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TMI Blog2022 (8) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the above said decision we restore this issue to the file of the A.O. for examining it afresh. Alternative claim that the expenses incurred to earn the interest income should be allowed u/s 57(iii) of the Act, if it claim for deduction u/s 80P(2)(a)(i) or 80P(2)(d) is not allowed - Since we have already restored the issue of claim of deduction u/s 80P(2)(d) of the Act, we restore this alternative contention also to the file of the A.O., since the claim of the assessee gets support from the decision rendered in the case of Totgars Co-operative Sales Society Ltd.Vs. ITO [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT] . - ITA No. 531/Bang/2022 & S.P. No. 32/Bang/2022 (in ITA No. 531/Bang/2022) - - - Dated:- 2-8-2022 - SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER AND SMT. BEENA PILLAI , JUDICIAL MEMBER Assessee by : Shri Ravi Shankar , Advocate Revenue by : Smt. Priyadarshini Baseganni , Addl. CIT ( DR ) ORDER PER BEENA PILLAI , JUDICIAL MEMBER Present appeal by the assessee has been filed by assessee against the order dated 28/04/2022 u/s. 250 passed by the National Faceless Appeal Centre (NFAC), Delhi relating to Assessment Year 2017-18 on following gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompulsion and therefore the said deposits are not made out of the surplus. Accordingly the interest income earned from the statutory deposits ought to be allowed as a deduction under section 80P (2)(d) of the Act. 7. The learned CIT(A) erred in confirming the order of the AO by not considering the precedents which held that the interest earned by credit co-operative societies on deposits with banks is an income attributable to business and hence eligible for deduction under Section 80 P(2)(a)(i) of the Act. 8. The reliance placed upon by the learned CIT(A) and the learned assessing authority on the judgement of the Hon'ble Karnataka High Court in the case of Pr. CIT Vs Totgar Co-operative Sale Society reported in 325 ITR 611 (Kar) is wholly misplaced and improper. 9. The learned CIT(A) and assessing authority did not appreciate that the Hon'ble High Court in Pr. CIT Vs Totgar Co-operative Sale Society reported in 325 ITR 611 (Kar) had no occasion to consider the deductions allowable under section 80 P (2) (d) vis- -vis the statutory deposits but only considered the investment of surplus amounts for a limited period. 10. The learned CIT(A) and assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed by the learned CIT (Appeals) are arbitrary excessive and ought to be reduced substantially 14. Levy of interest of Rs. 5,90,604/- under sections 234B and 234 C on the alleged ground that appellant has failed to pay the advance tax and has deferred the payment of advance tax is wholly arbitrary and unjustified. 15. For these and other grounds that may be urged at the time of hearing, appellant prays that the appeal be allowed, to meet the ends of justice and equity. 2. Brief facts of the case are as under: 2.1 The assessee is a cooperative bank. For the assessment year 2017-18, the return of income was filed on 31/10/2017 declaring total income of Rs. 8,45,180/- after claiming deduction of Rs.63,29,211/-. The assessment u/s 143(3) of the I.T.Act was completed vide order dated 16/12/2019 disallowing the deductions claimed by the assessee u/s. 80P(2)(a)(i) / 80P(2)(d) of the Act. 2.2 Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A). 2.3 The Ld.CIT(A) upheld the disallowance as under: a) Disallowance u/s. 80P(2)(a)(i) Rs.54,84,033/- b) Disallowance u/s. 80P(2)(d) Rs.14,22,213/- by relying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead as a proviso, which proviso now specifically excludes cooperative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to nonmembers, profits attributable to such loans obviously cannot be deducted. 46. It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) considered, `nominal members' are 'members' as defined under the Kerala Act. This Court in U.P. Cooperative Cane Unions' Federation Ltd., Lucknow v. Commissioner of Income Tax, Lucknow-I (1997) 11 SCC 287 referred to section 80P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety to nonmembers is not illegal, unlike the facts in Citizen Cooperative Society Ltd. (supra). 48. Resultantly, the impugned Full Bench judgment is set aside. The appeals and all pending applications are disposed of accordingly. These appeals are directed to be placed before appropriate benches of the Kerala High Court for disposal on merits in the light of this judgment. 6. In view of the recent judgment of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT (supra), we remit the issues raised in this appeal to the file of Ld.AO. The Ld.AO is directed to examine the deduction u/s 80P(2)(a)(i) of the I.T.Act in the light of the dictum laid down by the Hon'ble Supreme Court in the case of Mavilayi Service Co- operative Bank Ltd. v. CIT (supra). 7. The Ld A.R also submitted that the issue of deduction u/s 80P(2)(d) is being restored to the file of A.O. by the Bangalore bench of Tribunal with certain directions and accordingly prayed that this issue may be restored to the file of the A.O for examining afresh by considering all the contentions of the assessee. 8. We heard Ld. D.R. and perused the record. We notice that an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative Sale Society Ltd., 395 ITR 611 (Karn.). We have carefully gone through the said judgment. The facts of the case before the Hon ble Karnataka High Court was that the Hon ble Court was considering a case relating to Assessment Years 2007-08 to 2011-12. In case decided by the Hon ble Supreme Court in the case of the very same assessee, the Assessment Years involved was Assessment Years 1991-92 to 1999-2000. The nature of interest income for all the Assessment Years was identical. The bone of contention of the Assessee in AY 2007-08 to 2011-12 was that the deduction under Section 80P(2) of the Act is claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under Section 80P(2)(a) of the Act which was the claim in AY 1991-92 to 1999- 2000. The reason given by the Assessee was that in AY 2007-08 to 2011-12 investments and deposits after the Supreme Court's decision against the assessee Totgar's Cooperative Sale Society Ltd. (supra), were shifted from Schedule Banks to Cooperative Bank. U/s.80P(2)(d) of the Act, income by way of interest or dividends derived by a Co-operative Society from its investments with any other Co-operative Society is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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