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TMI Blog2019 (9) TMI 1333X X X X Extracts X X X X X X X X Extracts X X X X ..... Developments before Assessing Officer & CIT(A) 3. Briefly stated the relevant facts include that the assessee is a registered cooperative society registered under the Maharashtra Co-op. Society Act, 1960. The assessee filed the return of income declaring Nil income after claiming of deduction u/s 80P of the Act. The Assessing Officer took the case for "limited scrutiny" in view of the CASS guidelines and found that the assessee is not entitled to claim the deduction u/s 80P of the Act where the activities relate to giving loans to members/nominal members etc are earned the interest income. Further, the Assessing Officer noticed that the member/new members/family members are involved in this earning of the interest income. Following the Hon'ble Supreme Court judgements in the case of Citizen Co-operative Society Ltd. vs. ACIT in Civil Appeal No.10245/2017 dated 08.08.2017, the benefits of section 80P(2) of the Act was denied by the Assessing Officer. 4. During the first appellate proceedings, the assessee relied on the decision of Pune Bench of the Tribunal in the case of ITO vs. Jankalyan Nagari Sah. Pat Sanstha Ltd., 24 taxmann.com 127 (Pune-Trib.) and the judgement of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act vide order dt.29.12.2017 and the claim of deduction u/s 80P of the Act was denied to the assessee and the total income was thus determined at Rs. 18,38,878/-. Aggrieved by the order of AO, assessee carried the matter before Ld.CIT(A), who vide order dt.01.06.2018 (in appeal No.PN/CIT(A)-6/ITO Wd.10(5)/10297/2017-18) dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal before us and has raised the following grounds : "1. The Ld.CIT(A) - 6, Pune erred in law and on facts, in confirming the action of the learned AO in denying the deduction u/s 80P(2)(a)(i) of the ITA, 1961 amounting to Rs. 18,38,878/-. 2. The learned CIT(A)-6, Pune and the learned AD erred in law and on facts in denying deduction u/s 80P of the ITA, 1961 amounting to Rs. 18,38,878/-. The IT authorities erred in treating the appellant as a 'Business Financer' instead of a mere Credit Co-operative Society (i.e. PAT-SANSTHA) dealing with members. 3. Further, the learned CIT(A)-6, Pune erred in law and on facts in not allowing the deduction u/s 80P(2)(d) of the ITA,1961 on account of the interest received from Pune District Central Co-operative B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor any activities were carried out by them thereby violated the provisions of bye-laws of the Society by accepting the deposits from nominal members and new non-members. AO thereafter concluded that assessee was acted like a regular Bank by accepting deposits from any person and also giving loans and therefore the main motto of the assessee is to earn more profits. 7. AO also noticed that the assessee was required to invest surplus funds with the Co-operative Society and not with the Co-operative Banks and the interest earned on investments, surplus funds with Co-operative Banks was not eligible for claim of deduction. He therefore concluded that assessee satisfied the essential condition to qualify as a Co-operative Bank namely i.e., the primary object or principal business of which is the transaction of banking business and that assessee society can be treated as a Co-operative Bank and also nature of the activity shows that it has taken the character of the Co-operative Banks which were not eligible for deduction u/s 80P of the Act by virtue of share capital, surplus reserves and surpluses which were invested in banks other than mentioned in Sec.80P(2)(d) of the Act. He not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Vs. Jafar Momin Vikas Co-op. Credit Society Ltd. reported in [2014] 49 Taxmann.com 571 (Guj.), the High Court of Gujarat held in its order dtd.15/1/2014 that Sec.80P(4) will not apply to the assessee which is not a co-operative bank and in ruling so that it relied on the clarification issued by the CBDT in Circular No.133 of 2007 dtd.9/5/2007 in respect of the Delhi Co-operative Urban Thrift and Credit Society Ltd. 6.1.2 The ITAT Pune Bench B in the case of ITO Vs. Jankalyan Nagari Sah. Pat Sanstha Ltd. reported in [2012] 24 Taxmann.com 127 (Pune) for A.Y. 07-08 dtd.26/6/2012, has held that the co-operative credit society is distinct and separate from co-operative bank. It is also held that the co-operative credit society cannot be said to be a primary cooperative bank within the meaning of Banking Regulation Act 1949 relying on the principal of interpretation that there is no intendment in interpreting the statutes and has to be strict as the definitions in Sec.80P(4) are legislation by reference. 6.1.3 The Supreme Court in the case of The Citizen Co-operative Society Ltd. Vs. ACIT Cir-3, Hyderabad in the Civil Appeal No.10245/2017 dtd.8/8/2017 held that 80P(2)(a)(i) reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the appellant. Therefore the claim of deduction u/s.80P(2)(d) would also not be available to the appellant." Aggrieved by the order of Ld.CIT(A), assessee is now in appeal. 8. Before me, Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A). Before me Ld.A.R. reiterated the submissions made before AO and Ld.CIT(A) and submitted that Ld.CIT(A) while upholding the order of AO had relied on the decision of Hon'ble Apex Court in the case of Citizen Cooperative Society Limited Vs. ACIT in Civil Appeal No.10245 of 2017 order dated 08.08.2017. He submitted that the facts in the case of Citizen Cooperative Society (supra) are different and are therefore not applicable to the present facts. He submitted that the Citizen Co-operative Society (supra) was with respect to the Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995. He submitted that there is a difference in the meaning of 'member' as per Andhra Pradesh Mutually Aided Co-operative Societies Act the definition of 'member' as per the Maharashtra Co-operative Societies Act, 1960. He submitted that as per Maharashtra Co-operative Societies Act, Members include a nominal, associate or sympathizer member wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record. The issue in the present case is with respect to denial of claim of deduction u/s 80P of the Act. I find that AO while denying the claim of assessee had held the assessee can be treated as a Co-operative Bank looking at the nature of activities of the assessee and since Co-operative Banks are not eligible for deduction u/s 80P on the amount invested in banks other than those mentioned u/s 80P(2)(d) of the Act, he denied the claim of deduction. I find that the Co-ordinate Bench of the Tribunal while deciding the identical issue in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra) has decided the issue in assessee's favour by noting as under : "8. It is pertinent to note here that the definition of the Co-operative Credit Society is given in Clause (ccii) of Sec. 5 which reads as under : "co-operative credit society" means a Co-operative Society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank;" 9. The Banking Regulation Act, 1949 defines of Co-operative bank in cl.(cci) of sec. 5 (as inserted by sec. 56 of the said Act) and Cooperative Credit Society is not includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate that the order passed by the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., (supra) in A.Y. 2007-08 has been set aside by higher Judicial Forum. 11. I further find that Ld.CIT(A) while upholding the order of AO, had relied on the decision of Hon'ble Apex Court in the case of Citizen Co-operative Society (supra). Before me, Ld.A.R. has pointed to the difference in the definition of member in case of Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995 and Maharashtra Co-operative Societies Act, 1960 and Tamilnadu Co-operative Societies Act, 1983. The difference in the definition pointed out by Ld.A.R. has not been controverted by Ld. D.R. I thus find force in the argument of Ld.A.R. that the ratio of decision in the case of Citizen Co-operative Society (supra) will not be applicable to the present case. I further find that Hon'ble Madras High Court in the case of M/s. S1308 Ammapet Primary Agricultural Co-operative Bank (supra), after considering the decision of Citizen Co-operative Society (supra) has held as under : "11. We have elaborately heard the learned Senior Standing Counsel for the Revenue. 12. Admittedly, the assessee - soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivities, which were contrary to the provisions of the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995 and that they accepted deposits from third parties, who were not members in the real sense and were using those deposits to advance gold loans. Therefore, the Hon'ble Supreme Court pointed out that such an activity of the said society was that of a finance business and could not be termed as a cooperative society and that the loans, which were disbursed, were without the approval from the Registrar of Mutually Aided Cooperative Societies, Ranga Reddy District. The Hon'ble Supreme Court found that the said society was not entitled to deduction under Section 80P of the Act. 16. It is noteworthy to point out that the Hon'ble Supreme Court in the decision in the case of Citizen Cooperative Society Limited also observed that in the light of insertion of Sub-Section (4) to Section 80P of the Act by the Finance Act, 2006, such deduction should not be admissible to a cooperative bank and that if it is a primary agricultural credit society or a primary cooperative agriculture and rural development bank, the deduction would still be provided. 17. In the prece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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