TMI Blog2019 (3) TMI 1699X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashtra Co-operative Society Act, 1960 and is engaged in providing credit/loans to its members and collecting deposits from them by way of fixed deposits, saving deposits and daily recurring deposits etc., had filed its return of income for A.Y 2014-15 on 28.11.2014, declaring total income at Rs. Nil after claiming deduction of ₹ 44,13,761/- u/s. 80P(2)(d); ₹ 20,02,782/- u/s. 80P(2)(a)(i); and ₹ 50,000/- u/s. 80P(2)(c) of the I.T Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the I.T. Act. 2. During the course of the assessment proceedings the A.O after deliberating on the deduction claimed by the assessee u/s. 80P(2) of the IT Act was of the view that the deductions therein envisaged in the case of a co-operative credit society engaged in carrying on the business of banking (co-operative banks), except for in case of a primary cooperative credit society or a primary cooperative agricultural rural development bank had been withdrawn w.e.f. AY 2007-08. It was observed by the A.O that the legislature vide the Finance Act, 2006 w.e.f. 01.04.2007 had substituted sub-section (4) to Section 80P of the IT Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs for taking loans as well. Effectively, the transactions are comparable and similar. Moreover, as already pointed out, the activities were restrictive. ,it was concluded by the A.O that the assessee was not eligible for claim of deduction u/s. 80P(2)(a)(i), 80P(2)(c) or 80P(2)(d) in view of the specific provision of section 2(24)(viia) r.w Explanation to Sec. 80P(4) of the IT Act, w.e.f. 01.04.2007. The A.O treating the assessee as a Primary co-operative bank‟ concluded that by virtue of the activities carried out by the assessee the provisions of Section 80P(4) stood attracted and accordingly it being a co-operative bank was not eligible for claim of deduction of ₹ 64,66,543/- u/s. 80P of the I.T Act. On the basis of his aforesaid observations the A.O declined to allow the claim of deduction raised by the assessee u/s. 80P and assessed its income at ₹ 64,66,543/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Insofar the disallowance of deduction of ₹ 20,02,782/- claimed by the assessee under Sec. 80P(2)(a)(i) was concerned, the same was vacated by the CIT(A). However, the CIT(A) was not persuaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assesses claim of deduction u/s. 80P(2)(d) of ₹ 44,13,761/- may be vacated. 6. Per contra, the Ld. Departmental Representative (for short D.R‟) relied on the orders of the lower authorities. 7. We have heard the Authorised Representatives for both the parties, perused the orders of the lower authorities and the material available on record. As observed by us hereinabove, the lower authorities had declined to allow the claim of deduction of ₹ 44,13,761/- raised by the assessee primarily on two grounds viz. (i). the assessee was a primary co-operative bank; and (ii). the interest income earned by a co-operative society on its investments held with a co-operative bank would not be eligible for claim of deduction u/s. 80P(2)(d) of the I.T Act. Insofar the characterisation of the assessee which is a co-operative credit society as a primary co-operative bank is concerned, we are unable to persuade ourselves to accept the said observation of the A.O. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 (2014) 369 ITR 86 (Kar). The Hon‟ble High Court in its aforesaid judgment had observed as under: Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does not possess a licence from Reserve Bank of India to carry on business, it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e. carrying on the business of banking for providing credit facilities to its members. The object of the aforesaid amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in agreement with the view taken by the lower authorities. Before proceeding further, we may herein reproduce the relevant extract of the said statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. 80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely :- (a)............................................................................................ (b)............................................................................................ (c)............................................................................................ (d). in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, therefore, the interest income derived by a co-operative society from its investments held with a cooperative bank, would duly be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO- 21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. We further find that the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). However, as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), that where there is a conflict between decisions of nonjurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon‟ble High Court of jurisdiction, we thus respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) and Hon‟ble High Court of Gujarat in the case of State Bank Of India Vs. CIT (2016) 389 ITR 578 (Guj), wherein it has observed that the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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