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TMI Blog2024 (6) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in the Appellants own case in previous years. 4. The C.P.0 in law erred in interpreting that co-operative banks are not at par with co-operative societies which is against the definition of the co-operative banks defined in section 2(b-1) of Karnataka Co-operative Societies Act, 1959. 5. The C.P.0 erred in the law that the co-operative banks and other non-cooperative and non-commercial banks do not fall under the purview of co-operative societies, such notion of C.P.0 is bad in law as the co-operative banks and co-operative societies are registered under co-operative societies Act. 6. On the facts and circumstance of the case, under the provisions of the law, the C.P.0 erred in disallowing the claim u/s 80P(2)(d) of the Income Tax Act, 1961 without giving intimation to the Appellant Society, for such denial in writing or in electronic mode as mandated under the proviso to Sec. 143(1) of the Income Tax Act, 1961 and against the principal of natural justice. 7. On the fact and circumstances of the case and in law, the Commissioner of Income Tax (Appeals) erred in dismissing the ground of the Appellant Society of the C.P.C. not giving intimation to the Appellant Societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in co-operative banks have been allowed as deduction u/s. 80P(2)(d) of the Act. 5. On the other hand, the ld. DR relied on the orders of lower authorities and submitted that the CIT (Appeals) has discussed the issue in detail and also relied on the judgment of Hon'ble jurisdictional High Court in the case of Totgars Co-operative Sale Society dated 16.06.2017 reported in 395 ITR 611 (Kar). He also discussed the judgment of the Hon'ble Supreme Court in the case of Totgars Cooperative Sale Society 322 ITR 283 (SC) and judgment of Hon'ble Gujarat High Court in the case of SBI v. CIT, 389 ITR 578 (Guj) and various other judgments. He further submitted that in the case of Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer reported in [2023] 154 taxmann.com 305 (SC) the distinction between co-operative society and co-operative banks which are registered under co-operative societies Act has been discussed in detail. He submitted that Hon'ble Supreme Court has clearly stated that interest received from cooperative bank registered as a co-operative society and running the business of banking in terms of RBI regulations is a co-operative bank and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of business attributable to any one or more of such activities shall be deducted. The sub-section makes a clear distinction between business of banking on the one hand and providing credit facilities to its members by cooperative society on the other. Thus, the definition of banking under section 5(b) of the BR Act must be borne in mind as opposed to providing credit facilities to its members. 15.2 section 80P was inserted to the Act with effect from 1-4-1968, however, sub-section (4) was reinserted with effect from 1-4-2007, in the present form. Earlier sub-section (4) was omitted with effect from 1-4-1970. Sub-section (4) of section 80P in the present form is in the nature of an exception which states that the provisions of section 80P shall apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The expressions co-operative bank and primary agricultural credit society as well as primary co-operative agricultural and rural development bank are defined in the Explanation as co-operative bank and primary agricultural credit society having the meanings respectively assigned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive society shall carry on banking business in India unless it is a cooperative bank and holds a licence issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose. Secondly, a co-operative society must obtain a licence under section 22 of the BR Act, 1949, only if it functions as a cooperative bank and not otherwise. Thus, a co-operative society including a co-operative credit society which is not a co-operative bank does not require a licence to function as such. 15.5 ....... 15.6 ....... ..15.7 ........... 15.8 Since the words 'bank' and 'banking company' are not defined in the NABARD Act, 1981, the definition in sub-clause (i) of clause (a) of section 56 of the BR Act, 1949 has to be relied upon. It states that a cooperative society in the context of a co-operative bank is in relation to or as a banking company. Thus, co-operative bank shall be construed as references to a banking company and when the definition of banking company in clause (c) of section 5 of the BR Act, 1949 is seen, it means any company which transacts the business of banking in India and as already noted banking busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, unless the context otherwise requires, - references to a "banking company" or "the company" or "such company" shall be construed as references to a co-operative bank. Therefore, while considering the meaning of a co-operative bank inherently, such a co-operative society must be a banking company then only it would be construed as a co-operative bank requiring a licence under section 22 of BR Act, 1949 in order to function as such a bank." 8. In the above case the Hon'ble SC has examined in detail that what is co-operative Bank even if it is registered under the Cooperative Society Act. We remit this issue back to the file of AO for determination whether interest received by the assessee is only from co-operative society or co-operative bank as decided by the Hon'ble Apex Court. If the AO finds that interest is received from deposits in the co-operative society, the assessee is eligible for deduction u/s. 80P(2)(d) of the Act on such interest received. If the AO finds otherwise, then assessee would be eligible for deduction of cost of funds as per the judgment of the Hon'ble jurisdictional High Court in the case of Totgar Co-operative Sale Society vs ITO reported in (2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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