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TMI Blog2020 (12) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon ble Karnataka High Court in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra) still holds good. Hence, on this aspect, the issue should be restored back to the AO for a fresh decision after examining the facts in the light of these judgmentof The Totgars Co-operative Sale Society Ltd and Tumukur Merchnts Souharda Co-operative Ltd. (supra). AO will afford opportunity of being heard to the Assessee and filing appropriate evidence, if desired, by the Assessee to substantiate its case, before deciding the issue of deduction which was interest received by the Assessee from Apex Co-operative Bank and which was claimed as deduction u/s.80P(2)(a)(i) or (d). - ITA No.225/Bang/2020 - - - Dated:- 17-12-2020 - Shri N. V. Vasudevan, Vice President And Shri Chandra Poojari, Accountant Member For the Assessee : Shri. Sukesh S. Patil, CA For the Revenue : Shri. Priyadarshi Mishra, JCIT(DR)(ITAT), Bangalore ORDER PER N. V. VASUDEVAN, VICE PRESIDENT This appeal is by the assessee directed against the order dated 31.12.2019 of CIT(A)-3, Bangalore, relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccording to which the co-operative society means a co-operative society registered under the Karnataka Co-operative Societies Act, 1959. Thus according to the AO, if both the Acts are read jointly, it would be very clear that the co-operative and cooperative Societies are two different entities. The benefit of deduction can only be given to the co-operative societies and not to the co-operative. Therefore, the assessee is not even eligible to claim deduction under section 80P(2) of the Act. 4. In coming to the above conclusion, the AO placed reliance on the decisions rendered by the ITAT Bangalore Division Bench, in the case of Udaya Souharda Credit Co-operative Society Ltd. ITA No.2831/Bang/2017 order dated 17.8.2018 in which the issue whether souharda registered under the Karnataka Souharda Sahakari Act, 1997 can be regarded as co-operative society entitled to benefit of deduction u/s.80P(2)(a)(i) of the Act was remanded to the AO for fresh consideration. The CIT(A) confirmed the order of the AO. 5. Aggrieved by the order of the CIT(A), the Assessee is in appeal before the Tribunal. The learned counsel for the Assessee drew my attention to the fact that in the case of Ud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 others W.P.No.48414 of 2018 Judgment dated 16.1.2020, in which the Principal Commissioner of Income Tax, Bengaluru and the ITO Ward- 5(2)(3), Bengaluru were also parties and after considering the provisions of Sec.2(19) of the Act declared that the entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of Co-operative Society as enacted in Sec.2(19) of the Act and therefore subject to all just exceptions, are entitled to stake their claim for the benefit of Sec.80P of the Act. 8. The learned DR relied on the orders of the revenue authorities and the decision of the ITAT Bangalore Bench in the case of Udaya Souhardha Credit Co-operative Society Ltd. (supra). 9. We have considered the rival submissions. Sec.2(19) defines co-operative societies for the purpose of the Act and the same is as follows: Definitions. 2. In this Act, unless the context otherwise requires,- (19) co-operative society means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ; 10. The Hon ble Karnat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve registerd under the Karnataka Souharda Sahakari Act, 1997 (Karnataka Act 17 of 2000), and includes the Union Co-operative and the Federal Co-operative Similarly, the word 'co-operative' is defined by Sec. 2(e) of 1997 Act as follows: 2(e): Co-operative means a co-operative including a co-operative bank doing the business of banking registered or deemed to be registered under Section 5 and which has the words 'Souharda Sahakari' in its name (and for the purposes of the Banking Regulation Act, 1949 (Central Act 10 of 1949), the Reserve Bank of India Act, 1934 (Central Act 2 of 1934), the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (Central Act 47 of 1961) and the National Bank for Agriculture and Rural Development Act, 1981 (Central Act 67 of 1981), it shall be deemed to be a Co-operative Society . A close examination of these two definitions shows that they have abundant proximity with each other in terms of content and contours; it hardly needs to be stated that in both these definitions the word 'cooperative' is employed not as an adjective but as a noun; the definition of other relative concepts in the dictionary clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, we are of the view that the assessee should be allowed deduction under section 80P(2)(a)(i) of the Act. 12. We however find that out of the sum of ₹ 1,11,83,924/- claimed by the Assessee as deduction u/s.80P(2)(a)(i) of the Act, a sum of ₹ 9,47,434/- which was interest received by the Assessee from Apex Co-operative Bank was claimed as deduction u/s.80P(2)(a)(i) or (d) of the Act. u/s.80P(2)(d) of the Act, a deduction is allowed in respect of interest income earned on deposits by a co-operative society from investments with any other co-operative society. The AO relied on the decision of the Hon ble Supreme Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd., 83 taxmann.com 140 interest income had to be regarded as income from other sources . Since interest income was not income derived from the business of co-operative society, the deduction claimed by the assesee cannot be allowed. We may add that no other grounds were urged by the Revenue authorities for denying the claim of deduction on the sum of ₹ 1,11,83,924/- less the interest income of ₹ 9,47,434/- by the assessee. Hence, the claim of deduction u/s.80P(2)(a)(i) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idend income. The claim of the Assessee was that Co-operative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2) of the Act. The Hon ble Karnataka High Court followed the decision of the supreme Court in The Totgars Co-operative Sales Society Ltd. (supra) and held that interest earned from Schedule bank or co-operative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d)of the Act was not applicable to such interest income. It is thus clear that the source of funds out of which investments were made remained the same in AY 2007- 08 to 2011-12 and in AY 1991-92 to 1999-2000 decided by the Hon ble Supreme Court. Therefore whether the source of funds were Assessee s own funds or out of liability was not subject matter of the decision of the Hon ble Karnataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon ble Karnataka High Court in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra) still holds good. Hence, on this aspect, the issue should be restored back to the AO for a fresh decision after examing the facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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