ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2 (1), PANAJI., PANAJI vs. SHREE KALIKA URBAN CO-OP. CREDIT SOCIETY LIMITED, MAPUSA

ORDER

PER INTURI RAMA RAO, AM:

2. The Ld. CIT(A) has erred in deleting addition on account of disallowance of deduction in respect of income of co-operative society u/s. 80P(2)(a)(i), 80P(2)(c)(ii), 80P(2)(d) and 40(a)(ia) on the ground that the assessee is a co- operative society, accepts deposits only from its member s and can lend money only to its members and it cannot issue cheque books, when the assessee accepts deposits and grants loans to its members on which it makes profit and gain by way of charging interest, thus providing credit facility is akin to banking business as per section 2(24)(viia) and Part-V of the Banking Regulation Act, 1949, hence the assessee is not eligible for deduction u/s. 80P.

or add to the same, if deemed necessary.”

3. Briefly, the facts of the case are that the respondent-assessee is a cooperative society engaged in the business of accepting deposits and lending money to its members. The return of income for the assessment year 2014-15 was filed on 16.09.2014 declaring total income of Rs.60,242/- after claiming deduction u/s 80P(2) of the Income Tax Act, 1961 (‘the Act’). Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-2, Margao, Goa (‘the Assessing Officer’) vide order dated 23.11.2016 passed u/s 143(3) of the Act at a total income of Rs.4,37,14,442/- after making disallowance u/s 80P(2)(i)(a) of the Act amounting to Rs.2,46,89,152/- and disallowance of interest paid to the members for non-deduction of TDS u/s 40(a)(ia) of the Act of Rs.1,89,65,048/-. While doing so, the Assessing Officer denied the claim of deduction u/s 80P(2)(i)(a) of the Act on the ground that the respondent-assessee society is not a cooperative society but a cooperative bank placing reliance on the provisions of section 80P(4) of the Act. Similarly, the Assessing Officer was of the opinion that as the respondent-assessee society is a cooperative bank the provisions of section 194A of the Act are held to be applicable in respect of interest paid to the members on the deposits.

4. Being aggrieved by the above additions, an appeal was filed before the ld. CIT(A), who vide impugned order held that the respondent-assessee is not a cooperative bank but a cooperative society and, accordingly, allowed the claim 80P(2)(a)(i), section 80P(2)(c)(ii) and section 80P(2)(d) of the Act. As regards to the disallowance of interest paid to the members for non- deduction of TDS u/s 40(a)(ia) of the Act taking into consideration that the respondent-assessee society is not a cooperative bank held that the provisions of section 194A of the Act have no application. Accordingly, he directed the Assessing Officer to delete the addition of Rs.1,89,65,048/-.

raised by the Revenue challenges the decision of the ld. CIT(A) allowing the deduction u/s 80P(2) of the Act. The Assessing Officer was of the view that the respondent-assessee society is a cooperative bank and, therefore, relying on the provisions of sub-section (4) of section 80P of the Act, denied the deduction u/s 80P of the Act. Therefore, the question which requires to be examined is whether the respondent-assessee society is cooperative bank or not?. Admittedly, the respondent-assessee society is formed for the purpose of accepting deposits from members and lending it to its members and does not have licence from Reserve Bank of India to carry out the business of cooperative bank. The Hon’ble Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. & ors. vs. CIT, 431 ITR

01. (SC) held that the income-tax authorities cannot go behind the registration granted under the Cooperative Societies Registration Act. In the absence of banking licence from RBI, a cooperative society cannot be termed as cooperative bank. Applying the ratio of the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. (supra), we are of the considered opinion that in the facts of the present case the respondent-assessee society is only a members of cooperative society not cooperative bank and not hit by the provisions of sub-section (4) of section 80P of the Act and, therefore, the respondent-assessee society is clearly entitled for the deduction u/s 80P(2) of the Act. The decision of the ld. CIT(A) though cryptic has to be upheld in view of the fact that the decision of the ld. CIT(A) is in conformity with the ratio of the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. (supra). Having held that the respondent-assessee society is not a cooperative bank then the question of denying the claim for