TaxTMI 
TaxTMI 
2025 (11) TMI 1962
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....come of Rs. 41,63,32,549/- and total income of Rs. Nil after claiming deduction of Rs. 41,63,32,549/- u/s 80P (chapter VI-A) of the Act. The return of income filed by the assessee has been selected for complete scrutiny by issuing statutory notice u/s 142(1) dated 23/01/2020 alongwith reminders dated 12/03/2021, 22/03/2021 and 28/032021. The assessee was asked to furnish a break- up of the interest income received from investment and to explain why the interest received from District Co Op Banks and other Banks and Treasuries etc. should not be assessed as Income From Other Sources. The assessee informed the AO that during the year under consideration, the assessee has earned an interest income of Rs. 6,81,68,024 from deposits with various Commercial banks, Co-operative banks/ and other financial institutions; and has claimed the entire interest income as deduction u/s 80P(2)(a)(i) / 80P(2)(d) of the Act. The details of the said investments /deposits in the various Commercial banks are at para no. 6 of the order of AO. It was further noticed by the AO that the said deposits /investments in commercial banks, cooperative banks etc. are out of the surplus funds of the society. The AO ....
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.... in law, Ld. CIT(A) has erred in not considering the fact that the Hon'ble Apex Court in the case of The Mavilayi Service Co-op Bank Ltd & Others Vs. CIT. Civil Appeals Nos. 7343-7350 of 2019 dt. 12-01-2021, different views. Section have expressed as to provide that the provisions 80P of the Income tax Act was amended by inserting a new sub section (4) so other than of the said section shall not apply in relation to any co-operative bank a primary agricultural credit Society or a primary co-operative agricultural and rural development bank?" 4. " Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the considering entire addition of Rs. 6,81,68,024/- made by the AO, u/s 80P(2)(a)(i) of the Act, without the decision of the Hon'ble Supreme Court in the case of Citizen Co-operative Society Ltd. Vs. ACIT vide its order dated 08/08/2017 [[2017] 84 taxmann.com 114 (SC)] which was further affirmed in its order dated 21/11/2017 in response to a review petition [[2017] 88 taxmann.com 279 (SC)], wherein the Hon'ble Apex Court held that the co-operative bank cannot be treated as co-operative society and cannot take benefit of ded....
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....ann.com 413 (Mumbai-Trib.) order dated 27-04-2023. Ld. AR further relied on the impugned order of Ld. CIT(A) and submitted that the impugned order does not suffer any illegality and perversity and the assessee being a cooperative society doing its business for its members and it was not engaged in taking deposits or giving loans to any outsiders and the available /surplus funds from the deposits of its members were being deposited in cooperative banks and commercial banks, etc and as such the interest income is earned during the main as well as ancillary business of the assessee/society which is very well eligible to be deducted u/s 80P(2)(a)(i) of the Act. Therefore, Ld. AR submitted that that there is no illegality and perversity in the order passed by the Ld. CIT, hence the appeal of the revenue is liable to be dismissed. 7. We have considered the rival submissions and examined the orders passed by the AO as well as Ld. CIT(A). The contention raised by the assessee before the AO were dealt with and rejected by the AO in its order at para no. 8 to 9.2, is reproduced as under :- "8. The details and contentions of the assessee have been carefully considered. However, th....
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....an 282 (SC). Such interest income could not be said to be attributable to the activities or the society, viz .. carrying on the business of providing credit facilities to its members. 9.1 Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. Vs Income Tax Officer, Karnataka (supra) held in Para 11as under: "To say that the source of income is not relevant for deciding the applicability of section 80P would not be correct because one needs to give weightage to the words 'the "whole of the amount of profits and gains of business' attributable to one of the activities specified in section 80P(2)(a). The words ' the whole of the amount of profits and gains of the business emphasize that the income, in respect of which deduction is sought, must constitute the operational income and not the other income which accrues to the society . In the instant case, the evidence showed that the assessee- society earned interest on funds which were not required for business purposes at the given point of time. Therefore, on the facts and circumstances of the instant case such interest income fell in the category of. 'Other income' which ....
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....terest income of Rs.6,81,68,024/- only, from various commercial banks, by way of investments from such funds. 5.8 In the context of admissibility of such interest income u/s 80P, it would be pertinent to make reference here the observation made by the jurisdictional ITAT, Mumbai Bench, in a similar situation, in the case of New Satara Zilla Nagrik Sahakari Patsanstha Maryadit vs. National Faceless Appeal Centre, Vide: [2024] 164 taxmann.com 413 (Mumbai - Trib.). The hon'ble jurisdictional tribunal, Mumbai, by their order, dated: 27-04-2023, has held as under. "17. Aforesaid factual position as to deposit of funds by the assessee society with the nationalized/commercial banks, earning interest thereon with total cost of investment shows that the investment made by the assessee society was in compliance to the mandatory provisions of Maharashtra Co-operative Society Act thus integral part of its business and profession. Furthermore, when the assessee is wholly and exclusively doing its business for its members, the earning of interest on FDs with the banks is incidental to the assessee society's business of accepting the deposit and provision of credit facil....
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.... incorporated in the year 1979 under the Maharashtra State Co-operative Societies Act, 1960. It was established with the avowed object of providing credit facilities exclusively to its members in accordance with the principles of co-operation, mutual aid, and self-help. The Society is governed and regulated by the Commissioner & Registrar of Co-operative Societies, Maharashtra State. 3.1 The assessee filed its returns of income for the Assessment Years (AYs) 2017-18, 2018-19 and 2020-21 on 23.10.2017, 26.09.2018 and 13.11.2020, declaring incomes of Rs. 6,63,32,186/-, Nil and Nil respectively. The returns were duly processed under section 143(1) of the Income-tax Act, 1961 ("the Act"). The cases were thereafter selected for scrutiny and statutory notices were issued and complied with. In the assessments framed for the respective years, the Assessing Officer disallowed the assessee's claim of deduction under section 80P(2)(a)(i) of the Act on the reasoning that the assessee was in substance functioning as a co-operative bank and, in view of section 80P(4), was not entitled to deduction. 3.2 On appeal, the learned Commissioner of Income Tax (Appeals) [CIT(A)] all....
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....lities through cheques, drafts or other banking instruments. Thus, the essential attributes of "banking" under section 56 of the Banking Regulation Act, 1949 are not satisfied. Hence, the assessee does not fulfil the definition of a Co-operative Bank provided under the Explanation to section 80P(4) of the Act and thus assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act. 4.3 The Supreme Court in Mavilayi Service Co-operative Bank Ltd. v. CIT [(2021) 431 ITR 1 (SC)] has categorically held that so long as a co-operative society is engaged in providing credit facilities to its members, the income so earned is deductible under section 80P(2)(a)(i). The Court clarified that section 80P(4) carves out an exception only in respect of co-operative banks, as defined under the Banking Regulation Act, and does not affect societies confining their activities to members. 4.4 On the other hand, the ruling in Citizen Co-operative Society Ltd. v. ACIT [(2017) 397 ITR 1 (SC)] demonstrates the converse position, where a society, though registered as a co-operative society, was in fact engaged in accepting deposits from the public and advancing loans to non-members, thereby....
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....to its members, or" 16. The same ground was taken by the revenue in its appeal for the A.Y. 2014-15 decided in ITA No. 5217/Mum/2017, order dated 27.03.2019 by the Ld. Coordinate Bench, Mumbai, wherein the order of the Ld. Coordinate Bench has decided the grounds against the revenue. Until the said judgment of the Coordinate Bench is set aside by the higher courts, in view of our observation earlier in the judgment, the Ld. AO as well as the other revenue authorities higher to it are bound by the judgment of the Coordinate Bench. Therefore, for the sake of dealing with arguments of revenue, we have examined the ground regarding reliance by the revenue on the judgment of the Hon'ble Supreme Court Totgars Cooperative Sales Society Limited (supra). The facts and circumstances and the business activity of the assessee in that case were different from the facts and circumstances and the business activity of the assessee in the case before us. Para 17 and 18 of the said judgment would make these facts clear and are reproduced as under: 17. "In the present case, as stated above, the assessee Society regularly invests funds not immediately required for business purpos....