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TMI Blog2022 (6) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Ltd. (supra), we are of the view that the assessee is entitled to claim deduction u/s. 80P(2)(d) of the Act in respect of interest received from Co-operative bank at Rs. 68,47,885/- derived from The Tamilnadu Industrial Cooperative Bank Ltd. (TAICO Bank) which is also a co-operative society. Accordingly, the grounds of appeal are allowed. - ITA No. 900/CHNY/2020 - - - Dated:- 8-6-2022 - SHRI MAHAVIR SINGH , VICE PRESIDENT AND SHRI GIRISH AGRAWAL , ACCOUNTANT MEMBER Appellant by : None Respondent by : Shri. AR V Sreenivasan, Addl. CIT ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER : This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals), Puducherry in ITA No. 439/CIT(A)-PDY/2018-19 dated 27.08.2020 against the assessment order passed by ITO, Ward-2, Cuddalore u/s. 143(3) of the Income-tax Act, 1961 (herein after referred to as the Act ) dated 27.12.2018. 2. The grounds of appeal taken by the assessee are reproduced as here under: 1. The order of the Learned Commissioner of Income Tax (Appeals) is contrary to the law, facts and circumstances of the case. 2. For that the Learned Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the hearing of the appeal, it is prayed that this Hon'ble Tribunal may be pleased to delete the disallowance of deduction claimed u/s. 80P(2)(d) and/or pass such other orders as this Hon'ble Tribunal may deem fit. 3. Before us none appeared on behalf of the assessee and Department was represented by Mr. AR V Sreenivasan, Addl. CIT. However, there is a written submission dated 26.05.2022 placed on record, filed by the assessee. Considering the written submissions placed on record by the assessee and by taking assistance from the ld. SR. DR, we are inclined to adjudicate upon the matter. 4. Brief facts of the case are that the assessee society, NLC Industrial Co-operative society, which otherwise is called as NLC Indcoserve is registered as a co-operative society under Tamil Nadu Co-operative Act, 1983. The assessee filed its return of income on 19.07.2017 reporting nil total income after claiming deduction under Chapter VI-A of Rs. 5,51,96,055/-. The assessee had claimed deduction of Rs. 4,83,48,171/- u/s. 80P(2)(a)(vi) of the Act in respect of income earned by the assessee from its activities and further deduction of Rs. 68,47,885/- u/s. 80P(2)(d) of the Act in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Commissioner and Director of Industries and Commerce and other types of Co-operative societies other than Industrial Co-operative with the prior permission of the Industrial Commissioner and Director of Industries and Commerce. 6. While disposing the appeal, ld. CIT(A) did not find favour with the submissions made by the assessee and proceeded for the enhancement of making disallowance of Rs. 68,47,885/- claimed as deduction u/s. 80P(2)(d) of the Act by the assessee. The findings given by the Ld. CIT(A) is reproduced as under: 5.2.1 Second line of argument is that TAICO Bank is not a Cooperative Bank and that it is a Co-operative Society only and that the decision in case of Totgar Co-operative Sale Society (supra) is not applicable in case of assessee. The contention of assessee that TAICO Bank is a Co-operative Society is not contested. But a Co-operative Society can also be Co-operative Bank. On examination of official website of TAICO Bank, it is seen that it was engaged mainly in giving loans and cash credits facilities to industrial Co-operative Societies. But in the past ten years, it had diversified into issuing of loans and advances like jewel loans, ssi loan, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 80P(2)(d) of the Act, it is noted that it uses expression any income by way of interest or dividend for the purpose of granting benefit of deduction under the said section. In this context what is relevant is that the income should be by way of interest/dividend and that the same should have been derived by Co-operative society from investment in another Co-operative society. The fact that such interest income is in the nature of 'profit and gains' or income from other sources is not relevant for the purpose of granting benefit of deduction u/s. 80P(2)(d) of the Act. 9.1. Provisions of section 80P(4) of the Act relevant to the issue in hand are reproduced for ease of reference: 80P(1) ...... (2)........ (3) ...... (4) The provisions of this section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.-For the purposes of this sub-section,- (a) co-operative bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances we are of the considered view that the assessee is entitled to the deduction of Rs. 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 directed accordingly. (Emphasis supplied) 11.1. After examining the above said judgments and taking into account the insertion of 80P(4) vide the Finance Act, 2006, the Mumbai Bench of the Tribunal in the case of Kaliandas Udyog Bhavan Premises vs. ITO: ITA No. 6547/Mum/2017, dated 24.04.2018, while deciding the issue in favour of the assessee, held as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive 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 cooperative societies; We are of the considered view, 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, but however, as a co-operative bank continues to be a co-operative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest income derived by a co-operative society from its investments held with a cooperative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) r.w. Sec. 80P(4) had adjudicated the issue before them. We are afraid that the reliance placed by the ld. D.R on the aforesaid order of the Tribunal being distinguishable on facts, thus, would be of no assistance for adjudication of the issue before us. Still further, the reliance placed by the Ld. D.R on the order of the ITAT 'SMC' Bench, Mumbai in the case of Shri Sai Datta Co-operative Credit Society Ltd. Vs. ITO (ITA No. 2379/Mum/2015, dated 15.01.2016, would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination, That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Section 80P(2)(d). We however find 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-jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs co-operative Sale Society [2017] 392 ITR 74 (Karnataka) wherein it was held as under: 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 deductible 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 Cooperative 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 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. 11.4. The judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Bank Ltd. [2009] 309 ITR 106 (HP), prayed that the claim of deduction under section 80P(2)(d) should also be allowed. 7. On the other hand, the ld. DR relied on the orders of authorities below. 8. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The case of the assessee is that the income by way of interest and dividend earned by the assessee society are from investments made in Salem District Central Cooperative Bank, which is also admittedly, a co-operative society and are allowable deduction. The Assessing Officer has held that the assessee has made only with Salem District Central Cooperative Bank and therefore, the income from investment with the Bank is not entitled for deduction under section 80P(2)(d) of the Act. On appeal, the ld. CIT(Appeals confirmed the order passed by the ld. CIT(Appeals). We find that in the case of CIT v. Kangra Co-operative Bank Ltd. [2009] 309 ITR 106 (HP), the Hon'ble Himachal Pradesh High Court has considered section 80P(2)(d) of the Act. The interest earned by the assessee co-operative bank on fixed deposits with Himachal Pradesh State Co-operative Bank in compliance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that inadvertently the section referred is 80P(2)(a)(vi) of the Act, though the question of law answered is in respect of question no. 4 (supra) which is in respect of section 80P(2)(d) of the Act. 13. In conclusion, there is a judicial precedence by the Hon'ble High Court of Madras carrying force of binding nature covering the case of the assessee in its favour on the issue of claim of deduction u/s. 80P(2)(d) of the Act, affirming the decision of the coordinate bench of ITAT, Chennai. Reliance placed by the Ld. CIT(A) on the decision of Hon'ble High Court of Karnataka in the case of PCIT vs Totgars Cooperative Sale Society (supra) is not a jurisdictional court and possibly the judgment of Hon'ble Jurisdictional High Court of Madras (supra) was not placed before him. Considering the aspect of judicial discipline and hierarchy, respectfully following the decision of the Hon'ble Jurisdictional High Court of Madras in the case of CIT vs The Salem Agricultural Producers Co-operative Marketing Society Ltd. (supra), we are of the view that the assessee is entitled to claim deduction u/s. 80P(2)(d) of the Act in respect of interest received from Co-operative bank at ..... 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