Case Law Details

Case Name : Indian Bank Employees Cooperative Credit Society Limited Vs ITO (ITAT Mumbai)
Appeal Number : I.T.A. No. 1735/Mum/2021
Date of Judgement/Order : 02/05/2022
Related Assessment Year : 2017-18

Indian Bank Employees Cooperative Credit Society Limited Vs ITO (ITAT Mumbai)

Brief facts are that the assessee is The Indian Bank Employees Cooperative Credit Society Limited. On perusal of the profit and loss account and the computation of income, the Assessing Officer observed that the assessee has offered net income from business and profession at Rs. 40,31,437/- being interest receipts/dividend from Cooperative Bank and deduction under section 80P of Rs. 40,31,427/- is claimed against said income from business and profession during F.Y. 2016-17. The Assessing Officer was not satisfied with the deduction claimed under section 80P of interest earned from Cooperative bank. He referred to the provisions of section 80P(4) of the I.T. Act. He was of the opinion that same is applicable in the case of the assessee. He further referred some decisions and disallowed assessee’s claim.

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) :-

(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 co-operative 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 ITAT set aside the order of learned CIT(A) and decide the issue in favour of the assessee.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal by the assessee is directed against the order of learned CIT(A) dated 30.8.2021 pertains to A.Y. 2017-18.

2. The grounds of appeal read as under :

1. The Ld. CIT(A) has erred in affirming with the Ld. Assessing Officer and disallowing the deduction u/s 80P(2)(a)(i) available to the society.

2. The Ld. CIT(A) has erred in disallowing the deduction u/s 80P(2)(d) in respect of interest earned by the society.

3. The Ld. CIT(Appeal) has erred affirming with Ld. AO and in not considering deduction u/s 80P(2)(c) amounting to Rs. 50,000/-

4. The appellant further reserves the right to add, amend or alter the aforesaid grounds of appeal as they may think fit by themselves or by their representatives.

3. Brief facts are that the assessee is The Indian Bank Employees Cooperative Credit Society Limited. On perusal of the profit and loss account and the computation of income, the Assessing Officer observed that the assessee has offered net income from business and profession at Rs. 40,31,437/- being interest receipts/dividend from Cooperative Bank and deduction under section 80P of Rs. 40,31,427/- is claimed against said income from business and profession during F.Y. 2016-17. The Assessing Officer was not satisfied with the deduction claimed under section 80P of interest earned from Cooperative bank. He referred to the provisions of section 80P(4) of the I.T. Act. He was of the opinion that same is applicable in the case of the assessee. He further referred some decisions and disallowed assessee’s claim.

4. Upon assessee appeal learned CIT(A) confirmed the same.

5. Against the above order assessee is in appeal before ITAT.

6. I have heard both the parties and perused the record. I find that the issue is squarely covered in favor 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). 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) :-

“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 co-operative 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).”

7. Respectfully following the precedent as above, I set aside the order of learned CIT(A) and decide the issue in favour of the assessee.

8. In the result, appeal stands allowed.

Order pronounced in the open court on 02.05.2022.

Download Judgment/Order

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