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TMI Blog2024 (5) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of 'Shree Keshorai Patan Sahakari Sugar Mill, Bundi [ 2018 (2) TMI 499 - ITAT JAIPUR] decided the issue in favour of the assessee and allowed the deduction under section 80P/80P(2)(d) in respect of interest earned on deposits made with the banks/cooperative banks. In 'Shahpura Gram Seva Sahakari Samiti Limited, Shahpura [ 2020 (10) TMI 715 - ITAT JAIPUR] held that a cooperative bank would be considered as a cooperative society for the purposes of Section 80P(2)(d) of the Act; and that accordingly, in view of the fact that the Jaipur Central Cooperative Bank is a cooperative society registered under the Cooperative Societies Act, interest received by the assessee from the said Cooperative Bank is eligible for deduction under section 80P(2)(d) of the Act. Thus the assessee society, being a cooperative society, is entitled to the exemption claimed under section 80P(2)(d) of the Income Tax Act, in respect of income by way of interest derived by it from its investments with the cooperative banks. Accordingly, the revisionary order passed by the learned Principle Commissioner of Income Tax is set aside and cancelled and the assessment order is revived. - Decided in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice dated 10.02.2017, a copy whereof has been placed at APB 8 to 9, to the assessee, stating that the profit and loss account of the assessee showed that the assessee had reflected interest income of Rs. 82,13,316/- earned on long term fixed deposits with banks and had claimed deduction under section 80P on the said interest income. It was stated that interest earned on funds not required immediately for business purpose is taxable under Section 56, under the head 'income from other sources' and is not eligible for deduction under section 80P. It was stated that the assessment order showed that the AO had not disallowed deduction under section 80P on the interest income earned from the FDs maintained in the banks. It was stated that however, the assessee was not eligible for deduction under section 80P on this interest income. It was stated that the issue had not been examined by the AO, nor the assessee had offered any detail regarding claiming deduction of such income during the assessment proceedings. 4. In response, the assessee filed reply dated 27.02.2017. A copy thereof has been placed at APB 10 to 13. The assessee stated that the deduction under section 80P was ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative bank is nothing but interest received from a cooperative society, and that even the Banking Regulation Act, in section 56(i)(ccv) defines 'primary cooperative society bank' as a cooperative society. Reliance was placed on the decision of the Hon'ble Karnataka High Court in the case of 'Pr. CIT Vs. Totagars Cooperative Sale Society', 392 ITR 74 (Karn). It was stated that therefore, the condition that the Assessment Order is prejudicial to the interests of the Revenue, was not fulfilled, as the interest on FDRs with cooperative banks qualified for exemption under section 80P(2)(d) of the Income Tax Act. The learned PCIT was, as such, requested to drop the proceedings under section 263 of the Income Tax Act. 5. By virtue of the impugned order, however, the learned PCIT revised the Assessment Order. It was observed that the interest earned on FDRs from banks and dividend had been earned on funds collected by the society from its members over and above the requirement for the common goal of the members, that the excess amount collected and remaining unutilized year after year had been deposited in different bank accounts, that this was just like a deposit made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of the members of the society, or the society as such. It was observed that as per the assessment record and the replies submitted by the society before the AO during the assessment proceedings in response to the AO's Questionnaire dated 31.07.2014/4.8.2014 (Question Number 13), the society had itself submitted that it had claimed exemption under section 80P(2)(a)(i), under Chapter VIA of the Income Tax Act, as the activity of the society was to provide short and medium term loans to its members for agricultural production, dairy farming, poultry and piggery, and to provide agricultural inputs like fertilizers and insecticides to its members on a no profit no loss basis. It was observed that the function of the society was, therefore, covered under the provisions of section 80P(2)(a)(i) of the Income Tax Act, deduction under which is available in the case of a cooperative society engaged in carrying on the business of banking or providing credit facilities to its members. It was observed that the facts in the case of 'M/s Totagars Cooperative Sale Society', rendered by the Honorable Karnataka High Court, were clearly distinguishable and the said judgement was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested in fixed deposits of a cooperative bank and not with a cooperative society, and that hence also, it was not eligible for deduction under section 80P(2)(d). It was observed that it was thus evident that the income earned by the society was not by way of advancing any credit facility to one or more of its members from out of collections made from its members, but the money had been advanced or placed at the disposal of a commercial bank which had no concern with the welfare or activity of any member or the society as a whole. It was observed that the income earned was, therefore, not the surplus generated from mutual activities of the members or of the society. It was observed that funds had travelled beyond the privity of the mutuality. It was observed that therefore, the principle of mutuality was not applicable on this interest income. It was observed that the interest income earned from banks is not exempt under the principle of mutuality, as held by the Honorable Supreme Court in the case of 'CIT versus Bangalore Club'. It was held that in that case, the Honorable Supreme Court had even not found the interest income earned from banks in respect of a person who was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Assessing Officer, through Questionnaire dated 31.07.2014/04.08.2014, vide Question Number 13, specifically asked the assessee society about the deduction claimed to the tune of Rs. 36,41,848/-. A copy of the said Questionnaire has been filed at APB 1-3. Question Number 13 reads as follows: 13. A perusal of records reveals that you have claimed deduction to the tune of Rs. 36,41,848/- under Chapter VIA. Kindly state the specific provisions/section vide which the said deduction has been claimed. Also provide a detailed note elaborating as to how the conditions specified in the Act which entitled you to claim deduction under Chapter VIA are satisfied/met. In response, the assessee society stated that ; it had claimed exemption under section 80P(2)(a)(i) under Chapter VIA of the Income Tax Act, as the activity of the society is to provide short and medium term loans to its members for agricultural production, dairy farming, poultry and piggery, and to provide agricultural inputs like fertilizers and insecticides to its members on a no profit no loss basis. A copy of the reply filed by the assessee society is at APB 4-6. The answer to Question Number 13 states that: The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as stated that the society is a cooperative society and it had invested an amount of Rs. 72 lakh with the Central Cooperative Bank Mullanpur and an amount of Rs. 9,35,92,380/- with the Central Cooperative Bank Parol. It was stated that according to the Reserve Bank of India Act, 1934, as amended by the Banking Laws (Applicable to Cooperative Societies) Act, 1965, 'Central Cooperative Bank' means the principle cooperative society in a district in a state, the primary object of which is the financing of other cooperative societies in the district. It was stated that ; ... It may be mentioned that the deduction under section 80P was rightly claimed and allowed by the ld. AO while assessing the case. The AO had called for the details of the FDRs held by the assessee. The same was submitted to the AO vide his reply to the questionnaire. Copy of the reply filed is enclosed herewith. It may be mentioned that the deduction under section 80P under the limb 80P(2)(d) had been claimed. It was claimed under the main head section 80P. Section 80P(2)(d) reads as under: Section 80P(2)(d) in the Income Tax Act, 1995 (d) in respect of any income by way of interest or dividends derived by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation Act reads as under: Section 56 (ccv) in Banking Regulation Act, 1949 (ccv) 'primary co-operative bank' means a cooperative society other than a primary agricultural credit society, (1) the primary object or principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are not less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other cooperative society as a member: Provided that this sub-clause shall not apply to the admission of a cooperative bank as a member by reason of such cooperative bank subscribing to the share capital of such cooperative society out of funds provided by the State Government for the purpose; In a latest judgement the Hon'ble High Court of Karnataka in the case of Pr. CIT versus Totagar Cooperative Sale Society decided exactly the same issue as to whether the interest earned from FDR with Cooperative Bank would qualify for the deduction under section 80P(2)(d) of the Income Tax Act or not. It was decided in favour of the assessee that the cooperative society earning interest from FDR with Cooperative Bank would get the deduction under section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return was processed under section 143(1) and subsequently, the case was selected for scrutiny. Statutory notice under section 143(2) was issued and was duly served upon the assessee on 27.09.2013. Subsequently, notices under sections 143(2) and 142(1) along with detailed questionnaire were issued on 04. 08.2014 and were duly served upon the assessee. In response, Shri DS Sandhu, Advocate, attended the assessment proceedings from time to time and furnished the requisite details and documents which were examined. The assessee is a cooperative society. The main function of the society is to provide short and medium term loans to its members for agricultural production, dairy farming, poultry and piggery and to provide agricultural inputs like fertilizers, insecticides, etc. The society was registered on 14.11.1957 by the Assistant Register, Cooperative Societies, Ambala. During the assessment proceedings, the books of account were examined and no adverse inference has been drawn and exemption claimed by the assessee under section 80P is allowed. 16. A bare perusal of the Assessment Order evinces that indeed, while passing the Assessment Order, the AO has applied his mind, as rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof, that having examined the same and having become satisfied with it, the AO passed the Assessment Order, accepting the returned income of the assessee society. Therefore, there was no occasion for the revisionary provisions to have been invoked by the ld. PCIT. 18. In 'CIT Versus Hindustan Marketing and Advertising Cor. Ltd.', 341 ITR 180 (Del), it was held that the Tribunal had rightly held that the case was not a case where the enquiries were not made by the AOs or the relevant material was not collected before framing the Assessment Orders; that the observation of the Commissioner that the Income Tax Officers did not make sufficient enquiry was totally subjective; that it was not a case of lack of enquiry; that the Commissioner judged the sufficiency of the enquiry by subjective standards; that it appeared that according to the Commissioner, more enquiries should have been made; and that the observations of the Commissioner were general in nature, namely, that there was lack of proper enquiry or investigation or cosmetic treatment was given by the ITOs. In the present case also, as observed, we find that it was not a case of no enquiry and the learned PCIT has go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htly contended, as held by the jurisdictional High Court in 'Hari Iron Trading Company Versus CIT', 263 ITR 437 (P H), the assessee has no control over the way the assessment order is drafted. For arriving at the conclusion as to whether the AO has examined any issue or not, the entire record needs to be examined. Generally, issues which are accepted do not find mention in the Assessment Order and only such points are taken note of, on which, the assessee's explanations are rejected and additions or disallowances are made. The present case is a case in point, wherein, the claim of the assessee has been allowed by the AO after enquiry by way of a succinct order. 23. In Ganpati International Vs PCIT , (2023) 105 ITR-TRIB (Trib) 266 (CHD), (authored by one of us, the V.P.), as per the Pr. Commissioner of Income Tax, the AO, on the issue of unsecured loan received by the assessee, did not look into it, thereby completely failing to look into the three mandatory parameters of identity, credit worthiness and genuineness of the transaction. It was held that clearly, the assessee had not discharged its onus of establishing the genuineness of the transactions and the AO did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72 lacs with Central Cooperative Bank, Mullanpur and Rs. 9,35,92,380/- with Central Cooperative Bank, Parol, both being members of SAS Central Cooperative Bank; that according to the Reserve Bank of India Act, 1934, as amended by the Banking Laws (Applicable to Cooperative Societies) Act, 1965, 'Central Cooperative Bank' means the principal cooperative society in a district in a state, the primary object of which is the financing of other cooperative societies in the district; that the PCIT has applied the decision of the Honorable Supreme Court in the case of 'Totagars Cooperative Sale Society Limited', 322 ITR 283 (SC), which is not applicable to the facts of the assessee's case; that in the case before the Honorable Supreme Court, the issue pertained to claiming of deduction under section 80P(2)(a)(i) in respect of interest income and not under section 80P(2)(d) being amount not invested with a cooperative bank; that as such, the facts are distinguishable; that in the case of 'PCIT Versus Totagars Cooperative Sale Society', 392 ITR 74 (Karnataka), it has been held that for the purposes of section 80P(2)(d), a cooperative bank should be considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ti Limited Versus ITO', Order dated 17.6.2019, passed by the Jaipur Bench of the Tribunal in ITA Numbers 281 and 282/JP/2017 xii. 'Shahpura Gram Seva Sahakari Samiti Limited Versus ITO', Order dated 15.10.2020, passed by the Jaipur SMC Bench of the Tribunal in ITA Number 767/JP/2019, for AY 2015-16. 27. The learned DR, on the other hand, has placed strong reliance on the impugned order. It has been stated that as correctly observed by the learned PCIT, the assessee society is a cooperative society and its function, since its inception, is to provide short and medium term loans to its members for agricultural production, dairy farming, poultry and piggery, and to provide agricultural inputs, like fertilizers and insecticides to its members, on a no profit no loss basis; that during the year under consideration, the society had shown income from business, rent, dividend and interest from FDR with banks; that the society claimed exemption under section 80P(2)(a)(i) under Chapter VIA of the Income Tax Act because of its activities; that the society is for the mutual benefit of the members and the profits, if any, are to be distributed amongst the members only; that the func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not under section 80P(2)(d); that otherwise also, even if such contention is considered, the fact remains that any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank have been excluded from the scope of section 80P(4) of the Act; that as per the provisions of section 80P(4), the provisions of section 80P shall not apply in relation to any cooperative bank other than a primary agricultural credit society and rural development bank; that from the assessment record, during the year under consideration, the assessee had invested in fixed deposit of a cooperative bank and not in a cooperative society, and therefore also, it is not eligible for deduction under section 80P(2)(d) of the Act; that therefore, evidently, the income earned by the society is not by way of advancing any credit facility to one or more members from out of collections made by the society from its members, but the money has been advanced or placed at the disposal of commercial banks, which have no concern with the welfare or activity of any member, or the society as a whole; that therefore, the income earned is not the surplus generated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the assessment proceedings, the books of account of the society were examined and no adverse inference had been drawn; and that the exemption claimed by the society under section 80P was being allowed. 29. In 'Hari Iron Trading Company Versus CIT', 263 ITR 437 (P H), it has been held by the jurisdictional High Court that the entire record has to be examined before arriving at the conclusion as to whether the AO has examined any issue or not; that generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of, as on which the assessee's explanations are rejected and additions or disallowances are made. 30. The record in the present case shows that as per the Questionnaire (APB 1-3) issued by the AO, the following Question Number 13 was asked: 13. A perusal of records reveals that you have claimed deduction to the tune of Rs. 36,41,848/- under Chapter VIA. Kindly state the specific provisions/section vide which the said deduction has been claimed. Also provide a detailed note elaborating as to how the conditions specified in the Act which entitled you to claim deduction under chapter VIA are satisfied/met. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on had been considered by the AO, the record showed that the AO had applied his mind; that once such application of mind is discernible from the record, the proceedings under section 263 would fall into the area of the Commissioner having a different opinion; that the case would not be one of lack of enquiry and even if the enquiry was termed as inadequate, following the decision in 'M/s Sunbeam Auto Limited' that would not, by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. Similar is the position in the case at hand, as discussed. The application of mind by the AO is discernible from the record and the power under section 263 of the Act was exercised on the basis of a mere difference in opinion with the AO, rendering such exercise of revisionary power to be invalid. 35. In 'CIT Versus Hindustan Marketing and Advertising Cor. Ltd.', 341 ITR 180 (Delhi), it was held that the Tribunal had rightly held that the case was not a case where enquiries were not made by the AO, or the relevant material was not collected before framing the Assessment Orders; that the observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had directed the AO to make further fishing and roving enquiries, which were not germane to the facts and issues involved; that the Supreme Court, in the case of 'CIT Versus GM Mittal Stainless Steel (P) Limited', 263 ITR 255 (SC), has observed that the satisfaction by the Commissioner must be one objectively justifiable and based on material, legal or factual, when available, and it cannot be the mere ipse dixit of the Commissioner; and that so, the order of the Commissioner exercising jurisdiction under section 263 of the Act could not be held to be sustainable in law. Similarly, here also, the satisfaction of the Commissioner is not based on any material available. Rather, it is against the material available on record, that is, the Questionnaire issued by the AO and the reply file thereto by the society alongwith all the requisite details and information, which were duly examined by the AO before passing the Assessment Order. 38. In 'Surindra Enterprises Versus ITO', 18 ITR 325 (AT) (Chd.), under similar circumstances, it was held that where the AO had allowed discount paid to sub-dealer after making due enquiry and verification, invocation of the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which, the Supreme Court held that the words 'the whole of the amount of profits and gains of business' emphasize that the income, in respect of which deduction is sought, must constitute the operational income and not the other income which accrues to the society; that interest income earned on funds not required for business purposes at the given point of time falls in the category of 'other income', which is taxable under section 56 of the Act. It has been held that any cooperative bank other than a primary agricultural credit society, or a primary cooperative agricultural and rural development bank, have been excluded from the scope of section 80P(4) of the Act. It has been observed that during the year under consideration, the society invested in fixed deposits of cooperative banks and not with a cooperative society, and that so, it is not eligible for deduction under section 80P(2)(d). It has been held that evidently, the income earned by the society is not by way of advancing any credit facility to one or more members from out of collections made from its members, but the money has been advanced to, or placed at the disposal of, commercial banks, which have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orable Supreme Court in 'The Totgars Cooperative Sale Society Limited Versus Income Tax Officer, Karnataka ' (supra) is not applicable to the facts of the present case, as rightly contended on behalf of the assessee society. 47. In 'Principal Commissioner of Income Tax and Another Versus Totagars Cooperative Sale Society', 392 ITR 74 (Karnataka), the issue involved was deductibility or otherwise, under section 80P(2)(d), of interest earned from deposits in a cooperative bank, as is the case herein. It was observed that the word 'cooperative society' is a word of a large extent and it denotes a genus, whereas the word 'cooperative bank' is a word of limited extent which merely demarcates and identifies a particular species of the genus 'cooperative societies'; that cooperative society can be of different nature and can be involved in different activities; that cooperative society or bank is merely a variety of cooperative societies; that therefore, cooperative bank, which is a species of the genus, would necessarily be covered by the word 'cooperative society'; that furthermore, section 56(i)(ccv) of the Banking Regulations Act, 1949 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e holding so, it was observed that section 80P(2)(d) allows whole deduction of an income by way of interest or dividend derived by the cooperative society from its investment with any other cooperative society; and that 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 cooperative society from any investment with a cooperative society. 50. 'Doaba Cooperative Sugar Mills' (supra) has been followed in 'Surat Vankar Sahakari Sangh Limited Versus Assistant Commissioner of Income Tax', 421 ITR 134 (Gujarat). 51. No decision to the contrary has been cited before us. 52. Then, the learned PCIT has applied the provisions of section 80P(4). This has been challenged before us. It is seen that section 80P(4) states that the provisions of section 80P shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank, both defined in the Explanation to section 80P(4). Section 80P deals with deduction in respect of income of cooperative societies. So, the exclusion i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n different cases; that moreover, the words 'cooperative society' are the words of a large extent and denote a genus, whereas the words 'cooperative bank' are words of a limited extent which merely demarcate and identify a particular species of the genus 'cooperative society'; that cooperative society can be of different nature and can be involved in different activities, whereas 'cooperative bank' is merely a variety of cooperative societies; and that thus, 'cooperative bank', which is a species of the genus, would necessarily be covered by the words 'cooperative society'; that furthermore, even under section 56 (i)(ccv) of the Banking Regulations Act, 1949, 'primary cooperative society bank' has been defined as the meaning of 'cooperative society'; that therefore, 'cooperative society bank' would be included in the words 'cooperative society'; that admittedly, the interest which the assessee had earned was from a cooperative society bank; that therefore, according to section 80P(2)(d) of the Income Tax Act, the said amount of interest earned from a cooperative society bank would be deductible from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally excludes cooperative banks which are cooperative societies engaged in the banking business, that is, engaged in lending money to members of the public, which have a licence in this behalf from the RBI; that judged by this touchstone, it was clear that the impugned Full Bench judgement was wholly incorrect in its reading of 'Citizen Cooperative Society Limited'; that clearly, therefore, once section 80P(4) was out of harm's way, all the assessees in that case were entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members, which were not related to agriculture; and that also, in case it was found that there were instances of loans being given to non-members, profits attributable to such loans obviously could not be deducted. It was held that to summarise, it could be said that the limited object of section 80P(4) is to exclude cooperative banks that function at par with commercial banks, that is, which lend money to members of the public. 55. In 'Vavveru Cooperative Rural Bank Limited' (Telangana and Andhra Pradesh), it was held that if there is a cooperative society which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P(2)(d) for the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the decisions in 'Land End Cooperative Housing Society Limited', 'Sea Green Cooperative Housing Society Limited' and 'Marwanjee Park Cooperative Housing Society Limited'; that the Hon'ble High Court of Karnataka, in the case of 'Totagars Cooperative Sale Society' and the Hon'ble High Court of Gujarat, in the case of 'State Bank of India', had also held that the interest income earned by the assessee on its investments held with a cooperative bank would be eligible for deduction under section 80P(2)(d) of the Act; that still further, CBDT Circular Number 14 dated 28.12.2006 also makes it clear beyond any scope of doubt that the purpose behind the enactment of subsection 4 of section 80P was to provide that the cooperative banks which are functioning at par with other banks would no more be entitled for the claim of deduction under Section 80P(4) of the Act; that the decision of the Honorable Supreme Court in the case of 'Totagars Cooperative Sale Society Limited' was distinguishable on facts; that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sahakari Sakhar Karkhana Limited Versus PCIT', 138 taxmann.com 532 (Pune-Trib.), it was held that in that case indulgence had been sought for adjudicating as to whether or not the claim of the assessee for deduction under section 80P(2)(d) in respect of interest income earned from the investments or deposits made with the cooperative banks was in order; that the issue involved hinged around the adjudication of the scope and gamut of subsection 4 of section 80P as made available on the statute vide the Finance Act, 2006, with effect from 1.4.2007; that the PCIT, while passing order under section 263 of the Act, was of the view that pursuant to the insertion of subsection 4 of section 80P, the assessee would no more be entitled for the claim of deduction under section 80P(2)(d) in respect of the interest income earned on the amounts which were parked as investments or deposits with a Cooperative Bank, other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank; that observing that the cooperative banks from where the assessee was in receipt of interest income were not cooperative societies, the PCIT was of the view that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80P(2)(d) on the interest income derived from its investments held with a cooperative bank, is covered in favour of the assessee in 'Solitaire CHS Limited', 'Majalgaon Sahakari Sakhar Karkhana Limited' and 'Kaliandas Udyog Bhavan Premises Cooperative Society Limited'; that the Honorable High Court of Karnataka, in the case of 'Principle CIT Versus Totagars Cooperative Sale Society', (2017) 392 ITR 74 (Karnataka) and the Honorable High Court of Gujarat, in 'State Bank of India Versus CIT', (2016) 389 ITR 578 (Gujarat), had held that the interest income earned by the assessee on its investments with a cooperative bank would be eligible for the claim of deduction under section 80P(2)(d) of the Act; that still further, CBDT Circular Number 14, dated 28.12.2006 also makes it clear beyond any scope of doubt, that the purpose behind the enactment of subsection 4 of section 80P was that the cooperative banks which were functioning at par with other banks would no more be entitled for the claim of deduction under Section 80P(4) of the Act; that although, in all fairness, the Honorable High Court of Karnataka in the case of 'Principle CIT Vers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the Assessing Officer had drawn support from subsection 4 of section 80P of the Act, as per which, the entitlement to deduction under section 80P of the Act is available to cooperative banks with effect from AY 2007-08; that on such observation, the Assessing Officer had declined the assessee's claim for deduction under section 80P(2)(d) of the Act; that the view taken by the lower authorities could not be concurred with, since a cooperative bank falls within the realm of the definition of 'cooperative society' as contemplated in section 2(19) of the Act, the view that dividend income received by the assessee from the said bank, which was a cooperative bank, would not be eligible for deduction under section 80P(2)(d) of the Act could not be sustained; that this view was fortified by the order of the Mumbai Bench of the Tribunal in the case of 'Solitaire CGHS Limited', wherein, on an elaborate discussion, after considering various decisions, it had been held that the interest income derived by the assessee cooperative society from its investments held with the Cooperative Bank would be entitled for claim of deduction under section 80P(2)(d) of the Act. 59. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok a view that the income arising on the surplus invested in short term deposits and securities cannot be attributed to the activities of the society and, therefore, it was not eligible for exemption under section 80P of the Act; that however, the Honorable Karnataka High Court, in the case of 'Tumkur Merchants Soharda Credit Cooperative Limited Versus ITO', (2015) 230 taxmann 309 (Karnataka) and the Honorable Telangana and Andhra Pradesh High Court, in the case of 'Vaveru Cooperative Rural Bank Limited Versus CIT', (2017) 396 ITR, took a view that such interest income is attributable to the activities of the society and, therefore, it is eligible for exemption under section 80P(2)(a)(i) of the Act; that the coordinate Pune Bench of the Tribunal, in the case of 'M/s Ratnatray Gramin Bigar Sheti Sahakari Pat Sanstha Maryadit Versus ITO', vide order dated 11.12.2018, passed in ITA Numbers 559 and 560/Pune/2018, had taken a view in favour of the assessee, following the judgement of the Honorable Karnataka High Court in 'Tumkur Merchants Souharda Credit Cooperative Limited', and that following the same, it was being held that the interest income earned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andra Samruddhi Cooperative Housing Society Limited', which was passed on the basis of the decision of the Honorable Supreme Court in the case of 'Totgars Cooperative Sale Society Limited'; that in the case of 'Totagars Cooperative Sale Society Limited' while interpreting provisions of the section 80P(2)(a)(i) of the Act, the Honorable Supreme Court held that surplus funds not immediately required in the business and invested in the short term deposit would be accessible under the head of 'income from other sources' where the cooperative society is engaged in carrying on the business of banking or providing credit facilities to its members and, consequently, no deduction is available under section 80P(2)(a)(i) of the Act; that but, in the case before the Bench, the issue was whether a cooperative society, which has derived income on investment with cooperative banks, is entitled to deduction under section 80P(2)(d); that the provisions of section 80P(2)(d) of the Act provide for deduction in respect of income by way of interest or dividend on investments made with other cooperative societies; that from a close perusal of the provisions of section 80P(2)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed in ITA Numbers 418 and 419/JP/2017 and CO Numbers 23 and 24/JP/2017, for AYs 2013- 14 and 2014-15, by the Jaipur bench of the Tribunal, it was observed that the entire income of the assessee for the year under consideration was only from interest on deposits made with bank as well as cooperative banks; that in its computation of income, the assessee had given the details of the interest income, which comprised, inter alia, interest earned on deposits made with cooperative banks. The assessee had claimed deduction under section 80P(2)(d) in respect of the interest earned from cooperative banks; that the Assessing Officer disallowed the claim on the ground that the assessee was not in the business of banking or of providing credit facilities to its members. The CIT(A) allowed the claim by following various High Court and Tribunal orders. The Tribunal held that where any income by way of interest or dividend is derived by a cooperative society from its investment with any other cooperative society, the whole of such income is allowable for deduction under section 80P(1); that therefore, there is no condition for the assessee society to be engaged either in the business of bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Order dated 17.6.2019, the Jaipur Bench of the Tribunal, in ITA Numbers 281 and 282/JP/2017 and 87/JP/2018, for Assessment Years 2012-13, 2013-14 and 2014-15, following the decision of the Jaipur Bench of the Tribunal in the case of 'Shree Keshorai Patan Sahakari Sugar Mill, Bundi (supra), decided the issue in favour of the assessee and allowed the deduction under section 80P/80P(2)(d) in respect of interest earned on deposits made with the banks/cooperative banks. 67. In 'Shahpura Gram Seva Sahakari Samiti Limited, Shahpura Versus The Income Tax Officer, Ward-4(1), Jaipur, vide Order dated 15.10.2020, passed in ITA Number 767/JP/2019, for Assessment Year 2015-16, the Jaipur SMC bench of the Tribunal held that in 'ITO Versus Shri Keshorai Patan Sahakari Sugar Mill, Bundi' (supra), the Jaipur Tribunal had held that a cooperative bank would be considered as a cooperative society for the purposes of Section 80P(2)(d) of the Act; and that accordingly, in view of the fact that the Jaipur Central Cooperative Bank is a cooperative society registered under the Cooperative Societies Act, interest received by the assessee from the said Cooperative Bank is eligible for deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 examining the claim of the assessee under Section 80P observed that out of total claim of Rs 76,77,246/-, the assessee has claimed Rs 50,25,234/- under section 80P(2)(d) of the Act. The AO noted that said claim under section 80P(2)(d) consist of dividend income from KHRIBHCO, IFFCO and HAFED, interest income on deposits placed with HDFC Bank, ICICI Bank, AXIS Bank and Yamuna Nagar Central Co-operative Bank Ltd and referring to the provisions of section 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 HD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext 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 received from the cooperative bank. The assessment was completed after making disallowance of the deduction claimed which on appeal has been allowed by the Tribunal and thereafter, the question of law which was proposed by the Revenue for the opinion of the Hon ble High Court was whether on the facts and circumstances of the case, the Tribunal is right in law in allowing deduction under section 80P(2)(d) of the Act in respect of interest of Rs. 4,90,919/- on account of interest received from Nawanshahr Central Co-operative Bank without adjusting interest paid to the bank and in that backgr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Co-operative Bank without adjusting interest paid to the bank. Therefore, the reference is answered against the revenue, i.e., in the affirmative, and in favour of the assessee. 22. In the aforesaid decision, the Hon ble Jurisdictional High Court has referred to the provisions of Section 80P(2)(d) and held that the said provisions does not make any distinction with regard to the source of the investment because this section envisages deduction in respect of any income derived by the cooperative society from any investment with a co-operative society. It was held that it is immaterial whether any interest paid to the co-operative society exceeds the interest rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding 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 Co-operative Bank Ltd. Vs. CIT (supra) while analyzing the provision of Section 80P(4) of the Act has held that Section 80P(4) is a proviso to the main provision contained in Section 80P(1) and 80P(2) and excluded only cooperative banks which are cooperative society and also possesses a licence from RBI to do banking business. The Hon'ble Supreme Court further held that the limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Therefore Section 80P(2)(4) is relevant only where the assessee is a cooperative bank and who claimed the deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/CHD/2018 73. This is assessee's appeal for the assessment year 2013-14 against the order dated 23.03.2018, passed by the ld. PCIT-2, Chandigarh, u/s 263 of the Income Tax Act. 74. The assessee has raised the following grounds of appeal : 1. That the Ld. Commissioner of Income Tax has erred in law in issuing notice and thereafter passing the order under section 263 only on the basis of an audit objection which is not permissible and as such the order passed is illegal, arbitrary, unjustified which merits annulment. 2. Without prejudice to the above, the Ld. Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Act to set-aside the assessment order dated 30.10.2015 passed by the Assessing Officer in as much as the order is neither erroneous nor prejudicial to the interest of Revenue and as such the assumption of jurisdiction under section 263 of the Act is beyond his competence. 3. That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record, the action resorted by the Commissioner of Income Tax is unwarranted and uncalled for. 4. That t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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