TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 79
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.... and the Ld. CIT(A) also erred in confirming the same. (iii)For that on the facts and circumstances of the case as well as on the points of law the Assessing Officer erred in deciding that The Tripura State Co-operative Bank is not being a Co-op Society and therefore not allowed deduction u/s 80P(2)(d) on the interest income earned by the assessee. 3. Brief facts of the case are that, the assesseeis a Co-operative Society engaged in the business of purchasing milk from primary societies and after processing, sells the milk and milk products in the markets. The assessee filed its return of income for the AY 2018-19 on 30.10.2018 declaring gross total income of Rs. 1,49,10,876/- and total income at Rs. 23,20,400/- after claiming deduction u/s 80P of Rs. 1,25,90,478/- Act. During the course of assessment proceedings, the ld. Assessing Officer [AO] held that in the previous year under consideration, the assessee earned an interest income of Rs. 1,25,40,477/- on deposits with various Co-operative Banks / Commercial Banks and claimed the entire interest income as deduction u/s 80P(2)(d) of the Act. The same was disallowed by the ld. AO by treating it as income from other sour....
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....ulation Act. The Ld. AR relied on the decision of the Hon'ble Madras High Court dated 10.10.2023 passed in the case of Thorapadi Urban Co-Operative Credit Society Limited & Others Vs. ITO, Ward 1, Vellore, Tamil Nadu. However, the case is distinguishable and not applicable to the facts of the assessee. It has been held as under in that case: ■A reading of section 80P(2)(d) makes it clear that in the event if any Co-operative Society derived income by way of interest from investment made in any other Cooperative Society the whole such interest is eligible for deduction. Now the issue is as to whether the Co-operative Bank would fall within the purview of the term 'Cooperative Society'. In the present case, the assessee produced a document to show that the Co-operative Bank, where they have made investments was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20-5-2003. In this regard, he also produced a copy of the Certificate of Incorporation of the said Co-operative Bank. Therefore, it is clear that the investment made by the petitioner is a Cooperative Bank registered under the Co-operative Societies Act. [Para 9] ■A readin....
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....under section 80P(2) is now claimed by the assessee under section 80P(2)(d) 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 in Totgar's Co-operative Sale Society Ltd. v. ITO [2010] 322 ITR 283/188 Taxman 282 (SC), the assessee herein has shifted the deposits and investments from Schedule Banks to Co-operative Bank and such Cooperative 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 cooperative Society from its investments with any other co-operative Society. [Para 11] ■The sheet anchor of the contention of the assessee misses two essential points required for claiming the 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 whether it is earned or received from a Schedule Bank or Co-operative Bank, (ii) that What the Supreme Court held in the case of the assessee itself, against assessee, was that such interest income on its ....
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....tral Bank Limited in the present case is admittedly not such a primary agricultural credit society. [Para 14] {Emphasis supplied} ■The amendment of section 194A(3)(v) excluding the Co-operative Banks from the definition of 'Co-operative Society' by Finance Act, 2015 and requiring them to deduct tax at source under section 194A 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. [Para 15] ■ If the legislative intent is so clear, then it cannot be 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-operative bank, even though the Supreme Court's decision in the case of assessee itself is otherwise. [Para 16] ■ As stated above, it is the character and nature of income which determines its taxability or exemption from taxability. I....
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.... CIT(A) also has relied upon certain decisions in support of his observations. 11. We now refer to the provisions of Section 80P(2)(d) of the Act which are as under: "80P(2)(d) 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". Thus, section 80P(2)(d) states that the income by way of interest or dividends derived from investments with any other co-operative society is eligible for deduction. 12. Further, we have to examine as to whether the Tripura State Co-operative Bank Ltd. is a co-operative bank or merely a co-operative society. The Tripura State Co-operative Bank Ltd. is a Co-operative Bank and there is no dispute. In this connection, we may refer to the definition of Co-operative bank as defined under the Tripura Co- operative Societies Act, 1974 which defines the Co-operative Bank as under: "Co-operative Bank"" means a society registered under this Act and doing the business of banking as defined in clause (b) of sub-section (1) of section 5 of the Banking Regulation Act, 1949." Thus, a Co-operative Bank is a Co-operative....
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....e Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965); 1[(iii) references to "memorandum of association" or "articles of association" shall be construed as references to bye-laws; (iv) references to the provisions of the Companies Act, 1956 (1 of 1956), except in Part III and Part IIIA, shall be construed as references to the corresponding provisions, if any, of the law under which a co-operative bank is registered; (v) references to "Registrar" or "Registrar of Companies" shall be construed as references to "Central Registrar" or "Registrar of Co-operative Societies", as the case may be, under the law under which a co-operative bank is registered;] (b) in section 2, the words and figures "the Companies Act, 1956 (1 of 1956), and" shall be omitted; (c) in section 5,- 2[(i) after clause (cc), the following clauses shall be inserted namely:- (cci) "co-operative bank" means a state co-operative bank, a central co-operative bank and a primary co-operative bank; (ccii) "co-operative credit society" means a co-operative society, the primary object of which is to provide financial accommodation....
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....it society" means a co-operative society, other than a primary agricultural credit society,- (1) the primary object or principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose. Explanation.-If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final; (ccvii) "central co-operative bank", 1*** "primary rural credit society" and "state co-operative bank" shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);] 2[(ii) clauses (ff), (h) and (nb) shall be o....
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....the bank as per section 36(1) of the Act. It would be apposite to also refer to the memorandum to the Finance Act, 2007 which explains the rationale behind amendment in Sections 80P and 36(1) of the Act. In the Memorandum to the FINANCE BILL, 2007 for PROVISIONS RELATING TO DIRECT TAXES, the substance of the main provisions in the Bill relating to direct taxes is explained in the paragraphs following therein. Under the RATIONALISATION AND SIMPLIFICATION MEASURES - Deduction in respect of any provision for bad and doubtful debts to be allowed in the case of co-operative banks under section 36(1)(viia), it is explained as under: "Under the existing provisions of clause (viia) of sub-section (1) of section 36, deduction of an amount not exceeding seven and one-half per cent. of the total income (computed before making any deduction under the said clause and Chapter VIA) and an amount not exceeding ten per cent. of the aggregate average advances made by the rural branches of a scheduled bank or a non-scheduled bank computed in the prescribed manner is allowed as deduction in the computation of income of such banks. "Scheduled bank", as defined in the Explanation to clause (vii....
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....the effect of making the provisions of section 43D applicable to scheduled co-operative banks. These amendments will take effect, retrospectively, from 1st April, 2007 and will, accordingly apply in relation to the assessment year 2007-2008 and subsequent years. [Clauses 6 and 12]" 18. Thus, the legislative intention behind the amendments was to bring Cooperative Banks at par with commercial Banks and the provisions of Clause (d) of sub-Section (2) of Section 80P of the Act apply in respect of any income by way of interest or dividend derived by the co-operative Society from its investments with any other Society. Since Co-operative Bank and co-operative Society have been specified at different places in Section 80P of the Act, the reference to cooperative Society in Section 80P(2)(d) of the Act is a reference to the co-operative Society which is not a Co-operative Bank and is not carrying on any banking activity while the reference to Co-operative Bank in sub-Section (4) of Section 80P of the Act is to an entity which is a cooperative Society but is carrying on the business of banking and is governed by the rules and regulations of the RBI. Simultaneous to the insertio....