TaxTMI 
TaxTMI 
2025 (12) TMI 299
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....Section 148 of the Income-tax Act (for short "the Act"), the order dated 29.06.2025 passed under Section 148A(3) of the Act, and the show-cause notices dated 31.03.2025 and 23.05.2025 issued under Section 148A(1) of the Act as they are without jurisdiction, arbitrary, illegal and unconstitutional and violative of Articles 14 and 265 of the Constitution of India. 3. Brief facts of the case are as under: 3.1 The petitioner is a Co-operative Society registered under the relevant laws of the State of Gujarat, formerly engaged in the business of banking until the cancellation of its license by the Reserve Bank of India on 19.06.2004. Thereafter, the petitioner has been functioning solely as a Co-operative Society through its Official Liquidator. 3.2 For the Assessment Year 2020-21, the petitioner filed its return of income under Section 139(1) of the Act on 31.12.2020, duly verified in accordance with law. The return was selected for scrutiny. Notices under Section 143(2) of the Act dated 29.06.2021 and under Section 142(1) of the Act dated 04.01.2022 and 25.01.2022 were duly issued by the Department and complied with by the petitioner. Detailed replies with supporting material....
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....vision of section 80P would not be applicable as per the amendment of sub-section (4) of section 80P of the Act. Therefore, the exclusion of applicability of section 80P to cooperative banks by section 80P (4) of the Act would not disentitle the respondent assessee from claiming deduction under section 80P(2)(d) of the Act in absence of any amendment in the said section and that would not be sufiicient to deny the claim of the respondent assessee for deduction of interest earned from investment made in a cooperative bank which is also a cooperative society from the total income. 31. The Hon'ble Apex Court in case of Kerala Stote Co-operative Agricultural & Rural Development Bank Ltd. (supra) while considering various provisions of the Banking Regulation Act read with provisions of the Income Tax Act has held that the provision of section 80P(4) of the Act would not be applicable to a cooperative bank which is not a bank as per the provisions of the BR. Act, 1949, as under: "5. Interpretation. In this Act, unless there is anything repugnant in the subject or context, X X X (b) "banking" means the accepting, for the purpose of lending or invest....
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....n 22(1b) of the BR Act, 1949. In the instant case, the appellant herein is a co-operative bank having regard to the aforesaid conspectus of the provisions so as to require a licence under the aforesaid provision for carrying on banking business. In the circumstances, the question could still arise as to whether the appellant herein is entitled to benefit of deduction under Section 80P of the Act. 14.2 In Mavilayi Service Co-operative Bank, it has been observed that Section 80P of the Act is a beneficial provision which was enacted in order to 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 sub-section (2) of Section 80P must be given by way of deduction vide Citizen Cooperative Society This is because 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 The proviso excludes co-operative banks, whic....
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....the object of the provision being furtherance of the co-operative movement as a whole. 14.4 In paragraph 42 of Mavilayi Service Co-operative Bank, this Court observed that the object and purpose of sub-section (4) of Section 80P is to exclude only co-operative banks that function on par with other commercial banks ie which lend money to members of the public. That on a reading of Section 3 read with Section 56 of the BR Act, 1949, the primary co-operative bank cannot be a primary agricultural credit society. As such co-operative bank must be engaged in the business of banking as defined by Section 5(b) of the BR Act, 1949, which means accepting, for the purpose of lending or investment, 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 connec....