KARAD PATAN TALUKA MADHYAMIK SHALA SEVAKANCHI SAHAKARI PATHSANSTHA ,KARAD vs. ITO WARD 2 SATARA, SATARA

We have heard Ld. counsels from both the sides and perused the material available on record including the case laws relied on by both the parties. In this regard, we find that the assessee is a primary credit co-operative society and is engaged in the activity of providing credit facilities to its members and also accepting deposits from them. During the period under consideration, the assessee primary credit co-operative society claimed deduction of Rs.1,06,20,272/- u/s 80P(2)(a)(i) of the IT Act which was denied by the Assessing Officer by treating the assessee as a cooperative bank doing banking business in the light of provisions of section 80P(4) of the IT Act. Ld. CIT(A)/NFAC also confirmed the order passed by the Assessing Officer by placing reliance on the judgement passed by Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. vs. CIT [2021] 123 taxmann.com 161. In this regard, it was the contention of Ld. counsel of the assessee that the issue is squarely covered in favour of the assessee credit co-operative society by the judgement of Hon’ble Bombay High Court passed in the case of Principal Commissioner of Income-tax vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. dated 14-10-2019 which was confirmed by Hon’ble Supreme Court by dismissing the SLP filed by the Revenue in the case of Principal Commissioner of Income-tax vs. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. [2023] 150 taxmann.com 173 (SC) wherein Hon’ble Supreme Court dismissed the SLP filed by the revenue and held that the assessee being a primary credit co-operative society is entitled to claim deduction u/s 80P(2)(a)(i) of the IT Act by observing as under :- “1. Feeling aggrieved and dissatisfied with the impugned order dated 14-10-2019 passed by the High Court of Judicature at Bombay in by which the High Court has dismissed the said appeal preferred by the Revenue, relying upon its earlier decision in the case of Quepem Urban Co-operative Credit Society Ltd. v. Asstt. CIT [2015] 58 taxmann.com 113 (Bom.), the Revenue has preferred the present appeal.

The High Court considered the following question of law - "Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified as claimed by the assessee on the ground that the assessee, a co-operative credit society and is not a bank for the purpose of Section 80P(4) of the Act?"

Apart from the fact that against the relied upon decision in the case of M/s. Quepem Urban Co-operative Credit Society Ltd. (supra),the Special Leave Petition has been dismissed, having heard learned counsel appearing on behalf of the respective parties, the issue involved in the present appeal is squarely covered against the Revenue in view of the decision of this Court in Mavilayi Service Co- operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161 This Court, in the aforesaid decision has specifically observed and held that primary Agricultural Credit Societies cannot be termed as Co- operative Banks under the Banking Regulation Act and, therefore, 80(P)(2) of the Income-tax Act, 1961.

Ms. Aakansha Kaul, learned counsel appearing on behalf of the appellant/Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan. However, it is required to be noted that merely giving credit to its members only cannot be said to be the Co- operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also.

There are concurrent findings recorded by CITA, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under section 80(P)(2) of the Income-tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co- operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under section 80(P)(2) of the Income-tax Act.

In view of the above and for the reasons stated hereinabove, the present appeal deserves to be dismissed and is accordingly dismissed, answering the question against the Revenue and in favour of the Assessee.

Respectfully following the above jurisdictional Hon’ble Bombay High Court judgement which was confirmed by Hon’ble Supreme Court (supra), we find force in the argument of Ld. counsel of the assessee that the issue is squarely covered in favour of the assessee and the assessee credit co-operative society is entitled to claim deduction u/s 80P(2)(a)(i) IT Act. Accordingly,