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TMI Blog2024 (5) TMI 1567X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, dated 30.12.2016 for Assessment Year 2014-15. 1.2. The appeal filed by the Revenue in ITA No. 298/Mum/2024 is against the order of Ld. CIT(A), NFAC, Delhi, vide order no. ITBA/NFAC/S/250/2023-24/1058212036(1), dated 24/11/2023, passed against the assessment order by Central Processing Centre, u/s. 154 of the Act, dated 30.01.2023 for Assessment Year 2021-21. 2. Grounds taken by the Revenue are reproduced as under: ITA No. 44/MUM/2024 "1. Whether on the facts and in circumstances of the case and in law, the Ld. CIT (A) has erred in allowing the deduction w/s 80P(2)(d) of the Act on interest income earned of Rs. 1,89,79,925/-, from Co-operative bank treating the Cooperative bank as Co-operative society also, ignoring the fact that Co-operative Society and Co- operative bank are distinct entity and it is essential for a cooperative society to loose its status as a Co-operative society so as to turn into a co-operative bank and to acquire license from the RBI so as to conduct banking business." ITA No. 46/MUM/2024 "1. Whether On the facts and in the circumstances of the case and in Law, the Ld. CIT (A) has erred in allowing deduction of Rs.&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recurring daily deposits, etc. Ld. Assessing Officer observed that assessee gives various types of loans/ advances viz. team loans, against hypothecation or mortgage, vehicle loans, personal loans, housing loans, education loans, loan/ overdrafts against fixed deposits or NSC or LIC receipts etc. only to its members, but no cash credit facility, letter of credit, no export credit, packing credit etc. and no guarantee. Assessee earns interest from its members under various credit schemes and pays interest to its members under various deposit schemes. 3.1. Return of income was filed on 29.11.2014 reporting a total income of Rs. 4,24,724/- after claiming deduction u/s. 80P of the Act for Rs. 2,31,44,574/-. In the course of assessment, assessee was asked to explain about its claim of deduction u/s. 80P(2)(a)(i) vis-à-vis amendment made by the Finance Act, 2006 which inserted by inserting section 80P(4) with explanation thereto r.w.s. 2(24)(viia) of the Act. Assessee made its detailed submission by placing reliance on several judicial precedents including that of Hon'ble Jurisdictional High Court of Bombay in the case of the Quepem Urban Cooperative Credit Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to members together with other activities but do not include banking. Moreover, the assessee has not granted any loan to or accepted a deposit from a person who is not a member. 3.4. Assessee submitted that Co-ordinate Bench of ITAT, Mumbai in its own case for the Assessment Year 2010-11 vide ITA No. 5819/Mum/2014 and 5217/Mum/2014 dated 17.03.2017 had dismissed the revenue appeal by categorically accepting the fact that assessee is a Credit Co-Operative Society and entitled for benefit u/s 80P(2)(a)(i) of the Act. Relevant extracts are as under:- "9. H/e have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by the revenue authorities. After considering the facts of the case, we find that Ld. CIT (A) while dealing with the said ground has categorically mentioned the facts of the case and had given the findings in para no. 3.2.14 in its order after detailed discussion in para no. 3.1.6 to 3.2.13 and the same is reproduced below:- "3.2.14. The A.O., in support of his decision, has relied on various decisions as already mentioned. In case of Kekri Sahakari Bhoomi Vikas Bank Ltd. Decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this extent as far as applicability /charging of section 80P(2)(a)(i) is concerned, we do not find any perversity in the order of AO. 4. As far as assessee's claim u/s. 80P(2)(d) is concerned as discussed (supra), assessee is entitled for the same as assessee is not falling in section 80P(4) which is applicable only in the case of cooperative banks /cooperative societies having licences from RBI to do banking business. The whole foundation as laid down by the Ld. PCIT is on wrong appreciation of the facts and misinterpretation of relevant sections. To further substantiate our findings, we are reproducing and discussing the judicial pronouncements of Hon'ble Apex Court on both the issues i.e., section 80P (2) (a)(i), 80P(2)(d) and 80P(4) of the Act as under: - ⮚ [2023] 150 taxmann.com 173 (SC) PCIT v. Anna saheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. 1. In view of the above factual and legal discussion, we are not in agreement with the order of Ld. PCIT. Accordingly, the grounds raised by the assessee are allowed and order of Ld. PCIT find to be unsustainable, hence set-aside 2. In the result, the appeal filed by the assessee is allowed." 3.6. Assessee als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression "members" in Section 80- P(2)(a)(/) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression "members" in Section 80-P(2)(a)(/) of the Act in the light of the definition of that expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: "2. (n) 'Member' means a person who joined in the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to 'members' anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of any liability or duty shall not include reference to any class of members who by reason of the provisions of this Act do not possess such right or power or have no such liability or duty;" Considering the definition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire amount of profits and gains of business that are attributable to any one or more activities mentioned in subsection (2) of Section 80P must be given by way of deduction vide Citizen Co-operative Society. This is because subsection (4) of Section 80P is in the nature of a proviso to the main provision contained in subsections (1) and (2) of Section 80P. The proviso excludes cooperative banks, which are cooperative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section 5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 2. While analysing Section 80P of the Act in depth, the following points were noted by this Court: 1. Firstly, the marginal note to Section 80P which reads "Deduction in respect of income of co-operative societies" is significant as it indicates the general "drift" of the provision. 2. Secondly, for purposes of eligibility for deduction, the assessee must be a "cooperative society". 3. Thirdly, the gross total income must include income that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-operative Societies Act, 1960. Further, it is also found to be a co-operative society on the basis of relevant definitions contained in the Income-tax Act & not being a Cooperative bank as per the applicable provision of the Banking Regulations Act. Thus, it is held that being a co-operative society, appellant, is not hit by the exclusion provided in section 80P(4) of the Act and is therefore, eligible to claim deduction under section 80P(2)(a)(i) of the Act, subject to fulfillment of conditions specified therein. While giving appeal-effect, income arising from loans given to members (whether for agriculture or otherwise), in accordance with directions of the Hon'ble Apex Court (supra), are to be allowed. The appellant had claimed the entire 80P(2) deduction under sub-section (a)(i). However, as clearly laid down in Mavilayi judgment by the Hon'ble Apex Court in case of cooperative societies, profits from giving credit facilities to members are only eligible under this sub-section." 3.9. For the purpose of above observation, provisions of section 80P(4) were analysed by the ld. CIT (A) to arrive at a conclusion that assessee cannot be placed under any of the categories of coop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erative society) with co-operative banks (being a genus of the larger specie i.e. co-operative society) would be eligible for 80P(2)(d) deduction. However, the scheduled banks have to be excluded. 3.12. Ld. CIT (A) thus, partly allowed the appeal of the assessee on the issues relating to section 80P(2)(a)(i) r.w.s. 80P(4) and section 80P(2)(d). 3.13. On the issue relating to addition made towards bad and doubtful debts u/s. 36(1)(viia) of Rs. 6,24,32,302/- it was held by ld. CIT (A) that assessee is not a cooperative bank and therefore, provisions of Section 36(1)(viia) do not apply to cooperative society. Aggrieved, Revenue is in appeal before the Tribunal. 4. Before us, ld. Sr. DR placed reliance on the order of ld. Assessing Officer. Per contra, ld. Counsel for the assessee reiterated the submissions made before the ld. CIT(A). 5. We have heard the rival contentions and perused the material on record. We have given our thoughtful considerations to the submissions made before us and various judicial precedents relied upon as discussed above including those in the case of assessee itself dealing with the issue before us. Admittedly, it is a fact on record that assessee do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to the Cooperative Bank. 6. The Co-operative credit societies do not required license from Reserve Bank of India to carry on its business. The Co-operative banks are required to obtain license from Reserve Bank of India to carry on its business. 7. The Co-operative credit societies do not have cheque facilities, clearing facilities and they cannot issue demand drafts, pay orders etc. The Co-operative have cheque facilities, clearing facilities and they issue demand drafts, Assessment Year order, bank guarantees etc. 8. Co-operative Credit Societies cannot use word Bank/Bankers in their name. Co-operative Banks are mandatorily required to use word Bank/Bankers in their name. 9. Reserve Bank of India has no statutory power of control and supervision of Cooperative Societies. Reserve Bank of India has vested with statutory powers of control and supervision of Cooperative Banks. 6. Furthermore, in assessee's own case (supra), the coordinate bench has held that assessee is a cooperative credit society eligible for benefit of deduction u/s. 80P(2)(a)(i) and that Section 80P(4) restricting the benefit of deduction does not apply to the assessee since it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Totagar Cooperative Sales Society Limited v. ITO 322 ITR 283 (SC), is not on the issue of whether the assessee is entitled for exemption u/s. 80P(2)(d) of the Act vis-a-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 Totagar Cooperative Sales Society Limited v. ITO has no application to the facts of the present case. 6.2. From the above extraction, we also note that the Hon'ble High Court held that the word 'cooperative society' are the words of the large extent and denotes a genus, whereas the word 'cooperative bank' is a word of limited extent, which merely de-markets and identifies a particular species of the genus 'cooperative societies'. Thus, a cooperative bank is merely a variety of the cooperative societies which can be of a different nature and can be involved in different activities. 7. We are of the considered view, that though the co-operative bank pursuant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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