Delhi High Court - Orders
Pr. Commissioner Of Income Tax-12 vs Jawala Cooperative Thrift And Credit ... on 27 February, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Purushaindra Kumar Kaurav
$~16 & 17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 370/2023
PR. COMMISSIONER OF INCOME TAX-12..... Appellant
Through: Mr. Sanjeev Menon, Jr.
Standing Counsel for Mr.
Zoheb Hossain, Sr. Standing
Counsel.
versus
JAWALA COOPERATIVE THRIFT AND CREDIT
SOCIETY LTD ..... Respondent
Through: Mr. Rajesh Mahna, Mr.
Ramanand Roy, Mr. Mayank K.
and Mr. Shiva Narang, Advs.
17
+ ITA 371/2023
PR. COMMISSIONER OF INCOME TAX -12 ..... Appellant
Through: Mr. Sanjeev Menon, Jr.
Standing Counsel for Mr.
Zoheb Hossain, Sr. Standing
Counsel.
versus
JAWALA CO-OPERATIVE THRIFT AND CREDIT
SOCIETY LIMITED ..... Respondent
Through: Mr. Rajesh Mahna, Mr.
Ramanand Roy, Mr. Mayank K.
and Mr. Shiva Narang, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV
ORDER
% 27.02.2024
1. Having heard learned counsels for parties, we are of the opinion that this appeal would merit admission on the following question:-
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/03/2024 at 20:44:14 A. Whether the deposits made by the assessee in a cooperative bank would fall within the ambit of Section 80P(2)(d) of the Income Tax Act, 1961 ['Act']?
2. Mr. Menon, learned counsel submits that whether the deposit was made in a specified bank or a cooperative bank, the same would have no bearing on the question which stands posited since the deposit is in no manner connected with the activities of a cooperative society.
3. According to learned counsel, if a mere deposit in a scheduled or commercial bank were to not fall within the ambit of Section 80P(2)(a) of the Act, the same cannot be introduced by virtue of clause (d) of the said provision.
4. Learned counsel has also drawn our attention to the following observations that were rendered by the Karnataka High Court in Principal Commissioner of Income-tax and Another vs. Totagars Co-operative Sale Society [2017 SCC OnLine Kar] "11. The assessment years involved in the present batch of appeals are the assessment years 2007-08 to 2011-12. The bone of contention is that the deduction under section 80P(2) of the Act is now claimed by the respondent-assessee under section 80P(2)(d) of the Act and not under section 80P(2)(a) of the Act. The reason is that now the investments and deposits after the Supreme Court's decision against the assessee reported in Totgar's Co-operative Sale Society Limited v. ITO (2010) 322 ITR 283 (SC), the assessee has shifted the deposits and investments from scheduled banks to co- operative bank and such co-operative bank is essentially a co- operative society also and clause (d) allows deduction of income by way of interest or dividends derived by the assessee-co- operative society from its investments with any other co-operative society.
12. The sheet anchor of the contention of the learned counsel for the assessee misses two essential points required for claiming the exemption or 100 per cent. deduction from gross total income for a co-operative society : (i) that the character or nature of income, namely interest on investments or deposits, does not change irrespective of the fact whether it is earned or received from a schedule bank or co-operative bank. (ii) that what the hon'ble Supreme Court held in the case of the respondent-assessee itself, This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/03/2024 at 20:44:14 against the assessee, was that such interest income on its surplus and idle funds not immediately required for its business, is not income from business taxable under section 28 of the Act, but was taxable as "income from other sources" under section 56 of the Act, whereas for availing of the exemption or 100 per cent. deduction under section 80P of the Act the income is specified in clauses (a) to (f) of sub-section (2) of section 80P of the Act should be its business or operational income.
13. What section 80P(2)(d) of the Act, which was though not specifically argued and canvassed before the hon'ble Supreme Court, envisages is that such interest or dividend earned by an assessee-co-operative society should be out of the investments with any other co-operative society. The words "co-operative banks" are missing in clause (d) of sub-section (2) of section 80P of the Act. Even though a co-operative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is the banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949. Only the Primary Agricultural Credit Societies with their limited work of providing credit facility to its members continued to be governed by the ambit and scope of deduction under section 80P of the Act.
14. The banking business, even though run by a co-operative bank is sought to be excluded from the beneficial provisions of exemption or deduction under section 80P of the Act. The purpose of bringing on the statute book sub-section (4) in section 80P of the Act was to exclude the applicability of section 80P of the Act altogether to any co-operative bank and to exclude the normal banking business income from such exemption/deduction category. The words used in section 80P(4) are significant. They are : "The provisions of this section shall not apply in relation to any co- operative bank other than a primary agricultural credit society. . .". The words "in relation to" can include within its ambit and scope even the interest income earned by the respondent-assessee, a co- operative society from a co-operative bank. This exclusion by section 80P(4) of the Act even though without any amendment in section 80P(2)(d) of the Act is sufficient to deny the claim of the respondent-assessee for deduction under section 80P(2)(d) of the Act. The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural credit society.
15. The amendment of section 194A(3)(v) of the Act excluding the co-operative banks from the definition of "co-operative society" by the Finance Act, 2015 and requiring them to deduct Income-tax at source under section 194A of the Act also makes the legislative intent clear that the co-operative banks are not that specie of genus co-operative society, which would be entitled to exemption or This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/03/2024 at 20:44:15 deduction under the special provisions of Chapter VI-A in the form of section 80P of the Act.
16. If the legislative intent is so clear, then it cannot be contended that the omission to amend clause (d) of section 80P(2) of the Act at the same time is fatal to the contention raised by the Revenue before this court and sub silentio, the deduction should continue in respect of interest income earned from the co-operative bank, even though the hon'ble Supreme Court's decision in the case of respondent-assessee itself is otherwise.
17. As stated above, it is the character and nature of income which determines its taxability or exemption from taxability. It is needless to say that the provisions relating to exemption and deduction need to be strictly construed and no liberal interpretation or intendment can be inferred in such provisions. What was clearly held to be not exempt and not deductible under section 80P(2)(a) of the Act by the hon'ble Supreme Court in the case of respondent-assessee, cannot be contrarily held as exempted and deductible now for these years, merely because the depository bank, with whom the investments were made by the respondent-assessee happens to be a co-operative bank. We cannot appreciate this distinction so as not to apply the binding precedent of the hon'ble Supreme Court for subsequent years merely on account of the change of the bank where such deposits were made by the respondent-assessee, all other facts remaining the same, particularly the nature and character of the income earned by it. The interest income of the assessee continues to be not attributable to its business operations even in these subsequent years.
18. The contention of the learned counsel for the assessee that a Co-ordinate Bench of this court dismissed the Revenue's appeals by referring, but not applying the decision of the hon'ble Supreme Court, we observe with greatest respects that we do not find any detailed discussion of the facts and law pronounced by the hon'ble Supreme Court in the case of the respondent-assessee in the said order passed by the Co-ordinate Bench and therefore, we are unable to follow the same in the face of the binding precedent laid down by the hon'ble Supreme Court. We find in paragraph 8 of the said order passed by a Co-ordinate Bench that the learned judges have observed that "the issue whether a co-operative bank is considered to be a co-operative society is no longer res integra, for the said issue has been decided by the Income-tax Appellate Tribunal itself in different cases. . .". No other binding precedent was discussed in the said judgment. Of course, the Bench has observed that a co-operative bank is a specie of the genus co- operative society, with which we agree, but as far as applicability of section 80P(2) of the Act is concerned, the applicability of the Supreme Court's decision cannot be restricted only if the income was to fall under section 80P(2)(a) of the Act and not under section 80P(2)(d) of the Act.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/03/2024 at 20:44:15
19. In our opinion, it would not make a difference, whether the interest income is earned from investments/deposits made in a scheduled bank or in a co-operative bank. Therefore, the said decision of the Co-ordinate Bench is distinguishable and cannot be applied in the present appeals, in view of the binding precedent from the hon'ble Supreme Court."
5. Let the appeals be called again on 16.05.2024.
YASHWANT VARMA, J.
PURUSHAINDRA KUMAR KAURAV, J.
FEBRUARY 27, 2024/RW This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 04/03/2024 at 20:44:15