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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
O R D E R
PER SAKTIJIT DEY, JM
This is an appeal by the revenue against order dated 30.08.2019 of learned Commissioner of Income Tax (Appeals)-38, Mumbai for the assessment year 2016-17.
The dispute in the present appeal is confined to allowance of deduction claimed Under section 80P(2)(a) of the Income Tax Act, 1961. 3. Briefly the facts are, the assessee is a Co-operative Credit Society having status of Association of Person (AOP). For the impugned assessment year, assessee filed its return of income on 07.01.2016 declaring nil income after 2 Assessment Year: 2016-17 claiming deduction under section 80P of the Act. While completing the assessment under section 143(3) of the Act, the assessing officer (AO) disallowed assessee’s claim of deduction by holding that the assessee is basically carrying on activities of banking business. Challenging the aforesaid decision of the AO, assessee preferred an appeal before learned Commissioner (Appeals). Being convinced with the submissions of the assessee and applying the legal principles laid down in the decision cited before him, learned Commissioner (Appeals) allowed assessee’s claim of deduction under section 80(P) of the Act. 4. We have heard the parties and perused the materials on record. At the outset, learned counsel for the assessee submitted that identical issue has been decided in favour of the assessee in its own case in assessment year 2014-15 and 2015-16. 5. Learned Departmental Representative, though, relied upon the observations of the AO, however, he fairly submitted that the issue is covered in favour of the assessee by the decision of the Tribunal in its own case. It is observed, identical issue relating to claim of deduction under section 80P arose in assessee’s own case in assessment years 2014-15 and 2015-16. Though, the AO disallowed assessee’s claim of deduction, however, learned Commissioner (Appeals) allowed assessee’s claim. Being aggrieved with the decision of learned First Appellate Authority, the revenue came in appeal before the Tribunal. While deciding the issue in dated 11.03.2021, the Tribunal decided the issue in favour of the assessee holding as under:-
3 Assessment Year: 2016-17 “6. We have heard both the counsel and perused the records. We find that this issue is squarely covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of Citizen Cooperative Society Ltd. (Civil Appeal No. 10245 of 2017 vide order dated 8.8.2017) and The Mavilayi Service Cooperative Bank Ltd. & Ors. Vs. CIT, Calicut & Ors. (Civil Appeal Nos. 7343- 7350 of 2019 dated 12.1.2021. We find that the Assessing Officer has completely erred in treating the assessee as cooperative bank and invoking the provisions of section 80P(4). Section 80P(4) provides that :- (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.—For the purposes of this sub-section,— (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities.
Honourable Supreme Court in the case of Citizen Cooperative Society Ltd. (Civil Appeal No. 10245 of 2017 vide order dated 8.8.2017) has settled the law that for being considered as a cooperative bank licence from RBI in this regard is a sine qua non. In absence of the RBI licence as such the assessee cannot be treated as cooperative bank. Hence disallowing the deduction by referring to the provisions of section 80P(4) is completely unsustainable. Moreover section 80P(2)(d) provides exemption to interest earned on fixed deposit in cooperative societies. It is nobody's case that cooperative bank are not cooperative societies.
Moreover similar issue was elaborately dealt by a larger bench of honourable Supreme Court in the case of The Mavilayi Service Cooperative Bank Ltd. & Ors. Vs. CIT, Calicut & Ors. (Civil Appeal Nos. 7343-7350 of 2019 dated 12.1.2021) and the issue was decided in favour of the assessee. We may gainfully refer to the Hon'ble Apex Court observation in para 21 as under, wherein the Hon'ble Apex Court referred to its earlier decision of Citizen Cooperative Society Ltd. (supra) :-
4 Assessment Year: 2016-17 “The following propositions may be culled out from the judgment: (I) That section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee; (II) That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in subsection (2) of section 80P must be given by way of deduction; (III) That this Court in Kerala State Cooperative Marketing Federation Ltd. and Ors. (supra) has construed section 80P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; (IV) This is for the reason that when the legislature wanted to restrict the deduction to a particular type of co-operative society, such as is evident from section 80P(2)(b) qua milk co-operative societies, the legislature expressly says so - which is not the case with section 80P(2)(a)(i); (V) That section 80P(4) is in the nature of a proviso to the main provision contained in section 80P(1) and (2). This proviso specifically excludes only cooperative banks, which are cooperative societies who must possess a licence from the RBI to do banking business. Given the fact that the assessee in that case was not so licenced, the assessee would not fall within the mischief of section 80P(4).”
Respectfully following the precedent as above, we uphold the learned CIT(A)’s order.”
Facts being identical, respectfully following the aforesaid decision of the co-ordinate Bench, we uphold the decision of learned Commissioner (Appeals), while dismissing the grounds raised
7. In the result, appeal is dismissed.