PARIJAT CO OP CREDIT SOCIETY LTD,NAVI MUMBAI vs. INCOME TAX OFFICE 28 2 1, VASHI NAVI MUMBAI

Grounds taken by the Assessee are reproduced as under: “1. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has failed to appreciate that the appellant is a Co-operative Credit Society exclusively engaged in providing credit facilities to the members and therefore, he was not justified denying the bonafide claim of deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961 and Ld. CIT(A) also erred in sustaining the disallowance made by the Assessing Officer.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has wrongly interpreted the definition of "Primary Co-operative Bank" as laid down u/s 56(ccv) of the Banking Regulation Act, 1949 and thereby treating the appellant Society as Co-operative Bank and denying the deduction u/s 80P(2)(a)(i) of the Act.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer as well as CIT(A) has failed to appreciate that the appellant is a a Co- operative Credit Society and transactions of the said Society are confined to members only and therefore, the judgement of Hon'ble Bombay High Court in case of Quepem Urban Co-operative Credit Society vs ACIT (2015)120DTR(Bom.) 153 is applicable to the appellant Society.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer and CIT (A) has failed to follow binding precedents as the ITAT in appellant's own case has allowed the deduction u/s 80P of the Act.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has wrongly disallowed the bonafide claim of deduction of commission paid to the person specified u/s 40A(2)(b) of the Income Tax Act, 1961. 6. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has wrongly treated the tower rent as "Income from other sources" and also failed to give deduction of expenses incurred to earn the said income. Further, CIT(A) has also erred in sustaining the said disallowance.

On the facts and in the circumstances of the case and in law, the Id. Assessing Officer and CIT (A) have failed to consider the expenses incurred to earn tower rent income and wrongly treated entire gross receipts as income under the head "Income from Other Sources". 1. On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has failed to appreciate that the appellant is a Co-operative Credit Society exclusively engaged in providing credit facilities to the members and therefore, he was not justified denying the bonafide claim of deduction u/s 80P(2)(a)(i) of Parijat Coop Credit Society Ltd., AYs 2017-18 and 2018-19

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has wrongly interpreted the definition of "Primary Co-operative Bank" as laid down u/s 56(ccv) of the Banking Regulation Act, 1949 and thereby treating the appellant Society as Co-operative Bank and denying the deduction u/s 80P(2)(a) (i) of the Act.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer as well as CIT(A) has failed to appreciate that the appellant is a a Co- operative Credit Society and transactions of the said Society are confined to members only and therefore, the judgement of Hon'ble Bombay High Court in case of Quepem Urban Co-operative Credit Society vs ACIT (2015)120DTR(Bom.) 153 is applicable to the appellant Society.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer and CIT (A) has failed to follow binding precedents as the ITAT in appellant's own case has allowed the deduction u/s 80P of the Act.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer has wrongly treated the tower rent as "Income from other sources and also failed to give deduction of expenses incurred to earn the said income. Further, CIT(A) has also erred in sustaining the said disallowance.

On the facts and in the circumstances of the case and in law, the Ld. Assessing Officer and CIT (A) have failed to consider the expenses incurred to earn tower rent income and wrongly treated entire gross receipts as income under the head "Income from Other Sources".

There is a delay of 22 days noted by the registry in filing the present appeal for which petition of condonation of delay along with affidavit is placed on record. According to assessee, the delay in filing the return was due to non availability of its Authorised Representative, as he was suffering from medical issues and therefore undergone intensive medical treatment for which all clinical reports such as pathology, MRI scan of brain and angiography, X-ray, etc., followed by medication and complete rest almost for two months. Thereafter, assessee proceeded to file the present appeal along with petition for condonation of delay and affidavit. According to the assessee, the delay in filing appeal was unintentional and bonafide and hence prayed for condoning the same. Parijat Coop Credit Society Ltd., AYs 2017-18 and 2018-19

1. We have considered the petition for condonation of the said delay along with an affidavit. Upon perusal of the same and hearing both sides, we deem it fit to condone the delay on the ground that there was sufficient cause for the said delay. Accordingly, we condone the delay to take up the matter for adjudication.

The issue involved in both the appeals relate to disallowance of claim of deduction u/s. 80P(2)(a)(i) of the Act in respect of interest income earned by the assessee from term deposits made by it as well as addition of commission paid to the person specified u/s 40A(2)(b). Since, common issue is involved in both the appeals, we draw the facts from the appeal in ITA No.6392/Mum/2024 to arrive at our finding which will apply mutatis mutandis on the other appeal also.

Brief facts of the case as culled out from records are that assessee is cooperative credit society registered under Maharashtra State Cooperative Societies Act, 1960, carrying on the activity of providing credit facilities to the members. The object of the society mainly consists of acceptance of deposit from members and giving loan to the members amongst other incidental objects, to encourage and promote habit of thrift, self-help and cooperation among the members, to accept deposit from members, to provide credit facilities to its members, to develop self employment by providing credit facilities to the members for small scale and house hold businesses, to manage and protect properties of the society and to raise loans and funds for being used on the objects of the society. Assessee filed its return of income on 27.10.2017 reporting total income at Rs.19,44,880/- after claiming deduction u/s. 80P of the Act for Rs.83,68,337/-. Parijat Coop Credit Society Ltd., AYs 2017-18 and 2018-19

1. In the course of assessment, assessee was asked to explain about its claim of deduction u/s.80P(chapter VI-A), assessee made its detailed submission by placing reliance on several judicial precedents including that of Hon'ble Juri ictional High Court of Bombay in the case of the Quepem Urban Cooperative Credit Society Ltd. vs. ACIT in ITA No. 22, 23 & 24 of 2015. However, ld. Assessing Officer observed that with the insertion of section 80P(4) w.e.f. 01.04.2007, the benefit of deduction shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. He thus, held that assessee is a cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank and disallowed the claim of deduction of Rs.91,17,627/-. Aggrieved, assessee went in appeal before the ld. CIT(A).

Before the ld. CIT(A), assessee submitted that ld. Assessing Officer ignored the correct factual position while referring to Part V of the Banking Regulation Act,1949 and applied the provisions of Banking Regulation Act, 1949 on the Co-operative Society. According to the assessee, in the Banking Regulation Act,1949, in Section 56, definition of Co-operative Credit Society is as under: - (ccii) co-operative credit society means a co-operative society, the primary object of which is to provide financial accommodation to its members and includes a co- operative land mortgage bank. The expression financial accommodation, used in the definition of Co-operative Credit Society is not defined in Part V of Banking Regulation Act, 1949. However, in common parlance, it is understood to be accepting deposits and granting loan or advance. But it is different from business of banking since business of banking can be done in India only under license from Parijat Coop Credit Society Ltd., AYs 2017-18 and 2018-19

1. According to the assessee, co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. It was, therefore, proposed to amend section 80P by inserting a new subsection (4). It also submitted that requirement of transacting banking business is not a prerequisite for a Central or a State co- operative bank. The assessee has not claimed itself to be a Primary Co- operative Agricultural and Rural Development Bank. Rather, it is a co- operative society consisting of members being the residents of the territory of Navi Mumbai. The objects of the assessee include acceptance of deposits and granting of loans to members together with other activities but do not include banking. Moreover, the assessee has not granted any loan to or accepted a deposit from a person who is not a member.

2. Assessee placed reliance on the decisions of the Hon’ble Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. and others Vs. CIT [Civil Appeal Nos. 7343 to 7350 of 2019 dated 12.01.2021]which dealt with the issue relating to deduction u/s.80P(2)(a)(i) r.w.s. 80P(4). The relevant extract from para 45 to 48 is as under: “45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co- operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word “agriculture” into Section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes Parijat Coop Credit Society Ltd., AYs 2017-18 and 2018-19

It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) considered, ‘nominal members’ are ‘members’ as defined under the Kerala Act. This Court in U.P. Cooperative Cane Unions’ Federation Ltd., Lucknow v. Commissioner of Income Tax, Lucknow-I (1997) 11 SCC 287 referred to section 80P of the IT Act and then held:

Further, unlike the facts in Citizen Cooperative Society Ltd.(supra), the Kerala Act expressly permits loans to non-members undersection 59(2) and (3), which reads as follows: “59. Restrictions on loans:- (1) A society shall not make a loan to any person or a society other than a member: Provided that the above restriction shall not be applicable to the Kerala State Co-operative Bank.