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TMI Blog2024 (1) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... iming the deduction under section 80P(2)(a) of the Act as alleged for the last many years, which has also been allowed. The Assessee during the year under consideration, claimed the deduction of Rs. 35,10,345/- under section 80P(2)(a)(i) of the Act, which was examined and therefore, a show-cause notice dated 22.12.2019 was issued to the Assessee "as to why the said deduction should not be disallowed and added to the total income of Assessee". [In response the Assessee did not prefer to file any reply, therefore, the AO by presuming that the Assessee do not have any explanation for the same and analyzing various provisions of law as applicable to the case observed that in the present case, it is seen that the Assessee fulfils all the three conditions laid down under section 56(c)(ccv) of part-V of the Banking Regulation Act, 1949 and therefore, falls in the category of the Primary Co-operative Bank. The primary objective of the Assessee is to engage in carrying on the business of banking or providing credit facilities to its members as mentioned in its letter submitted during the Assessment proceedings and its Tax Audit Report. The AO ultimately disallowed the deduction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee earned income to the tune of Rs. 35,10,350/- which consists of interest on investment with Co-operative Bank to the tune of Rs. 18,09,761/-. The bifurcation of Rs. 35,10,350/- is as under: (i) Deduction under section 80P(2)(a) Rs. 17,00,569/- (ii) Deduction under section 80P(2)(d) Rs. 18,09,781/- Though the Ld. Commissioner by taking refuge of the decision of the Hon'ble Apex Court in the case of Mavilayi Service Co-operative Bank Ltd. (2021) 123 taxmann.com 161 (SC) has not treated the Assessee as Co-operative Bank within the meaning of section 80P(4) of the Act and therefore, allowed the claim of deduction of Rs. 17,00,569/- under section 80P(2)(a)(i), however with regard to the earning interest income on investment made with the Co-operative Bank to the tune of Rs. 18,09,761/-, by relying upon various judgments and holding "that after insertion of section 80P(4) in the Act, deduction under section 80P(2)(d) has been limited to interest/dividend received from other co-operative Society only and not from Co-operative Bank (other than PACS and Primary Co-operative Agricultural and Rural Development Bank). Therefore, it is clear that Co-operative Bank is an Urban Commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the income referred to in sub-section (2) to section 80P shall be allowed as a deduction to an assessee being a Co-operative Society. Further, section 80P(2)(d) of the Act, reads as under: "80P. Deduction in respect of income of co-operative societies. (1) ** ** (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) to (c)** ** ** (d) in respect of 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;" 10. Thus, for the purpose of provisions of section 80P(2)(d) of the Act, two conditions are required to be cumulatively satisfied- (i) income by way of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o merits in the aforesaid reasoning adopted by the AO and upheld by the learned CIT(A) in denying deduction under section 80P(2)(d) of the Act to the assessee. 12. As regards the claim of deduction under section 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co- operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d) of the Act. In Kaliandas Udyag Bhavan Premises Co-op Society Ltd. v. ITO [2018] 94 taxmann.com 15 (Mum.)/[ITA No. 6547/Mum./2017, dated 25-4-2018], while dealing with the provisions of section 80P(2)(d) vis-à-vis section 80P(4) of the Act, the coordinate bench of the Tribunal observed as under: 7....... Thus, from a perusal of the aforesaid sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee co-operative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. We may herein obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2017] 83 taxmann.com 140/395 ITR 611, wherein it was held that interest earned by the assessee, a Co-operative Society. from surplus deposits kept with a Co-operative Bank, was not eligible for deduction under section 80P(210) of the Act. We find that in an earlier decision the Hon'ble Karnataka High Court in Pr. CT v. Totagars Co-operative Sale Society (2017) 78 taxmann.com 169/392 ITR 74 held that according to section 80P(2)(d) of the Act, the amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Thus, there are divergent views of the same Hon'ble High Court on the issue of eligibility of deduction under section 80P(2)(d) of the Act in respect of interest earned from Co-operative Bank. No decision of the Hon'ble jurisdictional High Court was brought to our notice on this aspect. We have to, with our highest respect to both the views of the Hon'ble High Court, adopt an objective criterion for deciding as to which decision of the Hon'ble High Court should be followed by us. We find guidance from the judgment of the Hon'ble Supreme Court in CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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