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TMI Blog2024 (8) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... and other financial institutions has rendered the provisions of Section 80P(2)(a)(i) nugatory as the said section of the Act allows deduction to a cooperative Society engaged in carrying on business of banking or providing credit facilities to its members ? B. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in holding that the interest income of Rs.1,47,38,052/- earned by the assessee Cooperative society from fixed deposits kept with various cooperative banks was allowable as deduction u/s 80P(2)(a)(i) of the IT Act, ignoring the decision of Honble High Court of Gujarat in case of State Bank of India vs CIT 389 ITR 578 (Guj) dated 25.04.2016? C. On the facts and circumstances of the case and in law Ld. CIT (A) erred in holding that the interest income of Rs.1,47,38,052/- earned by the assessee Cooperative Society from fixed deposits kept with various cooperative banks was allowable as deduction u/s 80P(2)(d) of the IT Act, ignoring the decision of Honble High Court of Karnataka in case of PCIT Vs. The Totgars Co-operative Sale Society (2017) 395 ITR 611 dated 16.06.2017? D. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of allowability of deduction u/s. 80P(2)(d) in respect of Interest of Rs.24, 08, 264/- on Deposits with Co-operative Bank. & Dividend of Rs.50, 050/-Cross Objector prays to Confirm the Claim of Deduction u/s. 80P(2)(d) following Consistent Pune ITAT Decision. 2. Cross Objector Objects CIT(A) decision on refusing to grant deduction u/s. 80P(2)(l)(a) in respect of Interest of Rs.40, 483/- on Deposits/Accounts with non- Cooperative Banks. 3. Cross Objector prays for Confirmation of CIT(A) Order in respect of Allowing deduction u/s. 80P(2)(l)(a) of Rs.1, 47, 38, 050/- 4. Cross Objector prays to add, alter, amend any ground of Cross Objection and/or to withdraw the ground of Cross Objection." Submission of ld.AR : 2. The ld. Authorised Representative(ld.AR) of the assessee filed a paper book. The ld.AR submitted that assessee is registered under Maharashtra Co-op Societies Act, 1960 on 09/11/1995. The area of operation of the society is confined to employees of Defense Institute located in Pune district, who are eligible to become member of the society. This is Employee Credit Cooperative Society. The other class of members is Nominal Member. The Nominal Members ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as having 125 nominal members. Assessee has accepted deposits from these nominal members. Therefore, assessee is not eligible for deduction u/sec.80P(2)(a) of the Act. ITA No.450/PUN/2024 for A.Y.2017-18 Findings & Analysis: 4. We have heard both the parties and perused the record. Assessee had filed Return of Income on 06.10.2017. In the Return of Income assessee had claimed deduction u/sec.80P(2)(a) of the Act. Assessee is registered under Maharashtra Co-operative Societies Act, 1960 vide Certificate dated 09.11.1995 which is at page no.22 and 23 of the paper book. Admittedly, assessee is a Co-operative Credit Society, its members are mainly members of defense institutes located in PuneDistrict. On perusal of the assessment order, it is observed that Assessing Officer has denied assessee's claim of deduction u/sec.80P(2)(a) of the Act, only on one ground that assessee was having nominal members and assessee has accepted fixed deposits from nominal members. Therefore, AO held that as per section 80P(2)(a), profits and gains of business attributable to the activity of providing credit facility to members only is allowed, whereas in this case, assessee has obtained deposits from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be specified in the bylaws of the society." 5.4 Thus, assessee has not violated provisions of Maharashtra Co-operative Societies Act by admitting nominal members, therefore, AO has erred in rejecting assessee's claim of deduction u/sec.80P(2)(a) of the Act on the ground that assessee has violated provisions of Maharashtra Co-operative Societies Act and hence assessee's income is not attributable to the activity of providing credit facility to its members. It is observed that assessee provided credit facility exclusively to its members. Also, as per Maharashtra Co-operative Societies Act, members include nominal members. 5.5 The Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd.Vs. Commissioner of Income Tax, Calicut 431 ITR 1 (SC) dated 12.01.2021 held as under : "21. An analysis of this judgment would show that the question of law that was reflected in paragraph 5 of thejudgment was answered in favour of the assessee. The following propositions may be culled out from thejudgment:(I) That section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in orderto encourage and promote the growth of the co-operative sector gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section(vide Bengal Immunity Company Limited v. State of Bihar [1955] 2 SCR 603])." 28. Secondly, for purposes of eligibility for deduction, the assessee must be a "co-operative society". A co-operative society is defined in Section 2(19) of the IT Act, as being a co-operative society registered Either under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of cooperative societies. This, therefore, refers only to the factum of a cooperative society being registered under the 1912 Act or under the State law. For purposes of eligibility, it is unnecessary to probe any further as to whether the co-operative society is classified as X or Y. 29. Thirdly, the gross total income must include income that is referred to in sub-section (2). 30. Fourthly, sub-clause (2)(a)(i) with which we are directly concerned, then speaks of a co-operative society being "engaged in" carrying on the business of banking or providing credit facilities to its members. What is important qua sub-clause (2)(a)(i) is the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of subsection (2) of section 80P or not. 9. While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Cooperative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. ........................ 34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co-operative credit society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Jurisdictional High Court. Therefore, as per rule of precedence, we are duty bound to follow the decision of Hon'ble Andhra Pradesh and Telangana High Court. The Hon'ble Bombay High Court in the case of Smt.Godavaridevi Saraf Vs. CIT, 113 ITR 589(Bom) has held that in the absence of any contrary decision of Hon'ble Jurisdictional High Court, decision of Non-Jurisdictional High Court is binding on the Tribunal. 6.4 Therefore, respectfully following the Hon'ble Supreme Court and Hon'ble Andhra Pradesh and Telangana High Court(supra), we hold that assessee is eligible for deduction u/sec.80P(2)(a)(i) of the Act. Accordingly, Ground No.1 to 4 raised by the Revenue are dismissed. ITA No.451/PUN/2024 for A.Y.2018-19 7. Since we have already discussed the issue at length and the facts of ITA No.450/PUN/2024 are absolutely similar to the facts of ITA No.451/PUN/2024, therefore, our decision in ITA No.450/PUN/2024 shall apply mutatis mutandis to this appeal also, accordingly, grounds of appeal raised by the Revenue are dismissed. 8. In the result, appeal of the Revenue in ITA No.451/PUN/2024 is dismissed. C.O.Nos.23 & 24/PUN/2024 (Assessee) 9. Since we have already decided the ap ..... 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