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Income Tax Appellate Tribunal, F BENCH, MUMBAI
J R College Emps Co-Op Society, Vs LBS Marg, Ghatkopar (West), Mumbai - 400086 [PAN: AAAAJ3577G] ……………. Respondent Appearance For the Appellant/Department : Ms. Rajeshwari Menon For the Respondent/Assessee : Shri Tanmay Milind Phadke Date Conclusion of hearing : 25.04.2024 Pronouncement of order : 30.04.2024 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Revenue has challenged the order, dated 24/08/2023, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2017-18, whereby the Ld. CIT(A) had allowed the appeal of the Assessee against the Assessment Order, dated 07/12/2019, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The Revenue has raised the following grounds of appeal: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) correct in allowing deduction of Rs. 1,46,91,094/- under section 80P of the Income Tax Act, 1961 to the assessee by holding that the assessee is a co-operative society and not a co-operative bank and is entitled for deduction under Section 80P of the Income Tax Act, 1961 without appreciating the fact that the assessee society is neither a primary agricultural credit society nor primary co-operative agricultural and rural development bank and thus as per sub-section (4) of Section 80P of the Act, the assessee is not eligible for availing deduction u/s 80P(2)(a)(i) of the Act.”
3. The relevant facts in brief are that the Assessee is cooperative society, registered under Maharashtra Cooperative Societies Act, 1960, engaged in providing credit facility to the members of the society. The Assessee had claimed a deduction amounting to INR 1,46,91,094/-, under Section 80P of the Act in the return of income for the Assessment Year 2017-18 which is disallowed by the Assessing Officer while passing the Assessment Order dated 07/12/2019, passed under Section 143(3) of the Act treating the Assessee as a cooperative bank (as opposed to a co-operative society) on the ground that the Appellant was providing credit facility to its members.
Being aggrieved, the Appellant preferred appeal before the CIT(A). Vide order dated 24/08/2023, the CIT(A) reversed the decision of the Assessing Officer; allowed Assessee’s claim for under Section 80P of the Act; and deleted the addition.
The Revenue is now in appeal before us against the above relief granted by the CIT(A) on the grounds reproduced in paragraph 2 above.
We have heard the rival submissions and perused the material on record.
2 7. We note that the CIT(A) has allowed the claim for deduction under Section 80P of the Act holding as under: “5.6 In this case the appellant is a co-operative society engaged in extending credit facilities to its members. Its income is primarily by way of interest on loans given. Other items of income are also attributable to the primary activity of giving credit. Therefore, the appellant’s income qualifies for deduction u/s 80P(2)(a)(i). Now the question comes whether the appellant attracts the mischief of section 80P(4). This subsection qualifies section 80P(2). 80P(4) The provisions of this section (i.e. 80P) 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. 5.7 Section 80P(4) makes it clear that co-operative banks are not eligible for deduction u/s 80P(2)(a)(i). However, the appellant is only engaged in providing financial accommodation to its members. It is not engaged in banking activity. The Hon. Supreme Court has held in Mavilayi Service Co Operative Bank and Others vs CIT[2021] (431 ITR 1) (SC) that only a co-operative society with a banking License from RBI can be regarded as Co-Operative bank and attracts the mischief of section 80P(4). This decision also held that giving non- agricultural loans did not attract any mischief. It was further held that giving loan to nominal members would also count as giving loan to members. In the present case, the AO has brought nothing on record to show that the appellant holds a banking license from the RBI. Further the appellant has produced certificate from the Dy.