TaxTMI 
TaxTMI 
2023 (8) TMI 1417
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.... vide it's subsequent, larger bench decision by the Hon'ble High Court in CIT v. Poonjar Service Co-operative Bank Ltd. [2019] 414 ITR 67 (Ker)(FB) dated 19.3.2019. The later decision, however, having a retrospective effect, the captioned appellate orders were recalled following the decision in Kil Kotagiri Tea & Coffee Estates Co. Ltd. v. ITAT [1988] 174 ITR 579 (Ker). 3.1 All assessees are co-operative societies registered as Primary Agricultural Credit Societies (PACSs) under the Kerala Co-operative Societies Act, 1969 (Kerala Act). The Tribunal had per the recalled orders set aside the issue of deduction under section 80P(1) of the Income-tax Act, 1961 ('the Act' hereinafter) to the file of the Assessing Officer (AO), who was to in the set aside proceedings examine if the activities of the assessee-societies were in agreement with the provisions of the Kerala Act for a PACS. 3.2 Deduction, on their entire income, had been claimed in the instant cases u/s. 80P(1) r/w s. 80P(2)(a)(i). The same was denied by the AO on the ground that the assessee/s does not, in view of it's lending profile, qualify as a PACS, i.e., given the definition thereof under the Banking Regulation Act, 1....
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....ction u/s. 80P(2)(d) in the instant appeals. Contrary to as was projected before us, it was not so in Peroorkada SCB Ltd. (supra), as a reading thereof would clarify. This, though, would be of no moment. This is as, as explained in Kerala State Cooperative Marketing Federation Ltd. & Ors. v. CIT[1998] 231 ITR 814 (SC), the correct way of reading the different heads of exemption enumerated in sec. 80P would be to treat each as a separate and distinct head of exemption. Whenever a question arises as to whether any particular category of income of a co-operative society is exempt from tax what has to be seen is whether the income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head. 5.2 Next, we may examine the plea as advanced before us. Clearly, income to the extent assessed as business income would stand to be deducted w.r.t. 80P(2)(a)(i). This leaves us with interest on deposits with banks and treasuries, claimed deductible u/s.80P(1) r/ws. 80P(2)(d). The same, sure, does not fi....
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....viz., interest or dividend derived by the assessee from its investments with any other co-operative society. The source of interest income is from bank and treasury, interest income received from treasury be included in the computation of total income of the assessee. In other words, interest earned from treasury is inadmissible for deduction and interest income from co-operative societies registered under the Kerala Co-operative Societies Act are eligible for deduction. The contra consideration of the Commissioner of Income-tax (Appeals) and the Tribunal is incorrect and liable to be modified as stated above. Hence, it is held that the interest income earned by the assessee does not come within the ambit of section 80P(2)(a)(i) and permissible deduction of interest income is limited to co-operative societies/banks registered under Kerala Co-operative Societies Act under clause (d) of the Act and effect order on the above lines is made by the Assessing Officer. The questions are accordingly answered." In fine, interest from co-operative banks, inasmuch as they are also cooperative societies under the Kerala Act, is deductible u/s.80P(2)(d), while that from the treasury or other in....
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....s their activity did not answer the definition of banking u/s.5(b) of BRA, the prime condition of which is the acceptance of deposits from the public for the purpose of lending. That being the case, the Hon'ble High Court in Peroorkada SCB Ltd. (supra) extending the benefit of sec.80P(1) to deposits with co-operative banks, on the basis that they are also cooperative societies, though in the business of banking, so that income therefrom would fall to be covered u/s. 80P(2)(d), may be, with respect, inconsistent with the decision by the Hon'ble Apex Court in Mavilayi SCB Ltd.(supra),which concerns itself in the main with the scope of the exclusion clause of s.80P(4). Sec.80P(4) ousts from the purview of sec.80P any co-operative bank (i.e., other than the specified categories thereof). Sec.80P(2)(d) clearly provides exemption of income on investment in a co-operative society, which therefore ought not to be extended to a co-operative bank, excluded u/s. 80P(4). Co-operative banks are public entities, operating as banks, and which is the only reason for their exclusion from s. 80P per sub-section (4) thereof. When, therefore, a co-operative society places it's money with them, the sam....