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TMI Blog2024 (6) TMI 1270X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is only from co-operative society or co-operative bank as decided by the Hon ble Apex Court. If the AO finds that interest is received from deposits in the co-operative society, the assessee is eligible for deduction u/s. 80P(2)(d) of the Act on such interest received. If the AO finds otherwise, then assessee would be eligible for deduction of cost of funds as per the judgment of the Hon ble jurisdictional High Court in the case of Totgar Co-operative Sale Society [ 2015 (4) TMI 829 - KARNATAKA HIGH COURT ] Appeal by the assessee is allowed for statistical purposes. - Shri George George K., Vice President And Shri Laxmi Prasad Sahu, Accountant Member For the Appellant : Shri Rajeev Nulvi, Advocate. For the Respondent : Shri Ganesh R. Ghale, Standing Counsel. ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER This appeal is filed by the assessee against the DIN Order No. ITBA/APL/S/250/2023-24/1057528911(1) dated 31.10.2023 of the Addl./Jt.CIT(Appeals)-2, Mumbai, for the AY 2020-21 on the following grounds:- 1. The intimation order u/s 143(1)(a) of the Income Tax Act, 1961 and the order of the Commissioner of Income Tax (Appeals) confirming the intimation order u/s 143(1)(a) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income on 26.10.2020 u/s. 139(1) of the Act showing income from house property of Rs.1,37,257, loss from business of (-) Rs.87,37,294 and income from other sources of Rs.98,49,424, resultantly net taxable income was declared of Rs.12,49,887 and claimed deduction u/s. 80P(2)(d) of Rs.12,49,887. Accordingly there was a net taxable income of NIL. 3. The return was processed u/s. 143(1) by CPC disallowing claim of deduction u/s. 80P(2)(d) and determining taxable income of Rs.12,49,887. The CIT (Appeals) after discussing the issue in detail dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal. 4. The ld. AR strongly reiterated the submissions made before the CIT (Appeals) and submitted that assessee is eligible to make claim of deduction as per section 80P(2)(d) of the Act on the interest received on fixed deposits in banks with any other co-operative society, since cooperative bank is primarily co-operative society and relied on various decisions. The ld. AR further relied on the order dated 27.07.2023 of ITAT Mumbai in ITA No. 1346 1347/Mum/2023 wherein the judgment of Hon ble jurisdictional High Court is relied and it is observed that where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on deposits. Section 80P(2)(d) of the Act is very clear that interest received from the co-operative society is eligible for deduction. In the present case, the ld. AR could not bring to our notice that the interest received by the assessee is only from cooperative society and it is not carrying on business of banking as per RBI Regulations. This issue has been considered by the Hon ble Apex Court in the case of Kerla State Co-operative Agricultural Rural Development Bank Ltd. vs ITO (Supra). For the sake of convenience we are reproducing the relevant part of the above judgement. 15. It is on the aforesaid touchstone that these appeals must now be further considered from the point of view of the applicable provisions of law. 15.1 section 80P speaks about deduction in respect of income of cooperative societies from the gross total income referred to in subsection (2) of the said section. From the said income, there shall be deducted, in accordance with the provisions of section 80P, sums specified in sub-section (2), in computing the total income of the assessee for the purpose of payment of income tax. Sub-section (2) of section 80P enumerates various kinds of co-operative societi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company or such company shall be construed as references to a co-operative bank. in clause (c), it is stated that in section 5 as per clause (cci), co-operative bank means a state co-operative bank, a central co-operative bank and a primary co-operative bank. clause (ccv) defines primary co-operative bank while clause (ccvii) defines central co-operative bank and state co-operative bank to have the meanings assigned to them in the NABARD Act, 1981. Since the expression 'banking company' is defined under the BR Act, 1949, it would be useful to consider the definition of banking company in section 5(c) thereof which means any company which transacts the business of banking in India. Banking is defined in section 5(b) of the said Act 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. Therefore, a banking company must transact banking business vis- -vis the public. Thus, in the first place a co-operative society must be engaged in banking business as defined in section 5(b) of the said Act. For that, section 22 of the BR Act, 1949, spea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing as defined in clause (b) of section 5 of the BR Act, 1949, it would not be a co-operative bank. Then the definitions under the NABARD Act, 1981 would not apply. If a co-operative society is not a co-operative bank, then such an entity would be entitled to deduction but on the other hand, if it is a co-operative bank within the meaning of section 56 of BR Act, 1949 read with the provisions of NABARD Act, 1981 then it would not be entitled to the benefit of deduction under sub-section (4) of section 80P of the Act. 15.9 section 56 of the BR Act, 1949 begins with a non-obstante clause which states that notwithstanding anything contained in any other law for the time being in force, the provisions of the said Act, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to certain modifications. The object of section 56 is to provide a deeming fiction by equating a cooperative society to a banking company if it is a co-operative bank within the meaning of the said provision. This is because Chapter V of the BR Act, 1949, deals with application of the Chapter to co-operative societies which are co-operative banks within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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