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TMI Blog2022 (10) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... tive society from its investment with any other co-operative society. Section 80P(2)(d) provides additional benefit of deduction under section 80P for those co-operative societies, which has surplus funds even unrelated to its main business activity, which are invested with other co-operative societies. Thus, Clause (d) of section 80P applies to all co-operative societies, whether or not, their main businesses banking and credit facilities to the members. Therefore, in our view, the section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. Thus we hold that the assessee is eligible for deduction under section 80P(2)(d) in respect of interest earned from deposits made on other Co-operative banks. However, 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 Act, to the files of the Ld.AO to allow the claim as indicated herein above, by granting proper opportunity of being heard to the assessee. We direct the Ld.AO to allow the expenditure incurred while computing income under the head, Income from Other Sources , in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by assessee against three separate orders all dated 10/05/2022 passed by National Faceless Assessment Centre, Delhi for A.Ys. 2015-16, 2017-18 and 2019- 20. 2. Brief facts of the case are as under: Assessment Year 2015-16: 2.1 The assessee is a cooperative credit society engaged in providing credit facilities to its members, filed its return of income for the assessment year under consideration on 25/09/2015 declaring income of NIL after claiming Chapter VIA deduction u/s 80P(2)(a)(i) of the Act of Rs. 60,70,430/-. The Ld.AO after considering the submissions furnished by the assessee completed the assessment by disallowing the deduction claimed u/s. 80P. 2.2 Aggrieved by the order of the Ld.AO, the assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) observed and held as under: 5.4 However I find that the Appellant has earned a total interest income of Rs. 21,56,028/- on its investment with various Banks. In my view this is not an income which is eligible for deduction u/s. 80P(2)(a) or 80P(2)(d), since the said banks are neither members of the assessee society nor are they co-op societies/banks Moreover, the said interest income has arisen from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed 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 Ld.CIT(A), inter alia, relied on the decision of the Hon'ble Supreme Court in the case of The Totgar's Cooperative Sales Society Ltd., Vs. ITO reported in 322 ITR 283, wherein, 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 Business . Interest earned on investment of surplus funds not immediately required in short term deposits and securities by a Co-operative Society providing credit facilities to members or marketing agricultural produce to members is not business income but income from other sources and the society is not entitled to special deduction. 2.7. While Ld.AR relied on the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Credit Cooperative Ltd. , reported in 230 taxman 309 . We have carefully gone through the said judgment. 2.8. We have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tumukur Merchants Souharda Credit Co-operative Ltd. , reported in 230 taxman 309. 2.11. Similar is the view taken by coordinate bench of this Tribunal in case of Thannirupantha Primary Agricultural Credit Co-operative Society Ltd vs.ITO in ITA no.276-277/Bang/2020 by order dated 30/07/2021 , wherein it was held as under: 9.1 As regards the claim of deduction u/s 80P(2)(d) of the I.T.Act, the Bangalore Bench of the Tribunal in the case of M/s.The Jayanagar Cooperative Society Ltd. (supra), on identical facts, had restored the issue to the files of the A.O. for de novo consideration. The narration of facts, contentions and the findings of the Tribunal in the case of M/s.The Jayanagar Co-operative 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 Cooperative institutions. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), 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 to deduction of the whole of such interest or dividend 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 cooperative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-clause (ii) of clause (a) and clause (c) of section 30, section 31 and [sub-sections (1) [***] and (2)] of section 32 and subject to the provisions of [section 38]; [(iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or [fifteen] thousand rupees, whichever is less. Explanation.-For the purposes of this clause, family pension means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death ;] (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income; [(iv) in the case of income of the nature referred to in clause (viii) of subsection (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.] 2.14. We have heard the submissions advanced by both sides on this aspect. We direct the Ld.AO to allow the expenditure incurred while computing income under the head, Income from Other Sources , in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat all details regarding the depositors are available with the assessee. On the contrary, the Ld.DR submitted that the case deposited during the demonetisation period has not been verified by the Ld.AO in accordance with the CBDT Circular wherein an instruction has been issued on 21/02/2017, 03/03/2017, 15/11/2017 and 09/08/2019. He submitted that as the verification of the cash deposits is not in accordance with the directions of the CBDT. 4.1 We have perused the submissions advanced by both sides in the light of records placed before us. We are of the opinion that there is a violation of natural justice in respect of not granting sufficient time to the assessee for representing its case before the Ld.PCIT. However, considering the fact that in any event, the issue would have to be remanded to the Ld.AO in order to verify the cash deposit of Rs.1,23,80,000/- in specified bank notes during the demonetisation period in its bank account in accordance with various instructions referred to by the Ld.DR hereinabove. 4.2 Admittedly, the assessee had accepted the SBNs which were no longer a legal tender and were to be explained in accordance with the relevant circular mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim. Accordingly Ground nos. 6-8 stands partly allowed for statistical purposes. Ground no. 9 is consequential in nature and do not require adjudication. Ground no. 10 is general in nature. Accordingly the appeal filed by assessee stands allowed for statistical purposes. Assessment Year 2019-20 5. For the assessment year 2019-20, the return of income was filed on 28/10/2019 declaring total income of Rs.6,09,700/- after claiming deduction of Rs.1,03,11,674/-. The intimation u/s 143(1) of the I.T. Act was passed on dated 02/12/2020 by the CPC disallowing the deductions claimed by the assessee u/s. 80P(2)(a)(i) / 80P(2)(d) of the Act. 5.1 Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A). 5.2 The Ld.CIT(A) directed the Ld.AO to verify the claim of the assessee of Rs.1,03,11,674/-. 5.3 Aggrieved by the order of the Ld.CIT(A), the assessee has preferred this appeal before this Tribunal . ..... X X X X Extracts X X X X X X X X Extracts X X X X
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