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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 ..... peal, the submissions of the appellant and the order of the assessment, the learned CIT (A) has not passed a speaking order and therefore there is gross violation of Principles Of Natural Justice. 3. On the facts and in the circumstances of the case, learned CIT (appeals) ought to have appreciated that appellant provide credit facilities only to its members on payment of interest, though appellant had received deposits from nominal members. Appellant had not provided any loans to general public or to the nominal members at any point of time. 4. On the facts and in the circumstances of the case, learned CIT (appeals) ought to have appreciated that the Associate Members and the Regular Members are all working or associated with journalism and print media. These 2 categories are considered as members of the Appellant society and they are the shareholders of the appellant society. However the Associate Members are not given voting rights, until they become the resident members. The credit facilities have been extended by the appellant both to Associate Members and the Regular Members. However, at no point of time appellant has extended credit facilities to Nominal Members, who ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is derived from the deposits made with primary agricultural credit societies and therefore the reliance placed by the learned assessing authority upon the aforesaid judgement to deny the benefit of deduction under section 80 P (2) (d) is illegal. 11. Further, the learned CIT(A) and assessing authority failed to appreciate the interest income earned from deposits made with cooperative societies which are engaged in carrying on the business of banking is held to be allowable as a deduction under section 80 P (2) (d) of the Act in the following judgements; i. Menasi Seemeya Group Gramagala Seva Sshakari Sanga Niyamitha ITA Nos. 609 86610/Bang/2014 dated 6.2.2015 ii. Shri Marikamba Mahila Cooperative Credit Society Ltd ITA No. 617/Bang/2014 dated 20.3.2015 iii. The Totgar's Cooperative Sale Society Ltd ITA Nos. 704 to 709/Bang/2015 which has been affirmed by the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs The Totgar's Cooperative Sale Society Ltd reported in 392 ITR 74W (Kar). Against this judgement the Department has filed Special Leave Petition vide SLP(c) Nos. 26314- 26321/2017 and matters are pending adjudication. In view of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged are in respect of disallowance upheld by the Ld.CIT(A) u/s. 80P2(a)(i)/(d) of the Act. 3.1 The Ld.AR at the outset submitted that, identical issue was considered by the ITAT in ITA No.490/Bang/2021 in the case of M/s. Kakkabe VSSN BAnk Ltd.vs. Pr.CIT by order dated 28.02.2022 for Assessment Year 2015-16. The Ld.AR submitted that, this Tribunal in above cited case, directed the Ld.AO to consider the dictum laid down by the Hon'ble Supreme Court in case of Mavilayi Service Co- operative Bank Ltd. v. CIT reported in 431 ITR 1, de horse the observation of the Ld.CIT, u/s 263 of the I.T.Act. 4. The Ld.DR did not raise any objection for giving a similar direction in the instant case. 5. We have heard the submissions advanced by both sides based on the material placed on record. Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT (supra) held that, when the assessee is registered as a Co-operative Society under the respective State Acts, the interest income received for providing credit facilities to its members is entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act. The relevant finding of the Hon'ble Supreme Court reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a)(i) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: "2. (n) 'Member' means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to`members' anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power or have no such liability or duty;" Considering the definition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i). 47. Further, unlike the facts in Citizen Cooperative Society Ltd. (supra), the Kerala Act expressly permits loans to non- members under section 59(2) and (3), which reads as follows: "59. Restrictions on loans.- (1) A society shall not make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cooperative Society Ltd. (supra) reads as follow:- "4. The issues that arise for consideration in this appeal by the assessee are as to whether the Revenue authorities were justified in holding that the assessee was not entitled to the benefit of deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961 (in short 'the Act') on interest income earned and under section 80P(2)(d) of the Act in respect of interest received from Co-operative institutions. The Assessing Officer (AO) denied the claim of the assessee on the ground that interest income earned by making investment of surplus funds has to be assessed under the head "Income from Other Sources" and not income from business and since interest income is not assessed as business income, the claim for deduction under section 57 of the Act cannot be allowed. In upholding the above conclusions, the CIT(A), inter alia, relied on the decision of the Hon'ble Supreme Court in the case of The Totgar's Co-operative Sales Society Ltd., Vs. ITO 322 ITR 283 (SC) wherein the Hon'ble Supreme Court held that the benefit of deduction under section 80P(2)(a)(i) of the Act is only on income which is assessable under the head "Income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch 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 201112 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 examining the facts in the light of these judgment of the Hon'ble Apex Court rendered in the case of The Totgars Co-operative Sale Society Ltd. (supra) and of Hon'ble Karnataka high Court rendered in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra)." 9.2 In the light of the above order of the Tribunal, we deem it appropriate on the facts of the instant case, to restore the issue of claim of deduction u/s 80P(2)(d) of the I.T.Act to the files of the A.O. Hence ground Nos.6 and 7 are allowed for stati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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