TaxTMI 
TaxTMI 
2026 (2) TMI 1447
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....Hon'ble Pune ITAT. Hence, such disallowance of Rs. 35.43.169 may please be deleted and allowed to be deducted to the assessee society 2 On the facts and in the prevailing circumstances of the case and in Law, the learned Assessing Officer erred in making disallowance following the decision of Honourable Supreme Court in the case of S.C. Totagars Co-op. Sale Society Ltd. VS ITO. Karnataka (2010) 188 Taxman 282(SC) even though the same is not applicable to the case of the assessee. Thus, the Ld. Assessing Officer has erred in applying the decision of the Hon'ble Apex Court wrongly. Hence, such disallowance of Rs. 35,43.169 made wrongly may please be deleted and allowed to be deducted to the assessee society. 3: The Appellate craves the permission to add, amend, modify, alter, revise. substitute, delete any or all grounds of the appeal, if deemed necessary of the time of hearing of the appeal" Findings & Analysis : 2. We have heard both the parties and perused the records. In this case Assessee has filed return of income electronically for A.Y.2020-21 on 29.12.2020 declaring total income at Rs.NIL. Assessee's case was selected for scrutiny. It is mentio....
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....ous heads under section 6 of the Income-tax Act and the provisions of that Act applicable to these various heads are mutually exclusive. Section 12 is a residuary section and does not come into operation until the preceding heads are excluded. CIT v. Basant Rai Takhat Singh [1933] 1 ITR197. In our opinion, the High Court was in error in treating interest derived from deposits as not arising from the business of the bank and therefore not falling within the income exempted under the Notification. The appeal must therefore be allowed and the judgment and order of the High Court set aside. The appellant will have its costs in this court and in the court below." Unquote. 3.3 The Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. Vs. Commissioner of Income Tax, Calicut 431 ITR 1 (SC) dated 12.01.2021 held as under : "21. An analysis of this judgment would show that the question of law that was reflected in paragraph 5 of the judgment was answered in favour of the assessee. The following propositions may be culled out from the judgment:(I) That section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in order to e....
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....e words of a section particularly when the language of the section is clear and unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section(vide Bengal Immunity Company Limited v. State of Bihar [1955] 2 SCR 603])." 28. Secondly, for purposes of eligibility for deduction, the assessee must be a "co-operative society". A co-operative society is defined in Section 2(19) of the IT Act, as being a co-operative society registered either under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of co-operative societies. This, therefore, refers only to the factum of a co-operative society being registered under the 1912 Act or under the State law. For purposes of eligibility, it is unnecessary to probe any further as to whether the co-operative society is classified as X or Y. 29. Thirdly, the gross total income must include income that is referred to in sub-section (2). 30. Fourthly, sub-clause (2)(a)(i) with which we are directly concerned, then speaks of a co-operative society being "engaged in" carrying on the business of ban....
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....see is entitled to deduction u/s 80P(2)(a) and (d) of the IT Act, 1961 (b) Whether on the facts and circumstances of the case and in law, the Tribunal is right to allow the relief to the assessee by holding that the assessee being Co-operative Credit Society is not a Co-operative Bank hence entitled for deduction u/s 80P(4) of the I.T. Act despite the fact that the assessee is carrying on the banking business and has been categorized as Co-operative Bank / other Bank ? 6. The Revenue filed SLP before Hon'ble Supreme Court in the case of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedhi Ltd. Hon'ble Supreme Court in the case of PCIT Vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedhi Ltd /[2023] 454 ITR 117 (SC) (SUPP.) [20-04-2023] held as under : Quote, " 1. Feeling aggrieved and dissatisfied with the impugned order dated 14-10-2019 passed by the High Court of Judicature at Bombay in ITA No. 933/2017, by which the High Court has dismissed the said appeal preferred by the Revenue, relying upon its earlier decision in the case of Quepem Urban Co-operative Credit Society Ltd. v. Asstt. CIT [2015] 58 taxmann.com 113/232 Taxman 510/377 ITR 272 (Bom), the Revenue ....
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....gulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under section 80(P)(2) of the Income-tax Act. 6. In view of the above and for the reasons stated hereinabove, the present appeal deserves to be dismissed and is accordingly dismissed, answering the question against the Revenue and in favour of the Assessee. 7. The Appeal is accordingly dismissed. No costs. In favour of assessee." Unquote. 6.1 Thus, in the above case Hon'ble Supreme Court categorically held that it cannot be treated as a Bank and hence Section 80P(4) will not be applicable and it will be entitled for exemption u/s. 80P(2) of the Act. 6.2 Thus, the issue is settled now that a cooperative society registered under a state cooperative society Act or Central Cooperative Society Act will not be considered as Bank unless it has received Banking License from RBI. Section 80P(4) shall not be applicable to Such Cooperative Credit Societies and such Cooperative Credit Societies will be entitled for deduction u/s 80P(2)(a) of the Act. When we read....
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....l produce actually resulted in net loss to the society. Therefore, it appears that the assessee in Totgars was carrying on some of the activities listed in clause (a) along with other activities. This is perhaps the reason that the assessee did not pay to its members the proceeds of the sale of their produce, but invested the same in banks. As a consequence, the investments were shown as liabilities, as they represented the money belonging to the members. The income derived from the investments made by retaining the monies belonging to the members cannot certainly be termed as profits and gains of business. This is why Totgar's struck a different note. 35. But, as rightly contended by the learned senior counsel for the petitioners, the investment made by the petitioners in fixed deposits in nationalised banks, were of their own monies. If the petitioners had invested those amounts in fixed deposits in other co-operative societies or in the construction of godowns and warehouses, the respondents would have granted the benefit of deduction under clause (d) or (e), as the case may be. 36. The original source of the investments made by the petitioners in nationali....
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....that question must be answered in the negative, since we cannot accept the contention of the Revenue that the interest earned on those deposits loses its character as profits/gains attributable to the main business of the assessee. It is not as though the assessee in the instant case had used the surplus amount [the profit earned by it] for an investment or activity that was unrelated to its main business, and earned additional income by way of interest or gain through such activity. The assessee had only deposited the profit earned by it in the manner mandated under Section 63 of the Multi-State Co operative Societies Act, or permitted by Section 64 of the said Act. In other words, it dealt with the surplus profit in a manner envisaged under the regulatory Statute that regulated, and thereby legitimized, its business of providing credit facilities to its members. Under those circumstances, if the assessee managed to earn some additional income by way of interest on the deposits made, it could only be seen as an enhancement of the profits and gains that it made from its principal activity of providing credit facilities to its members. The nature and character of the principal incom....
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....eposits 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. In these facts which Hon'ble Karnataka High Court has mentioned in Para 10 and 11 above, Hon'ble Karnataka High Court decided the issued in para 23 as under : "23. Thus, the aforesaid judgments supports the view taken by this Court that character of income depends upon the nature of activity for earning that income and though on the face of it, the same may appear to befalling 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 ThokBhandar Ltd. (supra) was that of Section 80P(2)(e) of the Act, whereas in the present case, itis 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 ....