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TMI Blog2025 (1) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... er For the Revenue : Shri Sanjay Kumar, Sr.D.R. For the Assessee : Shri Hasmukh V Doshi, CA ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 03.11.2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as CIT(A) ), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relating to the Assessment Year 2020-21. 2. The Grounds of Appeal raised by the Revenue reads as under: (a) The Ld.CIT (A) has erred in law and on facts in allowing the deduction of Rs2,27,33,574/- claimed u/s 80P(2)(d) of the IT Act in respect of the interest received from Bank deposits from Co-operative Banks and Nationalized Bank. (b) The Ld.CIT (A) has erred in law and on facts in allowing the deduction of u/s 80P(2)(a)(i) of the IT Act without considering the provisions of section 57 of the IT Act. (c) The appellant craves leave to add, alter and/or to amend all or any of the ground before the final hearing of the appeal. 3. Brief facts of the case is that the assessee is a Cooperative Society and is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s. 80P(2)(d) of the Act on the interest income earned from Cooperative Society which are carried out banking activities. Thus pleaded the Revenue appeal is liable to be dismissed. 7. We have given our thoughtful consideration and perused the materials available on record. This issue is no more res integra by the very recent Jurisdictional High Court judgment in the case of Ashwinkumar Arban Cooperative Society Ltd. (cited supra) which has considered Karnataka High Court and Supreme Court judgment in the case of Totagars Coopeartive Sale Society and amendment in Section 194C(3)(v) of the Act and held that the interest earned on the investment made with the Coopearitve Society which was carried out the banking business, the assessee cannot be denied the deduction u/s. 80P(2)(d) of the Act by observing as follows: 28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P(2)(d) of the Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the total income. 31. The Hon ble Apex Court in case of Kerala State Co-operative Agricultural Rural Development Bank Ltd. vs. Assessing Officer (supra) while considering various provisions of the Banking Regulation Act read with provisions of the Income Tax Act has held that the provision of section 80P(4) of the Act would not be applicable to a cooperative bank which is not a bank as per the provisions of the BR Act,1949, as under: 5. Interpretation. In this Act, unless there is anything repugnant in the or context, X X X (b) banking means 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; (c) banking company means any company which transacts the business of banking in India. Explanation. Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause; 32. After considering the above interpretation of various provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... life of the country and therefore, has to be read liberally in favour of the assessee. 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 sub- section (2) of Section 80P must be given by way of deduction vide Citizen Co operative Society. This is because sub-section (4) of Section 80P is in the nature of a proviso to the main provision contained in sub- sections (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co-operative 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 Section5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 14.3. While analysing Section 80P of the Act in depth, the following points were noted by this Court: i) 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. ii) Secondly, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic. Also under Section 22(1)(b) of the BR Act, 1949, no co- operative society can carry on banking business in India, unless it is a co-operative bank and holds a licence issued in that behalf by Reserve Bank of India. It was pointed out that as opposed to the above, a primary agricultural credit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 14.5. It was further observed in the said case that some primary agricultural credit societies had sought for banking licence from Reserve Bank of India but the same was turned down by observing that such a society was not carrying on the business of banking and that it did not come under the purview of Reserve Bank of India requiring a licence for its business. 14.6. Thereafter in paragraph 48 of the judgment, it was observed that a deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. That sub-section (4) of Section 80P which is in the nature of a proviso specifically excludes co-operative banks which are co-operative s ..... 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