TaxTMI 
TaxTMI 
2025 (6) TMI 1629
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....re the Tribunal raising the following grounds of appeal: I. I.T.A. Nos.: 1582; AY 2018-19: "1. Whether Ld. CIT(A) is justified in deleting the addition of Rs. 2,59,49,002/- on account of interest received from the Sikkim State Cooperative Bank Limited and Citizens Urban Cooperative Bank Ltd. considering the said banks as co-operative societies registered under the State laws for registration of co-operative societies ignoring the facts that Sikkim State Cooperative Bank Limited and Citizens Urban Cooperative bank Ltd, though registered under the Sikkim Cooperative Societies Act 1978, they are not Primary Agricultural Credit Society or Primary Co-operative Agricultural and Rural Development Bank. 2. Whether Ld. CIT(A) is justified in deleting the addition of Rs. 2,59,49,002/- on account of interest received from the Sikkim State Cooperative bank Limited and Citizens urban Cooperative Bank Ltd. While Sikkim State Cooperative bank limited itself has declared that it is not qualified for deduction under section 80P. 3. Whether Ld. CIT(A) is justified in deleting the addition of Rs. 2,59,49,002/- on account of interest received from the Sikkim State C....
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....crutiny Selection (in short 'CASS') and in the course of the assessment proceedings, statutory notices issued were partly complied by the assessee. The assessment was completed u/s 143(3) read with section 143(3A) and section 143(3B) of the Act on 30.03.2021 at the total income of Rs.2,66,72,980/- after making additions/disallowances of - (i) Rs.3,65,190/- u/s 36(1)(va) of the Act for delayed payment of employees' contribution to Provident Fund, (ii) Rs.3,58,787/- u/s 40(a)(ia) of the Act (iii) Rs.2,59,49,002/- u/s 80P(2)(d) of the Act in respect of interest income from investments made with the Cooperative Banks. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) raising several grounds of appeal. The Ld. CIT(A) deleted the addition of Rs 3,65,190/-, gave part relief for addition of Rs.3,58,787/- and also deleted the addition u/s 80P made by the Ld. AO. The extract from the order of the Ld. CIT(A) is as under: "10.1 In the course of assessment proceedings, the A.O. noticed that during the year, the appellant had earned the interest income aggregating to Rs. 2,59,49,002/- from investments made, or deposits held with, Sikkim Stat....
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....taxmann.com 114) (SC) 2. Bangalore Club Vs CIT (29 Taxmann.com 29) (SC) 10.4 The AO has also observed that the provisions granting concessions should be rigidly interpreted. The AO has taken a view that if the words 'cooperative society' were to be read as 'co-operative bank', the same would render the entire provision redundant, otiose and nugatory; an outcome which is surely not intended by the Parliament. The AO has relied on the following authorities, in support of these proposition, - 1. Oswal Agro Mills (1993 (66) ELT 37) (SC) 2. Dilip Kumar & Company and Ors. (2018) (95 Taxmann.com 327)(SC) 10.5 On being asked, the appellant explained that both these Cooperative Banks are registered as Co-operative Society under the State laws, and therefore, the appellant was eligible to claim deduction of interest earned on investments made with the Cooperative Banks. AO however did not accept this contention of the appellant. AO held that exemption is allowed to interest earned by a Cooperative Society from investments made with a primary agricultural credit Society, or a primary Cooperative Agricultural and Rural Development Bank; but not ....
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....ooperative Bank Ltd. and Citizens Urban Cooperative Bank Ltd. The AO has not reverted any adverse factual finding as to source of these investments made by the appellant co-operative society. There is no dispute on the fact that the profits and gains of business, to the extent attributable to the activity of marketing of agricultural produce, are eligible for deduction under section 80P(2)(a) in the hands of the appellant cooperative society. The appellant co-operative society has, however, claimed total deduction of Rs. 2,59,49,002/- under section 80P(2)(d) of the Act. On verification of details of interest income, the AO noticed that the same includes income by way of interest aggregating to Rs. 2,59,49,002/- from investments and deposits made with two co-operative Banks. The only point of dispute is whether the interest income derived by the appellant cooperative society from the investment made by it with other co-operative Banks, namely Sikkim State Cooperative Bank Ltd. and Citizens Urban Cooperative Bank Ltd., shall qualify for deduction in terms of section 80P (2)(d) of the Act. The appellant has furnished copies of certificate of Registration of these two co-operative Bank....
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....High Court, on identical facts, has held as under- "8. The issue whether a Co-operative Bank is considered to be a Cooperative Society is no longer res integra. For the said issue has been decided by the IT AT itself in different cases. Moreover the word "Co-operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and I identifies a particular species of the genus Co-operative Societies. Co-'perative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Cooperative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society". 9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co-Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'. 10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Soc....
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....The Supreme Court judgment in the case of Mavilayi Service Co-operative Bank Ltd. Vs CIT (2021) (123 taxmann.com 161) (SC) also deals with the deals with the eligibility to claim deduction under section 80P (2)(a)(i), particularly in the wake of introduction of sub-section (4) to section SOP. On the facts of case, Hon'ble Apex Court held that where assessee1 was registered as primary agricultural credit society, it was entitled to benefit of deduction under section 80P(2)(a)(i) notwithstanding that it was also giving loans to its members which were not related to agriculture. 11.8.2 Hon'ble Bombay High Court, in the case of CIT Vs Common Effluent Treatment Plant (2010) (328 ITR 362) (Bombay) deals with the 'principle of mutuality'. The assessee in that case was an association formed with an object of setting up an effluent treatment plant for its members, who ran industrial units in certain areas. In this context, Hon'ble High Court held that interest received on bank deposits, made out of surplus funds, does not possess the same character of mutuality as the surplus funds derived by the assessee from the contributions of its members. Thus, the context of the Bombay High C....
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....ok filed have been examined. Before us, the Ld. DR has submitted as under: "The allowability of interest from Co-operative Bank and other agencies is much debated issue as several observations have been made by different Courts and Tribunals both in favour of the Department as well as the assessee. However, the treatment of interest income from outside agencies out of the investments made from idle fund of the Society has been decided by the Apex Court. According to the Hon'ble Supreme court in the case of M/s Totgars Co-operative Sale Society Limited dated 08.02.2010, the interest income from outside agencies would fall within the ambit of Section 56 as income from Other Sources and not chargeable to business income u/s. 28. In the instant case, the assessee apart from its regular activity of providing loans to its members, made investment of its idle/surplus fund to Sikkim State Cooperative Bank Limited and Citizens Urban Cooperative Bank Limited. As per observation of the Hon'ble Apex Court, the financial activities of a co-operative society of providing loan to its members and earning interest thereon comes under the principle of mutuality as the relation between the S....
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....come of the Co-operative Society from the ambit of the income tax, but to comply with the basics, i.e., by virtue of principles of Mutuality that any income generated within the closed proximity out of the funds accumulated by the members should be devoid of Income Tax separately. However, this is not applicable in respect of the income generated from outside agencies. Here, the Co-operative Bank is an outside agency irrespective of the fact that the Co-operative Bank is also a Co-operative Society or not. Once, the Co-Operative bank is entitled to come into transaction with any outside agency apart from its members or any such agency covered by the restrictions as such, i.e., another Co-operative Society, it loses its character of Co-operative Society in respect of such transactions made with outside agency or general public as such. Explanation to sub section 80P(4) defines a Co-operative bank as follows : "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949). Now coming to the submission of the assessee, the assessee-society argued t....
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....tive Bank does not qualify for this purpose as the relation between the assessee and the commercial Bank is not covered. (b) Interest income of Cooperative Society: The provisions of section 80P(2)(d) state that: "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 plain reading of the above provision, it is clear that the section refers to interest and dividends earned from investments in another co-operative society only. Thus, this deduction cannot be extended to the interest and dividend income earned from the investment in any co-operative bank. It is well-settled rule of interpretation that the Legislative mandate should be so read that no word used by the Parliament should be rendered nugatory. If the word "cooperative society" is to read as "Cooperative bank" the same would render the entire provision redundant, otiose and nugatory, an outcome which the Parliament could surely not have intended. It has also been further clarified in Oswal Agro Mills case reported in 1993 (66) ELT 37 (S.C.) that "where the words of the sta....
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....etween the contributors and participators as mandated by the first condition. Thus, in the case before us the first condition for a claim of mutuality is not satisfied. (d) Motive of Deduction u/s. 80-P: There is no conflict between the claim of deduction u/s 80P in respect of entire income except the interest income incurred from several Banks, which are normally falls under the head Income from Other Sources and to be recognized u/s 80P(2)(d). The provisions of section 80P(2)(d) state that: "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 plain reading of the above provision, it is clear that the section refers to interest and dividends earned from investments in another co-operative society only. Thus, this deduction cannot be extended to the interest and dividend income earned from the investment in any co-operative bank. (e) Principal of Mutuality: In CIT vs. Bangalore Club, Hon'ble Karnataka High Court has clarified that interest income from Bank would not come within the principle of Mutuality. Hence, the asse....
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....ourt in the case of Thalappalam Ser. Co Op Bank ltd & Ors vs. State Of Kerala & Ors vide civil Appeal No. 9017 of 2013 (arising out of SLP(C) No. 24290 of 2019 on definition of public authority under section 2(h) of The Right to information Act, 2005) have discussed at length about accountability and transparency in cooperative societies in general and formation of Public information officer which has no application over judgment on fiscal statute like Income Tax because one word occurring in different sections of the Act can have different meaning, if the object of the two sections are different and when both operate in different fields. In view of judgment of Hon Supreme Court in the case of Southern Technologies Ltd. v. Joint Commissioner of Income-tax, Coimbatore [2010] 187 TAXMAN 346 (SC) and also in view of judgment of Hon Supreme Court in the case of Medley Pharmaceuticals Limited v. Commissioner of Central Excise and Customs, Daman - (2011) 2 SCC 601 = 2011 (263) ELT 641 (SC) and in view of judgment of Hon Supreme Court in the case of Commissioner of Central Excise, Nagpur v. Shree Baidyanath Ayurved Bhavan Limited - 2009 (12) SCC 419 = 2009 (237) ELT 225 (SC)]. Ev....
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....is also defined as co-operative society. However, even this contention of the assessee cannot come to the rescue of the assessee for the reason that the interest is not earned from the Regional Rural Bank but ordinary Co-operative bank. As submitted by the assessee in the submission dated 09/11/2015, the above referred interest income of Rs. 1,06,77,541/- was derived from its investment in the following banks, a) NKGSB Co-operative Bank Ltd., b) Dombivali Nagari Sahakari Bank Ltd., c) The Saraswat Co-operative Bank Ltd. d) The TJSB Sahakari Bank Ltd., e) The Maharashtra State Co-op. Bank Ltd. f) Abhyudaya Co-op Bank Ltd. All these five banks are neither Co-operative Societies nor be Regional Rural Banks governed under Regional Rural Development Bank. 1976. The very basis of functioning of any co-operative society would be the principle of mutuality. If we go through the principle of mutuality, the three important basic conditions of the Principle are as under: 1) There must be a complete identity between the contributors and participators. 2) The actions of the participators and contributors must be in furtherance of the mandate of the association. ....
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.... sources and the society was not entitled to special deduction u/s 80P(2). The finding of the Hon'ble Supreme Court reads as follows:- "The words "the whole of the amount of profits and gains of business" in section 80P (2) of the Income-tax Act, 1961, emphasise that the income in respect of which deduction is sought by a cooperative society must constitute the operational income and not the other income which accrues to the society. 7. The Hon'ble Apex Court in the case of Banglore Club V CIT [2013] 29 taxmann.com 29 (SC) w.r.t. interest earned from member bank have denied mutuality benefit and have held vide para 25 to 28 as under: ......The interest earned from fixed deposits kept with non-member bank was offered for taxation and the tax due was paid. Therefore, we are required to examine the case of the assessee, in relation to the interest earned on fixed deposits with the member banks, on the touchstone of the three cumulative conditions, enumerated above. Para 26... as soon as these funds were placed in fixed deposits with banks, the closed flow of funds between the banks and the club suffered from deflections due to exposure to commercial banking operations. During....
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....posited amounts at a higher rate of interest to third parties. This loaning out of funds of the club by banks to outsiders for commercial reasons, in our opinion, snaps the link of mutuality and thus, breaches the third condition. Since all the three conditions are not satisfied Interest earned by assessee club on fixed deposits from its member banks would not be exempt from tax on basis of doctrine of mutuality. Judgment needs to be call back or appealed against or to be reviewed: The Hon. Gujarat High court in the case of Surat Vankar Sahakari Sangh Ltd. v. Assistant Commissioner of Income-tax [2016] 72 taxmann.com 169 (Gujarat) has talked about only interest received from co-operative society but gave judgment by approving Tribunal view that interest received from Co Operative Bank which amounts to granting unwanted benefit vide para 8.1 of the order which is as under: Para 8.1.... In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest p....
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....r clause (cci) of the provision, whereas Cooperative Societies come within the clauses of (ccii) and (cciia). For the purpose of the Income Tax Act, 1961, the following features are observed. (i) Co-operative Bank is an institution, which has been primarily registered as cooperative Society to venture its loan activities with its members for profit generation, has been allowed to extend its activities to people in general like a commercial bank for generating revenue from loan activities. The financial operation with non-members definitely does not come under the purview of principle of mutuality. (ii) The operation of Co-operative banks is guided by the RBI Act, whereas operation of co-operative societies is guided by respective State Co-operative Societies Act. (iii) Although a co-operative bank does not lose its recognition as a co-operative society, but itself seldom claims the benefits of Section 80P in its Return of Income or restricts its claim in respect of transactions made with its members only. (iv) The Hon'ble Karnataka High Court while giving effect to the direction of the Hon'ble Supreme Court in the case of Totagars Co....
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....prerequisite for availing benefit of deduction u/s. 80(P)(2)(d) ignoring the decision of the Apex Court observed severally; (iii) It has been relied upon the decision of the Hon'ble ITAT, Rajkot in the case of M/s. Surendranagar District Co-operative Milk Producers Union Ltd vs DCIT for coming at a conclusion that interest from Co-operative Bank on investment of surplus fund always qualifies for deduction u/s. 80P(2)(d), which is against the proposition of the Act and also the observation of the Hon'ble Karnataka High Court giving effect to the order of the Apex court in the case of Totagars Co-operative Sales Society. The reliance of the case laws Rena Sahakari Sakhar Karkhana Ltd vs. PCIT, Surat Vankar Sahakari Sangh Ltd, Ashok Tower D Co Op Housing Society Ltd also suffers the shortcomings'. (iv) The observation of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative bank Ltd vs. CIT (2021) does not deserve its interference in the present case as the status of the investor of surplus fund is different. In this case, the Hon'ble Supreme Court has observed that the Co-operative bank has not lost its Society character within the permissibilit....
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....in Principal CIT Vs Shree Aradhana Urban Co-operative Credit Society Ltd. in R/Tax Appeal No. 400 of 2024 (copy attached and marked as Annexure 'A'). The Hon'ble Gujarat High Court had decided the identical issue in favour of the assessee. We humbly request the Bench to refer to Para No. 5 of the judgment. The Hon'ble Court relied upon this earlier decision of the Gujarat High Court in Pr. CIT Vs Ashwinikumar Arban Co-operative Society Ltd. (discussed separately hereinafter). In fact the Gujarat High Court is of the view that sub-section (4) of section 80P is in the nature of a proviso to the main provision contained in sub-sections (1) and (2) of Section 80P (page 8 of 12). (ii) Also please refer to the decision of Pr. CIT Vs Ashwinikumar Arban Co-operative Society Ltd. Gujarat High Court (R/Tax Appeal No. 538 of 2024 with R/tax Appeal No. 221 of 2022 with R/Tax Appeal No. 419 of 2023). Copy of the judgment enclosed and is marked as Annexure B. The Gujarat High Court had the occasion to consider the view of Karnataka High Court that interest earned from investment any bank not being a co-operative society is not deductible under Section 80P(2)(d....
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....ced on the decision of the Apex Court in the case of CIT Vs Vegetable Products Ltd. (1973) 88 ITR 192 wherein the Highest Court of the Country had observed that if two reasonable constitutions of a taxing provision are possible, then the constitution which favours the taxpayers must be adopted. Finally it is submitted that in view of the aforesaid judicial pronouncements the Hon'ble Bench may please uphold the decision of the Ld. CIT(A) that the interest received by the co-operative assessee from co-operative banks should be allowed as a deduction under Section 80P(2)(d) of the Act." 5.1. The assessee has also relied upon the following case laws: "CASE -1 Commissioner of Income Tax, Coimbatore vs M/s. The Nilgiris Co-operative Marketing Society Ltd., Sailing House, Ooty (Chennai High Court) (TAX CASE (Appeal) No.758 of 2016) CASE - 2 Danda Co-op Credit Society Ltd. vs ITO - ITA.NO.2980/MUM/2022 (Tribunal - Mumbai) Quoting from Coordinate Bench in case of the same assessee ITA.No. 3240/Mum/2019 for the A.Y. 2012-13 Pg 8 - Last paragraph CASE - 3 Reserve Bank Staff and Officers co-op credit society Ltd, vs ITO (Tribunal -Mumbai) ITA No. 3114/Mum....
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....tracted as under: "11. The Assessment Years involved in the present batch of appeals are Assessment Years 2007-2008 to 2011¬2012. The bone of contention is that the deduction under Section 80P(2) of the Act is now claimed by the respondent assessee under Section 80P(2)(d) of the Act and not under Section 80P(2)(a) of the Act. The reason is that now the investments and deposits after the Supreme Court's decision against the assessee Totgars Co-operative Sale Society Ltd. (supra), the assessee has shifted the deposits and investments from Schedule Banks to Co-operative Bank and such Co-operative Bank is essentially a Co-operative Society also and Clause (d) allows deduction of income by way of interest or dividends derived by the assessee Co-operative Society from its investments with any other Co-operative Society. 12. The sheet anchor of the contention of the learned counsel for the assessee misses two essential points required for claiming the exemption or 100% deduction from gross total income for a co-operative society: (i) that the character or nature of income, namely interest on investments or deposits, does not change irrespective of the fact whethe....
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....ven though without any amendment in Section 80P(2)(d) of the Act is sufficient to deny the claim of the respondent assessee for deduction under Section 80P(2)(d) of the Act. The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural credit society. 15. The amendment of Section 194A(3)(v) of the Act excluding the Co-operative Banks from the definition of "Co- operative Society" by Finance Act, 2015 and requiring them to deduct income tax at source under Section 194A of the Act also makes the legislative intent clear that the Co-operative Banks are not that specie of genus co-operative society, which would be entitled to exemption or deduction under the special provisions of Chapter VIA in the form of Section 80P of the Act. 16. If the legislative intent is so clear, then it cannot contended that the omission to amend Clause (d) of Section 80P(2) of the Act at the same time is fatal to the contention raised by the Revenue before this Court and sub silentio, the deduction should continue in respect of interest income earned from the co-opera....
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....ection 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. 19. In our opinion, it would not make a difference, whether the interest income is earned from investments/deposits made in a Scheduled Bank or in a Co-operative 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. 20. In Udaipur Sahakari Upbhokta Thok Bhandar Ltd. v. CIT [2009] 315 ITR 21/182 Taxman 287 (SC), the Hon'ble Supreme Court while dealing with a case falling under Section 80P(2)(e) of the Act also negatived the claim of this special deduction to a co-operative society, while holding that the income derived by the Co-operative Society from the letting of the godowns or the warehouses was eligible for this deduction under Section 80P(2) of the Act only if such income was derived by such letting of godowns and warehouses for storage, processing or facilitating the marketing of commodities. Wher....
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.... Division Bench of the Gujarat High Court has held as under: "(ii) That the assessee did not carry on any banking business and its objects did not contemplate investment of surplus funds received from its members. The business of a credit society like that of the assessee was limited to providing credit to its members and the income that was earned by providing such credit facilities to its members was deductible under section 80P(2)(a)(i). The character of interest was different from the income attributable to the business of the assessee-society providing credit facilities to its members. The interest income derived from investing surplus funds with the bank must be closely linked with the business of providing credit facilities for it to be held attributable to the business of the assessee. Therefore, the profits and gains could be said to be directly attributable to the business of providing credit facilities to its members if there was a direct and proximate connection between the profits and gains and the business of the assessee. There was no obligation on the assessee to invest its surplus funds with the bank. Investing surplus funds in a bank was no part of the bu....
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....y required for business purposes. We reproduced paragraph 15 of the judgment only to indicate that we uphold the appellant's case only on the ground that the assessee is not entitled to the said deduction on the basis that it is engaged in carrying on the business of providing credit facilities to its members. We do not express any opinion as to whether the appellant would be entitled to the said benefit in the event of it being held that the assessee is also engaged in carrying on the business of banking. That is an issue that the Tribunal would decide upon remand pursuant to this order. 31. Mr. Bansal relied upon the judgment of the Andhra Pradesh High Court in CIT v. A. P. State Co-operative Bank Ltd. [2011] 336 ITR 516 (AP). The judgment is distinguishable. In that case, the respondent-assessee was a co-operative society engaged in the business of banking and it was held that the assessees were subject to the regulations of the Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949. The Division Bench distinguished the judgment of the Supreme Court in Totgar's case (supra) on the ground that the Supreme Court was not dealing with the case....
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....erative society, apart from providing credit facilities to the members, was also in the business of marketing of agricultural produce grown by its members. The sale consideration received from marketing agricultural produce of its members was retained in many cases. The said retained amount which was payable to its members from whom produce was brought, was invested in a short-term deposit/security. Such an amount which was retained by the assessee-society was a liability and 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 Act or under section 80P(2)(a)(iii) of the Act. Therefore in the facts of the said case, the apex court held the Assessing Officer was right in taxing the interest income indicated above under section 56 of the Act. Further they made it clear that they are confining the said judgment to the facts of that case. Therefore it is clear, Supreme Court was not laying down any law. 10. In the instant case, the amount which was invested in banks to earn interest was not an amount due to any members. It was not....
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....same may appear to be falling in any of the specified Clauses of Section 80P(2) of the Act, but on a deeper analysis of the facts, it may become ineligible for deduction under Section 80P(2) of the Act. The case in Udaipur Sahakari Upbhokta Thok Bhandar Ltd. (supra) was that of Section 80P(2)(e) of the Act, whereas in the present case, it is under Section 80P(2)(d) of the Act. Hence, the income by way of interest earned by deposit or investment of idle or surplus funds does not change its character irrespective of the fact whether such income of interest is earned from a schedule bank or a co-operative bank and thus, clause (d) of Section 80P(2) of the Act would not apply in the facts and circumstances of the present case. The person or body corporate from which such interest income is received will not change its character, viz. interest income not arising from its business operations, which made it ineligible for deduction under Section 80P of the Act, as held by the Hon'ble Supreme Court. 24. In view of the aforesaid, we are of the opinion that the appeals filed by the Revenue deserve to be allowed and the appeals filed by the assessee deserve to be dismissed. ....
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....in, by the 2nd amendment of the Tripura Co-operative Societies Act, 2009, the Tripura State Co-operative Banks have been declared as a Co-operative Society doing the business of banking with their jurisdiction defined as under: "State Co-operative Bank means an apex co-operative society doing the business of banking as defined in clause (b) of section 5 of the Banking Regulation Act, 1949 and having jurisdiction over whole of Tripura State and declared as such by the State Government under clause (u) of section 2 of the National Bank for Agriculture and Rural Development Act, 1981 (Central Act No. 61 of 1981)". 14. In this respect, as per section 2(19) of IT Act "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies. Further, as per the provisions of section 80P(4) of IT Act, the provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. 15. Since f....
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....ty registered or deemed to have been registered 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; 2[(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) ....
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....-clauses (cci) and (ccii) in section 56 read with section 5 of the Banking Regulation Act, 1949 [PART V] and while a primary co-operative bank is a co-operative society, all co-operative societies are not co-operative banks. Thus, the terms co-operative society and co-operative bank have to be understood in the context in which they are used and are not interchangeable in all situations. In view of the aforesaid discussion made in the preceding paras, it is evident that, the Tripura State Co-operative Bank Ltd. is co-operative Society doing the business of banking and therefore, it is a co-operative bank and not merely a cooperative society which is doing the business of banking. Thus, the Tripura State Co-operative Bank Ltd. is a co-operative bank even though it may be a co-operative society. 17. As is elaborated above, a co-operative society per se is not permitted to carry on the business of banking as per Part V of the Banking Regulation Act unless it is a Co-operative Bank which has been issued the requisite license by the RBI. The assessee relies upon the provisions of Section 80P(2)(d) of the Act in support of its claim that the Tripura State Co-operative Bank Ltd. ....
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....arlier allowable under section 80P in the case of a co-operative society engaged in carrying on the business of banking (co-operative banks) has been withdrawn from assessment year 2007-2008 barring in the case of a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Since profits of co-operative banks are now taxable after withdrawal of deduction available to a co-operative society engaged in carrying on the business of banking under section 80P, such co-operative society banks should be allowed deduction in respect of any provision for bad and doubtful debts as its profits have become taxable. The amendment proposes to allow this deduction to co-operative banks not being a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The definition of scheduled bank in clause (ii) of Explanation to said clause (viia) is also proposed to be amended to include scheduled co-operative banks within the definition. Under the existing provisions contained in the Explanation to item (fa) of sub-clause (iv) of clause (15) of section 10, the expression "scheduled bank" has....
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....h the other commercial banks and the deduction u/s 36(1)(viia) of the Act in respect of provisions made for bad and doubtful debts was also extended to a Co-operative Bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank with effect from 01.04.2007. Therefore, with effect from 01.04.2007 all Co-operative Banks for the purpose of Income Tax Act have been brought at par with other commercial banks and any interest or dividend received from a Co-operative Bank is no longer allowable as a deduction u/s 80P(2)(d) of the Act. Thus, even in respect of interest from Tripura State Co-operative Bank Ltd., (which has been declared as a co-operative Society by virtue of the second amendment of the Tripura Cooperative Societies Act, 2009), by virtue of the prohibitory amendment introduced by way of introduction of sub-Section (4) to Section 80P of the Act, the interest from Tripura State Co-operative Bank Ltd., is not deductible u/s 80P of the Act. Part V of the Banking Regulation Act, 1949 specifically bars a Co-operative Bank to be a member of any other co-operative Society. Therefore, both on the principle of mutuality and the....