TaxTMI 
TaxTMI 
2021 (9) TMI 137
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion claimed u/s.80P[2][a][i] of the Act amounting to Rs. 51,36,8881- in respect of the profits earned by the appellant from the business of providing credit facilities to its members under the facts and in the circumstances of the appellant's case. 3. The learned CIT[A] erred in holding that the business of providing credit facilities to the members carried on by the appellant cannot be regarded as a business carried on by a co-operative society complying with the principles of mutuality since the appellant had admitted nominal members, who could neither vote nor were entitled to a share in the of its as per the bye-laws of the appellant and hence, the appellant was not entitled to deduction u/s. 80P[2][a][i] of the Act having regard to the rationale behind the judgment of the Hon'ble Supreme Court in the case of Citizens Co-operative Society reported in 397 ITR 1 [SC] under the facts and in the circumstances of the appellant's case. 4. The learned CIT[A] ought to have appreciated that the appellant cooperative society had no doubt admitted nominal members, which was permissible under the Karnataka Co-operatives Societies Act, 1959 and that there was n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act, which under the facts and in the circumstances of the appellant's case deserves to be cancelled. 10. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs." Brief facts of the case are as under: 2. The Assessee is a co-operative society engaged in the business of acceptance of deposits from members, lending loans, providing banking facilities in rule rural village. Ld.AO observed that the purpose of creation of the societies to overall upliftment of Potters and Potter industry within the jurisdiction of the society. For years under consideration assessee filed its return of income after claiming deduction under section 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 assessee appeared before the Ld.AO and filed requisite details as called for. 2.1 The Ld.AO from the details filed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....view of the violation of the Karnataka Co-operative Society Act, the Ld.CIT(A) observed that the society is not eligible for deduction u/s 80P and as such ratio of the decision of Hon`ble Supreme Court decision 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 is applicable to the facts of the assessee society. 2.6 The Ld.CIT(A) also held that, in the assessee's case, mutuality principles have failed as substantial business is being carried out with the general public or nominal members and also in view of the assessee being registered as Souharda 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. 2.7 The Ld.CIT(A) thus upheld the order of Ld.AO. 2.8 Aggrieved by the order of Ld.CIT(A) assessee is in appeal before us now. 3. We have considered the rival submissions of both sides in the light of records placed before us. 3.1 The issue that arises for consideration is: (i) whether the authorities below were ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case of M/s Jyothi Pattin Souhard Sahakari Niyamit in ITA No.650/Bang/2020 for asst. year 2015-16 by order dated 13/8/2021 held as under:- "In the case of PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER vs. TOTAGARS CO-OPERATIVE SALE SOCIETY 392 ITR 0074 (Karn) in the context of deduction u/s.80P(2)(d) of the Act, it was held that Sec.80P(2)(d) of the Act allows deduction in respect of any income by way of interest or dividends derived by the cooperative society from its investments with any other co-operative society, the whole of such income. The Hon'ble Court held that that the aforesaid Supreme Court's decision in the case of Totgars (supra), was not applicable to deduction u/s.80P(2)(d) of the Act, because the said decision was rendered with regard to deduction under Section 80P(2)(a)(i) of the Act and not under Section 80P(2)(d) of the Act. 9. However, the Hon'ble Karnataka High Court in the case of PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER vs. TOTAGARS COOPERATIVE SALE SOCIETY 395 ITR 0611 (Karn) took a different view and held that interest income earned on deposits whether with any other bank will be in the nature of income from other sources ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve society should be out of the investments with any other co-operative society. The words 'Co-operative Banks' are missing in clause (d) of subsection (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. (Paragraph 13 of the Judgment). 2. 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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.(Paragraph-18 of the Judgment) 6. The Court finally concluded that it would not make a difference, whether the interest income is earned from investments/deposits made in a Scheduled Bank or in a Cooperative 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." (Paragraph 19 of the Judgment) 11. The Hon'ble Karantaka High Court in the aforesaid decision also placed reliance on a decision of the Hon'ble Gujarat High Court in the case of STATE BANK OF INDIA (SBI) vs. COMMISSIONER OF INCOME TAX 389 ITR 0578 (Guj) did ....