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TMI Blog2019 (3) TMI 1699X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible under the said section. The appellant wish to frame a question of law as under; "Whether a co-operative bank is a co-operative credit society or not as specified under Sec. 80P(2)(d)?" 2. Without prejudice to Grounds of Appeal No.1, Interest Income earned by the appellant on Fixed Deposits with Co-operative Bank is in the nature of income earned from business of lending to its members, hence the Interest Income earned by the appellant ought to have been allowed as deduction u/s 80P(2)(a)(i). 2. Briefly stated, the assessee which is a Co-operative credit society registered under the Maharashtra Co-operative Society Act, 1960 and is engaged in providing credit/loans to its members and collecting deposits from them by way of fixed deposits, saving deposits and daily recurring deposits etc., had filed its return of income for A.Y 2014-15 on 28.11.2014, declaring total income at Rs. Nil after claiming deduction of Rs. 44,13,761/- u/s. 80P(2)(d); Rs. 20,02,782/- u/s. 80P(2)(a)(i); and Rs. 50,000/- u/s. 80P(2)(c) of the I.T Act. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the I.T. Act. 2. During the course of the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provisions of section 80P(4) r.w.s. 2(24)(viia) are overriding over section 8OP as it stood after the amendments to these provisions w.e.f. AY 2007-08. (f) There was uniformity in the activities of the assessee with that of a bank in as much as for collecting deposits the depositor has to enrol as a member and deposit the money then and there and an identical process is followed for claiming back the amounts. In the banking business also, the depositors are to take deposit receipts and become account holders for taking loans as well. Effectively, the transactions are comparable and similar. Moreover, as already pointed out, the activities were restrictive. ,it was concluded by the A.O that the assessee was not eligible for claim of deduction u/s. 80P(2)(a)(i), 80P(2)(c) or 80P(2)(d) in view of the specific provision of section 2(24)(viia) r.w Explanation to Sec. 80P(4) of the IT Act, w.e.f. 01.04.2007. The A.O treating the assessee as a "Primary co-operative bank‟ concluded that by virtue of the activities carried out by the assessee the provisions of Section 80P(4) stood attracted and accordingly it being a co-operative bank was not eligible for claim of deduction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar the observation of the lower authorities (specifically that of the A.O) that the assessee was a "Primary co-operative bank‟, the ld. A.R rebutted the same and averred that the said observations were absolutely misconceived and baseless. It was the contention of the ld. A.R that the assessee was a co-operative credit society and not a cooperative bank. It was thus the contention of the Ld. A.R that the order of the CIT(A) upholding the disallowance of the assesses claim of deduction u/s. 80P(2)(d) of Rs. 44,13,761/- may be vacated. 6. Per contra, the Ld. Departmental Representative (for short "D.R‟) relied on the orders of the lower authorities. 7. We have heard the Authorised Representatives for both the parties, perused the orders of the lower authorities and the material available on record. As observed by us hereinabove, the lower authorities had declined to allow the claim of deduction of Rs. 44,13,761/- raised by the assessee primarily on two grounds viz. (i). the assessee was a primary co-operative bank; and (ii). the interest income earned by a co-operative society on its investments held with a co-operative bank would not be eligible for claim of deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, therefore, the 1st condition envisaged in Sec. 56(ccv) of the Banking Regulation Act, 1949 would not be satisfied, as it cannot be held that the primary object or principal business of the assessee was as that of transacting banking business. Apart there from, as per Sec. 56(4) of the Banking Regulation Act, 1949 every co-operative society shall before commencing banking business in India apply in writing to the Reserve Bank for a license under the said section. In fact, a cooperative credit society cannot be held to have as its principal business as banking business in the absence of a banking license issued by the Reserve Bank of India under the Banking Regulation Act, 1949. Rather, the issue that a co-operative society cannot be held to be a co-operative bank in the absence of a license to do banking business is covered by the Hon'ble High Court of Karnataka in the case of CIT and Another vs. Sri Biuru Gurubasva Pattina Sahakari Sangha Niyamitha Bagalkot (2014) 369 ITR 86 (Kar). The Hon‟ble High Court in its aforesaid judgment had observed as under: "Therefore, as the assessee is not a Cooperative bank carrying on exclusively banking business and as it does not pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Primary Cooperative Agricultural and Rural Development Bank, therefore, the interest income earned on such investments would not be entitled for claim of deduction under Sec. 80P(2)(d) of the Act. 7. We have deliberated at length on the issue under consideration and are unable to persuade ourselves to be in agreement with the view taken by the lower authorities. Before proceeding further, we may herein reproduce the relevant extract of the said statutory provision, viz. Sec. 80P(2)(d), as the same would have a strong bearing on the adjudication of the issue before us. "80P(2)(d) (1). Where in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2). The sums referred to in sub-section (1) shall be the following, namely :- (a)............................................................................................ (b)............................................................................................ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest income derived by a co-operative society from its investments held with a cooperative bank, would duly be entitled for claim of deduction under Sec.80P(2)(d) of the Act. 8. We shall now advert to the judicial pronouncements that had been relied upon by the authorized representatives for both the parties and the lower authorities. We find that the issue that a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d), in respect of the interest income derived from its investments held with a cooperative bank is covered in favour of the assessee in the following cases: (i) Land and Cooperative Housing Society Ltd. Vs. ITO (2017) 46 CCH 52 (Mum) (ii) M/s C. Green Cooperative Housing and Society Ltd. Vs. ITO- 21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017 (iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. Vs. ITO-Range-20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017. We further find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO (ITA No. 2379/Mum/2015, dated 15.01.2016, would also not be of any assistance, for the reason that in the said matter the Tribunal had set aside the issue to the file of the assessing officer for fresh examination. That as regards the reliance placed by the ld. D.R on the judgment of the Hon'ble High Court of Karnataka in the case of Pr. CIT Vs. Totagars co-operative Sale Society (2017) 395 ITR 611 (Karn), the High Court had concluded that a co-operative society would not be entitled to claim of deduction under Sec. 80P(2)(d). However, as held by the Hon'ble High Court of Bombay in the case of K. Subramanian and Anr. Vs. Siemens India Ltd. and Anr (1985) 156 ITR 11 (Bom), that where there is a conflict between decisions of nonjurisdictional High Court‟s, then a view which is in favour of the assessee is to be preferred as against that taken against him. Thus, taking support from the aforesaid judicial pronouncement of the Hon‟ble High Court of jurisdiction, we thus respectfully follow the view taken by the Hon'ble High Court of Karnataka in the case of Pr. Commissioner of Income Tax and Anr. Vs. Totagars Cooperative Sale Society (2017) 392 ITR 74 (Karn) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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