TaxTMI 
TaxTMI 
2024 (5) TMI 1567
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....ome Tax Officer 28(3)(4), Mumbai, u/s. 143 of the Act, dated 30.12.2016 for Assessment Year 2014-15. 1.2. The appeal filed by the Revenue in ITA No. 298/Mum/2024 is against the order of Ld. CIT(A), NFAC, Delhi, vide order no. ITBA/NFAC/S/250/2023-24/1058212036(1), dated 24/11/2023, passed against the assessment order by Central Processing Centre, u/s. 154 of the Act, dated 30.01.2023 for Assessment Year 2021-21. 2. Grounds taken by the Revenue are reproduced as under: ITA No. 44/MUM/2024 "1. Whether on the facts and in circumstances of the case and in law, the Ld. CIT (A) has erred in allowing the deduction w/s 80P(2)(d) of the Act on interest income earned of Rs. 1,89,79,925/-, from Co-operative bank treating the Cooperative bank as Co-operative society also, ignoring the fact that Co-operative Society and Co- operative bank are distinct entity and it is essential for a cooperative society to loose its status as a Co-operative society so as to turn into a co-operative bank and to acquire license from the RBI so as to conduct banking business." ITA No. 46/MUM/2024 "1. Whether On the facts and in the circumstances of the case and in ....
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....see collects deposits from its members by way of fixed deposits, saving deposits and recurring daily deposits, etc. Ld. Assessing Officer observed that assessee gives various types of loans/ advances viz. team loans, against hypothecation or mortgage, vehicle loans, personal loans, housing loans, education loans, loan/ overdrafts against fixed deposits or NSC or LIC receipts etc. only to its members, but no cash credit facility, letter of credit, no export credit, packing credit etc. and no guarantee. Assessee earns interest from its members under various credit schemes and pays interest to its members under various deposit schemes. 3.1. Return of income was filed on 29.11.2014 reporting a total income of Rs. 4,24,724/- after claiming deduction u/s. 80P of the Act for Rs. 2,31,44,574/-. In the course of assessment, assessee was asked to explain about its claim of deduction u/s. 80P(2)(a)(i) vis-à-vis amendment made by the Finance Act, 2006 which inserted by inserting section 80P(4) with explanation thereto r.w.s. 2(24)(viia) of the Act. Assessee made its detailed submission by placing reliance on several judicial precedents including that of Hon'ble Jurisdic....
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.... Mumbai. The objects of the assessee include acceptance of deposits and granting of loans to members together with other activities but do not include banking. Moreover, the assessee has not granted any loan to or accepted a deposit from a person who is not a member. 3.4. Assessee submitted that Co-ordinate Bench of ITAT, Mumbai in its own case for the Assessment Year 2010-11 vide ITA No. 5819/Mum/2014 and 5217/Mum/2014 dated 17.03.2017 had dismissed the revenue appeal by categorically accepting the fact that assessee is a Credit Co-Operative Society and entitled for benefit u/s 80P(2)(a)(i) of the Act. Relevant extracts are as under:- "9. H/e have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by the revenue authorities. After considering the facts of the case, we find that Ld. CIT (A) while dealing with the said ground has categorically mentioned the facts of the case and had given the findings in para no. 3.2.14 in its order after detailed discussion in para no. 3.1.6 to 3.2.13 and the same is reproduced below:- "3.2.14. The A.O., in support of his decision, has rel....
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....n-members are concerned that has already been taxed by the AO in his assessment order amounting to Rs. 12,45,924/- so to this extent as far as applicability /charging of section 80P(2)(a)(i) is concerned, we do not find any perversity in the order of AO. 4. As far as assessee's claim u/s. 80P(2)(d) is concerned as discussed (supra), assessee is entitled for the same as assessee is not falling in section 80P(4) which is applicable only in the case of cooperative banks /cooperative societies having licences from RBI to do banking business. The whole foundation as laid down by the Ld. PCIT is on wrong appreciation of the facts and misinterpretation of relevant sections. To further substantiate our findings, we are reproducing and discussing the judicial pronouncements of Hon'ble Apex Court on both the issues i.e., section 80P (2) (a)(i), 80P(2)(d) and 80P(4) of the Act as under: - ⮚ [2023] 150 taxmann.com 173 (SC) PCIT v. Anna saheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. 1. In view of the above factual and legal discussion, we are not in agreement with the order of Ld. PCIT. Accordingly, the grounds raised by the assessee are allowed and ord....
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....sion "members" is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in Section 80- P(2)(a)(/) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression "members" in Section 80-P(2)(a)(/) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: "2. (n) 'Member' means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to 'members' anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such ....
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....encourage and promote the growth of the co-operative sector generally in the economic life of the country and therefore, has to be read liberally in favour of the assessee. That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in subsection (2) of Section 80P must be given by way of deduction vide Citizen Co-operative Society. This is because subsection (4) of Section 80P is in the nature of a proviso to the main provision contained in subsections (1) and (2) of Section 80P. The proviso excludes cooperative banks, which are cooperative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section 5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 2. While analysing Section 80P of the Act in depth, the following points were noted by this Court: 1. Firstly, the marginal note to Section 80P which reads "Deduction in respect of income of co-operativ....
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....benefit of deduction under Section 80P of the Act. The questions for consideration are answered accordingly." 3.8. Based on the above submissions of the assessee, ld. CIT (A) observed on section 80P(2)(a)(i) r.w.s. 80P(4) that, "6.4 Appellant is registered as a co-operative society under the Maharashtra Co-operative Societies Act, 1960. Further, it is also found to be a co-operative society on the basis of relevant definitions contained in the Income-tax Act & not being a Cooperative bank as per the applicable provision of the Banking Regulations Act. Thus, it is held that being a co-operative society, appellant, is not hit by the exclusion provided in section 80P(4) of the Act and is therefore, eligible to claim deduction under section 80P(2)(a)(i) of the Act, subject to fulfillment of conditions specified therein. While giving appeal-effect, income arising from loans given to members (whether for agriculture or otherwise), in accordance with directions of the Hon'ble Apex Court (supra), are to be allowed. The appellant had claimed the entire 80P(2) deduction under sub-section (a)(i). However, as clearly laid down in Mavilayi judgment by the Hon'ble Apex Court in case ....
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....and section 80P(2)(d) provides for deduction in this behalf. For holding such income as eligible for deduction under section 80P(2)(d) of the Act, ld. CIT (A) referred to decision of Pr. CIT v. Peroorkada Service Cooperative Bank Ltd. [2022] 442 ITR 141 (Ker) dated 01.11.2021 according to which investment by the assessee (cooperative society) with co-operative banks (being a genus of the larger specie i.e. co-operative society) would be eligible for 80P(2)(d) deduction. However, the scheduled banks have to be excluded. 3.12. Ld. CIT (A) thus, partly allowed the appeal of the assessee on the issues relating to section 80P(2)(a)(i) r.w.s. 80P(4) and section 80P(2)(d). 3.13. On the issue relating to addition made towards bad and doubtful debts u/s. 36(1)(viia) of Rs. 6,24,32,302/- it was held by ld. CIT (A) that assessee is not a cooperative bank and therefore, provisions of Section 36(1)(viia) do not apply to cooperative society. Aggrieved, Revenue is in appeal before the Tribunal. 4. Before us, ld. Sr. DR placed reliance on the order of ld. Assessing Officer. Per contra, ld. Counsel for the assessee reiterated the submissions made before the ld. CIT(A). 5. We have h....
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....ke Co-operative credit societies they can advance loans to the members only. 4. Co-operative Credit Societies cannot accept deposits from public. Co-operative can accept deposits from public. 5. The provisions of Banking Regulation Act 1949 are not applicable to the Cooperative Credit Societies. The provisions of Banking Regulation Act 1949 are applicable to the Cooperative Bank. 6. The Co-operative credit societies do not required license from Reserve Bank of India to carry on its business. The Co-operative banks are required to obtain license from Reserve Bank of India to carry on its business. 7. The Co-operative credit societies do not have cheque facilities, clearing facilities and they cannot issue demand drafts, pay orders etc. The Co-operative have cheque facilities, clearing facilities and they issue demand drafts, Assessment Year order, bank guarantees etc. 8. Co-operative Credit Societies cannot use word Bank/Bankers in their name. Co-operative Banks are mandatorily required to use word Bank/Bankers in their name. 9. Reserve Bank of India has no statutory power of control and supervision of Cooperative Societies. Rese....
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....on the decision of Hon'ble High Court of Karnataka in case of the PCIT vs. Totagar Cooperative Sales Society Limited [2017] 392 ITR 74 / 78 taxmann.com 169 (SC).The findings so arrived at by the coordinate bench is as under: "6.1. From the above, we understand that the provisions of section 80P(2)(d) of the Act are very clear and assessee is entitled for deduction u/s. 80P(2)(d) of the Act in respect of interest or dividends received from investments made with any other cooperative societies. The decision on which the Ld. CIT (A) placed reliance i.e. The Totagar Cooperative Sales Society Limited v. ITO 322 ITR 283 (SC), is not on the issue of whether the assessee is entitled for exemption u/s. 80P(2)(d) of the Act vis-a-vis the interest income earned by the cooperative society from investments in other cooperative societies. Hence the decision of Hon'ble Supreme Court in the case of The Totagar Cooperative Sales Society Limited v. ITO has no application to the facts of the present case. 6.2. From the above extraction, we also note that the Hon'ble High Court held that the word 'cooperative society' are the words of the large extent and denotes a genus,....