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TMI Blog2024 (6) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... not be entitled to any leniency. Appeal by the assessee is allowed for statistical purposes. - Smt. Beena Pillai, Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Appellant : Shri Varun Bhat, CA For the Respondent : Shri V. Parithivel, Jt.CIT(DR)(ITAT), Bengaluru. ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER This appeal is filed by the assessee against the order dated 07.08.2023 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2018-19. 2. There is a delay of 158 days in filing the appeal. In the affidavit it is stated that the return is filed with the help of ITP and the email-id and phone number in the profile of assessee society in the income tax portal belongs to ITP only, hence the assessee was unaware of the order passed by the CIT(Appeals) and it came to the notice of assessee when demand notice was issued by the AO. Therefore it is requested that the delay in filing appeal may be condoned. 3. After hearing both the parties, it is observed that there are sufficient reasons for the delay and following the judgment of the Hon'ble Apex Court in the case of Collector, Land Acquisition Vs. MST. Katiji and Others (1987) 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Division Bench of Hon ble ITAT in the case of UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. (ITA NO.2831/BANG/2017). However, the matter raised therein had not reached its finality. It was not a verdict in favour of the department. In fact, if we refer to the speaking order in the case, which read as shown hereunder as ready reference, we come to know that the appeal by the assessee is allowed. Since all these new points have been raised during the course of hearing before us and according to us all these points goes to the root of the case, we are of the view that proper adjudication of the issues is required by the AO . We accordingly set aside the order of the CIT(A) and restore the matter to the AO to re examine all these aspects by making necessary enquiry and investigation and also by passing a reasoned order in this regard. Since we have restored the matter to the AO, we find no justification to adjudicate the issue raised on merit. Accordingly, order of the CIT(A) is set aside and matter is restored to the AO for adjudication of the impugned issue in terms indicated above. 14. In the result, appeal of the assessee stands allowed for statistical purposes. 4. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is held to be incorrect. However, the other conditions for allowing deduction u/s. 80P(2)(a)(i) of the Act needs to be examined by the AO. I, therefore, remand the question of allowing deduction u/s. 80P(2)(a)(i) of the Act to the AO, except the issue already decided above. 12. In the result, appeal by the Assessee is allowed for statistical purposes. 7. In the recent decisions relating to Siddartha Pattina Souharda Sahakari Niyamitha, Manvi (ITA No. 1234/Bang/2019) and also, Halapur Pattina Souharda Sahakari Niyamitha (ITA No 1233/Bang/2019), both of which were passed very recently (26-07-2019), the same Income Tax Appellate Tribunal, Bengaluru, has given the verdict as under. 11. The above discussion would show that souharda co-operatives are also one form of co-operative societies registered under a law in force in the State of Karnataka for registration of cooperative societies. Therefore the conclusion of the revenue authorities that co-operative societies and co-operatives are different and that co-operative registered as Souharda Sahakari cannot be regarded as co-operative societies is unsustainable. We therefore hold that the Assessee should be allowed deduction u/s.80P(2)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of deposits in co-operative bank as well as the other bank is concerned, the Appellant society is registered under the provisions of THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 where in the Act stipulates that certain funds of the society are to be invested outside the business. 12. As per the above norms, Appellant society had to make the deposits outside its business as under # Particulars Total Required Amount invested 1 General Reserve 1,73,76,358 100% 1,73,76,358 2 Deposits collected from members 49,89,56,553 20% 9,97,91,310 3 Total Investment required 11,71,67,668 4 Deposits made 8,02,31,170 5 Excess deposits -Nil- 6 Total Interest earned 82,90,021 7 Interest apportionable to business income 82,90,021 8 Interest to be claimed u/s 80P2(a)(i) 82,90,021 13. Total investment made by the society in order to comply with the statutory requirements as under Sl no Particular Nature of deposit Amount Interest Earned 01 Karnataka Bank Investments to meet the 25,17,772 2,13,584 02 DCC Bank 3,52,76,090 39,17,751 03 Canara Bank statutory requirements 13,48,987 1,17,987 04 Karnataka Gramina Bank 2,60,13,267 32,07,036 05 State Bank Of India 83,64,737 5,62,933 06 Interest received from Sav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained amount which was payable to its members from whom produce was bought, was invested in a short term deposit or security. Such an amount which was retained by the assessee-.society was a liability and it was shown in the balance sheet on the liability side. Therefore, to the extent, such interest income cannot be said to be attributable to either to the activity mentioned in section 80P(2)(a)(i) of the act or under 80P(2)(a)(iii) of the Act therefor in the facts of the said case, the Apex court held the assessing officer was right in taxing the interest income indicated above u/s 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear: supreme court was not laying down any law. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profit and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore they had deposited the money in a bank so as to earn interest th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in light of the recent judgment of the Hon ble Apex Court in the case of Kerala State Co-operative Agricultural Rural Development Vs. AO reported in 458 ITR 384 (SC). It is ordered accordingly 21. In addition to this We would like to quote the case law which is recently ordered by Income tax Appellate Tribunal Banglore -A bench in the case of M/s. Sumantha Pathina Souharda Sahakari Niyamita, has come up with the opinion that The jurisdictional High Court in the case of PCIT Vs. Totgars Sales Society (supra) had categorically held that the interest income received from Scheduled Banks / Co-operative Banks are not entitled to deduction under section 80P(2)(a)(i) or under section 80P(2)(d) of the Act. However, the latest judgment of the Hon ble Apex Court in the case of Kerala State Co-operative Agricultural and Rural Development Bank Ltd., Vs. AO reported in 458 ITR 384 (SC) had categorized various co-operative banks as co-operative societies thereby granting the benefit of deduction under section 80P of the Act to the said co-operative banks. Though the Hon ble Apex Court was considering the interpretation of section 80P(4) of the Act, when a cooperative bank is deemed to be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r determination of net income after set off of cost of funds/interest expenditure in earning the interest income for the purpose of taxability u/s. 56 of the Act as per law. Needless to say that the assessee may be given reasonable opportunity of being heard and the assessee is directed to produce all the relevant documents to substantiate its claim and avoid seeking unnecessary adjournment for early disposal of the case. This issue is allowed for statistical purposes. 24. In addition to this We would like to quote the case law which is recently ordered by Income tax Appellate Tribunal Banglore -C bench in the case of Siddhi Vinayaka Souhardha Pattina Sahakari Niyamita Kalaburagi., has come up with the opinion that the assessee is eligible for claim of its cost of funds on the entire interest income The assessee has relied on the judgment of Co-ordinate Bench of the Tribunal in case of The West Coast Paper Mill Employees Souhardha Credit Co-op. Ltd.. Accordingly, the assessee is directed to provide the details of cost of funds before the assessing officer. Therefore for allowing cost of funds, we are remitting this issue to the assessing officer for determining the cost of funds fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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