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TMI Blog2024 (1) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80P(2)(d) of the Act, a show-cause was issued as to why claim of deduction in respect of interest income on deposits placed with HDFC Bank, ICICI Bank, AXIS Bank should not be disallowed and thereafter, after considering the submissions of the case, has returned a finding that such interest income has not been earned from any other Cooperative society but from Scheduled commercial banks and the deduction so claimed from Scheduled commercial banks was denied and while doing so, the AO has allowed the claim of deduction in respect of Yamuna Nagar Central Cooperative Bank Ltd, being the deduction in respect of interest income on deposits with any other Co-operative Society. We therefore find that the AO has duly examined the facts of the present case and has allowed the deduction in respect of interest income received from the Yamuna Nagar Central Co-op Bank Ltd. as being in compliance with the provisions of Section 80P(2)(d) of the Act. Where the facts in the present case and legal position is not in dispute, we therefore don t understand how the ld PCIT in the same breath hold that the assessee shall not be eligible for claim of deduction under section 80P(2)(d) of the Act. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns placed on record in proceedings before her in the correct perspective which is arbitrary and unjustified. 5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 6. That the order of Principal Commissioner of Income tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law. 3. Briefly the facts of the case are that the assessee is a cooperative society and during the year under consideration, it derives income from marketing of agriculture produce, service charges for purchase of wheat and paddy for HAFED, income from supplying weedicides and fertilizer to its members, interest income on FDRs, dividend income from KHRIBCO, IFFCO etc. and rent from godowns etc. It filed its return of income under section 139(1) declaring NIL income after claiming deduction under Section 80(P) amounting to Rs. 77,67,945/- which include deduction under section 80P(2)(d) amounting to Rs. 50,25,234/-/. The case of the assessee was selected for limited scrutiny through CASS to verify claim of large deduction under Chapter VIA after calling for the necessary information and documentation. 4. The assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dt. 07/12/2020 issued under section 142(1) and the response filed by the assessee dt. 20/12/2020, thereafter another notice dt. 28/01/2021 and response submitted by the assessee dt. 12/02/2021 and thereafter the showcause dt. 09/03/2021 and reply to the show cause dt. 11/03/2021. It was submitted that after thorough examination of the factual position and considering the decisions of the Hon ble Supreme Court in case of Totgars Co-operative Sale Society Ltd.(Supra) and Mavilayi Service Co-operative Bank Ltd. (Supra) as well as Hon ble Punjab and Haryana High Court CIT Vs. Punjab State Cooperative Federation of Housing Building Societies Ltd (Supra), the AO has restricted the claim of deduction under Section 80P(2)(d) of the Act in respect of interest income received from the Schedule Commercial Banks and at the same time, deduction in respect of interest income received from the Yamuna Nagar Central Co-op Bank Ltd. was duly allowed as the same being in compliance with the provisions of Section 80P(2)(d) of the Act and the aforesaid decisions. 9. It was accordingly submitted that it is incorrect on the part of the Ld. Pr. CIT to hold that the AO has not examined the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted in 138 Taxmann.com 476. 14. Per contra, the Ld. CIT/DR has relied on the findings of the Ld. Pr. CIT and we deem it appropriate to reproduce the said findings which read as under: (ii) I have considered the facts of the case. It is true that as per Section 80P(2)(d), interest income derived by a co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income. Further that with the insertion of sub-section (4) of sec. 80P, vide the Finance Act, 2006 with effect from 1-4-2007, the provisions of sec. 80P are no more applicable in the case of a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. However, the aforesaid amendment does not jeopardise the claim of deduction of a co-operative society under sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a cooperative bank. (iii) However, it is also trite law that each case needs to be decided on its own facts. Further that the ratio decidendi or the principle that a case establishes needs to be followed. The issue before Hon'ble Supreme Court in Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative Sales Society Ltd. 322 ITR 283 (SC) 2010, and of the jurisdictional Hon'ble P H High Court in Commissioner of Income tax II Chandigarh Vs. Punjab State Co-operative Federation of Housing Building Society Ltd., correctly and completely. (iv) The assessment order passed in the case of the assessee is considered to be erroneous in so far as it is prejudicial to the interest of revenue in terms of clause (d) of the Explanation 2 to section 263 of the Income Tax Act, 1961 as the order has not been passed in accordance with the ratio of the decision of jurisdictional Hon'ble P H High Court in Commissioner of Income tax II Chandigarh Vs. Punjab State Co-operative Federation of Housing Building Society Ltd. which is adverse to the assesse. In this case, Hon'ble High court reiterated the ratio of the decision of Hon'ble Supreme Court in Pr.CIT Vs. the Totgars Co-operative Sales Society Ltd 9 (322 ITR 283 (SC) 2010) holding that interest on bank deposits or govt, securities derived by a co-operative society could not be attributed to the activities of the society of providing various facilities to its members. After duly adverting to the decision of Hon'ble Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 17. The term co-operative society as defined under section 2(19) of the Act (19) means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies. 18. As per the ld PCIT own findings, as per Section 80P(2)(d), interest income derived by a co-operative society from its investments held with any other cooperative society shall be deducted in computing its total income. Further, she has referred to the amendment by way of insertion of sub-section (4) of sec. 80P, vide the Finance Act, 2006 with effect from 1-4-2007 where the provisions of sec. 80P are no more applicable in the case of a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. As per the ld PCIT, the aforesaid amendment does not jeopardise the claim of deduction of a co-operative society under Section 80P(2)(d) in respect of its interest income on investments/deposits parked with a cooperative bank. 19. In the present case, there is no dispute that the assessee is a Co- Operative Society. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial banks in form of fixed deposits and saving bank accounts. Referring to the decision of the Hon ble Supreme Court in case of case of Totgars Co-operative Sale Society Ltd (Supra), it was held that since the judgment of the Tribunal was prior to the judgment of the Hon ble Supreme Court, the Tribunal did not have the advantage of the said judgment and the matter was decided in favour of the Revenue. We therefore find that the Hon ble Punjab and Haryana High Court following the decision of the Hon ble Supreme Court which was also rendered in the context of section 80P(2)(a)(i) held that interest income from commercial banks was not eligible for claim of deduction under section 80P(2)(a)(i) of the Act. Therefore, the said decision rendered in the context of section 80P(2)(a)(i) is distinguishable and doesn t support the case of the Revenue and has been wrongly referred in support while challenging the assessee s claim of deduction on interest income under section 80P(2)(d) of the Act in respect of deposits placed with Yamuna Nagar Central Co-op Bank Ltd 21. Now, coming to another decision of the Hon ble Punjab and Haryana High Court in case of CIT Vs. Doaba Co-op Sugar Mills Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Collector of Central Excise Customs AIR 1970 SC 755 at p. 759. 6. Section 80P(2)(d) 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. This provision does not make any distinction in regard to the source of the investment because this section envisages deduction in respect of any income derived by the co-operative society from any investment with a cooperative society. It is immaterial whether any interest paid to the co-operative society exceeds the interest received from the bank on investments. The revenue is not required to look to the nature of investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by the learned counsel for the revenue. The provision does not indicate any such adjustment in regard to interest derived from the co-operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by the learned counsel for the revenue. In our opinion, the Tribunal was right in law in allowing deduction under section 80P(2)(d) in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deductable from the gross income of the Co-operative Society in order to assess its total income. In the latter decision referred by the ld PCIT (he has not referred to the earlier decision), 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(2)(d) of the Act. We therefore find that there are divergent views of the non-jurisdictional 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 as against the decision of the Jurisdictional Punjab and Haryana High Court in case of CIT vs Doaba Co-operative Sugar Mills Ltd and the latter shall be our guiding force as far as the present proceedings are concerned. 24. Having said that, we find that in the latter decision of Hon ble Karnataka High Court in case of PCIT vs. Totgars Co-operative Sale Society (Supra), the Hon ble High Court has basically laid great emphasis on the provision of Section 80P(4) of the Act and basis interpretation of Section 80P(4) of the Act, the deduction under section 80P(2)(d) has been held to be not elig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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