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TMI Blog2023 (12) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... e deductions of Rs. 64,16,217/- claimed under section 80P(2)(a)(i) of the Act, on the facts and circumstances of the case. 4. The Ld. Commissioner (Appeals) failed to appreciate that Co-operative Banks are primarily Co-operative Societies and the interest earned needs to be allowed as a deduction u/s 80P(2)(d) of the Act, on the facts and circumstances of the case. 5. The Ld. Commissioner(Appeals) failed to appreciate that the interest of Rs. 64,16,217/- was alternatively allowable under section 80P(2)(a)(i) of the Act as business income, on the facts and circumstances of the case. 6. The Authorities below erred in the order in interpreting and applying provisions of section 80P(2). 7. The Authorities below failed in the order by not appreciating the submissions made by the Appellant. 8. The initiation of penalty u/s 270A of the Act is not tenable in law as the appellant has not under reported the particulars of income. 9. The levy of interest u/s 234B of the Act is excessive and ought to be deleted. 10. Each ground is mutually exclusive and the appellant craves leave to add, alter, modify, delete, or substitute any or all of the grounds. 11. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LTD 62,500.00 ADARSHA VIVIDHODDESHA SAHAKARI SANGHA 37,813.00 TEACHERS CR. CO-OPERATIVE SOCIETY 1,31,250.00 TEACHERS CR. CO-OPERATIVE SOCIETY 50,000.00 TEACHERS CR. CO-OPERATIVE SOCIETY 65,625.00 ADARSHA VIVIDHODDESHA SAHAKARI SANGHA 37,812.00 TEACHERS CR. CO-OPERATIVE SOCIETY 50,000.00 ADARSHA VIVIDHODDESHA SAHAKARI SANGHA 37,813.00 TEACHERS CR. CO-OPERATIVE SOCIETY 59,375.00 SCDCC BANK LTD 58,58,404.00 64,16,217.00 3.1 The ld.AR submitted that the cooperative societies /cooperative banks with which assessee had made investments, are registered with the Karnataka Cooperative Societies Act and, therefore, the interest/dividend earned by the assessee from such investments, made with such cooperative banks are eligible for deduction u/s 80P(2)(d) of the Act. He relied on the decision of Hon'ble Karnataka High Court in case of PCIT vs. Totagars Cooperative Sales Society reported in (2017) 392 ITR 74, wherein the Hon'ble Court observed and held as under:- "The word "Co-operative Society" are the words of a large extent, and denotes a genus, whereas the word "Cooperative Bank" is a word of limited extent, which merely demarcates and identifies a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the Hon'ble Supreme Court in case of Totgars Co-operative Sale Society Ltd. vs. ITO(supra) was in context of Sec. 80P(2)(a)(i), and not on the entitlement of a cooperative society towards deduction under Sec. 80P(2)(d) on the interest income on the investments/deposits parked with a cooperative bank. Therefore, reliance was placed by the Ld. DR on the decision of Hon'ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. vs. ITO (supra) is distinguishable on facts. 5.2 In the instant case, the amount which was invested with other co-operative societies and SCDCC bank to earn interest was not any amount due to its members. This is very clear from the submissions reproduced in the assessment order wherein the assessee has submitted that it is due to the statutory obligation to keep the reserve fund of the society in SCDCC Bank that such deposits are made, and therefore, such fixed deposit has to be maintained. Further the claim of the assessee in u/s 80P(2)(d) was not any liability due to its members. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein claimed deduction under Section 80P (2)(a)(i) of the Act. The Ld.AO disallowed the deduction under Section 80P(2)(a)(i) holding that the appellant/assessee is neither a primary agricultural credit society nor a primary co-operative agricultural and rural development bank. The Ld.AO therein heald that the appellant/assessee is a "co-operative bank" and thus, was hit by the provisions of Section 80(P)(4) and was not entitled to the benefit of Section 80(P)(2) of the Act. This was upheld by the Ld.CIT(A) and the Tribunal. The decision of the Tribunal was confirmed by Hon'ble Keral High Court. 5.6 The Hon'ble Supreme Court analyzed the legal framework, relevant provisions under relevant co-operative societies Act, NABARD Act, provisions of sec. 80P under the Income Tax Act, 1961, RBI Act, the Banking Regulation Act and the various judicial precedents on similar issues. The observations of Hon'ble Supreme Court in para 14.3 and 15.8 are of relevant that reads as under:- "14.3. While analysing Section 80P of the Act in depth, the following points ere noted by this Court: i) Firstly, the marginal note to Section 80P which reads "Deduction in respect of income of co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it means any company which transacts the business of banking in India and as already noted banking business is defined in clause (b) of Section 5 to mean the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Thus, it is only when a cooperative society is conducting banking business in terms of the definition referred to above that it becomes a co-operative bank and in such a case, Section 22 of the BR Act, 1949 would apply wherein it would require a licence to run a co-operative bank. In other words, if a co-operative society is not conducting the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949, it would not be a co-operative bank and not so within the meanings of a state co-operative bank, a central co-operative bank or a primary co-operative bank in terms of Section 56(c)(i)(cci). Whereas a co-operative bank is in the nature of a banking company which transacts the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949. But if a co-operative society does not transact the business of banking as defined ..... X X X X Extracts X X X X X X X X Extracts X X X X
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