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TMI Blog2023 (8) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... mber The present appeal is filed by the assessee against the order dated 31/3/2023 passed by the NFAC, Delhi for the assessment year 2017-18 on following ground of appeal:- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. Under the facts and circumstances of the case, the authorities below failed to appreciate that the surplus funds which is not immediately required for business activities is invested and the interest on such deposits is le for deduction u/s 80P(2)(a)(i) of the Act 3. The authorities below erred in not appreciating the fact that interest earned on investments made with co-operative banks are eligible for deduction u/s 80P(2)(d) of the Act. 4. Without prejudice, if the interest earned on investments with banks is considered as income from other sources, then the Ld.AO ought to have allowed deduction towards proportionate expenditure as held by the Hon'ble Apex Court in the case of Totagars Co-operative Sale Society 5. The impugned orders passed by the authorities are illegal and are liable to be set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Totgar Cooperative Sales Society Vs. ITO reported in (2010) 188 Taxmann.com 282 and decision of Hon ble Karnataka High Court in the case of PCIT Vs. Totgar Cooperative Sales Society reported in (2017) 83 Taxmanno.com 140 to upheld the addition made by the Ld.AO. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before this Tribunal. 4.1 The Ld.AR submitted that in the instant case, the assessee did not carry on business of bank. It is submitted that it carried on the business of providing credit facilities to its members. The Ld.AR submitted that assessee is a co-operative society and carrying on the business of providing credit facility to members. They also accept deposits from members. During the AY 2017-18 they have carried on the said business with their members only and have not done any business with non members. 4.2 It is submitted that the assessee is an employees cooperative society and the members are employees of Bharat Electronics Ltd., only and no outsiders are admitted as members. The Ld.AR further submitted that Clause 7(2) and 7(3) of the bye-laws clearly restricts the memberships and no outsiders except the permanent em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee from cooperative banks/banks during the year under consideration and that has been listed herein above in the preceding paragraphs. In the recent decision by the coordinate bench of this Tribunal in the case of M/s University of Agricultural Employees House Building Coop Society Ltd., in ITA No. 319/Bang/2023 for the assessment year 2016-17 vide order dated 18/05/2023 observed and held as under:- 4.1 the claim of deduction u/s 80P(2)(d) of the Act, the has been considered by the coordinate bench of this Tribunal in the case of M/s. The Jayanagar Cooperative Society Ltd. v. ITO in ITA No. 3254/Bang/2018 by order dated 23.07.2019, on similar facts, had restored the matter to the files of the Ld.AO for de novo consideration. The Ld.AR 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 A 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. 5. This Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income. 2.9. On a plain reading of section 80P(2)(d), there is no such stipulation or prerequisite as to the nature of the funds. We also find that Section 80P(2)(d) of the Act, allows whole deduction of an income by way of interest or dividends derived by the co-operative 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 cooperative 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 cooperative society from any investment with a co-operative society. 2.10. We have also considered the case of Totgars Cooperative Sale Society Ltd., reported in 322 ITR 283 relied upon by the Ld.DR, and find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety 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. 5. While learned AR relied on the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Credit Co-operative Ltd., 230 taxman 309 (Karn), the DR relied on a subsequent decision of the Hon'ble Karnataka High Page Court in the case of PCIT Vs. Totgars Co- operative 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 M/s. Thannirupantha Primary Agri.Cr.Coop.So.Ltd. the deduction under Section 80P(2) of the Act is claimed by the respondent asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for deduction under section 80P(2)(d) in respect of interest earned from deposits made on other Cooperative 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. 2.13. The Ld.AR also took the plea that, the expenditure incurred in earning of interest from the commercial banks be allowed while computing the taxable income. The provision of Section 57 reads as under: Section 57: The income chargeable under the head Income from other sources shall be computed after making the following deductions, namely: (i) in the case of [dividends, 94[other than dividends referred to in section 115-O,]] [or interest on securities], any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend [or interest] on behalf of the assessee; [(ia) in the case of income of the nature referred to in sub-clause (x) of clause (24) of section 2 which is chargeable to income-tax under the head Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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