INCOME TAX OFFICER, WARD-1(1), KALYAN, KALYAN vs. MARATHWADA NAGARI SAHAKARI PATH SANSHTA MARYADIT, BHIWANDI

4. On the facts and in circumstances of the case, with regard to the addition of Rs. 1,97,86,879/- u/s 69a, the Ld. CIT(A) erred in fact by completely ignoring the fact that the assessee was not a specified entity to accept SBNs as per the prevailing RBI guidelines [RBI Amended Notification No. S.O.3408(E){F.No.10/03/2016-F.Y.1 DATED 08/11/2016] during the demonetization period.

5. The order of the CIT(A) may be vacated and that of Assessing Officer may be restored.”

3.1. Aggrieved, assessee went in appeal before the ld. CIT(A) who allowed the claim u/s.80P made by the assessee after observing that ld. Assessing Officer did not bring anything on record to prove that assessee is not carrying out its business in accordance with its bye- laws. For the addition made u/s.69A towards deposit of cash during the demonetisation period, ld. CIT(A), after taking account the facts and decision of Coordinate Bench of ITAT, deleted the same. Appeal of the assessee was thus allowed by ld. CIT(A). Aggrieved, Department is in appeal before the Tribunal.

9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-operative Society bank as the meaning of Co- Operative Society. Therefore, a Co-operative Society Ban. would be included in the words 'Co- operative Society'.

11.The learned counsel has relied on the case of Totgars Co- operative Sale Society Ltd. v. IΠΟ (2010) 322 ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the L.T. Act and not Section 80P(2)(a)(i) of the IT. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of la canvassed by the learned counsel for the Revenue even arise it is the present case.

5.1. We also find that the issue before us of whether a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank or not, is covered in favour of the assessee not only by the decision of Hon’ble High Court of Karnataka referred above but also in plethora of cases including few of the following cases: (i) Land and Cooperative Housing Society Ltd. v. ITO (2017) 46 CCH 52 (Mum) (ii) C. Green Cooperative Housing and Society Ltd. v. ITO 21(3)(2), Mumbai (ITA No. 1343/Mum/2017, dated 31.03.2017

(iii) Marvwanjee Cama Park Cooperative Housing Society Ltd. v. ITO Range- 20(2)(2), Mumbai (ITA No. 6139/Mum/2014, dated 27.09.2017.

5.2. From the above, we understand that the provisions of section 80P(2)(d) of the Act are very clear and assessee is entitled for deduction u/s.80P(2)(d) of the Act in respect of interest or dividends received from investments made with any other cooperative societies. From the above extraction, we also note that Hon'ble High Court held that the word ‘cooperative society’ are the words of large extent and denotes a genus, whereas the word ‘cooperative bank’ is a word of limited extent, which merely de-markets and identifies a particular species of the genus ‘cooperative societies’. Thus, a cooperative bank is merely a variety of the cooperative societies which can be of a different nature and can be involved in different activities.

5.3. We are of the considered view, that though the co-operative bank pursuant to the insertion of Sub-section (4) of Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but however, since a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being enforced in any state for the registration of cooperative societies, therefore, the interest and dividend income derived by a cooperative society from its investments held with a co-operative bank, would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. Accordingly, grounds raised in this respect are dismissed.

6. Issue relating to claim of deduction u/s.80P(2)(a)(i) made by the assessee is also no longer res integra as held in long line of judicial precedents listed below: i) Guttigedarara Credit Where interest income earned by Co-operative Society Ltd. assessee society by providing credit vs. ITO facilities to its members was [2015] 60 taxmann.com deposited in banks for a short 215 (Karnataka) duration which had earned interest, said interest on deposits was attributable to business of banking of assessee and it was liable to deduction under section 80P(2)(a)(i) ii) PCIT v. Gunja Samabay Where assessee, co-operative Krishi Unnayan Samity society, earned interest income on Ltd. surplus funds invested in deposits [2023] 147 taxmann.com with banks and Government 518 (Calcutta) securities, since neither said amount of deposit was due to its members nor it was liability to its members, same would qualify for deduction under section 80P(2)(a)(i) iii) Vavveru Co-operative Income of co-operative societies Rural Bank Ltd. vs. CCIT Assessment years 2010-11, 2013- [2017] 396 ITR 371 14 and 2014-15 -Assessee-society (Telangana and Andhra was entitled to deduction under Pradesh) section 80P in respect of interest income from fixed deposits with nationalised bank when source of such investment was income derived from activities listed in sub- clauses (i) to (vii) of clause (a) of section 80P(2) [In favour of assessee] iv) ITO vs. Yendagandhi Interest income received by Large Sized Co-operative assessee, a co-operative society, on Society Ltd. deposits pertaining to reserved fund [2023] 156 taxmann.com with co-operative banks and other 669 (Visakhapatnam nationalized banks was eligible for Trib.) deduction under section 80P

V) Supa (Kurel) Vibhag Seva Interest income received by Sahakari Mandli Ltd. v. assessee, co-operative society, from ITO FDRs in nationalized bank would [2017] 87 taxmann.com qualify for exemption under section 355 (Ahmedabad - Trib.) 80P(2)(a)(i).

Marathwada Nagari Sahakari Path Sanshta Maryadit. AY 2017-18 vi) DIT Vs. Buldana Urban In the instant case, the amount Co-op. Credit Society Ltd. which was invested in banks to earn [4398/Mum/2023] interest was not an amount due to any members. It was not the liability. It was not shown as liability in their account. In fact this amount which is in the nature of profits and gains, was not immediately required by the assessee for lending money to the members, as there were no takers. Therefore, they had deposited the money in a bank so as to earn interest. The said interest income is attributable to carrying on the business of banking and therefore it is liable to be deducted in terms of Section 80P(1) of the Act.

6.1. Assessee submitted a detailed note on its operations of providing credit facilities to its members which yields interest on deposits made on a temporary basis or to meet statutory requirement for the conduct of its business. The same is reproduced as under: “In this regard, kindly also note that, as per the provisions of section 66 the Maharashtra Co-operative Societies Act, 1960, the Society is required appropriate 25 % of the net profit to Reserve fund. In addition to this, as per section 144-10A of the MCS Act, 1960, Cooperative Credit Societies are required to maintain the Statutory Liquidity Ratio (SLR) of not less than 25% of the deposits accepted from members. In view of this, in order to comply the provisions of said Act, the Society is required to make mandatorily investment of Reserve Fund & SLR in the securities specified in section 70 of the MCS Act, 1960. Therefore, these investments are mandatorily required to carry on the business of providing credit facilities to the members. Further, as per the Bye-laws of the Society, providing credit facilities and making investment is core business activity. Making investment is a core business activity at par with providing credit facilities to the members. The Respondent Society has made investment as per the statutory compliance and provisions of Bye-laws of the Society and unless such investment is made, the respondent Society cannot carry on the business of providing credit facilities. Therefore, interest income received on such investment is an income attributable to providing credit facilities to members and same is Income from Business and the same is eligible for deduction on u/s 80P(2)(a) (i) of the Income Tax Act, 1961. In this regard kindly also note that unlike a Co-operative Banks, advancing loan and investment is core business activity of respondent Society. In case of Co- Marathwada Nagari Sahakari Path Sanshta Maryadit. AY 2017-18 operative banks, income on investment is assessed as income from business moreover there is circular issued by the CBDT that the investment income shall be taxed under the head Income from Business. Though the Respondent is Society is distinct entity from Co-operative Banks, however, the aims and object with regard to the carrying on business are almost same and therefore taking clue from the same, interest on mandatory investment by Society is Income from business and therefore eligible for deduction 80P(2)(a)(i) of the Act as held in CIT(A) order.”

6.2. In view of the above facts and judicial precedents, we are of the considered view that assessee is eligible for deduction u/s.80P(2)(a)(i).

8.1. Assessee also submitted that it runs electricity bills collection centre of Torrent Power Ltd. in Bhiwandi area. During the demonetisation period, it was allowed to accept utility bills of water and electricity of individuals and households from the period from 25.11.2016 to 15.12.2016. Assessee collected electricity bills of residential consumers amounting to Rs.62,79,180/- during this period which included SBN of Rs.38,50,500/-. The said amount was also deposited in the bank account.

8.2. Ld. CIT(A) considered all the above facts and circumstances under which assessee deposited the cash in its bank accounts during the demonetisation period. He by placing reliance on certain decision of Coordinate Bench, observed that ld. Assessing Officer had not brought any material on record, to prove that the amount deposited in the bank account does not belong to the members of the assessee society. He thus, held that ld. Assessing Officer is not justified in making the addition and the same was deleted.

8.3. We have considered the submissions made and perused the order of the authorities below. We note that ld. Assessing Officer has not doubted on the fact that cash was collected by the assessee from its members only. Assessee has maintained books of accounts which have been duly audited by Government Auditors wherein cash received by it has been recorded. Assessee has furnished all the details of receipt and deposit of the cash giving details relating to its members with their KYC compliances. Considering the facts and judicial precedents relied upon by the ld. CIT(A), we do not find any reason to interfere with the findings arrived at by him in deleting the additions so made. Accordingly, grounds raised in this respect are dismissed.