TMI Blog2024 (4) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the Assessing Officer to allow the expenses against the income under the mutuality concept. Accordingly, Grounds raised by the assessee are allowed. - Shri Amit Shukla, Hon ble Judicial Member And Shri S. Rifaur Rahman, Hon'ble Accountant Member For the Assessee : Shri Bhupenra Shah For the Department : Shri R.R. Makwana ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short Ld. CIT(A) ] dated 04.08.2023 for the A.Y. 2016-17 2. Assessee has raised following grounds in its appeal: - 1. In the facts and circumstances of the case and in law, the learned Assessing Officer erred in assessing the total income of Rs. 32,58,230/- as against returned income of Nil/- and thereby made addition to the tune of Rs. 32,58,230/-. 2. In the facts and circumstances of the case and in law, the AO erred in considering club house income received from members as taxable although the same is covered by Mutually. 3. In the facts and circumstances of the case and in law, the AO erred in disallowing the expenses incurred on maintenance of club house u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessments u/s. 143(3) of the Act denied the deduction u/s. 80P(2)(a)(i) of the Act for the assessee, holding that the assessee is engaged in the banking activities and therefore assessee is not a cooperative society but is a cooperative bank. He also observed that in view of the provisions of Sec. 80P(4) of the Act since assessee is a cooperative bank assessee is not entitled for deduction u/s. 80P of the Act. However, Ld.CIT(A) considering the activities of the assessee and referring to various judicial pronouncements held that assessee cannot be treated as a cooperative bank. Ld.CIT(A) deleted the disallowance made by the Assessing Officer in respect of the income earned from the activities of providing credit facilities to its members. In other words, the Ld.CIT(A) allowed deduction u/s. 80P(2)(a)(i) of the Act in respect of the income earned by the assessee in providing credit facilities to its members as cooperative society and not a cooperative bank. No appeal by the Revenue challenging this finding of the Ld.CIT(A). He quantified the deduction to be allowed at ₹.8,07,963/- and ₹.10,34,063/- for the A.Ys. 2013-14 and 2014-15 respectively. However, the Ld.CIT(A) he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive society, the whole of such income. 8. As could be seen from the above, the provisions of section 80P(2)(d) of the Act are very clear and assessee is entitled for deduction u/s. 80P(2)(d) of the Act in respect of interest or dividends received from investments made with any other cooperative societies. The decision on which the Ld.CIT(A) placed reliance i.e. The Totgar Cooperative Sales Society Limited v. ITO (supra), is not on the issue of whether the assessee is entitled for exemption u/s. 80P(2)(d) of the Act vis- -vis the interest income earned by the cooperative society from investments in other cooperative societies. Hence the decision of Hon'ble Supreme Court in the case of The Totgar Cooperative Sales Society Limited v. ITO (supra) has no application to the facts of the assessee s case. 9. At this stage it is relevant to note that in the case of Pr.CIT v. Totgar Cooperative Sales Society Limited [392 ITR 74] the Hon'ble Karnataka High Court considered the meaning of the word cooperative society within the provisions of section 80P(2)(d) and held that cooperative society includes cooperative bank for the purpose of deduction u/s. 80P(2)(d) of the Act. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n different cases. Moreover, the word Cooperative Society are the words of a large extent, and denotes a genus, whereas the word Co-operative Bank is a word of limited extent, which merely demarcates and identifies a particular species of the genus Cooperative Societies. Co-Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus the Cooperative Bank which is a species of the genus would necessarily be covered by the word Co-operative Society . 9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Cooperative Society. Therefore, a Co-operative Society Bank would be included in the words Co-operative Society . 10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Cooperative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come; Thus, from a perusal of the aforesaid Sec. 80P(2)(d) it can safely be gathered that income by way of interest income derived by an assessee cooperative society from its investments held with any other cooperative society, shall be deducted in computing the total income of the assessee. We may herein observe, that what is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other cooperative society. We though are in agreement with the observations of the lower authorities that with the insertion of Sub-section (4) of Sec. 80P, vide the Finance Act, 2006, with effect from 01.04.2007, the provisions of Sec. 80P would no more be applicable in relation to any co-operative bank, other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given a thoughtfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me earned by the assessee on its investments held with a co-operative bank would be eligible for claim of deduction under Sec. 80P(2)(d) of the Act. Still further, we find that the CBDT Circular No. 14, dated 28.12.2006, as had been relied upon by the ld. A.R, also makes it clear beyond any scope of doubt, that the purpose behind enactment of sub-section (4) of Sec. 80P was to provide that the cooperative banks which are functioning at par with other banks would no more be entitled for claim of deduction under Sec. 80P(4) of the Act. We are of the considered view that the reliance placed by the CIT(A) on the judgment of the Hon ble Supreme Court in the case of Totgars Cooperative Sale Society Ltd. vs. ITO (2010) 322 ITR 283(S.C) being distinguishable on facts, thus, had wrongly been relied upon by him. The adjudication by the Hon ble Apex Court in the aforesaid case was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a co-operative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments parked with a co-operative bank. We further find that the reliance place by the ld. D.R on the order of the ITAT F bench, Mumbai in the case of M/s Va ..... 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