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TMI Blog2019 (11) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... Milk Products e.g. Milk Ghee, Milk Powder etc. It filed its return of income on 11.10.2014 declaring total income of Rs. 1,36,14,620/- wherein it claimed deduction u/s 80P amounting to Rs. 29,01,553/-. Thereafter, the Assessing Officer passed the assessment order u/s 143(3) dated 27.12.2016 wherein the returned income was accepted. 3. The ld. Pr. CIT, Ajmer subsequently examined the assessment records and it was noticed by him that out of total deduction of Rs. 29,01,553/- claimed by the assessee u/s 80P of the Act, an amount of Rs. 28,01,553/- relates to interest received from Ajmer Central Co-operative Bank Ltd. As per ld. Pr. CIT, the assessee was not eligible for deduction as it has not satisfied the conditions laid down u/s 80P(2)(d) of the Act as Ajmer Co-operative Bank Ltd. is not a Co- operative Society as provided u/s 80P(2)(d) of the Act. Accordingly, a show cause was issued to the assessee on 18.09.2018 and after considering the submissions of the assessee, it was held by the ld. Pr. CIT, Ajmer that the assessment order passed u/s 143(3) dated 27.12.2016 is erroneous and prejudicial to the interest of the Revenue and matter was set aside to the file of the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench decision in case of Bhilwara Zila Dugdh Utpadak Sahakari Sangh Ltd., Bhilwara in ITA No. 437/Jodh/2017 dated 31.10.2018. It was accordingly submitted that once it is a settled law and there is no debate, the view taken by the Assessing Officer cannot be considered as erroneous or prejudicial to the interest of the Revenue. Therefore, the ld. Pr. CIT has erred in exercising his jurisdiction u/s 263 of the Act. It was further submitted that the principle of consistency should be followed and the Commissioner cannot take recourse to revisional powers u/s 263 on fundamental aspects of a transaction on which a view had been taken and was accepted by Revenue for several preceding years as held by the Hon'ble Delhi High Court in case of CIT vs. Escorts Ltd. (2011) 198 Taxman 324/9 taxmann.com 22 (Delhi). It was further submitted that even where two views are possible, the revision is not permissible and the reliance was placed on the Hon'ble Supreme Court decision in case of CIT vs. Greenworld Corporation (2009) 181 taxman 111(SC) and decision of the Hon'ble Karnataka High Court in case of CIT vs. Gokuldas Exports (2011) 333 ITR 214 (Kar.). 6. Per contra, the ld. Pr CIT/DR has vehe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest or dividend derived by the Cooperative Society from its investment with any other cooperative society, the whole of such income is allowable for deduction u/s 80P(1). Therefore, there is no condition for the assessee society to engaged in the activity of provide credits to the Members or banking business for availing the deduction u/s 80P(2)(d) read with section 80P(1) of the Act. As regards the cooperative bank shall be treated as cooperative societies for the purpose of the interest income on investment in such cooperative bank u/s 80P(2)(d) the Mumbai Bench of this Tribunal in case of Lands End Co-operative Housing Society Ltd. Vs. ITO(supra), after considering the decision of the Hon'ble Supreme Court in case of Totagar's Co-operative Sale Society Ltd. Vs. ITO (supra) has considered and decided this issue in para 8.3 as under:- "8.3 We have heard the rival submissions and perused the material on record. We find that the CIT(A) enhanced the income of the assessee by rejecting the deduction u/s 80P(2)(d) of the Act of Rs. 14,88,107/- being interest on investment with other Coop. banks by following the decision in the case of Sandra Samruddihi Co- operative Housing Soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business whereas latter provides for deduction in respect of income by way interest and dividend derived by assessee from its investments with other cooperative society. Thus it is amply clear that a cooperative society can only avail deduction u/s 80P(2)(d)(i) in respect of its income assessable as business income and not as income from other sources if it carries on business of the banking or providing credit facilities to its members and has income assessable under the head business whereas for claiming u/s 80P(2)(d) it must have income of interest and dividend on investments with other Co-operative society may or may not be engaged in the banking for providing credit facilities to its members and the head under which the income is assessable is not material for the claim of deduction under this section. Now will evaluate the assessee's case in the light of the decision of the Hon'ble Supreme court. The Honble Supreme Court in the case of Totagar's Co- operative Sale Society Ltd.(Supra) held that a society has surplus funds which are invested in short term deposits where the society is engaged in the business of banking or providing credit faculties to its members in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, and not from the interest received from the bank on the fixed deposits. The assessees were therefore right in the submissions which they made before the Commissioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5.' 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.' 8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co-Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'. 10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. 11. The learned counsel has relied on the case of Totgars Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aroda 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 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 co-operative 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 society 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." 12. In another case, the Coordinate Bench in case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs Income-tax Officer-21(2)(1), M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Bank, therefore, the interest income earned on such investments would not be entitled for claim of deduction under Sec. 80P(2)(d) of the Act. 7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further, we may herein reproduce the relevant extract of the said statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. "80P(2)(d) (1) Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums 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) to (c)** ** ** (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income;" Thus, from a perusal of the aforesaid Sec. 80P(2)(d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with a co- operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. (supra) (ii) Sea Green Cooperative Housing and Society Ltd. (supra) (iii) Marwanjee Cama Park Cooperative Housing Society Ltd. (supra). We further find that the Hon'ble High Court of Karnataka in the case of Totagars Cooperative Sale Society(supra) and Hon'ble High Court of Gujarat in the case of State Bank Of India (supra), had also held that the interest income earned by the assessee on its investments held with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bom), where there is a conflict between the decisions of non-jurisdictional High Court's, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Totagars Cooperative Sale Society(supra) and Hon'ble High Court of Gujarat in the case of State Bank Of India (supra), wherein it was observed that the interest income earned by a co-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. 9. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower authorities that the assessee would not be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income on the investments made with the co-operative bank. We thus set aside the order of the lower authorities and conclude that the interest income of Rs. 27,48,553/-earned by the assessee on the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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