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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 ..... t Income earned by investing Income derived from Business and Profession by a Co-Operative Society was eligible for deduction u/sec.80P(2)(a) - Revenue has not brought to our notice any contrary decision of Hon ble Jurisdictional High Court. The Hon ble Bombay High Court in the case of Smt.Godavaridevi Saraf [ 1977 (9) TMI 24 - BOMBAY HIGH COURT ] 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. Therefore, we hold that assessee is eligible for deduction u/sec.80P(2)(a)(i) of the Act. Assessee appeal allowed. - SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR.DIPAK P. RIPOTE, ACCOUNTANT MEMBER For the Assessee : Shri S.N.Puranikh AR For the Revenue : Shri Sourabh Nayak Addl.CIT(DR) ORDER PER DR. DIPAK P. RIPOTE, AM: The Revenue has filed two appeals for two separate Assessment Years i.e. 2017-18 and 2018-19 against two separate orders of ld. Commissioner of Income-tax(Appeals)[NFAC], both dated 06.12.2023 passed under section 250 of the Income Tax Act, 1961. The assessee has filed two cross objection in C.O.No.23/PUN/2024 and C.O.No. 24/PUN/2024 to support order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case and in law, Ld.CIT(A) erred in holding that the interest income of Rs.1,61,20 972/- 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 Hon ble 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.1,61,20,972/- 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 Hon ble 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 relying upon the decision of the Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd. and ignoring the decision of the Hon ble Gujarat High Court in the case of State Bank of India Vs CIT 389 ITR 578 (GUJ), Wherein it has been held that interest income on depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on the deposits to nominal members. Therefore, the AO held that assessee has violated provisions of Maharashtra Cooperative Societies Act. However, ld.AO has erred as assessee has not violated any provision of the Maharashtra Co-operative Societies Act. The Maharashtra Co-operative Societies Act does not prohibit accepting deposits from nominal members, therefore, AO has erred. Ld.CIT(A) has discussed the Maharashtra Cooperative Societies Act and applicable case laws and allowed assessee s appeal. Therefore, ld.CIT(A) s order may kindly be sustained. 2.1 The ld.AR for the Assessee relied on the following case laws: Nashik Road Nagari Sahakari Patsanstha Ltd. (B Bench) Pune 93 ITR (Trib.) 44 Pune Mavilaavi Service Co-operative Bank Ltd. 431 ITR 161 (SC) Sarvodav Gramin Bigarsheti Sahakari Patsanstha Maryadit ITA No.1606/PUN/2018 Others Jalgaon District Central Co-operative Bank Ltd. Jankalyan Nagari Sahakari Patsanstha Maryadit 24 Taxmann.com 127 Pune Nivrutiseth Gramin Bigarsheti Sahakari Patsanstha Maryadit ITA No.1562/PUN/2018 dated 15/03/2022. Nirmiti Nagari Sahakari Patsanstha Maryadit ITA No. 442/PUN/2022 dated 26/10/2022 Ratnadeep Sahakari Nagari Patsanstha Maryadit IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Societies Act as held by Assessing Officer. 5.2 Section 43 of Maharashtra Co-operative Societies Act is reproduced as under : 43. Restrictions on borrowings. (1) A society shall receive deposits and loans from members and other persons, only to such extent and under such conditions, as may be prescribed, or specified by the byelaws of the society. 5.3 Thus, Maharashtra Co-operative Societies Act permits society to receive deposits from members and other persons. It means there is no bar to receive deposits from nominal members. Hence, assessee has not violated Maharashtra Co-operative Societies Actby accepting deposits from nominal members. We are aware that there has been an amendment in 2019, however, said amendment does not affect the deposits from nominal members. The amended section is as under : 24. (1) Notwithstanding anything contained in section 22, a society may admit any person as a 4[nominal or associate member]. (2) A nominal member 5* * shall not be entitled to any share in any form whatsover in the profits or assets of the society as such member. A nominal 5* * member shall ordinarily not have any of the privileges and rights of a member, but such a member, or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of a proviso to the main provision contained in section 80P(1)and (2). This proviso specifically excludes only co-operative banks, which are cooperative societies who must possess a licence from the RBI to do banking business. Given the fact that the assessee in that case was not so licenced, the assessee would not fall within the mischief of section 80P(4). .. We now turn to the proper interpretation of section 80P of the Income-tax Act. Firstly, the marginal note to section 80P which reads Deduction in respect of income of co-operative societies is important, in that it indicates the general drift of the provision. This was so held by this Court in K.P. Varghese v. ITO [1981] 7 Taxman 13/131 ITR 597 as follows: 9. This interpretation of sub-section (2) is strongly supported by the marginal note to Section 52 which reads Consideration for transfer in cases of understatement . It is undoubtedly true that the marginal note to a section cannot be referred to for the purpose of construing the section but it can certainly be relied upon as indicating the drift of the section or, to use the words of Collins, M.R. in Bushel v. Hammond [1904] 2 KB 563 to show what the section is deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised Ground No.2 that ld.CIT(A) erred in allowing interest income earned from fixed deposits kept with various co-operative banks ignoring the decision of Hon ble Gujarat High Court in the case of State Bank of India Vs. CIT 389 ITR 578 (Guj) dated 25.04.2016. 6.1 The Ground No.2 raised by Revenue is not emanating from the assessment order. Revenue cannot improve the assessment order at this stage. Be it as it may be, it is observed that assessee has earned interest income from fixed deposits kept with Pune District Central Co-operative Bank Ltd, (PDCCBL), the said details are available at page 55 of the paper book filed by the assessee. We have already mentioned that the AO in the assessment order has not discussed this issue and has not analysed these facts. However, the decision of Hon ble Gujarat High Court in the case State Bank of India(supra) is distinguishable on facts as the issue in that case was pertaining to Section 263 of the Act. 6.2 The Hon ble High Court of Andhra Pradesh and Telangana in the case of Vavveru Co-operative Rural Bank Ltd. [2017] 396 ITR 371 analysed the provisions of Section 80P, succinctly distinguished the decision of Hon ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationalised banks is admittedly the income that the petitioners derived from the activities listed in sub-clauses (i) to (vii) of clause (a). The character of such income may not be lost, especially when the statute uses the expression attributable to and not 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 far as it relates to treating the interest income as something not allowable as a deduction under section 80P(2)(a), is set aside. Unquote. 6.3 Thus, Hon ble High Court of AP TS held that Interest Income earned by investing Income derived from Business and Profession by a Co-Operative Society was eligible for deduction u/sec.80P(2)(a) of the Act. The ld.DR for the Revenue has not brought to our notice any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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