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TMI Blog2025 (2) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeals), (in short "Ld. CIT(A)"), ADDL/JCIT (A)-11, Mumbai vide order dated 25.10.2024 passed for A.Y. 2020-21. 2. The assessee has taken the following grounds of appeal:- "1.1 The order passed u/s. 250 on 25.10.2024 by NFAC [CIT(A)] Mumbai dismissing the appeal on the ground of limitation and thereby confirming disallowance of deduction u/s 80P of Rs. 2,80,904/- is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in dismissing the appeal on the ground of limitation without informing the alleged delay and providing the opportunity to explain the same so that there is gross violation of the principles of natural justice. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding that the interest income of Rs. 2,80,904/- was chargeable to tax in the hands of the appellant society and further that no deduction u/s 80P was admissible. 2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) has grievously erred in confirming the disallowance of the deduction u/s 80P of Rs. 2,80,904/-. 3.1 Without prejudice to above and in the alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. 29. Reliance placed by the learned advocate for the revenue on decisions of the Hon'ble Karnataka High Court and Hon'ble Supreme Court in case of Totgars' Cooperative Sale Society Ltd, the Hon'ble Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) of the Act wherein the cooperative bank is excluded from the applicability of tax to be deducted at source. However, it appears that the interpretation made by the Hon'ble Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the cooperative societies by Finance Act,2015 by amending section 194A(3)(v) of the Act is concerned, on perusal of section 194A (3) of the Act, it appears that it provides for exemption from deducting Tax Deducted at Source ['TDS' for short] from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yzed the provisions as under: "14.1. In Apex Co-operative Bank of Urban Bank of Maharashtra and Goa Ltd., it was categorically held that under Section 56 of the BR Act, 1949 only three co-operative banks have been defined, namely, state cooperative bank, central co-operative bank and primary co-operative bank which are covered under Section 56 (cci) read with (ccvii) read with the provisions of the NABARD Act, 1981. Thus, it is only these three banks which are cooperative banks which require a licence under the BR Act, 1949 to engage in banking business. If any bank does not fall within the nomenclature of the aforesaid three banks as defined under the NABARD Act, 1981, it would not be a co-operative bank within the meaning of Section 56 of BR Act, 1949 irrespective of whatever nomenclature it may have or structure it may possess or incorporated under any Act. It was further stated that if a bank has to be a state co- operative bank, there has to be a declaration made by the State Government in terms of Section 2(u) of NABARD Act, 1981. Hence, it is necessary to go into the question as to, whether, the appellant herein has been so declared as a state cooperative bank. This questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the assessee must be a "co-operative society". (iii) Thirdly, the gross total income must include income that is referred to in sub-section (2). (iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being "engaged in", inter alia, carrying on the business of banking or providing credit facilities to its members. (v) Fifthly, the burden is on the assessee to show, by adducing facts, that it is entitled to claim the deduction under Section 80P. (vi) Sixthly, the expression "providing credit facilities to its members" does not necessarily mean agricultural credit alone. It was highlighted that the distinction between eligibility for deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. (vii) Seventhly, under Section 80P(1) (c), the co-operative societies must be registered either under Cooperative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from Reserve Bank of India." 33. In view of the above dictum of law as well as the provisions of the Act which are considered we are of the opinion that the provisions of section 80P(2)(d) would be applicable in the facts of the case and the PCIT was not justified in invoking revisional powers under section 263 of the Act which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) of the Act which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled. 34. In view of the foregoing reasons we answer the question in favour of the assessee and against the Revenue. Tax Appeals are being devoid of any merit accordingly dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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