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TMI Blog2024 (6) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the case of the Assessee neither the AO nor the CIT(A) has stated that the Assessee is in receipt of License from RBI. Therefore, in the absence of Banking License, respectfully following the Hon ble Supreme Court (Supra), it is held that the assessee is not a Co- Operative Bank as envisaged in section 80P(4) of the Income Tax Act. Hence, provisions of Section 80P(4) will not be applicable in the case of the Assessee. As specifically mentioned in the Assessment Order that Assessee has invested Surplus funds in the PDCC and other banks and earned Interest Income. Thus, it is an admitted fact by the Assessing officer that the investment is of the income derived from the Business of the assessee. As per Assessment Order the main object of the assessee society is to provide credit facility to its members and also accept deposits from members. Thus, admittedly the assessee is providing credit facility to its members. Thus, the investments made by the assessee are from the Surplus generated by assessee during the course of providing credit facility to its members and the assessee has earned Interest Income by investing these surplus funds in PDCC Bank. Therefore, the section 80P(2)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbers despite that the AO has not pointed out / brought on record any such instance of having non-member in the assessment order. Such general direction may kindly be set aside or withdrawn. 6. The assessee hereby requests for allowing any other relief as available under the law. 7. The assessee craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal." Brief facts of the case : 2. In this case, assessee is a Co-operative Society engaged in the business of providing credit facilities to its members. Assessee is registered under Maharashtra State Co-Op Society Act, 1960, the Ld.AR filed copy of registration certificate dated 12/03/1986 (page 21 of the Paper book). For A.Y.2017-18, assessee filed return of income on 31.10.2017 declaring total income at Rs.NIL after claiming deduction under section 80P. In the Assessment Order the AO observed that the assessee has invested surplus fund in PDCC and other Banks, and earned interest income of Rs.1,26,45,671/-.In para 9 of the Assessment Order the AO held that the Assessee society can be treated as Co-Operative banks as paid-up share capital and reserve are more than Rs.1 lac. The Assessing Officer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court decision in the case of Totagars Co-operative Sale Society and Mavilayi Service Cooperative Bank; it is hereby held that the interest income from deposits kept with Schedule Banks and Cooperative Banks are to be taxed under the head income from other sources and their nature of income cannot be changed to business income. 7. However, the Pune ITAT is consistently deciding and holding the issue of deduction of bank interest from coop banks and scheduled banks in assessee's favour. It has been held by Pune ITAT in a number of cases that interest income earned by a co-operativesociety on deposits made out of surplus funds with co-operative banks as well as scheduled banks qualifies for deduction both under section 80P(2)(a)(i) and section 80P(2)(d). 8. In this respect we are enclosing latest favourable judgements delivered by the Hon. Pune ITAT bench on the issue of deduction of bank interest u/s 80P. 9. [2024] 158 taxmann.com 322 (Pune - Trib.) IN THE ITAT PUNE BENCH 'SMC' in Kolhapur District Central Co-Op. Bank Kanista SevakanchiSahakari Pat Sanstha Ltd. v. Income-tax Officer, IT APPEAL NO. 1365 (PUNE) OF 2023 [A.Y. 2018-19] dated - JANUARY 1,2024. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the Assessee neither the AO nor the CIT(A) has stated that the Assessee is in receipt of License from RBI. Therefore, in the absence of Banking License, respectfully following the Hon'ble Supreme Court (Supra), it is held that the assessee is not a Co- Operative Bank as envisaged in section 80P(4) of the Income Tax Act. Hence, provisions of Section 80P(4) will not be applicable in the case of the Assessee. 5.5 It is specifically mentioned in the Assessment Order that Assessee has invested 'Surplus funds' in the PDCC and other banks and earned Interest Income. Thus, it is an admitted fact by the Assessing officer that the investment is of the income derived from the Business of the assessee. As per para 7.1 of the Assessment Order the main object of the assessee society is to provide credit facility to its members and also accept deposits from members. Thus, admittedly the assessee is providing credit facility to its members. Thus, the investments made by the assessee are from the Surplus generated by assessee during the course of providing credit facility to its members and the assessee has earned Interest Income by investing these surplus funds in PDCC Bank. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by thepetitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had investedthose amounts in fixed deposits in other co-operative societies or in the construction of godowns andwarehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the casemay be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly theincome that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). Thecharacter of such income may not be lost, especially when the statute uses the expression "attributable to" andnot any one of the two expressions, namely, "derived from" or "directly attributable to". 37. Therefore, we are of the considered view that the petitioners are entitled to succeed. Hence, the writ petitions are allowed, and the order of the Assessing Officer, in so fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Karnataka High Court in Tumkur Merchants Souharda Credit Cooperative Ltd. Vs. ITO (2015) 230 taxmann 309 (Kar.) allowing the deduction u/s. 80P on interest income and the Hon'ble Delhi High Court in Mantola Cooperative Thrift Credit Society Ltd. Vs. CIT (2014) 110 DTR 89 (Delhi) not allowing deduction u/s.80P on interest income, earned from banks under similar circumstances. Both the Hon'ble High Courts have taken into consideration the ratio laid down in the case of Totgar's Cooperative Sale Society Ltd. 322 ITR 283 (SC). There being no direct judgment from the Hon'ble jurisdictional High Court on the point, the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) preferred to go with the view taken in favour of the assessee by the Hon'ble Karnataka High Court in the case of Tumkur Merchants Souharda Credit Cooperative Ltd. (supra). In the absence of their being any change in the legal position prevailing on this issue after the passing of the order by the Pune Bench of the Tribunal in Shri Laxmi Narayan Nagari Sahakari Pat Sanstha Maryadit (supra) and host of other orders reiterating the similar view, respectfully following the precedent, we uphold t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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