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TMI Blog2021 (3) TMI 662X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 80P(4) is completely unsustainable. Moreover section 80P(2)(d) provides exemption to interest earned on fixed deposit in cooperative societies. It is nobody's case that cooperative bank are not cooperative societies. - Decided in favour of assessee. - I.T.A. No. 4896/Mum/2019, I.T.A. No. 4897/Mum/2019 - - - Dated:- 11-3-2021 - Shri Shamim Yahya (AM) And Shri Ramlal Negi (JM) For the Assessee : Shri Anil Topiwala For the Department : Shri Bharat Andhle ORDER PER SHAMIM YAHYA (AM) :- These are appeals by the Revenue against respective orders of learned CIT(A) for A.Y. 2014-15 2015-16. 2. The common issues raised read as under :- 1. Whether on facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the assessee's claim for deduction u/s. 80P(2)(d) of the I.T. Act, 1961 disregarding the provisions of section 80P(4) of the Act,1961. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that co-operative banks are cooperative societies and as such the assessee is entitled to claim interest earned from deposit kept with co-ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 15 crores while the issued and subscribed share capital stands at ₹ 3,55,77,030/- as on 31.03.2014. Further, the Reserve Fund of the assessee shows a credit balance of ₹ 4.12 crores as on 31.-03.2014. In this background, it needs to be seen whether the assessee is a banking institution engaged in banking activity. For this, a reference may be made to the relevant provisions of the Banking Regulation Act, 1949 (reproduced in para 5 above). According to section 5(ccii), 5(ccv) and 5(ccvi) of Banking Regulation Act, where principal business of a primary credit society is the transaction of banking business and its paid up capital and reserves attained the level of Rs.l lakh, that primary credit society automatically becomes a primary co-operative bank. Further, its banking business activity is carried on in the city / suburb of Mumbai. 5.7 Over and above all these, as per the Banking Regulation Act, 1949, there are three basic tests for judging whether a given cooperative credit society/patpedhi is a cooperative bank or not. Firstly, the primary object or principal business transacted should be banking business. Secondly, the paid up share capital and reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the AO in refusing to grant the deduction u/s.80P(2)(a)(i) to the tune of ₹ 1,69,20,631/-. This has been challenged vide grounds 3.2 to 3.4 which shall be adjudicated together. 7.2 I have very carefully perused the impugned order, the entire relevant facts and circumstances of the matter and the submissions of the Ld. AR, as well as the various judicial pronouncements cited by him. I have also perused with circumspection, the pertinent details and materials on record. 7.3 On this entire issue, it is pertinent to mention that the activities mentioned in Section 80P(2)(a)(i) are a co-operative society engaged in carrying on business of banking or providing credit facilities to its members'. As per section 80P(4), the provisions of section SOP shall not apply in relation to any co-operative bank. Therefore, even after the insertion of Sec. 80P(4), the co-operative society engaged in providing credit facilities to its members continued to be entitled for deduction u/s 80P(2)(a)(i). There is no prohibition u/s. SOP not to allow deduction to such co-operative societies in respect of business relating to its members. 7.4 Further, it is to be noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bay), decided on 17.04.2015 wherein it is held that the assessee cannot be considered as a co-operative Bank for the purposes of section 80P(4) of the Act, unless the following three conditions are satisfied- (i) the principal business or primary objective should be business of banking (ii) its paid up share capital and reserves should not be less than rupee one lac (iii) its bye-laws do not permit admission of any other co-operative society as its member. It is also pertinent to note that in the above quoted decision of the jurisdictional High Court in the case of Quepem Urban Co-operative Credit Society Ltd. (quoted supra), the Hon ble High Court has also taken due note of the decision in the case of Totgars Cooperative Sales Society Limited. 5. Against the above order the Revenue is in appeal before us. 6. We have heard both the counsel and perused the records. We find that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of Citizen Cooperative Society Ltd. (Civil Appeal No. 10245 of 2017 vide order dated 8.8.2017) and The Mavilayi Service Cooperative Bank Ltd. Ors. Vs. CIT, Calicut Ors. (Civil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee; (II) That once the assessee is entitled to avail of deduction, the entire 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; (III) That this Court in Kerala State Cooperative Marketing Federation Ltd. and Ors. (supra) has construed section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; (IV) This is for the reason that when the legislature wanted to restrict the deduction to a particular type of co-operative society, such as is evident from section 80P(2)(b) qua milk co-operative societies, the legislature expressly says so - which is not the case with section 80P(2)(a)(i); (V) That section 80P(4) is in the nature of a proviso to the main provision contained in section 80P(1) and (2). This proviso specifically excludes only cooperative banks, which are cooperative societies who must possess a licence from the RBI to do banking b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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