TaxTMI 
TaxTMI 
2024 (11) TMI 847
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...."CIT(A)"] u/s. 250 of the Income tax Act, 1961 [hereinafter referred to as "Act"] for the Assessment year [A.Y.] 2014-15, wherein learned CIT(A) has confirmed the addition of Rs. 56,64,970/- made vide assessment order dated 21.12.2016 and dismissed assessee's appeal. 2. (i) The brief facts state that the assessee is a co-operative credit society, registered under Maharashtra co-operative society Act, 1960 and is engaged in providing credit facilities to those CIDCO employees who are members of credit society. The assessee e-filed its return of income on 29.11.2014, declaring total income of Rs. Nil. The return was processed u/s. 143(1) of the Act. The case was selected for scrutiny under CASS and statutory notices u/s. 143(2) and u/s. 142(1) of the Act were issued and served upon the assessee. Assessee responded and filed required details. During the year, the assessee has shown income of Rs. 56,64,971/- from business and claimed deduction u/s. 80P of the Act amounting to Rs. 56,64,971/-. Learned assessing officer held that assessee's credit society fell under the category of primary co-operative bank and therefore, the provisions of section 80P(4) is applicable in assesse....
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....ls under the category of primary co-operative bank, thus hit by the exclusion clause provided in section 80P(4) of the Act and is not entitled either to the benefit of section 80P(2)(a)(i) or of section 80P(2)(d) of the Act. 10. The law relevant to the facts of the case is extracted as under: i. Income tax Act 1961 "80P. Deduction in respect of income of co-operative societies. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of the agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intend....
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....iety "means a society for the benefit of the consumers: (d) 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; e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22. [Explanation. - For the purposes of this section an "urban consumers' co-operative society" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) I....
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....Act shall apply to- (a) a primary agricultural credit society; or (b) a co-operative land mortgage bank; and (c) any other co-operative society, except in the manner and to the extent specified in Part V. XXX 5. Interpretation-In this Act, unless there is anything repugnant in the subject or context, XXX (b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; (c) "banking company" means any company which transacts the business of banking in India. Explanation. Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause; XXX 22. Licensing of banking companies. (1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any su....
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....in the opinion of the Reserve Bank, be necessary to ensure that the carrying on of banking business in India by the company will not be prejudicial to the public interest or the interests of the depositors. (3A) Before granting any licence under this section to a company incorporated outside India, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise that the conditions specified in sub-section (3) are fulfilled and that the carrying on of banking business by such company in India will be in the public interest and that the Government or law of the country in which it is incorporated does not discriminate in any way against banking companies registered in India and that the company complies with all the provisions of this Act applicable to banking companies incorporated outside India. (4) The Reserve Bank may cancel a licence granted to a banking company under this section (i) if the company ceases to carry on banking business in India; or (ii) if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or (iii) if at any time, any of the c....
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....ed under any Central Act for the time being in force relating to the multi-State co-operative societies, or any other Central or State law relating to co- operative societies for the time being in force; (cciii) "director", in relation to a co-operative society, includes a member of any committee or body for the time being vested with the management of the affairs of that society; (cciiia) "multi-State co-operative bank" means a multi- State co-operative society which is a primary co- operative bank; (cciiib) "multi-State co-operative society" means a multi-State co-operative society registered as such under any Central Act for the time being in force relating to the multi-State co-operative societies but does not include a national co- operative society and a federal co-operative; (cciv) "primary agricultural credit society" means a co- operative society, - (1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops); and (2) the bye-laws of which do not permit admissi....
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....ll carry on banking business in India unless- (a) (*) (b) it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose: Provided that nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a co-operative bank carrying on banking business commencement at the of the Banking Laws (Application to Cooperative Societies) Act, 1965 (23 of 1965), for a period of one year from such commencement. Provided further that nothing in this sub-section shall apply to a primary credit society carrying on banking business commencement of on or before the the Banking Laws (Amendment) Act, 2012, for a period of one year or for such further period not exceeding three years, as the Reserve Bank may, after recording the reasons in writing for so doing, extend. (2) Every co-operative society carrying on business as a co-operative bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965) shall before the expiry of three months from the commencement, every co-o....
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....ch principal society in a district, the State Government may declare any one or more cooperative societies carrying on the business of financing other co-operative societies in that district to be also or to be a central co-operative bank or central co-operative banks within the meaning of this definition XXX (u) "State co-operative bank" means the principal co- operative society in a State, the primary object of which is the financing of other cooperative societies in the State: Provided that in addition to such principal society in a State, or where there is no such principal society in a State, the State Government may declare any one or more cooperative societies carrying on business in that State to be also or to be a State cooperative bank or State cooperative banks within the meaning of this definition; (v) "State land development bank" means the co-operative society which is the principal land development bank (by whatever name called) in a State and which has as its primary object the providing of long-term finance for agricultural development: Provided that, in addition to such principal land development bank in a State, or where the....
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.... carry on banking business unless it falls within the permitted categories set out in Section 22. The term "co-operative bank" has been defined under Section 5(cci) as a state co-operative bank, a central co-operative bank and a primary co-operative bank. Thus, the term "co-operative bank" does not include all co-operative societies. It was further observed by Hon'ble Supreme Court that when a term is specifically defined in a statute, then, for purposes of that statute, that term cannot bear a meaning assigned to it in another statute. One cannot ignore the specific definition given in the BR Act, 1949 and apply some other definition set out in some other statute. Therefore, a co-operative bank must have the meaning assigned to it in Section 5(cci) of BR Act, 1949. Reserve Bank of India cannot go by any other meaning given to the term "co-operative bank" for purposes of licensing under BR Act, 1949. Reserve Bank of India has to go by the meaning given to this term in the said Act only. Therefore, it was concluded that the Reserve Bank of India, by virtue of its power under Section 22 cannot grant a licence to any co-operative society unless it is a state co-operative bank or a ....
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....stment, of deposits of money from the public. Also under Section 22(1)(b) of the BR Act, 1949, no co- operative society can carry on banking business in India, unless it is a co-operative bank and holds a licence issued in that behalf by Reserve Bank of India. It was pointed out that as opposed to the above, a primary agricultural credit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 14.5. It was further observed in the said case that some primary agricultural credit societies had sought for banking licence from Reserve Bank of India but the same was turned down by observing that such a society was not carrying on the business of banking and that it did not come under the purview of Reserve Bank of India requiring a licence for its business. 14.6 Thereafter in paragraph 48 of the judgment, it was observed that a deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. That sub- section (4) of Section 80P which is in the nature of a proviso specifi....
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....o-operative Sale Society Ltd., [2010]322 ITR 283SC, Hon'ble Andhra Pradesh and Telangana High Court in case of The Vavveru co-operative rural bank V The Chief Commissioner of Income Tax (2017) 396 ITR 71(AP), has discussed the decision of the Hon'ble Apex Court in Totgars (Supra) and distinguished the facts vide para 34 of its judgement as under: "34. The case before the Supreme Court in Totgars was in respect of a Cooperative Credit Society, which was also marketing the agricultural produce of its members. As seen from the facts disclosed in the decision of the Karnataka High Court in Totgars, from out of which the decision of the Supreme Court arose, the assessee was carrying on the business of marketing agricultural produce of the members of the Society. It is also found from Paragraph-3 of the decision of the Karnataka High Court in Totgars that the business activity other than marketing of the agricultural produce actually resulted in net loss to the Society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in Clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members ....
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.... of interest earned from a co-operative bank would be deductible from the gross income of the co-operative society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee- respondent. The learned counsel has relied on the case of Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under section 80P(2)(a) (i) of the Income-tax Act. For, in the present case the interpretation that is required is of section 80P(2)(d) of the Income-tax Act and not section 80P(2)(a)(i) of the Income-tax Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two sub- stantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case." 15. The coordinate Mumbai bench of the Tribunal in the University of Mumbai employees co-op. credit society Ltd. (Supra) has held in Para 7 as under: "...... We find that issue involved in present appeal filed by the assessee is squarely covered in favour of the assessee b....
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....ricted to its employees only. The appellant assessee society's members contribute their funds to society and same funds are given as loans on interest amongst its members only. Assessee's principal business is not banking business as it does not transact banking business with general public in India. The first and third conditions, thus do not exist in the functioning of assessee society. It is accordingly held that in absence of aforesaid two conditions, the appellant assessee does not fall under the category either of a co-operative bank or a "primary co-operative bank", hence not hit by sub section 4 of section 80P of the Act. 18. We further notice that apart from the business income, certain small portion of income of the society was earned from the interest and dividend. It appears from the profit & loss A/C of paper book at page 37 that the appellant"s co-operative credit society received interest income on investments at Rs. 19,31,375/- and dividend income on bank shares at Rs. 1,32,500/-. The investee institutions have not been questioned by the authorities below in respect of their status as co-operative societies. The total income from profit & gains of Rs. 56,64,971/-....