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Income Tax Officer-17 (2) (1) , Mumbai Versus M/s. Jansagar Kamgar Sahakari Patpedhi Maryadit

Deduction u/s. 80P(2)(a)(i) and u/s 80P(2)(d) - dividend received by the assessee from its share holdings in other co-operative societies - Held that:- Since the facts whether the assessee has different categories of members; first resident members or ordinary members and second nominal members and whether the assessee is getting the deposits from nominal members and advancing loan to the resident members/ordinary members are not on record and has not been examined by this Tribunal in the assess .....

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f The Citizen Co-operative Society Limited vs. ACIT, Circle-9(1), Hyderabad (2017 (8) TMI 536 - SUPREME COURT ) - In respect of claim of deduction under section 80P(2)(d) on dividend income received from the co-operative society is concerned, in our opinion this issue will depend upon the outcome of the first issue. If the assessee is entitled to deduction under section 80P(2)(a)(i) the assessee will also be entitled for deduction under section 80P(2)(d). Since the issue is consequential to .....

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G. Ginde ORDER Per P.K. Bansal, Vice President This appeal has been filed by the Revenue against the order of the CIT(A)-28, Mumbai dated 01.02.2017 for A.Y. 2013-14 by taking the following effective grounds of appeal: - 1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in allowing deduction u/s. 80P(2)(a)(i) of ₹ 49,66,626/- without appreciating the fact that the assessee is not a co-operative credit society, but a co-operative bank, as the assesse .....

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ties of money lending and earning interest and dividend, which is nothing but a normal banking activity on commercial basis to benefit commercially. 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in allowing deduction u/s. 80P(2)(a)(i) and u/s. 80P(2)(d) to the assessee without appreciating the fact that the issue of allowability of deductions under u/s. 80P(2)(a)(i) and u/s. 80P(2)(d) have not reached its finality as the Department has not accepted th .....

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assessee's own case for A.Y. 2012-13 and appeal before the ITAT has been filed which is pending for decision. 2. The brief facts of the case are that the assessee submitted the return of income declaring Nil income on 12.09.2013 which was assessed at ₹ 50,68,210/- The assessee went in appeal before the CIT(A) against the denial of deduction under section 80P(2)(a)(i) and 80P(2)(d). The CIT(A) allowed the appeal of the assessee and directed the AO to allow the deduction under section 8 .....

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the assessee in which vide order dated 11.04.2017 the Tribunal has partly allowed the appeal of the assessee holding that the assessee will be entitled for deduction under section 80P(2)(a)(i) but subsequent to the decision we noted that there had been a decision of the Hon'ble Supreme Court recently on which the learned D.R. vehemently relied upon and the learned D.R. has contended that the CIT(A) in the impugned assessment year and the Tribunal in the assessment year 2012-13 has not exami .....

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d A.R. even though relied on the order of CIT(A) but did not object if the matter be restored to the file of the Assessing Officer to be examined in the light of the decision of Hon'ble Supreme Court in the case of The Citizen Co-operative Society Limited vs. ACIT, Circle-9(1), Hyderabad (supra). We have gone through the decision of Hon'ble Supreme Court in the case of The Citizen Co-operative Society Limited vs. ACIT, Circle-9(1), Hyderabad (supra) in Civil Appeal No.10245 of 2017 in wh .....

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efore, such a provision has to be read liberally, reasonably and in favour of the assessee (See - Bajaj Tempo Limited, Bombay v. Commissioner of Income Tax, Bombay City-11}, Bombay}. It is also trite that such a provision has to be construed as to effectuate the object of the Legislature and not to defeat it (See - Commissioner of Income Tax, Bombay & Ors. v. Mahindraand Mahindra Limited & Qrs.). Therefore, it hardly needs to be emphasized that all those co-operative societies which fall .....

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business of banking and; (ii) those providing credit facilities to its members. (1992) 3 SCC 78 (1983) 4 SCC 392. 20) In the case of Kerala State Cooperative Marketing Federation Limited & Ors. V. Commissioner of Income Tax, this Court, while dealing with classes of societies covered by Section 80P of the Act, held as follows: 6. The classes of societies covered by Section 80-P of the Act are as follows: (a) Engaged in business of banking and providing credit facilities to its members; 7. W .....

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be seen is whether income fell within any of the several heads of exemption. If it fell within any one head of exemption, it would be free from tax notwithstanding that the conditions of another head of exemption are not satisfied and such income is not free from tax under that head of exemption... 21. In the case of Commissioner of Income Tax v. Punjab State Co-operative Bank Ltd, while dealing with an identical issue, the High Court of Punjab and Haryana held as follows: 8. The provisions of s .....

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e fell within any of the several heads of exemption. If it fell within any one head of exemption, It means that a co-operative society engaged in carrying on the business of banking and a cooperative society providing credit facilities to its members will be entitled for exemption under this sub clause. The carrying on the business of banking by a cooperative society or providing credit facilities to its' members are two different types of activities which are covered under this sub-clause. .....

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s evident from clause (f) with reference to a milk cooperative society that a primary society engaged in supplying milk is entitled to such exemption while denying the same to a federal milk co-operative society. 22. The aforesaid judgment of the High Court correctly analyses the provisions of Section SOP of the Act and it is in tune with the judgment of this Court in Kerala State Cooperative Marketing Federation Limited (supra). 23. With the insertion of sub-section (4) by the Finance Act, 2006 .....

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, the appellant does not get covered thereby. It is also a matter of common knowledge that in order to do the business of a co-operative bank, it is imperative to have a licence from the Reserve Bank of India, which the appellant does not possess. Not only this, as noticed above, the Reserve Bank of India has itself clarified that the business of the appellant does not amount to that of a co-operative bank. The appellant, therefore, would not come within the mischief of sub-section (4) of Sectio .....

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is catering to two distinct categories of people, the first category is that of resident members or ordinary members. There may not be any difficulty as far as this category is concerned. However, the assessee had carved out another category of 'nominal members'. These are those members who are making deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not members in real sense. Most of the business of the appellant was with this second category of .....

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s to general public as well. All this is done without any approval from the Registrar of the Societies. With indulgence in such kind of activity by the appellant, it is remarked by the Assessing Officer that the activity of the appellant is in violation of the Co-operative Societies Act. Moreover, it is a cooperative credit society which is not entitled to deduction under Section 80P(2)(a)(i) of the Act. 26. It is in this background, a specific finding is also rendered that the principle of mutu .....

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vested with bank which are not member of association welfare fund, and the interest has been earned on such investment for example, ING Mutual Fund [as said by the MD vide his statement dated 20.12.2010]. [Though the bank formed the third party vis-avis the assessee entitled between contributor and recipient is lost in such case. The other ingredients of mutuality are also found to be missing as discussed in further paragraphs]. In the present case both the parties to the transaction are the con .....

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age of the High Court. Once we keep the aforesaid aspects in mind, the conclusion is obvious, namely, the appellant cannot be treated as a co-operative society meant only for its members and providing credit facilities to its members. We are afraid such a society cannot claim the benefit of Section 80P of the Act. 5. We noted that in this decision Hon'ble Supreme Court has clearly laid down that The Citizen Co-operative Society Limited was catering to two distinct categories of people. The f .....

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atter of fact, in this case it was found that the depositors and borrowers are quiet distinct and in reality, the activity of the assessee was that of finance business and therefore, took the view that it cannot be termed as co-operative society. In that case it was also noted by Hon'ble Supreme Court that the assessee is engaged in the activity of granting loan to general public without getting any approval in this regard from the Registrar of Societies which is in violation of Co-operative .....

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