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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
ORDER PER BENCH
These three appeals by the Revenue are directed against three separate orders, all dated 30.06.2025, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017- 18, 2018-19 and 2020-21 respectively. As common issue in dispute is involved in all three appeals, therefore, same were heard together and disposed off by way of this consolidated order for the sake of and disposed off by way of this consolidated order for the sake of and disposed off by way of this consolidated order for the sake of convenience.
As identical grounds have been raised in all the appeal As identical grounds have been raised in all the appeal As identical grounds have been raised in all the appeals except the quantum of deduction in quantum of deduction involved, for sake of brevity, the grounds or sake of brevity, the grounds raised in the assessment year 2017 raised in the assessment year 2017-18 are reproduced as under: 18 are reproduced as under:
On facts and in law, the Ld. CIT(A) erred in allowing 1. On facts and in law, the Ld. CIT(A) erred in allowing 1. On facts and in law, the Ld. CIT(A) erred in allowing the assessee's claim for deduction under Section the assessee's claim for deduction under Section the assessee's claim for deduction under Section 80P(2)(a)(i) of the Income 80P(2)(a)(i) of the Income-tax Act, 1961, despite the bar ite the bar provided under Section 80P(4) applicable to co provided under Section 80P(4) applicable to co-operative operative banks.
2. The Ld. CIT(A) failed to appreciate that the assessee 2. The Ld. CIT(A) failed to appreciate that the assessee 2. The Ld. CIT(A) failed to appreciate that the assessee fulfils all the conditions laid down under Section 5(ccv) of fulfils all the conditions laid down under Section 5(ccv) of fulfils all the conditions laid down under Section 5(ccv) of the Banking Regulation Act, 1949, thereby qualifying as the Banking Regulation Act, 1949, thereby qualifying as the Banking Regulation Act, 1949, thereby qualifying as a "primary co- mary co-operative bank" and making it ineligible for operative bank" and making it ineligible for deduction under Section 80P(2)(a)(i). deduction under Section 80P(2)(a)(i).
The Ld. CIT(A) erred in relying on the decisions of the 3. The Ld. CIT(A) erred in relying on the decisions of the 3. The Ld. CIT(A) erred in relying on the decisions of the Hon'ble ITAT in the assessee's own cases for earlier Hon'ble ITAT in the assessee's own cases for earlier Hon'ble ITAT in the assessee's own cases for earlier years and in the case of Quepem Urban Co years and in the case of Quepem Urban Co-operative operative Credit Society Ltd., without independently evaluating the Credit Society Ltd., without independently evaluating the Credit Society Ltd., without independently evaluating the applicability of Section 80P4 based on the facts of the applicability of Section 80P4 based on the facts of the applicability of Section 80P4 based on the facts of the relevant assessment year. relevant assessment year. 4. The Ld. CIT(A) failed to consider that each assessment 4. The Ld. CIT(A) failed to consider that each assessment 4. The Ld. CIT(A) failed to consider that each assessment year is independent and that reliance on earlier orders is year is independent and that reliance on earlier orders is year is independent and that reliance on earlier orders is not not not binding binding binding where where where the the the statutory statutory statutory provisions provisions provisions and and and underlying facts have been properly applied and underlying facts have been properly applied and underlying facts have been properly applied and examined afresh during the currem Assessment examined afresh during the currem Assessment 5. The order of the Ld. CIT(A) is contrary to the legislative 5. The order of the Ld. CIT(A) is contrary to the legislative 5. The order of the Ld. CIT(A) is contrary to the legislative intent behind Section SOP) and the factual findings intent behind Section SOP) and the factual findings intent behind Section SOP) and the factual findings recorded by the Assessing Officer based on the ecorded by the Assessing Officer based on the ecorded by the Assessing Officer based on the activities and and bye-laws. 3. Briefly stated, facts of the case are that Briefly stated, facts of the case are that the assessee is a the assessee is a registered Co-operative Credit Society, incorporated in the year operative Credit Society, incorporated in the year operative Credit Society, incorporated in the year 1979 under the Maharashtra State Co 1979 under the Maharashtra State Co-operative Societies Act, operative Societies Act, 1960. It was established with the avowed object of providing credit 1960. It was established with the avowed object of providing credit 1960. It was established with the avowed object of providing credit facilities exclusively to its members in acc facilities exclusively to its members in accordance with the ordance with the principles of co-operation, mutual aid, and self operation, mutual aid, and self-help. The Society is help. The Society is governed and regulated by the Commissioner & Registrar of Co- governed and regulated by the Commissioner & Registrar of Co governed and regulated by the Commissioner & Registrar of Co operative Societies, Maharashtra State. operative Societies, Maharashtra State.
3.1 The assessee filed its returns of income for the Assessment The assessee filed its returns of income for the Assessment The assessee filed its returns of income for the Assessment Years (AYs) 2017–18, 2018 18, 2018–19 and 2020–21 on 23.10.2017, 21 on 23.10.2017, 26.09.2018 and 13.11.2020, declaring incomes of ₹6,63,32,186/-, 26.09.2018 and 13.11.2020, declaring incomes of 26.09.2018 and 13.11.2020, declaring incomes of Nil and Nil respectively. The returns were duly processed under Nil and Nil respectively. The returns were duly processed under Nil and Nil respectively. The returns were duly processed under section 143(1) of the Income section 143(1) of the Income-tax Act, 1961 (“the Act”). The cases tax Act, 1961 (“the Act”). The cases were thereafter selected for scrutiny and statutory notices were after selected for scrutiny and statutory notices were after selected for scrutiny and statutory notices were issued and complied with. issued and complied with. In the assessments framed for the In the assessments framed for the respective years, the Assessing Officer disallowed the assessee’s respective years, the Assessing Officer disallowed the assessee’s respective years, the Assessing Officer disallowed the assessee’s claim of deduction under section 80P(2)(a)(i) of the Act on the claim of deduction under section 80P(2)(a)(i) of the Act on the claim of deduction under section 80P(2)(a)(i) of the Act on the reasoning that the assessee was in substance functioning as a co hat the assessee was in substance functioning as a co hat the assessee was in substance functioning as a co- operative bank and, in view of section 80P(4), was not entitled to operative bank and, in view of section 80P(4), was not entitled to operative bank and, in view of section 80P(4), was not entitled to deduction.
3.2 On appeal, the learned Commissioner of Income Tax (Appeals) On appeal, the learned Commissioner of Income Tax (Appeals) On appeal, the learned Commissioner of Income Tax (Appeals) [CIT(A)] allowed the deduction by placing reliance on the binding [CIT(A)] allowed the deduction by placing reliance on the bi [CIT(A)] allowed the deduction by placing reliance on the bi decisions of the Tribunal in assessee’s own cases for AYs 2013–14 decisions of the Tribunal in assessee’s own cases for AYs 2013 decisions of the Tribunal in assessee’s own cases for AYs 2013 and 2014–15 (ITA Nos. 7752/Mum/2019, 7753/Mum/2019 and 15 (ITA Nos. 7752/Mum/2019, 7753/Mum/2019 and 15 (ITA Nos. 7752/Mum/2019, 7753/Mum/2019 and 1288/Mum/2021), wherein the assessee was held not to fall within 1288/Mum/2021), wherein the assessee was held not to fall within 1288/Mum/2021), wherein the assessee was held not to fall within the mischief of section 80P(4). the mischief of section 80P(4).
We have carefully considered We have carefully considered the rival submissions and the the rival submissions and the material on record. Section 80P(2)(a)(i) entitles a co material on record. Section 80P(2)(a)(i) entitles a co-operative society operative society to deduction in respect of to deduction in respect of whole of amount of profits and gains of profits and gains of business attributable to carrying on the business of banking or business attributable to carrying on the business of banking or business attributable to carrying on the business of banking or providing credit facilities to its members. lities to its members. The assessee is engaged in The assessee is engaged in the activity of providing credit facility to its member and therefore, the activity of providing credit facility to its member and therefore, the activity of providing credit facility to its member and therefore, the relevant income earned , which is attributable to said activity the relevant income earned , which is attributable to said activity the relevant income earned , which is attributable to said activity reported under the head of “profit and gain of business” is eligible reported under the head of “profit and gain of business” is eligi reported under the head of “profit and gain of business” is eligi for deduction u/s 80P(2)(a)(i) of the Act. for deduction u/s 80P(2)(a)(i) of the Act. However, by virtue of However, by virtue of section 80P(4), the deduction u/s 80P is not available to a “co- section 80P(4), the deduction u/s 80P is not available to a “co section 80P(4), the deduction u/s 80P is not available to a “co operative bank” other than a primary agricultural credit society or a operative bank” other than a primary agricultural credit society or a operative bank” other than a primary agricultural credit society or a primary co-operative agricultural and rural developme operative agricultural and rural development bank. The operative agricultural and rural developme Explanation to section 80P(4) incorporates the definition of “co- Explanation to section 80P(4) incorporates the definition of “co Explanation to section 80P(4) incorporates the definition of “co operative bank” from Part V of the Banking Regulation Act, 1949. operative bank” from Part V of the Banking Regulation Act, 1949. operative bank” from Part V of the Banking Regulation Act, 1949.
4.1 Since the assessee is not a ince the assessee is not a ‘primary agriculture credit society primary agriculture credit society’ or ‘primary co-operative agricult operative agricultural and rural development bank rural development bank’, therefore, the decisive question is whether the assessee is a “co he decisive question is whether the assessee is a “co he decisive question is whether the assessee is a “co- operative bank” within the meaning of section 80P(4). operative bank” within the meaning of section 80P(4). operative bank” within the meaning of section 80P(4).
4.2 Under the Explanation to section 80P(4) of the Act co Under the Explanation to section 80P(4) of the Act co Under the Explanation to section 80P(4) of the Act co-operative bank has been defined that as the meaning bank has been defined that as the meaning assigning to them assigning to them under part 5 of Banking Regulation Act, 1949. Before us, the Ld. part 5 of Banking Regulation Act, 1949. Before us, the Ld. part 5 of Banking Regulation Act, 1949. Before us, the Ld. counsel for the assessee has referred to section 56 of the Banking counsel for the assessee has referred to section 56 of the Banking counsel for the assessee has referred to section 56 of the Banking Regulation wherein the banking is defined as accepting deposits Regulation wherein the banking is defined as accepting deposits Regulation wherein the banking is defined as accepting deposits from the public, withdrawal facilities thr withdrawal facilities through cheques and drafts. ough cheques and drafts. The Ld. counsel submitted that the respondent society meet this The Ld. counsel submitted that the respondent society meet this The Ld. counsel submitted that the respondent society meet this criteria as it deals exclusively with its members and not the public criteria as it deals exclusively with its members and not the public criteria as it deals exclusively with its members and not the public and and and cannot cannot cannot provide provide provide withdrawal withdrawal withdrawal facility facility facility through through through banking banking banking instruments. This fact has not been controv instruments. This fact has not been controverted by the Ld. erted by the Ld. Departmental Representative (DR). Departmental Representative (DR). Thus, it is undisputed that the t is undisputed that the assessee does not accept deposits from, nor extend facilities to, the assessee does not accept deposits from, nor extend facilities to, the assessee does not accept deposits from, nor extend facilities to, the general public. Its activities are confined exclusively to its members, general public. Its activities are confined exclusively to its members, general public. Its activities are confined exclusively to its members, and it does not provide withdra and it does not provide withdrawal facilities through cheques, drafts wal facilities through cheques, drafts or other banking instruments. Thus, the essential attributes of or other banking instruments. Thus, the essential attributes of or other banking instruments. Thus, the essential attributes of “banking” under section 56 of the Banking Regulation Act, 1949 are “banking” under section 56 of the Banking Regulation Act, 1949 are “banking” under section 56 of the Banking Regulation Act, 1949 are not satisfied. Hence, t Hence, the assessee does not fulfil the definition of he assessee does not fulfil the definition of a Co-operative Bank provided under the Explanation to section 80P(4) nk provided under the Explanation to section 80P(4) nk provided under the Explanation to section 80P(4) of the Act and thus assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act and thus assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act and thus assessee is eligible for deduction u/s 80P(2)(a)(i) of the Act.
4.3 The Supreme Court in The Supreme Court in Mavilayi Service Co-operative Bank Ltd. operative Bank Ltd. v. CIT [(2021) 431 ITR 1 (SC)] has categorically held [(2021) 431 ITR 1 (SC)] has categorically held [(2021) 431 ITR 1 (SC)] has categorically held that so long as a co-operative society is engaged in providing credit facilities to its operative society is engaged in providing credit facilities to its operative society is engaged in providing credit facilities to its members, the income so earned is deductible under section members, the income so earned is deductible under section members, the income so earned is deductible under section 80P(2)(a)(i). The Court clarified that section 80P(4) carves out an 80P(2)(a)(i). The Court clarified that section 80P(4) carves out an 80P(2)(a)(i). The Court clarified that section 80P(4) carves out an exception only in respect of co exception only in respect of co-operative banks, as defined under banks, as defined under the Banking Regulation Act, and does not affect societies confining the Banking Regulation Act, and does not affect societies confining the Banking Regulation Act, and does not affect societies confining their activities to members. their activities to members.
4.4 On the other hand, the ruling in On the other hand, the ruling in Citizen Co-operative Society operative Society Ltd. v. ACIT [(2017) 397 ITR 1 (SC)] demonstrates the converse [(2017) 397 ITR 1 (SC)] demonstrates the converse [(2017) 397 ITR 1 (SC)] demonstrates the converse position, where a society, though registered as a co on, where a society, though registered as a co on, where a society, though registered as a co-operative society, was in fact engaged in accepting deposits from the public society, was in fact engaged in accepting deposits from the public society, was in fact engaged in accepting deposits from the public and advancing loans to non and advancing loans to non-members, thereby functioning as a full members, thereby functioning as a full- fledged co-operative bank. It was held therein that such a society operative bank. It was held therein that such a society operative bank. It was held therein that such a society would fall within the exclusionary clause of section 80P(4). would fall within the exclusionary clause of section 80P(4). would fall within the exclusionary clause of section 80P(4).
4.5 Tested against these authoritative pronouncements, the Tested against these authoritative pronouncements, the Tested against these authoritative pronouncements, the assessee’s case is squarely governed by the ratio of assessee’s case is squarely governed by the ratio of Mavilayi Mavilayi (supra) and stands on a completely different footing from Citizen Co- and stands on a completely different footing from and stands on a completely different footing from operative Society (supra). The assessee operates solely within the (supra). The assessee operates solely within the (supra). The assessee operates solely within the co-operative fold of its members and does not satisfy the statutory operative fold of its members and does not satisfy the statutory operative fold of its members and does not satisfy the statutory test of being a “co-operative bank”. operative bank”.
4.6 In view of the above legal position and following the consistent In view of the above legal position and following the consistent In view of the above legal position and following the consistent orders of the Tribunal in assessee’s own cases for earlier years, we nal in assessee’s own cases for earlier years, we nal in assessee’s own cases for earlier years, we uphold the order of the learned CIT(A) granting deduction under uphold the order of the learned CIT(A) granting deduction under uphold the order of the learned CIT(A) granting deduction under section 80P(2)(a)(i). No infirmity has been pointed out warranting section 80P(2)(a)(i). No infirmity has been pointed out warranting section 80P(2)(a)(i). No infirmity has been pointed out warranting interference.
4.7 The grounds raised by the Revenue in all the three appeal he grounds raised by the Revenue in all the three appeal he grounds raised by the Revenue in all the three appeal are dismissed.
In the result, all the three appeals of the Revenue are In the result, all the three appeals of the Revenue are In the result, all the three appeals of the Revenue are dismissed.
Order pronounced in the open Court on ounced in the open Court on 22/09/2025. /09/2025.