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TMI Blog2024 (2) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue. Hence, the impugned order of the Pr. CIT passed u/s 263 is set aside. Appeal of the assesse is allowed. - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER For the Appellant : Shri Anil Kamal Garg, AR For the Respondent : Shri Ashish Porwal, Sr. DR ORDER Per Vijay Pal Rao, JM: This appeal by the by the assessee is directed against the order dated 27.03.2023 of Pr. Commissioner of Income Tax passed u/s 263 for A.Y.2018-19. The Assessee has raised following grounds of appeal: Grounds of Income-Tax Appeal before the Hon'ble Income-Tax Appellate Tribunal, Indore Bench, Indore, against the Order passed by the Id. Pr. Commissioner of Income- Tax -1, Indore, u/s. 263 of the Income-Tax Act, 1961, pertaining to the assessment year 2018-19. 1(a) That, on the facts and in the circumstances of the case, the learned Pr. CIT grossly erred in law in invoking the provisions of section 263 of the Income-Tax Act, 1961 [in short, 'the Act'] in the appellant's case without considering the material fact that the Assessment Order passed by the learned Assessing Officer, under s.143(3) r.w.s. 143(3A) 143(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he members. The assessee has earned interest income of Rs. 29,41,561/- from deposit in the Co-operative Bank and claimed deduction u/s 80P(2)(d) which was allowed by the AO while passing scrutiny assessment. Thereafter, the Pr. CIT had gone through the assessment record and observed that the AO has not considered some of the points selected for scrutiny through CASS and issued show cause notice u/s 263 on 04.03.2023. the Pr. CIT has taken up the issue of deduction u/s 80P(2)(d) in respect of interest income earned from deposit in Co-operative Bank in para 4 of the show cause notice as under: 4. On the perusal of Assessment records, it is found that the assessee society had earned interest income on deposits and fixed deposits in Banks and out of this interest earned, claimed deduction of Rs. 29,41,561/- u/s 8OP(2)(d) of the IT Act. However, the interest earned by the assessee from investment or deposits in Co- operative banks is not allowable for deduction u/s 80P (2)(d) of the IT Act. 1961. In view of the above, deduction of Rs 29,41,561/- as claimed u / s 8OP(2) (d) of the Act was required to be disallowed and added back to the total income of the assessee which was not done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or before 29.12.2020. Yours faithfully, Additional/Joint/Deputy/Assistant Commissioner of Income Tax/ Income-tax Officer, National e-Assessment Centre, Delhi 4. Thus, it is clear that the AO has conducted specific inquiry on this issue of allowability of deduction u/s 80P(2)(d) in respect of the interest income earned from the deposit made with Co-operative Bank. The assessee duly replied to the said notice vide letter which are placed at page no.25 to 30 of the paper book. Thus, the assessee has claimed in the reply that fixed deposits were made with Smriti Nagrik Co-operative Bank Ltd. which is registered under Co-Operative Act and governed by the Co-operative Society Act. Therefore, the assesse claimed before the AO that the interest received from the deposits in the Co-operative Bank falls within the ambit of section 80P(2)(d). The AO after considering the reply has allowed the claim of the assesse and therefore, it is not a case of lack of inquiry or inadequate inquiry on the part of the AO but the AO has duly conducted an inquiry and taken a possible view on this issue. Ld. AR has relied upon various decisions of this tribunal on this issue wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Sec. 80P(2)(d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with the co-operative bank, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not cooperative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 8. After necessary deliberations, we are unable to persuade ourselves to concur with the view taken by the Pr. CIT. Before proceeding any further, we may herein cull out the relevant extract of the aforesaid statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. 80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of the considered view, that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be 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, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 6. Thus, the Tribunal has referred and relied upon the various decisions on the point wherein the interest income earned by Co-operative Society on the investment held in Co- operative Bank was eligible for claim of deduction u/s 80P(2)(d) of the Act. We further note that Indore Bench of this Tribunal in case of Indore Pragatishil Sahakari Sakh Sanstha Maryadit vs. ITO in ITANo. 317/Ind/2023 vide order dated 10.01.2024 has considered and decided this issue in para 9 to 12 as under: 9. We have considered the facts, rival submissions and perused the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al produce of its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities ; (b) in the case of co-operative society, being a primary society engaged in supplying milk raised by its members to a federal milk co-operative society, the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause(b) [either independently of, or in addition to, all or any of the activities so specified], so much of its profits and gains attributable to such activities as does not exceed 1[fifteen thousand rupees]; (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; (e) in respect of any income derived by the co-operative so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Gujarat High Court in the case of State Bank of India vs. CIT, (2016) 389 ITR 578 (Guj) has held that interest income earned by Cooperative Society on its investment held with Cooperative Bank would be eligible for claim of deduction u/s 80P(2)(d). Relevant portion of the decision of the Coordinate Bench, Mumbai in the case of Amore Commercial Premises Co-Op. Society Limited vs. Central Processing Centre, (supra) reads as follows :- 7. Issue as to the allowability of the deduction claimed by the Assessee u/s. 80P (2)(d) of the Act, is no longer Res-Integra having being decided by the co-ordinate Bench of the Tribunal in case of Palm Court M Premises Co- operative Society Ltd. in ITA No.561/M/2021 order dated 09.09.2022 by settling the issue in favour of the assessee by distinguishing the judgment rendered by Hon ble Supreme Court in case of Totgar s Co-operative Sale Society Ltd. Vs. Income Tax Officer, 188 Taxman 282(SC) and by discussing the decision rendered by Hon ble Bombay High and Hon ble Gujarat High Court wherein it is held that interest income earned by the Co-operative Society on its investment made with co-operative bank would be eligible for claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the investments/deposits made with the co-operative banks is in order, or not. In our considered view, the issue involved in the present appeal revolves around the adjudication of the scope and gamut of sub-section (4) of Sec. 80P as had been made available on the statute, vide the Finance Act 2006, with effect from 01.04.2007. On a perusal of the order passed by the Pr.CIT under Sec. 263 of the Act, we find, that he was of the view that pursuant to insertion of sub-section (4) of Sec. 80P, the assessee would no more be entitled for claim of deduction under Sec. 80P(2) (d) in respect of the interest income that was earned on the amounts which were parked as investments/deposits with cooperative banks, other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank. Observing, that the co-operative banks from where the assessee was in receipt of interest income were not co-operative societies, the Pr. CIT was of the view that the interest income earned on such investments/deposits would not be eligible for deduction under Sec. 80P(2)(d) of the Act. 7. After necessary deliberations, we are unable to persuade ourselves to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term cooperative society had been defined under Sec. 2(19) of the Act, as under:- (19) Co-operative society means a cooperative society registered under the Cooperative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of cooperative societies; We are of the considered view, that though the cooperative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be 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, therefore, the interest income derived by a cooperative society from its investments held with a cooperative bank would be entitled for claim of deduction under Sec.80P(2) (d) of the Act. 8. We shall now advert to the judicial pronouncements that have been relied upon by the Id. A.R. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) on the interest income derived f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had observed, that the interest income earned by a co-operative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2) (d) of the Act. We find that as held by the Hon ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of non-jurisdictional High Court s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Accordingly, taking support from the aforesaid judicial pronouncement of the Hon ble High Court of jurisdiction, we respectfully follow the view taken by the Hon ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a cooperative society on its investments held with a cooperative bank would be eligible for claim of deduction under Sec.80P(2)(d) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cooperative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. 10. So following the decision rendered by Hon ble Karnataka High Court (supra) and Hon ble Gujarat High Court (supra), we are of the considered view that assessee society who has earned an amount of Rs. 6,96,725/- from its investment of surplus fund with cooperative banks is entitled for deduction under section 80P(2)(d) of the Act. Resultantly, the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act. 8. In view of but has been discussed above, I am of the consider view that Ld. CIT(A) has erred in upholding the denial of deduction claimed by the Assessee Society u/s. 80P (2)(d) of the Act, hence Assessing Officer is directed to allow the same. 12.On examination of facts of the instant case, we find that the above referred decision is squarely applicable and, therefore, respectfully following the same, we are inclined to hold that the assessee is eligible for deduction u/s 80P(2)(d) of the Act at Rs. 10,77,910/- in respect of FDR interest received from Cooperative Bank. Thus, the finding of the Ld. CIT(A) is set-asi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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