TaxTMI 
TaxTMI 
2025 (6) TMI 1996
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.... Banks, by wrongly holding that such income is not eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The authorities below failed to appreciate that the deposits were made out of working capital and operational funds in the normal course of business as a measure of commercial prudence, and the interest income thereon is directly attributable to the business activity of providing credit facilities to members. The lower authorities also ignored the principle of mutuality, which governs cooperative societies, and incorrectly assessed the income under the head "Income from Other Sources" instead of treating it as business income eligible for deduction under Section 80P(2)(a)(i). 2. Incorrect Interpretation of Cooperative Bank not as a Cooperative Society Denial of Deduction under Section 80P(2)(d): The learned CIT(A) erred in holding that interest income earned from deposits made with Cooperative Banks is not eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961. The CIT(A) failed to appreciate that Cooperative Banks are basically registered as cooperative societies and after obtaining banking license from Res....
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....ate of Registration was filed during the assessment proceedings. Assessee's Society was registered under Maharashtra Co-operative Societies Act, 1960 on 11.10.1984. The Assessing Officer in para 4.6 of the order noted as under : "4.6 Conclusion drawn:- Issue of Deduction u/s 80P(2)(a)(i) / 80p(2)(d) :- It is verified from the Financial Statements filed during assessment proceedings that the assessee has earned income by way of providing credit facilities to its members and also earned interest income on investments with Co-op Banks. The interest earned from members is deductible under section 80P(2)(a)(i) of the I.T. Act, 1961 as the assessee society is providing credit facilities to its members only. However, the assessee has received interest of Rs. 35,79,590 from investment with Co-op banks. The said interest earned from investment with Co-op Banks is not deductible either under section 80P(2)(a)(i) or section 80P(2)(d) of the I.T. Act, 1961. Further, in its reply dated 28-08-2022 which is filed in response to Show Cause Notice dated 22-08-2022, the assessee has filed the details of interest claiming that the said interest earned is from Short....
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....nder : Quote,"8. Therefore, the real controversy arising in these writ petitions is as to whether the income derived by the petitioners by way of interest on the fixed deposits made by them with the banks, is to be treated as profits and gains of business attributable to any one of the activities indicated in sub-clauses (i) to (vii) of clause (a) of sub-section (2) of section 80P or not. 9. While the petitioners place strong reliance upon a decision of the Division Bench of this court in CIT v. Andhra Pradesh State Cooperative Bank Ltd. [2011] 12 taxmann.com 66/200 Taxman 200/336 ITR 516, the Revenue places strong reliance upon the decision of the Supreme Court in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282/322 ITR 283. ........................ 34. The case before the Supreme Court in Totgar's Co-operative Sale Society Ltd.'s case (supra) was in respect of a co-operative 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....
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.... the Act. 6. In the case of Sahyadri Co-operative Credit Society Limited, the Sahyadri Co-operative Credit Society had deposited excess funds in the Banks or Institutions permitted by the Co-operative Societies Act. In that context, the Hon'ble Kerala High Court in the case of Pr.CIT Vs. Sahyadri Co-operative Credit Society Ltd., [2024] 301 Taxman 36 (Kerala) vide order dated 04.09.2024 has held as under : Quote "7. On a consideration of the rival submissions, we are of the view that for the reasons stated hereinafter, the question of law that arises for consideration before us must be answered against the Revenue and in favour of the assessee. The permissible deduction that is envisaged under Section 80P(2) of the I.T. Act for a Co-operative Society that is assessed to tax under the head of 'Profits and Gains of Business or Profession' is of the whole of the amount of profits and gains of business attributable to any one or more of its activities. Thus, all amounts as can be attributable to the conduct of the specified businesses by a Co-operative Society will be eligible for the deduction envisaged under the statutory provision. The question that arises theref....