M/s. Ravindra Multipurpose Co-operative Society Limited, Udupi v. Income Tax Officer, Ward - 3, Udupi

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI ACCOUNTANT MEMBER AND SMT. BEENA PILLAI JUDICIAL MEMBER ITA NO.1262/BANG/2019 ASSESSMENT YEAR : 2016-17 M/S RAVINDRA MULTIPURPOSE CO-OPERATIVE SOCIETY LTD NO.31018 SHYANUBHOG BUILDING KUKKUNDOOR UDUPI-576 117. PAN AAAAR 9986 M VS. THE INCOME-TAX OFFICER WARD-3 UDUPI. APPELLANT RESPONDENT ASSESSEE BY : SHRI RAMASUBRAMANIYAN C.A REVENUE BY : SMT. H KABILA ADDL.CIT DATE OF HEARING : 26-08-2021 DATE OF PRONOUNCEMENT : 31-08-2021 ORDER PER BEENA PILLAI JUDICIAL MEMBER PRESENT APPEALS ARE FILED BY THE ASSESSEE AGAINST T HE COMMON ORDER DATED 30/03/2019 PASSED BY THE LD.CIT(A) MANG ALURU FOR ASSESSMENT YEAR 2016-17 ON THE FOLLOWING GROUNDS. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME-TAX (APPEALS) IS BAD IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMST ANCES OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APE ALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.2 9 08 581/- CLAIMED AS DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT. PAGE 2 OF 12 ITA NO.1262/BANG/2019 3. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) DENIED THE DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT ON THE ONLY GROUND THAT THE APPELLANT DEALS WITH NOMINAL AND ASSOCIATE MEMBERS. 4. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT IS REGISTERED AS CO- OPERATIVE SOCIETY UNDER KARNATAKA STATE CO-OPERATIVE SOCIETIES ACT 1 959 AND THE SAID ACT ALLOWS THE APPELLANT TO ADMIT NOMINAL AND ASSOC IATE MEMBERS. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE T O ONE ANOTHER THE APPELLANT SEEKS THE LEAVE OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL BANGALORE TO ADD DELETE AMEND OR OTHERW ISE MODIFY EACH OR ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT TH E TIME OF HEARING THIS APPEAL. 2. FOLLOWING ADDITIONAL GROUNDS HAS BEEN RAISED BY ASSESSEE VIDE APPLICATION DATED 31/12/2020: THE APPELLANT HEREIN SEEKS THE LEAVE OF THE HON'BL E TRIBUNAL TO FILE THE FOLLOWING ADDITIONAL GROUNDS: 1. WITHOUT PREJUDICE TO THE CLAIM THAT THE APPELLAN T IS ENTITLED TO DEDUCTION U/S 80P(2)(A) OF INCOME TAX ACT 1961 (ACT) THE LEAR NED LOWER AUTHORITIES OUGHT TO HAVE ALLOWED THE DEDUCTION U/S 80P(2)(A) O F THE ACT TO THE EXTENT THAT SUCH INCOME IS ATTRIBUTABLE TO THE DEALING WIT H REGULAR MEMBERS AND NOMINAL MEMBERS. 2. THAT THE LEARNED LOWER AUTHORITIES OUGHT TO HAVE ALLOWED THE DEDUCTION U/S 80P(2)(D) OF THE ACT IN RESPECT OF THE INTEREST EARNED FROM CO-OPERATIVE BANKS AND CO-OPERATIVE SOCIETIES. 2.1. IT HAS BEEN SUBMITTED BY THE LD.COUNSEL THAT T HEY EMANATE FROM THE FACTS THAT ARE ALREADY ON RECORD AND THAT NO NEW FACTS NEEDS TO BE CONSIDERED TO ADJUDICATE IT. HE SUBMITT ED THAT THESE ARE LEGAL ISSUES TO BE LOOKED INTO FOR ADJUDICATING THE CLAIM OF ASSESSEE. LD.COUNSEL PLACED RELIANCE ON THE DECISIO N OF HONBLE SUPREME COURT IN CASE OF NATIONAL THERMAL POWER CORPORATION LTD (NTPC) VS. CIT REPORTED IN (1998) 229 ITR 383 AND JUTE CORPORATION OF INDIA LTD. REPORTED IN 187 ITR 688 . HE SUBMITTED THAT NO PREJUDICE WILL BE CAUSED TO THE REVENUE UPO N ADMISSION PAGE 3 OF 12 ITA NO.1262/BANG/2019 OF THE ADDITIONAL GROUNDS RAISED. HE THUS PRAYED FO R ITS ADMISSION. 2.2. ON THE CONTRARY THE LD.DR THOUGH OPPOSED THE ADMISSION OF THE ADDITIONAL GROUNDS COULD NOT CONTROVERT THE SU BMISSIONS MADE BY THE LD.COUNSEL. 2.3. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY TH E BOTH SIDES AND RECORDS PLACED BEFORE US. 2.4. WE NOTE THAT ISSUE RAISED BY THE ASSESSEE IN T HIS ADDITIONAL GROUND IS NO LONGER RES-INTEGRA. THE GROUND RAISED BY ASSESSEE UNDER THIS APPLICATION IS A LEGAL GROUND AND NEEDS TO BE ADMITTED. WE DRAW OUR SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN CASE OF NATIONAL THERMAL POWER CORPORATION LTD (NTPC) V. CIT(SUPRA) . ACCORDINGLY WE ADMIT THE ADDITIONAL GROUNDS IS REPR ODUCED HEREINABOVE. BRIEF FACTS OF THE CASE ARE AS UNDER: 3. ASSESSEE IS A CO-OPERATIVE SOCIETY PROVIDING CRE DIT FACILITIES TO ITS MEMBERS. FOR YEARS UNDER CONSIDERATION ASSESSEE FILED ITS RETURN OF INCOME AFTER CLAIMING DEDUCTION UNDER SEC TION 80P OF THE ACT. THE RETURN WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO ASSESSEE. IN RESPONSE TO THE STATUTORY NOTICES REPRESENTATIVE OF ASSESSE E APPEARED BEFORE THE LD.AO AND FILED REQUISITE DETAILS AS CAL LED FOR. 3.1 LD.AO FROM THE DETAILS FILED BY ASSESSEE OBSERV ED THAT: PAGE 4 OF 12 ITA NO.1262/BANG/2019 (I) ASSESSEE HAS EARNED INTEREST ON INVESTMENT IN C O-OPERATIVE BANKS NATIONALISED BANKS; (II) ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 8 0P(2)(A) OF THE ACT IN RESPECT OF AMOUNT OF PROFIT ATTRIBUTABLE TO THE ACTIVITY OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. 3.2 IN THE INSTANT CASE IT WAS NOTICED BY THE LD.A O DURING ASSESSMENT PROCEEDINGS THAT THE ASSESSEE SOCIETY W AS EARNING INCOME NOT ONLY FROM THE MEMBERS BUT MAJORITY OF TH E INCOME FROM THE NOMINAL/ ASSOCIATE MEMBERS. TAKING INTO CO GNIZANCE THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CITIZEN CO-OP SOCIETY LTD HYDERABAD V. ACIT C-9(1 ) HYDERABAD IN CIVIL APPEAL NO.10245 OF 2017 DATED 8.08.2017 THE LD.AO DENIED DEDUCTION CLAIMED U/S.80P BY HOLDING THAT TH E ASESSEE PROVIDED CREDIT FACILITIES TO THREE CATEGORIES OF M EMBERS VIZ. I) REGULAR MEMBER II) ASSOCIATE MEMBERS AND III) NOMIN AL MEMBERS. HENCE LD.AO DISALLOWED THE DEDUCTION CLAI MED U/S.80P(2)(A)(I) OF THE ACT. 3.3 THE LD.AO WAS OF THE VIEW THAT PRINCIPLE OF MUT UALITY WAS VIOLATED BY ASSESSEE AND THEREFORE DENIED THE DEDUC TION IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF CITIZEN CO- OPERATIVE SOCIETY LTD. IN CIVIL APPEAL NO. 10245/2017 DATED 08.08.2017 ON FOLLOWING GROUNDS: I) INTEREST/DIVIDEND INCOME WAS HELD TO BE INCOME F ROM OTHER SOURCES AND EXCLUDED FROM THE DEDUCTION UNDER SECTI ON 80P(2)(A)(I). FOR THE DEDUCTION UNDER SECTION 80P(2 )(D) WAS ALSO PAGE 5 OF 12 ITA NO.1262/BANG/2019 DENIED RELYING ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF M/S TOTGARS CO-OPERATIVE SO SALE SOCIETY LTD. BY ORDER DATED 16/06/2017. II) THE PRINCIPLES OF MAJORITY WERE VIOLATED RELYIN G ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF M/S CITIZEN CO-OPERATIVE SOCIETY LTD. HYDERABAD DATED 08/09/2017. 3.4 AGGRIEVED BY THE ORDER OF LD.AO ASSESSEE PREFE RRED APPEAL BEFORE THE LD.CIT(A). 3.5.THE LD.CIT(A) CAME TO THE CONCLUSION THAT AS PE R THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CITIZENS CO-OP SOCIETY (SUPRA ) IF THE PRINCIPLE OF MUTUALITY IS NOT SATISFIED THEN THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S 80P(2)(A) (I) OF THE ACT. 3.5 IN RESPECT OF MEMBERS THE LD.CIT(A) OBSERVED T HAT THE ASSESSEE ADMITTED EXCESS NOMINAL/ASSOCIATE MEMBERS WHICH IS MORE THAN 15% OF THE TOTAL MEMBERS WHEN COMPARED TO REGULAR MEMBERS WHICH IS IN VIOLATION OF KARNATAKA CO-OPERA TIVE SOCIETY ACT 1959. IN VIEW OF THE VIOLATION OF THE KARNATA KA CO-OPERATIVE SOCIETY ACT THE LD.CIT(A) OBSERVED THAT THE SOCIET Y IS NOT ELIGIBLE FOR DEDUCTION U/S 80P AND AS SUCH RATIO OF THE DECI SION OF HON`BLE SUPREME COURT DECISION IN THE CASE OF CITIZEN CO-OP SOCIETY LTD HYDERABAD V. ACIT C-9(1) HYDERABAD I N CIVIL APPEAL NO.10245 OF 2017 DATED 8.08.2017 IS APPLICABLE TO THE FACTS OF THE ASSESSEE SOCIETY. 3.6 THE LD.CIT(A) ALSO HELD THAT IN THE ASSESSEE'S CASE MUTUALITY PRINCIPLES HAVE FAILED AS SUBSTANTIAL BUS INESS IS BEING PAGE 6 OF 12 ITA NO.1262/BANG/2019 CARRIED OUT WITH THE GENERAL PUBLIC OR NOMINAL MEMB ERS AND ALSO IN VIEW OF THE ASSESSEE BEING REGISTERED AS SOUHARD A CO-OPERATIVE SOCIETY AND NOT AS CO-OPERATIVE SOCIETY AND TAKING INTO ACCOUNT THE BYELAWS AND THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE THE SOCIETY IS NOT ELIGIBLE FOR DEDUCTION U/S 80P OF THE INCOME TAX ACT 1961. 3.6 THE LD.CIT(A) THUS UPHELD THE ORDER OF LD.AO. 4 AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS I N APPEAL BEFORE US NOW. 4.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BO TH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 4.2. THE ISSUE THAT ARISES FOR CONSIDERATION IS: (I) WHETHER THE AUTHORITIES BELOW WERE JUSTIFIED IN DENYING THE CLAIM OF THE ASSESSEE FOR REDUCTION U/S 80P(2)(A)(I ) OF THE ACT. (GROUNDS 2-4 ADDITIONAL GROUND NO.1) (II) WHETHER INTEREST INCOME EARNED BY ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80P(2)(D) OF THE ACT WHEREAS THE DED UCTION IS ONE CLAIMED U/S 80P(2)(A)(I) OF THE ACT. (ADDITIONAL GR OUND 2) 5. GROUND NO.1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 6. GROUNDS 2-4 & ADDITIONAL GROUND NO.1: IN RESPECT OF ASSOCIATE/NOMINAL MEMBERS HONBLE SUPREME COURT IN THE CASE OF MAVILAYI SERVICE COOPERATIVE BANK LTD. V. CIT (2021) 123 TAXMANN.COM 161 (SC) HAS HELD THAT THE EXPRESSION MEMBERS IS NOT DEFINED IN THE INCOME-TAX ACT. HEN CE IT IS NECESSARY TO CONSTRUE THE EXPRESSION MEMBERS IN S ECTION PAGE 7 OF 12 ITA NO.1262/BANG/2019 80P(2)(A)(I) OF THE ACT IN THE LIGHT OF DEFINITION OF THAT EXPRESSION AS CONTAINED IN THE CONCERNED CO-OPERATIVE SOCIETIE S ACT. IN VIEW OF THIS THE FACTS ARE TO BE EXAMINED IN THE LIGHT OF PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN MAVILAYI SERVICE COOPERATIVE BANK LTD. (SUPRA) . ACCORDINGLY WE REMIT THIS ISSUE OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT TO THE FILE O F LD.AO TO EXAMINE THE SAME DE NOVO IN THE LIGHT OF THE ABOVE JUDGMENT. NEEDLESS TO SAY THAT PROPER OPPORTUNITY OF BEING HE ARD IS TO BE GRANTED TO ASSESSEE IN ACCORDANCE WITH LAW ACCORDINGLY GROUNDS 2-4 AND ADDITIONAL GROUND NO.1 STANDS ALLOWED FOR STATISTICAL PURPOSES. 7. ADDITIONAL GROUND 2 IS IN RESPECT OF INTEREST FROM INVESTMENT IN CO-OPERATIVE BANKS NATIONALISED BANK S. 7.1 THIS ISSUE HAS BEEN DECIDED BY COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF POTTERS COTTAGE INDUSTRIAL CO-OPERATIVE SOCIETY LTD. FOR ASSESSMENT YEARS 2015-16 IN ITA NO 1257 & 1258/BANG/2019 BY ORDER DATED 30-08-2019 . THIS TRIBUNAL OBSERVED AND DECIDED AS UNDER: WE NOTE THAT THE LD.AO DENIED DEDUCTION UNDER SECT ION 80P(2)(D) OF THE ACT AS WELL IN RESPECT OF INTEREST INCOME RECEIVED BY ASSESSEE FROM DEPOSITS KEPT WITH BANKS FOR THE YEARS UNDER CONSID ERATION. THE LD.AO ASSESSED THE INTEREST INCOME RECEIVED FROM BANK DEP OSITS UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD.COUNSEL PLACED RELIANCE ON THE DECISION OF H ONBLE KARNATAKA HIGH COURT IN KEEP CASE OF TOTGARS CO-OPERATIVE SAL E SOCIETY LTD. VS ITO REPORTED IN (2015) 58 TAXMANN.COM 35. WE HAVE PERUSED PLETHORA OF DECISIONS ON THIS ISSUE BY HONBLE KARNATAKA HIGH COURT AND THE RATIO LAID DOWN BY HON BLE SUPREME COURT. HONBLE SUPREME COURT IN THE CASE OF THE TOT GARS CO-OPERATIVE SALE SOCIETY LTD. VS. ITO REPORTED IN 322 ITR 283 H ELD THAT INCOME FROM PAGE 8 OF 12 ITA NO.1262/BANG/2019 UTILISATION OF SURPLUS FUNDS WAS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES AND THEREFORE NOT ELIGIBLE FOR DEDUC TION U/S 80P. HONBLE KARNATAKA HIGH COURT IN CASE OF TUMKUR MERC HANTS SOUHARDA CREDIT COOPERATIVE LTD. VS. ITO REPORTED IN 230 TAX MAN 309 DEALT WITH AN ISSUE WHERE DEDUCTION U/S.80P(2)(A)(I) OF THE AC T WAS CLAIMED ON INTEREST FROM THE DEPOSITS MADE IN A NATIONALIZED B ANK WHICH WAS USED FOR PROVIDING CREDIT FACILITIES TO ITS MEMBERS. TH E ASSESSEE THEREIN CLAIMED THAT THE SAID INTEREST AMOUNT IS ATTRIBUTAB LE TO THE CREDIT FACILITY PROVIDED BY THE ASSESSEE AND FORMS PART OF PROFITS AND GAINS OF BUSINESS. HONBLE KARNATAKA HIGH COURT AFTER CONSID ERING THE DECISION BY HONBLE SUPREME COURT IN CASE OF TOTGARS(SUPRA) HELD THAT SINCE THE WORD INCOME IS QUALIFIED BY THE EXPRESSION ATTRIB UTABLE TO THE BUSINESS OF BANKING IS USED IN SEC.80P(2)(A)(I) OF THE ACT IT HAS TO RECEIVE A WIDER MEANING AND SHOULD BE INTERPRETED A S COVERING RECEIPTS FROM SOURCES OTHER THAN THE ACTUAL CONDUCT OF BUSIN ESS. HONBLE KARNATAKA COURT HELD THAT A COOPERATIVE SOCIETY THA T IS CARRYING ON WITH THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS EARNS PROFITS AND GAINS OF BUSINESS BY PROVIDING CREDIT FACILITIE S TO ITS MEMBERS. THE INTEREST INCOME SO DERIVED OR THE CAPITAL IF NOT I MMEDIATELY REQUIRED TO BE LENT TO THE MEMBERS CANNOT BE KEPT IDLE. IF THE Y DEPOSIT THIS AMOUNT IN BANK SO AS TO EARN INTEREST THE SAID INTEREST I NCOME IS ATTRIBUTABLE TO THE PROFITS AND GAINS OF THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS ONLY. THE SOCIETY IS NOT CARRYING ON ANY SE PARATE BUSINESS FOR EARNING SUCH INTEREST INCOME. THE INCOME SO DERIVED IS THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO THE A CTIVITY OF CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILIT IES TO ITS MEMBERS BY A CO-OPERATIVE SOCIETY AND IS LIABLE TO BE DEDUCTED F ROM THE GROSS TOTAL INCOME UNDER SECTION 80P OF THE ACT. HONBLE KARNAT AKA COURT DISTINGUISHED THE FACTS IN THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TOTGARS (SUPRA) BY OBSERVING THAT HONB LE SUPREME COURT WAS DEALING WITH A CASE WHERE THE ASSESSEE-COOPERAT IVE SOCIETY APART FROM PROVIDING CREDIT FACILITIES TO THE MEMBERS WA S ALSO IN THE BUSINESS OF MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS M EMBERS. THE SALE CONSIDERATION RECEIVED FROM MARKETING AGRICULTURAL PRODUCE OF ITS MEMBERS WAS RETAINED IN MANY CASES. THE SAID RETAIN ED AMOUNT WHICH WAS PAYABLE TO ITS MEMBERS FROM WHOM PRODUCE WAS BO UGHT WAS INVESTED IN A SHORT-TERM DEPOSIT/SECURITY. SUCH AN AMOUNT WHICH WAS RETAINED BY THE ASSESSEE-SOCIETY WAS A LIABILITY AN D IT WAS SHOWN IN THE BALANCE SHEET ON THE LIABILITY SIDE. THEREFORE TO THAT EXTENT SUCH INTEREST INCOME CANNOT BE SAID TO BE ATTRIBUTABLE EITHER TO THE ACTIVITY MENTIONED IN SECTION 80P(2)(A)(I) OF THE OR UNDER SECTION 80P (2)(A)(III) OF THE ACT. THEREFORE IN THE FACTS OF TOTGARS (SUPRA) HONBLE SUPREME COURT HELD THE ASSESSING OFFICER WAS RIGHT IN TAXING THE INTER EST INCOME INDICATED ABOVE UNDER SECTION 56 OF THE ACT. THE COURT ALSO O BSERVED THAT EVEN THE PAGE 9 OF 12 ITA NO.1262/BANG/2019 HONBLE SUPREME COURT MADE IT CLEAR THAT THEY ARE CONFINING THE SAID JUDGMENT TO THE FACTS OF THAT CASE. SIMILAR VIEW TAKEN IN CASE OF GUTTIGEDARARA CREDIT CO-OPERATIVE SOCIETY LTD. VS. ITO REPORTED IN [2015] 377 ITR 464 BY HON BLE KARNATAKA HIGH COURT. IN A SUBSEQUENT DECISION OF PR.CIT AND ANRS VS. TOTAGARS CO- OPERATIVE SALE SOCIETY REPORTED IN 392 ITR 74 IN TH E CONTEXT OF DEDUCTION U/S.80P(2)(D) OF THE ACT IT WAS HELD BY HONBLE KA RNATAKA HIGH COURT THAT DEDUCTION IN RESPECT OF ANY INCOME BY WAY OF I NTEREST OR DIVIDENDS DERIVED BY THE CO-OPERATIVE SOCIETY FROM ITS INVEST MENTS WITH ANY OTHER CO-OPERATIVE SOCIETY THE WHOLE OF SUCH INCOME IS A VAILABLE UNDER SEC.80P(2)(D) OF THE ACT. HONBLE KARNATAKA HIGH CO URT HELD THAT DECISION BY HONBLE SUPREME COURT IN CASE OF TOTGARS (SUPRA) WAS NOT ON THE DEDUCTION CLAIMED U/S.80P(2)(D) OF THE ACT BUT WAS RENDERED IN RESPECT OF DEDUCTION CLAIMED UNDER SECTION 80P(2)(A)(I) OF THE ACT. HONBLE KARNATAKA HIGH COURT IN THE CASE OF PR.CIT ANR. VS. TOTGARS CO- OPERATIVE SALE SOCIETY REPORTED IN 395 ITR 611 TOOK A DIFFERENT VIEW AND HELD THAT INTEREST INCOME EARNED ON DEPOSITS WHETHER WIT H ANY OTHER BANK WILL BE IN THE NATURE OF INCOME FROM OTHER SOURCES AND NOT INC OME FROM BUSINESS AND THEREFORE THE DEDUCTION U/S.80P(2)(D) OF THE ACT CA NNOT BE ALLOWED TO THE ASSESSEE. THE HONBLE COURT FOLLOWED DECISION OF HO NBLE GUJARAT HIGH COURT IN THE CASE OF SBI VS. CIT REPORTED IN 389 ITR 578 WH EREIN HONBLE GUJARAT HIGH COURT DISSENTED FROM THE VIEW TAKEN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF TUMKUR MERCHANTS CASE (SUPRA). IT CAN THUS BE SEEN THAT THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF TOTAGARS COOPERATIVE SALES SOCIETY IN 395 ITR 611 IS THAT I N LIGHT OF THE PRINCIPLES ENUNCIATED BY HONBLE SUPREME COURT IN TOTGARS CO-O PERATIVE SALE SOCIETY (SUPRA) IN CASE OF A SOCIETY ENGAGED IN PROVIDING CREDIT FACILITIES TO ITS MEMBERS INCOME FROM INVESTMENTS MADE IN BANKS DOES NOT FALL WITHIN ANY OF THE CATEGORIES MENTIONED IN SECTION 80P(2)(A) OF TH E ACT. THUS INTEREST EARNED FROM INVESTMENTS MADE IN ANY BANK NOT BEING A CO-O PERATIVE SOCIETY IS NOT DEDUCTIBLE UNDER SECTION 80P(2)(D) OF THE ACT. HOWE VER SECTION 80P(2)(D) OF THE ACT SPECIFICALLY EXEMPTS INTEREST EARNED FROM FUNDS INVESTED IN CO-OPERATIVE SOCIETIES. THEREFORE TO THE EXTENT OF THE INTEREST EARNED FRO M INVESTMENTS MADE BY ASSESSEE WITH ANY CO-OPERATIVE SOCIETY A CO-OPE RATIVE SOCIETY IS ENTITLED TO DEDUCTION OF THE WHOLE OF SUCH INCOME UNDER SECTION 80P(2)(D) OF THE ACT. THIS NEEDS TO BE VERIFIED BY THE LD.AO. ON THE BASIS OF ABOVE DISCUSSIONS AND IN THE INTER EST OF JUSTICE WE REMAND THIS ISSUE BACK TO THE LD.AO TO VERIFY THE INTEREST EARNED FROM INVESTMENTS MADE IN CO-OPERATIVE SOCIETIES THAT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(D) OF THE ACT. PAGE 10 OF 12 ITA NO.1262/BANG/2019 11.2 RESPECTFULLY FOLLOWING THE ABOVE VIEW WE DIRE CT THE LD.AO TO VERIFY THE INTEREST EARNED ON INVESTMENT EARNED FRO M CO-OPERATIVE SOCIETIES AND TO CONSIDER THE CLAIM OF ASSESSEE IN ACCORDANCE WITH LAW UNDER SECTION 80P(2)(D) OF THE ACT. ACCORDINGLY THESE GROUNDS RAISED BY ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ACCORDINGLY THE APPEALS FILED BY ASSESSEE FOR ASSE SSMENT YEARS UNDER CONSIDERATION STANDS ALLOWED FOR STATIS TICAL PURPOSES. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMB ER BANGALORE DATED THE 31 ST AUG 2021. /VMS/ PAGE 11 OF 12 ITA NO.1262/BANG/2019 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE PAGE 12 OF 12 ITA NO.1262/BANG/2019 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -8- 2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -8- 2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -8- 2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -8- 2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -8- 2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -8- 2021 SR.PS 8. IF NOT UPLOADED FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -8- 2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS