Income Tax Appellate Tribunal - Ahmedabad
The Banas Dairy Employees Credit & ... vs The Acit,B.K.Circle,, Palanpur on 11 May, 2022
आयकर अपीलीय अिधकरण, अहमदाबाद यायपीठ
IN THE INCOME TAX APPELLATE TRIBUNAL,
'' SMC'' BENCH, AHMEDABAD
(CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD)
BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER
And
SHRI SIDDHARATHA NAUTIYAL, JUDICIAL MEMBER
आयकर अपील सं./ITA No. 3/AHD/2022
िनधारण वष/Asstt. Year: 2017-2018
Banas Dairy Employees Credit & Supply A.C.I.T.,
Consumers Co-op. Society Limited, Vs. B.K. Circle,
Banas Dairy, Palanpur.
Palanpur,
Banaskantha-385001.
PAN: AAAAB0631R
(Applicant) (Respondent)
Assessee by : Shri S.N. Divetia, A.R
Revenue by : Shri Umesh Agarwal, Sr.D.R
सुनवाई क तारीख/Date of Hearing : 05/05/2022
घोषणा क तारीख /Date of Pronouncement: 11/05/2022
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 06/11/2021 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-2018.
ITA no.3/AHD/2022 A.Y. 2017-18 2
2. The assessee has raised the following grounds of appeal:
1. The Hon.CIT(A). National Faceless Appeal Centre, Delhi, has grievously erred in making the addition of Rs.21,41,377/- u/s.80P(2)(d) of the I.T. Act, 1961 being the interest income of the Co-op. society without considering the submission of the appellant stating that the interest/dividend income received from co.op. bank is eligible for the deduction u/s.80P(2)(d) of the I.T. Act or under the head of Business Income.
2. The appellant therefore requests that the addition of interest of Rs.21,41,377/- made by the Ld.AO and confirmed by the Hon. CIT(A) National Faceless Appeal Centre, Delhi u/s.80P(2)(d) should be deleted looking to the merits of the case.
3. The appellant reserves the right to add, amend, alter or modify any of the grounds stated herein above either before or at the time of hearing.
3. The only issue raised by the assessee is that the learned CIT-A erred in confirming the order of the AO by sustaining the disallowance of the deduction claimed by the assessee under section 80P(2)(d) of the Act with respect to the interest income from the Nationalized banks/co-operative banks.
4. The facts in brief are that the assessee in the present case is a co-operative society and engaged in the business of providing credit facilities to its members. The assessee in the year under consideration besides the income by way of interest from the members, has also shown interest income on the deposits made with nationalized banks and co-operative banks amounting to ₹ 21,41,377.00 only. The assessee on such interest income claimed deduction under section 80P(2)(d) of the Act. However, the AO was of the view that such interest income was not eligible for deduction under section 80P(2)(d) of the Act as the same is not arising from the deposits with the co-operative societies.
5. On appeal, the learned CIT-A upheld the order of the AO.
6. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.
ITA no.3/AHD/2022 A.Y. 2017-18 3
7. The learned AR before us submitted that the impugned amount of interest of ₹ 21,41,377.00 consists of interest from the co-operative banks as well as from the nationalized banks amounting to ₹ 16,62,756.00 and 4,78,621.00 respectively. According, to the learned AR, the amount of interest income from the co-operative banks amounting to ₹ 16,62,756.00 is eligible for deduction under section 80P(2)(d) of the Act. The learned AR in support of his contention relied on the order of this tribunal in the case of the Peoples Co-operative Credit Society Ltd versus ACIT in ITA Nos. 1891/AHD/2014 and 2987/AHD/2015 for the assessment years 2011-12 and 2012-13. Likewise, the learned AR also relied on the judgment of Hon'ble Gujarat High Court in the case of CIT versus Sabarkantha District Co-operative Milk Producers Union Ltd. in tax appeal No. 473 of 2014.
7.1 The learned AR with respect to interest income from the nationalized bank amounting to Rs. 4,78,621.00 did not advance any arguments.
8. On the contrary, the learned DR submitted that the assessee wrongly claim the said interest income as deduction u/s 80P(2)(d) of the Act, 1961. In this regard the provisions with regard to allowing deduction in respect of interest income earned by a co-operative society are contained in section 80P(2)(d) of the Income-tax Act, 1961, which read as under :
"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"
8.1 According to the ld. DR, the provisions of Act do not extend the deduction further, i.e., interest received from the investments made with co-operative banks. The learned DR vehemently supported the order of the authorities below.
9. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that this tribunal in the case of The Uttar Gujarat Uma Co-op Credit Society Ltd. Vs. Income Tax Officer in ITA Nos. 1670 & 1671/Ahd/2018 for the Assessment Years 2014-15 & 2015-16 after due ITA no.3/AHD/2022 A.Y. 2017-18 4 deliberations has decided the issue in favour of the assessee with respect to the interest income from the co-operative banks. But the ITAT in the case cited above has not allowed any benefit to the assessee with respect to the interest income from the nationalized bank. The relevant and detailed finding of the ITAT reads as under:
9. We ha ve carefull y co nsid ered th e ri val su bmi ssion s. Th e disp u te con cern s section 80P of th e Act which p ro vi d es fo r d edu ction of i ncom e of a co-op erative so ci et y eng ag ed i n specifi ed a cti vity catalo gu ed in S ection 80P(2) of th e Act. The principal cont ro ver sy i n t h e caption ed appeal is towa rd s maint ai nability of d eduction under s .80P(2 )(d ) of th e Act in th e hands of t he credit co-oper ative so ci et y towa rd s in terest ea rn ed f ro m dep o sit pla ced with co -op erati ve ban ks, mo re s o, in th e light o f in sertion of s. 80P(4) of the Act b y F ina n ce Act , 20 06 . Thu s, th e incid ental point in is su e i s wh ether the benefit of S . 8 0 P d eni ed to coop ban ks b y th e insert io n of 80P(4) ad ver sely impacts th e in vestment in such ba n ks by a co -op so ci et y or n ot? It is commo n kno wl edge th at a la rge number of co-op. soci eti es place th ei r su rplus with co-op. ban ks and s eek b enefit of S ection 8 0P (2 )(d ) of th e Act o n int er est income d eri ved. Henc e, a nua nced und ersta nding of the raging cont roversy is st ron gly n eed ed.
9.1 It is p redo minantl y the cas e of th e a ss essee that the co-op erativ e banks essentiall y con tinue to b e co-op erat ive so ci eti es and whi le 'co-
operative so ci eti es' i s a g enus te rm, th e 'co -operative ba nks' a re sp eci es ther eto. T h erefo re, such co-op erati ve ban ks a re essentiall y co-o pe rati ve so ci eti es notwithstan ding their engagem ent in b ankin g bu sin ess. Con sequ ently, it i s cla imed that the in vest ment in co-op erati ve ba n ks a r e to be t r eat ed at par with investment in co-op era tive so ci et i es fo r the purp o ses of eli gi bility of d educt ion und er s.80P(2 )(d) of the Act . The Revenu e, on th e other h and, has cont ended that in view of definition p r ovid ed for co- operative so ci eties un d er S ection 2 (19); ded uction p ro vid ed u nd er S ection 80P(2)(d) r. w. s. 80P (4) of th e A ct i s not a vai labl e to in vestment in a co- operative bank a s su ch in vestment cannot b e t reat ed at par wit h th e investment in co-opera tive so ci et y. It is al so cont en ded on b eha lf of the Revenue that th e p ro vi sion s of S ection 8 0 P of th e A ct ar e fou nded o n 'prin cipl es of mutuality' i.e. common id ent it y between th e cont ribu tor s and parti cipator s. Th e d eposit in th e co- op erat ive ban k la cks the d egr ee of proxi mity b et ween t h e members of the so ciet y with that of co-op erative ban k and thu s offends thi s sa cro san ct p rin cipl e of mutuality. It was th us cont ended that int erest income b y a co -o perati ve soci et y f ro m a co- operative bank i s not cover ed in th e fold of Section 80P (2 ) of th e Act. It i s further cas e of the as sess ee that exclu sion of co-op ban ks fo r eligi bility of ded u ction un der S. 80 P owing to ins ertion of S . 80P(4 ) do es n ot, in a n y mann er, take awa y the b en efit avai labl e un d er S. 80P (2 )(d ) to a n i nvestor so ci et y (exclu ding co- op ban k) in a co -op bank w hich i s a co -op soci et y for all intent and p u rposes whi le car rying on t he fun ctions of a ban k. It is thus paddl ed th at whil e a co-op soci ety fun cti on ing as a co-op bank i s n ot entitl ed to ben efit of 80P owi ng to exclu si o ns mad e, a co-op so ci et y n ot being a co-op ban k remain s unaff ected b y S. 80 (4 ) and can enjoy th e ben efit s of S. 80P(2)(d) conf erred on the so ci eti es on fulfi llment of pre- r equi sit es.
ITA no.3/AHD/2022 A.Y. 2017-18 5 9.2 Before we pro ceed to deal wit h th e i ssu e in hand, it woul d be apt to quote th e rel evant p ro vi sion s g o verning th e cont ro vers y in han d.
9.2.1 Section 2(19) d efin es t he me aning of exp ression 'Co-o p So ci et y' as under:
" co-op erati ve society" mea ns a co-o perative s oci et y regi st ered un der the Co-oper ative Soci eti es Act, 1 912 (2 o f 1912 ), o r u nd er any other law fo r the time b ei ng in for ce in an y Stat e fo r the regi st ration of co - operative s ocieties;
9.2.2 Income un der S. 2 (24 ) of t he Act al so i n clud es:
the profit s and gain s of any busines s of ban ki ng (incl uding pr oviding cr edit facilit ies ) car ried o n b y a co-op er ative so ci et y with i t s member s 9.2.3 Th e rel evant portion o f S. 80-P go verning d eduction a vailabl e t o co-operative so ci eties is al so quot ed h ereund er:
"Deductio n in respect of incom e of co-oper ative so ci eti es.
80P. (1 ) Wh ere, in th e ca se of an assessee b eing a co-op erati ve so ci et y, th e gro ss total incom e includ es any income ref err ed to i n sub- section (2), th ere sha ll be dedu ct ed, i n accord an ce with an d subj ect to the p ro vi sio ns of thi s section, the su ms specified in sub- s ection (2 ), in computi ng th e to tal in co me of the assessee.
(2 ) The sums ref er red to in sub- sect ion (1 ) sh all b e th e following , namely :--
(a ) in the ca se of a co-operati ve so ci et y en gag ed in--
(i ) car rying on the bu sin es s of ba nking o r p roviding credit
facilities to its memb ers; or
(ii) a cottag e indu str y ; o r
(iii) ---
(i v) ---
(v) ---
(vi ) ---
(vii) ----
the who l e of the am ount of p rofits and g ains of business attributabl e to an y on e o r mor e of su ch a ctivities :
(b ) -----------
(c) -----------
ITA no.3/AHD/2022
A.Y. 2017-18
6
(d )
in respect of an y in com e b y wa y o f intere st or di vid en d s deri ved by the co-o p erative s o ciet y f rom its invest ments with an y o th er co- operative so ciet y, the whol e of such incom e;
(e) -----------
(f)
(4 ) The pro visio n s of this section shal l not apply in relation to a n y co-operative bank oth er than a p rimar y ag ricultu ral cr edit so ci et y or a p ri ma ry co-o pera tive ag ricultu ral a nd rura l d evelopm ent ban k.
Explanation. --For th e purpo s es of thi s sub-section,--
(a) "co-operati ve ban k" and "p rima ry a g ricultural credit soci et y" sh a ll have the mea ning s resp ecti vel y as signed to them in Pa rt V of the Ban king Regulation A ct, 1949 (10 of 194 9);
(b) "primary co-op erati ve agri cultu ral and rural developm ent ba nk"
means a so ci et y havin g its a rea of op eratio n confi ned to a talu k and the p rincipal obj ect of which i s to p ro vide for long-t erm cr edit for agri cultu ral and rural develop ment a ctiviti es. "
9.2.4 Part V of Ban kin g Reg ulation Act, 1 949 d efines ' co-o perative ban k' in Section 5(cci) a s u n der:
" Co-o p erative bank' means a stat e co-oper ative ba n k, a cent ral co- operative ban k and a pri mar y co-op erative bank;
9.2.5 A 'p rimar y co-op erative ban k' a s p er S ecti onn 5(ccv) of Pa rt V of B an king Regulation Act, 1949 r ead s to mean :
"(ccv) "pri ma ry co-o perat i ve ba n k" mea n s a co-op erative society, other than a p ri ma ry agri cultu ral credit so ci et y,-
...... ...... ......... ......... .
9.2.6 As p er cla use (ccvii ) of Section 5, how ever, 'Central Co-op B an k' and 'Stat e Co-op Ba nk' s hall ha ve th e same meaning s respectively assign ed to them in th e National Ban k fo r Agri cul tur e and Ru ral Developm ent (NABARD) Act, 1981 . NABA RD, in turn d ef ines these two te rms a s under:
Section 2(d) of NABAR D defin es 'cent ral co- operative ban k' mean s th e "d. " cent ral co-op er ative ba nk" mean s th e principal co- operati ve so ci et y in a di strict i n a Stat e, the p ri mar y obj ect of whi ch i s the financing of oth er co- oper ative s o cieti es in that dist ri ct:.......... "
ITA no.3/AHD/2022 A.Y. 2017-18 7 u. " Sta te co-op erati ve ba nk" mea n s th e p rin cip al co- operative so ci et y in a St at e, the p rimar y obj ect of which i s th e financing of oth er co - operative s ocieties in the Stat e: .................. "
9.3 Ha ving not ed th e relevant p ro vi sion s in earli er pa ra, it wo uld b e expedi ent to fi rstly ref er to the d eci sion of Th e Citi zen C o-Op erati ve Soci et y Ltd. (supra ) to gath er the rul es of int erpr etatio n of va riou s su b- sections of the b eneficial p rovi sio n of S . 80P. Th e Hon 'ble Sup reme Court in ter a li a has ob served th at di fferent head s of exempt ion enumerat ed in th e S ection 80P of the Act sho uld be t reat ed a s sepa rate and di sti n ct head of 'exemption'. If any pa rti cular catego ry of a n in com e fa ll s wit hi n a ny o n e hea d of ' exemption', t h e a ss essee would b e free f ro m ta x not with standing that th e conditions of other h ead of exempt ion a re not satisf ied and su ch inco me i s not f r ee f ro m tax und er oth er h ea d of ' exemption'. Th us , in view of the express ju dicial dicta, p ro vi sion s of Section 80P (2)(a) a nd 80P (2 )(d ) ar e mutuall y exclusi ve and a re to be rea d indep endent of ea ch other.
9.4 We a re p resentl y co ncerned with th e a vaila bili ty of d edu ction to a co-op so ci et y within t he real m of Section 8 0 P(2 )(d ) of the A ct. Two thin gs need to be not ed in th is rega rd; fi rstl y, unli ke Se ction 80P (2 )(a ) or (b ) or
(c) of th e Act where t he a ss essee i s q ualified for d ed u ction of "prof its & gains of b usin ess" att ributabl e to on e o r mor e of a ctiviti es enumerat ed in thes e sub-s ecti ons, S ection 80P(2)(d ) of t he Act, in sharp d epartu r e, provid es for deduction of "whol e of su ch i n come" [without any d i stin ction on natur e of in come] as deri ved b y a co-operati ve so ci et y fro m its investment with an y ot her co-op erati ve so ci ety. Needl ess to sa y, in a ta xing Act, on e has to loo k merely at what i s clea rl y said. Th ere i s n o room f or any in tendment and one has to lo o k fai rly at th e languag e used. Thu s, sco p e of ben efit und er s.80P (2)(d ) i s not rest ri ct ed t o 'bu sines s in come' al o ne but also extends to incom e d erived f ro m in vest ment s o rdina ril y falli ng under the h ead 'incom e f ro m oth er so urces' a s wel l ; secondl y doc trin e of mutuality i s n ot n ecessa rily a p re-conditi on in app ropri ate ci rcu mstan ces, for in st ance 8 0P(2 )(a(ii ); a nd thirdly and quit e signif ica ntly ; th e investment by a co- op so ci et y in a co-op so ci et y should re sult in inte rest or divid end income f rom its invest ment. Th u s what i s pertinent i s that the investment by th e a sses see so ciet y should be pa rked i n anoth er 'co-o p so ci et y' for the purpo s es of sub- claus e 2 (d ) o f S. 80P . The moot question thus natu rall y emer ges i s ; wh eth er th e investment in a co-op ba nk is to be r egar ded as invest men t i n-eff ect in a co- op soci et y o r not ?
9.5 At this junctu re, we also t a ke si multan eou s not e of su ch S ect io n 80P(4) of t he Act in sert ed b y Finan ce Act, 2006 wh ereb y a co-o perati v e bank has been d eprived of dedu ction und er s.80P of the Act . T o put it sl ightl y differentl y, with adv ent of s ecti on 8 0 P(4), co-op ban ks have b een brought to ta x b y d en ying them th e b enefit of S ection 80P of th e A ct.
9.6 Th e in sert ion of Section 80P (4 ) of the A ct has pu rpo rt edl y also obfuscated and cast a sper sion on the d ed uctibil ity of inco m e deri ved b y a co-operative so ci et y f rom in vest m ents plac ed wi th co -op erat ive ba n k under S. 80P(2 )(d ) of the A ct . In this conte xt, it wo uld be int er esting to n ote that ITA no.3/AHD/2022 A.Y. 2017-18 8 the af oresaid claus e 80P(4 ) its elf hold s th at a co-op erati ve ban k ma y al so possibl y includ e ' a cr edit so ci et y'; fo r ins tance, a p rima ry ag ri cultu ral cr edit soci et y. Th eref ore, on an in cisi ve reading o f Section 80P (4) of th e Act, it appears that co -operati ve ban ks can a lso b e co-op era tive soci et y for the purpo ses of S ection 80P (2 )(d ) of th e Act . Thu s, o n a conjoi nt r eadin g of Section 80P(2)(d ) an d 80P(4), it woul d app ea r that whil e th e co- operative ban ks in certain cas es [a s sp ecified in S ectio n 80P (4)] may not qualify for dedu ction und er s. 80P of th e A ct , a co-op erati ve so ciet y p er s e woul d not come withi n th e mis chief of sub-section 4 o f th e Act o f Sect ion 80P of the Act and wou ld co ntinu e to a vail t he b enefit of S ection 8 0P (2)(d ) of th e A ct. Thus, simpl y put, whil e a co-op erat i ve b a n k ha s b een st ripp ed of th e ben efit of Section 80P of th e Act on i ts va rio u s in co me b y i ns ertion of S. 8 0P(4 ), the in vestment in su ch co-op erative ban k [ b ea rin g t he l egal trappings of a co-op soci et y ] by a co-o p soci et y a s en vi sa g ed in Section 80P(1) of th e Act i s not divest ed of such b en efit.
9.7 Joining th e i ssu e in h an d, as p er S ectio n 8 0P(2)(d ) of the A ct, t he only requi rem ent i s th at t he in come should b e recei ved from in vest ment b y a co-op erati ve so ci et y in oth er co-o perative s ociet y and it i s claimed t ha t co-operative bank namely 'Ahmeda bad Di st ri ct Co-o p erative Bank', in th e pr esent case, i s noth ing but a co-op erative so ci et y r eco gni sed by th e compet ent au tho rit y of the Stat e a s contemplat ed u nd er S ection 2 (1 9) of th e Act. On these fa ct s, th e eligibil ity of d edu cti on unde r S ection 80 P(2)(d) o f the Act i s requi red to be evaluat ed ind ep end ent of mutuality d o ctri ne ta ken awa y b y insertion of S. 2 (24 )(viia). Th e a ssessee so ci et y would t hu s b e entitl ed to ben efit of section 8 0P (2 )(d ) on i n terest in co me fro m in vestm ent in co-op b an k. As noticed f ro m th e d efi nition of 'co-op ban k' with refer en ce to Ban king Regulation Act, 1 949; rea d with NABA RD A ct, it is ost en si bl e that the co-op ban ks of va riou s t yp es are es sentiall y co-op. soci eti es. Hen ce, th e claim of d eductio n mad e under S. 80P(2)(d ) b y a co-o p so ci et y in such co-op banks can not b e d eni ed not withstanding that som e t hese co- op banks are not eligib le fo r 80P b en efits d espit e b eing co-op so ci eti es.
9.8 Coupled with thi s, cert ain ob servation s ma d e by the Hon'bl e Guja ra t High co u rt in State Ban k of India (su p ra ) a nd in Saba rkanth a Di st rict (sup ra) al so r einfor ces that int er est earned o n fixed d ep osit with co- operative ban k ca n be said to be qu alified for d edu ction und er s.8 0 P of th e Act notwith stan ding th at su ch o b servation s a ppear to b e in th e natu re of an obiter in th e cont ext o f thos e ca ses.
9.9 At thi s stage, it would also b e p erti n ent to ag ain restat e that for th e purposes of Section 8 0P of th e Act, th e p rincipl e of mutualit y h as b een obliterat ed in vi ew of i ns ertio n of S ecti on 2 (2 4) (viia ) o f the A ct b y Finan ce Act, 2 006 and such pri ncipl es thus n o l o nger se rve a s st ri ct guiding principl e to t est th e relief el igible und er S. 8 0P (2)(d ) of the A ct. Th erefo r e, the plea rai sed on b ehalf of th e Re venu e towa rd s a b sen ce of prin cipl e of mutuality in su ch d ep osit s with co-op erative ban ks is a da mp sq u ib. Thus, the a ss essee b eing a co-oper ative so ci et y as cont emplat ed under s. 80P(1 ) of th e A ct , ca nnot be dep ri ved of b en efit of S. 80P (2 ) (d) d espit e p urp orted absen ce of mutu ality i n in vestment with a co-op ban k. We, thu s, con cur wit h plea of as ses see for a llo wability of dedu ct i on on int erest in co me d erived from co-operative soci ety in th e f o rm of Co -o p erat ive ba nk on fi rst ITA no.3/AHD/2022 A.Y. 2017-18 9 principl es. Th e i ssue is a cco rdingl y res olved in f a vo u r of th e a sses see an d against the Reven u e.
9.10 We a re con sciou s of th e d eci sion of the Hon'bl e Karn at ka High Cour t in Pr. CIT vs. Totaga rs C o.op erati ve Sales Soci et y (2018 ) 3 95 ITR 611 (Karn) wh erein it wa s held that inte rest i ncome not a ri sing from busin ess operations is not elig ible fo r d edu ction und er s.80P of the A ct . A reading of th e judgment of t h e Ho n'ble High Cou rt shows that it w a s gu id ed b y nature of acti vity to d et ermin e th e charact er of inc ome fo r th e pur poses of Section 80P(2)(d) of th e Act . Pla cing relian ce upo n th e j udgment s ren d ered in t he cont ext of 8 0P(2)(a)(i) of th e Act, th e Hon'bl e High Court co nclud ed that the deduction of i nt erest in co me is n ot p ermi ssibl e unl es s it a ri ses f ro m busin ess op erations . Clea rl y, th e di stinctio n b etw een S ectio n 80P (2)(a ) and 80P(2)(d) of the Act o f sub sta nt ial natur e (a s di s cus sed in pa ra 9 .4 of this order ) was not broug h t to th e notice of Hon' ble High Co urt. Th e d edu ction under s. 80P(2 )(a) o r (b) o r (c) of the Act i s availa bl e onl y on a ccount of inco me/profits ari sin g from b u sin ess a ctivit y. However, thi s r equi r ement i s not appli cabl e und er s.8 0P(2 )(d ) of the A ct wh er e whol e of th e incom e arising f rom int er est or di vidend et c. i s a llowabl e withou t su ch l imitation of bu siness a ctivit y. This cardinal differen ce of over whelmin g n a tur e was not brought to th e n o tice of th e Hon'bl e High Cou rt . Co n seq u ently, th e deci sion r endered by the Hon'bl e Hig h Co urt app ea rs to b e su b sil entio . Thus, go verned by th e obs ervation s of th e Hon'ble Guja rat Hig h Cou rt in the ca se of S abar kant ha Di st ri ct (sup ra ) a n d Stat e Bank of In dia (sup ra ), we ha ve not h esitation to affirm th e pl ea of the a ssess ee fo r allowa bility o f ded u ction.
9.11 It is, how ever, fo r th e a sses see t o d emon strat e on fact s that th e invest ee co-operati ve ban k in qu estio n is r ecogn ised a s a co-o pe rati ve so ci et y in deed within the meaning of S ect ion 2 (19 ) of th e A ct. A self- decla ration f rom the resp ecti ve co-o p. ban k in thi s regard o r a ny other su itabl e document ma y disch arge th e onu s of t he a ssessee tow ards th e status of th e co-op. ban k. S i milarly, th e a ssessee i s ent itled to a vail d ed uction of r esult ant 'income' deri ved and not g ros s r eceipt of int erest under S. 80P(2)(d) of the Act in acco rd with ba sic ra tionale of ta xation. Hen ce, all expen ses/lo sses att ributab le t o such int erest in come a re r equi r ed to b e neces saril y d edu ct ed and onl y result ant in terest inco me i s elig i ble for ded u ction under S. 80 P(2 )(d) of th e Act. The AO w ou ld thu s b e at libert y to ascertain these fa ctual a sp ect s fo r whi ch th e a ssessee shall pro vid e su itabl e assi stance .
10. Th e al terna tive claim of the a ssessee fo r all owance of p ro- rat a expen diture a gain st the int er est in come f r om in vestment in co- ope rati ve banks et c. is rendered in fru ctuou s in vi ew o f t he endo rsement of the main plea. In vi ew of ou r findings that th e a ssessee i s entitled fo r d edu ction under s. 80P(2 )(d ) of t he Act for resultant income d eri ved f ro m in vestments placed wit h co-op era tive ban ks, w e do n ot seek to delineat e furth er . Th erefore, AO may all ow claim of d eductio n und er s. 80P(2 )(d ) of th e A ct on net income f ro m interest after redu cti on of all inci d ental exp en ses incu rr ed to earn su ch income. The i ssue i s thus remitted back to AO for quantification of d edu ction of in t erest in co me in a cco rd a nce with law on ITA no.3/AHD/2022 A.Y. 2017-18 10 being sati sfied that the recei ver co-op erat ive ban k sa tisfi es to be a co- operative s ociety equa lly.
11 Th e inte rest in co me of R s.1 ,139/- d eri ved by th e a sses see so ci ety from investment with p ri vat e ba n k i.e. Axi s Bank is ho w ever, n either qualifi ed under s. 80P (2 )(a )(i) of the Act in th e lig ht o f th e ratio of Th e Citi zen Co- Operati ve Soci et y Ltd. (sup ra ) nor u nd er s. 80P (2)(d) o f the A ct . Thus, th e a ssessee i s n o t entitl ed for d edu ction or int erest d eri ved f ro m the privat e ban k.
12. In the result, app eal o f the as sess ee i s pa rtl y allo wed.
9.1 The facts of the case on hand are identical to the facts of the case as discussed above. Thus, respectfully following the principles laid down by the order of the ITAT in the case cited above, we hold that the assessee is entitled for deduction under section 80P(2)(d) of the Act, 1961 with respect to the interest income earned by it from the co-operative bank. However, respectfully following the order of the ITAT cited above, we further hold that the assessee shall not be entitled, for the interest income earned from the nationalized bank, for deduction under section 80P(2)(d) of the Act, 1961. Hence the ground of appeal of the assessee is partly allowed.
10. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 11/05/2022 at Ahmedabad.
Sd/- Sd/-
(SIDDHARATHA NAUTIYAL) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
(True Copy)
Ahmedabad; Dated 11/05/2022
Manish