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TMI Blog2025 (2) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... y to explain the same so that there is gross violation of the principles of natural justice. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding that the interest income of Rs. 2,80,904/- was chargeable to tax in the hands of the appellant society and further that no deduction u/s 80P was admissible. 2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) has grievously erred in confirming the disallowance of the deduction u/s 80P of Rs. 2,80,904/-. 3.1 Without prejudice to above and in the alternative, the ld. AO has failed to appreciate that real income arising from the receipts and expenses of the society was chargeable to tax." 3. The issue for consideration before us is whether the assessee is eligible for deduction under Section 80P(2)(d) of the Act in respect of interest income of Rs. 2,80,904/- earned from cooperative banks. 4. Before us, the Counsel for the assessee submitted that the issue is now covered in favour of the assessee by order of the Hon'ble Gujarat High Court in the case of PCIT vs. Ashwinkumar Arban Co Operative Society Ltd. 168 taxmann.com 314 (Gujarat), in which it was held that deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pretation made by the Hon'ble Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the cooperative societies by Finance Act,2015 by amending section 194A(3)(v) of the Act is concerned, on perusal of section 194A (3) of the Act, it appears that it provides for exemption from deducting Tax Deducted at Source ['TDS' for short] from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to deduct TDS from the interest other than interest on securities. Therefore it cannot be said that cooperative banks are excluded from the definition of cooperative societies by such an amendment. 30. Moreover, as reliance placed on the aforesaid decision for applicability of section 80P(4) of the Act in the facts of the case is also not possible to accept as section 80P(4) of the Act would be applicable to the cooperative bank when the cooperative bank is liable to pay tax under the provisions of the Act and in such eventuality, the provision of section 80P would not be applicable as per the amendment of sub-section (4) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee banks as defined under the NABARD Act, 1981, it would not be a co-operative bank within the meaning of Section 56 of BR Act, 1949 irrespective of whatever nomenclature it may have or structure it may possess or incorporated under any Act. It was further stated that if a bank has to be a state co- operative bank, there has to be a declaration made by the State Government in terms of Section 2(u) of NABARD Act, 1981. Hence, it is necessary to go into the question as to, whether, the appellant herein has been so declared as a state cooperative bank. This question would need not detain us for long as the Kerala High Court in A.P. Varghese had categorically stated that the "Kerala State Co-operative Bank" is a "state co-operative bank" as defined under the NABARD Act, 1981. Therefore, the appellant bank has not been declared as a state co- operative bank under the provisions of NABARD Act, 1981. Further, in the case of Mavilayi Service Co-operative Bank, this Court observed that a co-operative bank would engage in banking business on obtaining a licence under Section 22(1b) of the BR Act, 1949. In the instant case, the appellant herein is not a co-operative bank having regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. (vii) Seventhly, under Section 80P(1) (c), the co-operative societies must be registered either under Cooperative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). (viii) Eighthly, sub-clause (d) states that where interest or dividend income is derived by a co-operative society from investments with other cooperative societies, the whole of such income is eligible for deduction, the object of the provision being furtherance of the co-operative movement as a whole. 14.4. In paragraph 42 of Mavilayi Service Co-operative Bank, this Court observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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