TMI Blog2021 (3) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... t function at par with other commercial banks i.e. which lend money to members of the public . To sum up: In Totagars Co-operative Sale Society [ 2017 (1) TMI 1100 - KARNATAKA HIGH COURT ] the Hon ble Karnataka High Court has held that for purpose of section 80P(2)(d) a Co-operative Bank should be considered as a Co-operative Society. In Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] the Hon ble Supreme Court has held that Section 80P of the IT Act, being benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be liberally and reasonably, and if there is any ambiguity, in favour of the assessee. - ITA No. 5230/MUM/2019 - - - Dated:- 30-3-2021 - Shri Vikas Awasthy (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : None For the Revenue : Ms. Smita Verma, DR ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2015-16. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-44, Mumbai [in short CIT(A) ] and arises out of the assessment completed u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety collects/accepts/raise funds in the form of share capital, deposits from members and provide credit facilities to the members only, and the society invest the remaining funds as per the provisions of section 66, 70 and rules 54 and 55 and the bye laws of the society The total funds which is contributed/collected from members or generated in the activity or business of society has to be utilized by the society in the following manner and priorities. a) To provide credit societies to members within the framework of the Act, Rules Bye Laws of the Society. b) To invest the statutory Reserve funds as per the provisions of section 66 70 of the Maharashtra State Co-operatives Societies Act and Rules 54 55 and provisions of the bye-laws of our society. c) To keep Cash and Bank Balances and liquid investment to meet the working capital requirement of the Society. As per provision of section-80P(2)(a)(i) in the case of Co-operative Society engaged in carrying on the business of providing credit facilities to its members, the whole of the amount of profit and gains of business attributable to any one or more of such activities which is included in gross total in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-operative Banks are not eligible for deduction u/s 80P(2)(d) or 80P(2)(a)(i) of the Act and accordingly, the Ld. CIT(A) has rightly restricted the disallowance u/s 80P to ₹ 16,49,464/- being the amount of interest received from investment made in Co-operative Banks. Thus the Ld. DR supports the order passed by the Ld. CIT(A). 6. We have heard the Ld. DR and perused the relevant materials on record. The bone of contention here is the order of the Ld. CIT(A) holding that interests income earned from investment of surplus funds with Cooperative Banks are not eligible for deduction u/s 80P(2)(d) or 80P(2)(a)(i) of the Act. In CIT v. Kalpadi Co-operative Township Ltd. (2016) 74 taxmann.com 226 (Madras), the Hon ble Madras High Court held that a Cooperative Credit Society providing credit facilities to its members alone and not to general public large nor it did receive moneys by way of deposits on general public, would not be treated as Co-operative Bank ; it would be entitled to deduction u/s 80P. In CIT v. Nilgiris Co-operative Marketing Societies Ltd. (2017) 77 taxmann.com 23 (Madras), again the Hon ble Madras High Court has held that where assessee co-operative cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stions of law canvassed by the learned counsel for the Revenue even arise in the present case. Thus, the Hon'ble High Court has held that for purpose of section 80P(2)(d) a Co-operative Bank should be considered as a Co-operative Society 6.2 Let us conclude with a recent judgment dated 12th January 2021 . In the Mavilayi Service Co-operative Bank Ltd. v. CIT (2021) 123 taxmann.com 161 (SC), the Hon ble Supreme Court has observed that: 39. The above material would clearly indicate that the limited object of section 80P(4) is to exclude co-operative banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus, if the Banking Regulation Act, 1949 is now to be seen, what is clear from section 3 read with section 56 is that a primary co-operative bank cannot be a primary agricultural credit society, as such co-operative bank must be engaged in the business of banking as defined by section 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment, of deposits of money from the public. Likewise, under section 22(1)(b) of the Banking Regulation Act, 1949 as applicable to co-oper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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