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TMI Blog2022 (3) TMI 1633X X X X Extracts X X X X X X X X Extracts X X X X ..... d interest income of INR 3,80,214/- consisting of (a) interest on fixed deposit with Mumbai District Central Co-operative Bank (MDCC) amounting to INR 2,53,915/-, (b) interest on fixed deposit with Sarswati Co-operative Bank Ltd. (SCB) amounting to INR 84,853/- and (c) interest on savings account of INR 41,446/-. Appellant filed its Income-Tax return on 25.09.2014 claiming deduction under Section 80P(2)(d) of the Act. 3. During the assessment proceedings, the AO noticed that saving bank interest of INR 41,446/- was credited to the P & L account whereas interest received from cooperative banks amounting to INR 3,38,768/-. Therefore, the Assessee was asked to show cause why the aforesaid interest should not be added back to the total income of the Assessee and deduction claimed under Section 80P(2)(d) be disallowed. In response to the said show cause notice the Appellant filed submissions explaining that interest income of INR 3,38,763/-, consisting of interest of INR 2,53,915/-, received from MDCC and INR 84,853/- received from SCB, is eligible for deduction under Section 80P(2)(d) of the Act as the same has been received from cooperative banks. However, the Assessing Officer added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on the decision of the Hon'ble Kerala High Court in the case of Peroorkada Service Co-operative Bank Ltd. (ITA No. 323 of 2019) as well as decisions of the Mumbai Bench of the Tribunal in the case of Kaliandas Udyog Bhavan Premises Co-operative Society Ltd. (ITA No. 6574/Mum/2017) and Land's End Co-operative Housing Society Limited (ITA No. 3566/Mum/2014). 7. Per contra, Ld. Departmental Representative relied upon the order passed by the Assessing Officer (AO) and CIT(A) to contend that the judgment of Hon'ble Supreme Court in the case of Totagar's Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (S.C.) is applicable in the facts of the present case and the AO was correct in denying the deduction claimed by the Appellant under Section 80P of the Act. 8. We have heard the rival submissions, perused the material on record and examined the legal position. 9. The Hon'ble Supreme Court had, while interpreting the provisions of Section 80P(2)(a)(i) of the Act in the case of Totgars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283 (SC), took note of the fact the expression "profits and gains of business" has been used in Section 80P(2)(a)(i) of the Act and ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression "profits and gains of business". Such interest income cannot be said also to be attributable to the activities of the society, namely, carrying on the business of providing credit facilities to its members or marketing of the agricultural produce of its members. When the assessee-Society provides credit facilities to its members, it earns interest income. As stated above, in this case, interest held as ineligible for deduction under section 80P(2)(a) is not in respect of interest received from members. In this case, we are only concerned with interest which accrues on funds not required immediately by the assessee(s) for its business purposes and which have been only invested in specified securities as "investment". Further, as stated above, assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this "retained amount" which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities. Such an amount, which was retained by the assessee-Society, was a liability and it was shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the whole of such income under section 80P(2)(d) of the Act. However, interest earned from investments made in any bank, not being a cooperative society, is not deductible under section 80P(2)(d) of the Act." 12. Similar view was taken by the Hon'ble Karnataka High Court in the case of Pr. CIT Vs. Totagars co-operative Sale Society [2017] 392 ITR 74 (Karnataka) wherein it was held as under: "10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co-operative Society Bank would be deductible from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. 11. The learned counsel has relied on the case of Totgars Cooperative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. Before proceeding further we may herein reproduce the relevant extract of the said statutory provision, viz Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. "80P(2)(d) (1) Where in the case of an assessee being a cooperative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following namely:- (a)......................................................................... (b)......................................................................... (c)........................................................................ (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income" Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 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 following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 32 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITORange-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), had also held that the interest income earned by the assessee on its investments held with a cooperative bank would be eligible for claim of deduction under Sec. 80P(2)(d) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative society would not be entitled to claim of deduction under Section 80P(2)(d). We however find that as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), where there is a conflict between the decisions of nonjurisdictional High Court"s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon'ble High Court of jurisdiction, we respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon'ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it was observed that the interest income earned by a co-operative society on its investments held with a co operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. 9. We thus in the backdrop of our aforesaid observations are unable to persuade ourselves to be in agreement with the view taken by the lower autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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