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TMI Blog2024 (2) TMI 888X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 80P(2)(4) is relevant only where the assessee claiming the deduction under Section 80P of the Act is a cooperative bank and not where a co-operative society is claiming deduction on deposits placed with a co-operative bank. In the instant case, there is an admitted and undisputed fact that the assessee is a Cooperative Society (and not a co-operative bank) registered with Registrar, Cooperative Society, Himachal Pradesh which was engaged in providing short term credit facility to its members besides acting as an agent on behalf of the Government of Himachal Pradesh for supplying the food grains under PDS System. Secondly, the Kangra Central Cooperative Bank Ltd. is also a Cooperative Society registered with Registrar, Cooperative Society and necessary registration certificate has been duly submitted before the lower authorities and the same has not been disputed. Therefore, interest income has been earned on deposits placed with a co-operative society and duly eligible for deduction under section 80P(2)(d) of the Act. No justifiable basis in denying the claim of deduction by the assessee society under section 80P(2)(d) in respect of interest income on deposit placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le disallowing the said claim. Referring to the Hon ble Karnataka High Court decision in case of Totagars Co-operative sale society Ltd. Vs. PCIT(2017) 83 taxmann.com 140(Karnataka), the AO held that though in the said decision, the Hon ble High Court has observed that a Cooperative bank is a species of Cooperative society, thus taking care of the issue raised by him in the show-cause, at the same time, the AO following the said decision held that the interest earned on deposit would be eligible for deduction under section 80P(2)(d) of the Act only where there is a clear nexus between the interest earned on deposit and the business activity of the assessee society and which was found absent in the present case, the AO concluded that the assessee was not eligible for claim of deduction under section 80P(2)(d) of the Act and same was disallowed and the income was brought to tax under the head income from other sources . 5. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A), NFAC Delhi who has upheld the order of the AO stating that he has relied on the decision of Hon ble Karnataka High Court in case of Totagars Cooperative sale society Ltd. Vs. PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 912), 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 Cooperative Society. There is also no dispute that Yamuna Nagar Central Co-op Bank Ltd. is also a Co-operative society. Further, during the course of assessment proceedings, we find that the AO while exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d (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. (Supra). Briefly the facts of the case were that the assessee, a cooperative society, filed its return of income claiming deduction in respect of interest income receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 respect of interest of Rs. 4,90,919 on account of interest received from Nawanshahr Central Cooperative Bank without adjusting interest paid to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Cooperative 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 eligible. In this regard, we find that the Hon ble Supreme Court in case of Mavilayi Service Cooperative Bank Ltd. Vs. CIT (supra) while analyz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive sale society as well as recent decision of Hon ble Supreme Court in case of Mavilayi Service Co-operative Bank Limited. As we have held in the said decision, what needs to be seen for the purpose of Section 80P(2)(d) is that firstly, the income should be by way of interest earned by Cooperative Society from its investment and secondly such investment should be with any other cooperative society. These are only two conditions which have been provided in the statute as apparent from the plain reading of the provisions of Section 80P(2)(d) of the Act and nothing more has to be read and applied/tested besides these two conditions. More particularly, it is not relevant to examine whether interest income is earned from any specified co-operative activity or for that matter, it is a case of deployment of surplus funds. The Hon ble Supreme Court in case of Mavilayi Service Cooperative Bank Ltd. Vs. CIT (supra) has held that Section 80P(4) is a proviso to the main provision contained in Section 80P(1) and 80P(2) and excludes only cooperative banks which are cooperative society and which possesses a licence from RBI to do banking business and the limited object of section 80P(4) is to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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