VASAI URBAN COOPERATIVE C REDIT SOCIETY LTD,VASAI vs. PCIT-1, THANE, THANE

Per Kavitha Rajagopal, J M:

This appeal has been filed by the assessee, challenging the order of the learned
Principal Commissioner of Income Tax, Thane – 1 (‘ld. PCIT’ for short), passed u/s.
263 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’
for short) 2020-21. 2. The assessee has raised the following grounds of appeal:
“[A] Grounds of Appeal:

a. In the facts of the case and in Law, the learned CIT has erred in invoking the provision of sec. 263 merely because he wants to take a view different from the one taken by the Assessing Officer and thereby changing the opinion of the Assessing
Officer by his/her opinion.

b. In the facts of the case and in Law, the learned CIT has erred in holding that Assessing Officer failed to verify the claim of the Appellant u/s80P(2)(d) in respect of interest income of Rs. 96,32,202// on from investments made with Cooperative
Banks and claimed deduction thereof u/s. 80P(2)(d) of the Act even though all the details were furnished to the Assessing Officer.

c. In the facts of the case and in Law, the learned CIT has erred in disregarding the fact that similar deduction was already allowed in scrutiny assessment in earlier years as well..

d. In the facts of the case and in Law, the learned CIT has erred in disregarding the fact that the deduction granted in initial year cannot be withdrawn in subsequent years on the same fact..

e. Overlooking order of ITAT in our own case for AY 18-19 thereby causing non observance of judicial discipline

[B] Relief Prayed:

The appellant therefore prays as follows,

[C] General: -

The appellant reserve rights to add alter or delete any portion of this appeal before its conclusion.

This appeal is filed on time and the same may please be allowed in full.

A Detailed paper book along with case laws will be submitted at the time of hearing.”
Vasai Urban Cooperative Credit Society Ltd.

the issue in hand is recurring in nature and that the coordinate bench in assessee’s case for A.Y. 2018-19 had decided the issue in favour of the assessee in ITA No.
1507/Mum/2024, vide order dated 25.07.2024. The ld. AR further contended that the ld. AO has enquired into this issue and had taken one of the plausible view and hence, the assessment order is not said to be erroneous in so far as it is prejudicial to the interest of the revenue.
7. The learned Departmental Representative ('ld. DR' for short) for the revenue on the other hand controverted the said fact and relied on the order of the ld. PCIT.
8. Upon perusal of the rival contentions, it is observed that the assessee has earned interest income on investment from co-operative banks which details are tabulated herein under:
Particulars
Interest Amount
Vasai Vikas Sahakari Bank
37,76,693
Vasai Janta Sahakari Bank
28,88,976
Bassein Catholic Co-op. Bank
25,62,021
New India Co-op. Bank Ltd.
36,82,981
Model Co-op. Bank Ltd.
2,09,423
Total (Rs.)
1,31,20,094

of the Act on the same. During the assessment proceeding, it is observed that the ld.
AO had issued notice u/s. 142(1) of the Act, dated 18.11.2021, seeking for details pertaining to the assessee’s claim of deduction u/s. 80P along with supporting documentary evidences for which the assessee vide its submission is said to have provided with the information sought for by the ld. AO. The ld. AO then passed the assessment order accepted the returned income filed by the assessee. The ld. AR extensively relied on the decision of the coordinate bench in assessee’s own case for A.Y. 2018-19, where the coordinate bench has held that the assessee was entitled to deduction claimed u/s. 80P(2)(d) pertaining to the interest earned from the co-operative banks. The coordinate bench further held that on this ground the assessment order was not to be held erroneous in so far as it is prejudicial to the interest of the revenue by relying on the decision of the Hon'ble Apex Court in the case of Malabar Industrial
Co. Ltd. v. CIT (2000) 243 ITR 83 (SC). The relevant extract of the said decision is cited herein under for ease of reference:
11. In the present case, there is no dispute that the assessee is a Co-operative Credit
Society, which is engaged in accepting deposits from the customers and gives loans to its members only. Thus, if any income as referred to in sub-section (2) to section 80P of the Act is included in the gross total income of the assessee, the same shall be allowed as a deduction. It is pertinent to note that since the assessee is registered under the Maharashtra Co-operative Societies Act, 1960, it is required to invest or deposit its funds in one of the modes provided in section 70 of the aforesaid Act, which includes investment or deposit of funds in the District Central Co-operative
Bank or the State Co-operative Bank. Accordingly, the assessee kept the deposits in District Central Co-operative Banks and earned interest, which was claimed as a deduction under section 80P(2)(d) of the Act. It is pertinent to note that the Hon'ble
Supreme Court in Mavilayi Service Co-operative Bank Ltd. v/s CIT, Calicut, [2021]
431 ITR 1 (SC) while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Co-operative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. The Hon'ble Supreme
Vasai Urban Cooperative Credit Society Ltd.

Court further held that the limited object of section 80P(4) is to exclude Co- operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus, we are of the considered view that section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co- operative Bank, claims a deduction under section 80P of the Act. We also find that in PCIT v/s Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [2023] 150
taxmann.com 173 (SC), the Hon'ble Supreme Court held that a taxpayer who is merely giving credit to its members cannot be said to be the Co-operative
Banks/Banks under the Banking Regulation Act and the banking activities under the Banking Regulation Act are altogether different. Therefore, the Hon'ble Supreme
Court held that the assessee, a co-operative credit society, could not be termed a bank/Co-operative Bank and that being a credit society, it was entitled to exemption under section 80(P)(2) of the Act. Therefore, we find no merits in the aforesaid reasoning adopted by the learned PCIT vide impugned order passed under section 263 of the Act. As regards the claim of deduction under section 80P(2)(d) of the Act, it is also pertinent to note that all Co-operative Banks are Co-operative Societies but vice versa is not true.

"7. Hon'ble High Court of Karnataka in case of Pr. CIT & Anr. Vs. Totgar's Co- operative Sale Society Ltd. (2017) 292 ITR 74 (Kar.) and Hon'ble Gujarat High
Court in case of State Bank of India vs. CIT (2016) 389 ITR 578 (Guj.) had also held that interest Income earned by a co-operative society on its investment held with co-operative bank would be eligible for claim of deduction under section 80P(2)(d) of the Act. We are of the considered view that the Ld. CIT(A) has erred in upholding the denial of deduction by the AO to the assessee under section 80P(2)(d) of the Act.

society claimed under section 80P(2)(d) of the Act, hence, AO is directed to allow the same."

Copy of the Order forwarded to:

(Dy./Asstt.