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2019 (3) TMI 1699 - AT - Income TaxDeduction u/s 80P(2)(d) - Interest on Deposits placed by the appellant with the Cooperative Bank - Whether a co-operative bank is a co-operative credit society or not as specified under Sec. 80P(2)(d)? - HELD THAT:- Admittedly, as per the Explanation to Sec. 80P(4) the term “Co-operative bank” has to be construed as per the meaning given to it in Part V of the Banking Regulation Act, 1949 (10 of 1949). As is discernible from Sec. 56 (cci) of Part V of the Banking Regulation Act, 1949, a “Co-operative bank” means a state cooperative bank, a central co-operative bank and a primary cooperative bank. It is the case of the A.O that the assessee is a “Primary co-operative bank”. As neither of the lower authorities have recorded any finding that the assessee was also accepting deposits or lending money from/to the non-members, therefore, the 1st condition envisaged in Sec. 56(ccv) of the Banking Regulation Act, 1949 would not be satisfied, as it cannot be held that the primary object or principal business of the assessee was as that of transacting banking business. Apart there from, as per Sec. 56(4) of the Banking Regulation Act, 1949 every co-operative society shall before commencing banking business in India apply in writing to the Reserve Bank for a license under the said section. In fact, a cooperative credit society cannot be held to have as its principal business as banking business in the absence of a banking license issued by the Reserve Bank of India under the Banking Regulation Act, 1949. Rather, the issue that a co-operative society cannot be held to be a co-operative bank in the absence of a license to do banking business is covered by the Hon’ble High Court of Karnataka in the case of CIT and Another vs. Sri Biuru Gurubasva Pattina Sahakari Sangha Niyamitha Bagalkot [2015 (1) TMI 821 - KARNATAKA HIGH COURT] In absence of any material to the contrary available on record, are of the considered view that in can safely be concluded that the assessee is a cooperative credit society and not a co-operative bank. Insofar the issue that a co-operative society is entitled to claim deduction u/s 80P(2)(d) on the interest received from deposits with a co-operative bank is concerned, the same we find is covered by the order in the case of Kaliandas Udyog Bhavan Premises Co-operative Society Ltd. Vs. ITO-21(2)(1), Mumbai [2018 (4) TMI 1678 - ITAT MUMBAI]. It can safely be concluded that the assessee which is a co-operative credit society was duly entitled to claim deduction u/s 80P(2)(d) on the interest income on its investments held with the co-operative banks. Assessee which is a co-operative credit society is entitled to claim deduction on its investments held with the co-operative banks, therein direct the A.O to allow the same to the said extent. The order of the CIT(A) is set aside in terms of our aforesaid observations. - Decided in favour of assessee.
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