. 1745/PUN/2024 is dismissed. ITA No. 1747/PUN/2024, AY 2020-21 9. At the outset, both the Ld. DR and Ld. AR s....
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....eduction under u/s 80P(2)(d) on surplus fund parked with cooperative banks. B. "Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in holding that the interest income of Rs. 5,90,63,718/- the society earned from investment with other co-operative banks was allowable as deduction u/s.80P(2)(d) of the IT Act, ignoring the decision of Hon'ble Supreme Court in the case of TOTAGARS CO-OPERATIVE SALE SOCIETY LTD vs ITO 322 ITR 283 ?" C. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in concluding that the Assessment Order is not erroneous and prejudicial to the interest of Revenue without appreciating the fact that The interest income from investment earned by the assessee society is out of its surplus funds, not immediately required for its business, and that which is parked as "investment". The Assessing Officer should have examined that the assessee Society is investing its Surplus money which is not required for its activities in to Deposits and hence should have applied the Decision of Hon'ble Supreme Court in the case of TOTAGARS CO-OPERATIVE SALE SOCIETY LTD vs ITO 322 ITR 283.....