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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 ..... elating to deduction so claimed by the assessee, the order passed by the Assessing officer wherein he has allowed the deduction u/s 80(P)(2)(d) on interest on FDRs placed with Ajmer Central Co- operative Bank Ltd cannot be held as erroneous in view of the aforesaid discussion wherein there cannot be any dispute regarding claim of the deduction u/s 80(P)(2)(d) of the Act. In light of the same, the impugned order passed by the Pr CIT passed u/s 263 of the Act is set-aside and matter is decided in favour of the assessee. - ITA No. 90/JP/2019 - - - Dated:- 28-8-2019 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Sunil Porwal (CA) And Shri Ashok Gupta (CA) For the Revenue : Shri B. K. Gupta (CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. Pr. CIT, Ajmer dated 01.11.2018 passed u/s 263 of the Act wherein the assessee has taken the following grounds of appeal:- Under the facts circumstances of case the Ld. CIT, Ajmer has erred in confirming the issue of:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rural development bank. It was further held by the ld. Pr. CIT that the Assessing Officer has not made any enquiries or verification which should have been made during the course of assessment proceedings as far as the claim of the assessee u/s 80P(2)(d) of the Act is concerned. It was accordingly held that the assessment order was erroneous and prejudicial to the interest of the Revenue. Against the said order of the ld. Pr. CIT, Ajmer, the assessee is now in appeal before us. 5. During the course of hearing, the ld. AR submitted that the order passed by the Assessing Officer is not erroneous in nature since the law is very clear and our reference was drawn to the provisions of section 80P(2)(d) of the Act which provides that in respect of any income by way of interest or dividend derived by the Co-operative Society from its investments with any other Co- operative Society, the whole of such income shall be deducted. It was submitted that section 80P(2)(d) is very clear and only requirement is that the interest on investments should be from any other co-operative society and in the instant case, Ajmer Central Co-operative Bank Ltd. is a Co-operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee u/s 80P(2)(d) of the Act is concerned. It was accordingly submitted that where the issue has not been examined by the Assessing Officer, the order passed by the Assessing officer is erroneous and prejudicial to the interest of the Revenue. It was further submitted that the claim of the assessee u/s 80P(2)(d) of the Act is not permissible in light of the Hon ble Karnataka High Court decision in case of Pr. CIT vs. Totagars Co-operative Sale Society [2017] 83 taxmann.com 140 (Karnataka). 7. We have heard the rival contentions and perused the material available on record. The issue under consideration is whether the interest income on FDRs placed by the assessee cooperative society with Ajmer Central Cooperative Bank Ltd is eligible for deduction u/s 80P(2)(d) of the Act which reads as under: 80P. (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business and invested in the short term deposit would be assessable under the head 'income from other sources where the Co-operative society is engaged in carrying on business of banking or providing credit facilities to its members and consequently no deduction is allowable u/s 80P(2)(a)(i) of the Act. Whereas in the case before us the issue is whether a co-operative society which has derived income on investment with cooperative banks is entitled to deduction u/s 80P(2)(d). The provisions of Section 80P(2)(d) of the Act provide deduction in respect of income by way of interest or dividend on investments made with other Cooperative society. For the purposes of better proper understanding of these two provisions the relevant extract of the section are reproduced below: 80P: Deduction in respect of income of co-operative Societies. 1. Where, in the case of an assesssee 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of income which is assessable as business income and not as income from other sources. Whereas in distinction to this , the provisions of section 80(P)(2)(d) of the Act provides for deduction in respect of income of a coop society by way of interest or dividend from its investments with other coop. society if such income is included in the gross total income of the such coop society. In view these facts and circumstances we are of the considered view that the assessee is entitled to the deduction of ₹ 14,88,107/-in respect of interest received/derived by it on deposits with coop. banks and therefore the appeal of the assessee is allowed by reversing the order of the CIT(A). The AO is directly accordingly. 6.2 We further note that the Hon ble Jurisdictional High Court in the case of CIT vs. Rajasthan Rajya Sahakari Kray Vikray Sangh Ltd. (supra) by following the decision of Hon ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. Vs. ACIT, 72 taxmann.com 169 has held in as under:- 8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Section 80P(2) (d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Co-operative Bank and has also received interest from the said co- operative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Section 80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under : 80P. (2)(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. 6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by-now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the exercise of that option would come within the ambit of section 12(2) of the Indian Income-Tax Act but where the option has no connection with the carrying on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits. 9. In view of the above, the questions raised in the present appeals are answered in favour of the assessee and against the revenue. The order passed by the Tribunal is accordingly quashed and set aside. 6. Further the Hon ble Karnataka High Court in case of PCIT and Another vs. Totagars Co-operative Sale Society 392 ITR 0074 as relied upon by the Ld. AR of the assessee as held in para 7 to 11 as under:- 7. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0P(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 the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case. 6.4 Thus, the Hon ble High Court has held that the Co-operative Bank is considered to a cooperative society for the purpose of section 80P(2)(d). Accordingly, in view of the decisions as cited (supra), we do not find any error or illegality in the orders of the ld. CIT(A) to the extent of the allowing the claim of the assessee u/s 80P(2)(d) in respect of interest income from deposits/FDRs with the Co-operative Banks. 9. In the instance case, there is no dispute that Ajmer Central Cooperative Bank Ltd is a co-operative society. Therefore, in light of the aforesaid discussions, for the purposes of section 80P(2)(d) of the Act, it shall be treated as a co-operative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. 10. Now, coming to a relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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), Mumbai [2018] 94 Taxmann.com 15 had an occasion to examine similar contention wherein the latter decision of the Hon ble Karnataka High Court in case of Totagars Co-operative Sale Society (Supra), relied upon by the ld CIT DR was also considered. It was held by the Co-ordinate Bench that though 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, as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of co- operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. We see no reason to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) it can safely be gathered that income by way of interest income derived by an assessee co-operative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. 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 cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub- section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ama 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 ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the co-operative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT (A) on the judgment of the Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon'ble Apex Court in the aforesaid case was in context of Sec. 80P(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 27,48,553/-earned by the assessee on the investments held with the co-operative bank would be entitled for claim of deduction under Sec. 80P(2)(d). 12. In light of above, by virtue of provisions of Section 80P(4) of the Act, the claim of the assessee under section 80(P)(2)(d) cannot be denied to the assessee society as the deposits have been placed by the assessee co- operative society with Ajmer Central Co-operative Bank Ltd which is registered as a co-operative society and retains the same character even though it is carrying on the banking business. 13. We are therefore of the considered v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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