BOMBAY CITY POSTAL CLERKS CO-OP CREDIT SOCIETY LTD.,MUMBAI V. .THE PR. CIT-20, MUMBAI

ITA 771/MUM/2021

AI Insights

The case involves the Bombay City Postal Clerks Co-op. Credit Society Ltd., which appealed against the order of the Principal Commissioner of Income Tax, Mumbai 20, concerning the assessment year 2017-18. The primary contention was regarding the deduction under section 80P(2)(a)(i) of the Income Tax Act, which the society claimed was applicable as it is a cooperative credit society and not a cooperative bank. The Principal Commissioner had set aside the original assessment order, deeming it erroneous and prejudicial to the interest of the revenue, leading to the society's appeal. The Tribunal examined the applicability of section 80P(4) and the interpretation of relevant Supreme Court judgments, ultimately deciding in favor of the society.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470939 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Mavilayi Service Co-operative Bank Ltd. & Ors. vs. CIT, Kerala State Co-operative Agricultural and Rural Development Bank Ltd. vs. AO, Malabar Industrial Co. Ltd. Vs. CIT, Jamnadas T. Mehta Vs. ITO, Citizen Co-operative Society Ltd.
• Laws Referred To: Income Tax Act, 1961, Maharashtra Co-op. Society's Act, 1960
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH C. KANOJIYA
• Assessee Lawyers: PARAG R. POTFODE
• Keywords: Set aside; Question of law; Co-operative Credit Society
• Section: 142(1); 263; 56; 43; 22; 13; 80P; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SMT BEENA PILLAI, JUDICIAL MEMBER AND SMT RENU JAUHRI, ACCOUNTANT MEMBER ITA No.771/M/2021 Assessment Year: 2017-18 Bombay City Postal Clearks Co.op. Credit Society Ltd. 3rd Floor, Dadar Head Post Office, Dr. Ambedkar Road, Dadar, Mumbai- 400014. PAN: AAAAB7476J Vs. The Principle Commissioner of Income Tax, Mumbai 20 Room No. 418, 4th Floor, Piramal Chamber, Lal Baug, Parel, Mumbai- 400012. Appellant : Respondent Present for: Assessee by : Shri Parag R. Potfode Revenue by : Shri Kailash C. Kanojiya, CIT DR Date of Hearing : 21.11.2024 Date of Pronouncement : 19.12.2024 O R D E R Per Beena Pillai, JM: Present appeal is filed by the assessee against order passed by Ld.PCIT-20 Mumbai u/s. 260 of the act for A.Y. 2017-18 on following grounds of appeal: 1. “Deduction u/s. 80P (2)(a)(i) shall be allowed being the Assessee is Postal Employees Co-op. Credit Society registered under Maharashtra Co-op. Society Act, 1960. 2. The Investments in Fixed deposit with apex co-op. society are mandatory as per Maharshtra Co-op. Society's Act, 1960 hence income is exempted u/s 80P (2)(a)(i). ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 2 3. The Society is Register under Maharashtra Co-op. Society Act. hence will govern only Maharashtra under Co-op. Society Act. hence will not come under ambit of section 80P(4) of Income Tax Act. 1961. 4. The Principal Commissioner of Income Tax, Mumbai 20 had not interpret the judgement of Hon'ble Supreme Court in the case of The Mavilayi Service co-op. Bank Ltd and Others correctly and interpret that the case laws is applicable to Primary agricultural Credit Society only.” Brief facts of the case are as under: 2. The assessee is a Cooperative Credit Society and filed its return of income for year under consideration on 30.10.2017 declaring ‘NIL’ income. The assessment was completed on 03.06.2019 by accepting the return income filed by the assessee. Subsequently, the case was taken up for review and notice u/s. 263 was issued to the assessee on 03.02.2021. A copy of the notice issued is scanned and reproduced as under: ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 3 ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 4 ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 5 2.1. In response to the above notice, the assessee furnished its reply on 12.02.2021 wherein it was contended that, the assessee is a salary earner Co-operative Credit Society and the members of the society are employees of Government of India, Postal Department in Mumbai. It was submitted that, the loans and advances by the society are given to the members only and the society was earning by way of interest on balance fund invested in fix deposit with Co- operative Banks and with Government Securities. It was further submitted that, the society is also registered under Maharashtra Co-operative Society Act. Assessee relied on the decision of Hon’ble Supreme Court in case of Mavilayi Services Co-operative Banks Ltd. & Ors. vs. CIT reported in (2021) 431 ITR Page 1 in support of the deduction claimed u/s. 80P (2)(a)(i) of the act. ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 6 2.2. However the Ld.PCIT set aside the assessment order passed u/s.143(3) of the act dated 03.06.2019 by holding it to be erroneous and pre-judicious to the interest of the revenue for the reasons mentioned in the notice issued u/s.263 of the act. The Ld. PCIT thus directed the Ld.AO to complete the assessment afresh as per the directions in Para 6 of the impugned order that treats as under:- “6. From the above discussion, I have reached to the conclusion that the assessee society is not entitled for deduction u/s 80P(2) of the I. T. Act, in view of the newly inserted provision of section 80P(4) of the I. T. Act,. Therefore the deduction u/s 80P(2) of the I. T. Act, claimed by the assessee is required to be disallowed.” Aggrieved by the order of the Ld.PCIT, assessee is in appeal before this Tribunal. 3. The Ld.AR submitted that, the issue considered by the Ld.PCIT in the notice u/s. 263 of the act was verified by the Ld.AO during the original assessment proceedings. He referred to the notice issued u/s. 142(1) of 12.02.2019 wherein the Ld.AO specifically asked the assessee to furnish various details about the assessee as per point no. 1 to 12. He referred to point no. 3 of 142(1) wherein the assessee was asked to submit detailed note on nature of business carried out and the modus operandi of the assessee. 3.1. The Ld.AR thereafter relied on response filed by it on 20.02.2019 wherein the assessee furnished documents as called for. Subsequently, notice on 28.05.2019 was issued by the Ld.AO calling upon assessee to furnish details regarding deduction ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 7 claimed under Chapter VI A of the act. In response, the assessee vide letter dated 30/05/2019 furnished explanation of deduction claimed u/s. 80P(2) of the act. 3.2. He thus submitted that, the deduction claimed by the assessee was verified by the Ld.AO during the original assessment proceedings and it was upon satisfaction of the Ld.AO that the assessment order was passed without any verification. 3.3. Ld.AR submitted that, in respect of applicability of section 80P(4) of the act to the facts of the assessee, decision of Hon'ble Bombay High Court at Goa in case of M/s. Cuepen Urban Cooperative Credit Society vs. ACIT in ITA NO. 22-24/2015 vide order dated 17.04.2015 squarely covers the issue. Hon'ble Court considered the issue of applicability of section 80P(4) to an assessee while answering following question of law of framed: “Whether on the facts and in the circumstances of the case, the Hon’ble Tribunal was right in law in holding that the Appellant is a Co-operative Bank and hence, it is not entitled to deduction under Section 80P(2)(a)(i) by virtue of Section 80P(4) of the Act?” 3.4. Hon'ble Court after considering the decisions on the issue observed and held as under:- “8. Section 80P of the Act provides deduction in support of income of co-operative societies. Subsection (1) allows deduction to Cooperative Society to the extent its gross income includes any income referred to in subsection (2) in computing its total income. Subsection (2) refers to various incomes to which the deduction under subsection (1) is available. In this case we are concerned with clause (a)(i) of subsection (2), which refers to a cooperative society engaged in carrying on banking business or providing credit facilities to its ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 8 members. Thus the deduction is available on either of the two activities i.e. banking business or providing credit facilities to its members. We are not concerned with the other sub clauses of Subsection (2) or Subsection (3) of Section 80P(4) of the Act for the purposes of this case. Subsection (4) provides that Section 80P of the Act will not apply in relation to a cooperative bank other than a primary agricultural credit society or primary agricultural and rural development bank. Before us, the appellant is not claiming to be a primary agricultural credit society or primary agricultural and rural development bank but it claims to be engaged in providing credit facilities and not a banking society. Thus not hit by subsection (4) of section 80P of the Act. 9. There is no dispute between the parties that the appellant is a co- operative society as the same is registered under the Co-operative Societies Act. The appellant is claiming deduction of income earned on providing credit facilities to its members as provided under Section 80P(2)(a)(i) of the Act. It is appellant's case that, it is not carrying on the business of the banking. Consequently, not being a co-operative bank the provisions of Section 80P(4) of the Act would not exclude the appellant from claiming the benefit of deduction under Section 80P(2)(a)(i) of the Act. However in terms of Section 80P of the Act the meaning of the words Cooperative Bank is the meaning assigned to it in Chapter V of the Banking Regulation Act, 1949. A cooperative bank is defined in Section 5(cci) of Banking Regulation Act to mean a State Cooperative Bank, a Central Cooperative Bank and a primary cooperative bank. Admittedly, the appellant is not a State Cooperative Bank, a Central Cooperative Bank. Thus what has to be examined is whether the appellant is a primary Cooperative Bank as defined in Para V of the Banking Regulation Act. Section 5(ccv) of the Banking Regulation Act defines a primary cooperative bank to mean a cooperative society which cumulatively satisfies the following three conditions: (1) Its principal business or primary object should be banking business of Banking; (2) Its paid up share capital and reserves should not be less that rupees one lakh. (3) Its bye-laws do not permit admission of any other cooperative society as its member. It is accepted position that condition No.(2) is satisfied as the share capital in an excess of rupees one lakh. It has been the ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 9 appellant's contention that the conditions No. (1) and (3) provided above are not satisfied. 10. Therefore the issue that arises for consideration is whether the appellant satisfies condition No.(1) and (3) above. The impugned order after referring to the definition of 'Banking Business' as defined in Section 5b of the Banking Regulation Act, held that the principal business of the Appellant is Banking. Section 5b of the Banking Regulation Act defines banking to mean accepting of deposits for the purpose of lending or investment, of deposit of money from the public repayable on demand or otherwise. The impugned order juxtaposes the above definition with the finding of fact that the appellant did deal with non members in a few cases by seeing deposits. This read with Bye law 43 leads to the conclusion that it is carrying on banking business. This fact of accepting deposits from people who are not members has been so recorded by the CIT(A) in his order dated 15 July, 2014. Before the Tribunal also the appellant did not dispute the fact that in a few cases they have dealt with non members. However so far as accepting deposits from non members is concerned it is submitted that the Bye-law 43 only permits the society to accept deposits from its members. It is submitted that Bye laws 43 does not permit receipt of deposits from persons other then members, the word \"any person\" is a gloss added in the impugned order as it is not found in Bye law 43. It is undisputed that the transactions with non members are insignificant/miniscule. On the above basis it cannot be concluded that the appellant's principal business is of accepting deposits from public and therefore it is in banking business. In fact, the impugned order erroneously relies upon bye-law 43 of the society which enables the society to receive deposits to conclude that it can receive deposits from public. However, the impugned order relies upon bye- law 43 to conclude that it enables the appellant to receive deposits from any person is not correct. Thus in the present facts the finding that the appellant's principal business is of Banking is perverse as it is not supported by the evidence on record. So far as the issue of primary object of the appellant is concerned the impugned order gives no finding on that basis to deprive the appellant the benefit of Section 80P of the Act. The impugned order sets out the object clause of the appellant, which has 24 objects but thereafter draws no sequiter to conclude that the primary object is Banking. Consequently there is no occasion to deal with the same as that is not the basis on which the impugned order holds that it is a Primary Cooperative Bank” ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 10 3.5. He thus submitted that, even on merits and interpretation of the issue on first principles, the assessee cannot be denied the deduction claimed u/s. 80 P(2)(a)(i) by invoking section 80 P (4) as observed in the notice issued u/s. 263 of the act. On the contrary the Ld.DR relied on the orders passed by the authorities below. 3.6. The Ld.DR submitted that, there is an exclusion mentioned in 80P(4) inserted by Finance Act, 2006, which provides that the provision of section 80P(4) shall apply in relation to any Cooperative Bank other than a Primary Agricultural Society or a Primary Cooperative Bank or Agricultural Credit Society or a Primary Cooperative Agricultural Bank and Rural Development Bank. He emphasized on the explanation to 80P(4) and submitted that, the definition of Cooperative Bank defines the term Cooperative Bank and Primary Agricultural Cooperative Society, Primary Agricultural and Rural Development Bank for the purposes of the sub-section. He thus submitted that, as the assessee is provided credit facility to its members and considering the fact that assessee is a Cooperative Credit Society, the provision of sub-section 4 to section 80P is applicable to the present facts of the case. We have perused the submissions advanced by both sides in light of records placed before us. 4. On merits of the issue of claim of deduction, Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 11 reported in (2021) 123 taxmann.com 161 while delivering the judgment in favour of assessee held as under: \"Section 80P being a benevolent provision enacted by Parliament to encourage and promote credit of co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of 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 revenue 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, limited object of which is to exclude co-operative banks that function at par with other commercial banks, i.e., which lend money to members of public. Thus, if Banking Regulation Act, 1949 is to be seen, what is clear from section 3 read with section 56 is that a primary co-operative bank cannot be a primary agricultural credit society, as such co-operative bank must be engaged in the business of banking as defined by section 5(b) of the said Act, which means accepting, for the purpose of lending or investment, of deposits of money from public. Likewise, under section 22(1)(b) of Banking Regulation Act, 1949 as applicable to co-operative societies, no co-operative society would carry on banking business in India, unless it is a cooperative bank and holds a licence issued in that behalf by RBI. As opposed to this, a primary agricultural credit society is a co-operative society, primary object of which is provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. As a matter of fact, some primary agricultural credit societies applied for a banking licence to the RBI, as their bye-laws also contain as one of the objects of the Society the carrying on of business of banking. This was turned down by RBI. Clearly, therefore, once section 80P(4) was out of harm's way, all the assessee's entitled to the benefit of deduction under section 80P(2)(a)(i), notwithstanding that they might also be giving loans to their members which were not related to agriculture. Also, in case it is found that there were instances of loans being given to non-members, profits attributable to such loans obviously could not be deducted.\" 4.1. In a subsequent decision by Hon’ble Supreme Court in case of Kerala State Co-operative Agricultural and Rural Development ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 12 Bank Ltd. vs. AO reported in (2023) 154 taxmann.com 305 also observed and held as under: 15.1 section 80P speaks about deduction in respect of income of co- operative societies from the gross total income referred to in sub-section (2) of the said section. From the said income, there shall be deducted, in accordance with the provisions of section 80P, sums specified in sub- section (2), in computing the total income of the assessee for the purpose of payment of income tax. Sub-section (2) of section 80P enumerates various kinds of co-operative societies. Sub-section (2)(a)(i) states that if a co- operative society is engaged in carrying on the business of banking or providing credit facilities to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities shall be deducted. The sub-section makes a clear distinction between business of banking on the one hand and providing credit facilities to its members by co-operative society on the other. Thus, the definition of banking under section 5(b) of the BR Act must be borne in mind as opposed to providing credit facilities to its members. 15.2 section 80P was inserted to the Act with effect from 1-4-1968, however, sub-section (4) was reinserted with effect from 1-4-2007, in the present form. Earlier sub-section (4) was omitted with effect from 1-4-1970. Sub-section (4) of section 80P in the present form is in the nature of an exception which states that the provisions of section 80P shall 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. The expressions co-operative bank and primary agricultural credit society as well as primary co-operative agricultural and rural development bank are defined in the Explanation as co-operative bank and primary agricultural credit society having the meanings respectively assigned to them in Part V of the BR Act, 1949. 15.3 The controversy in this case is, whether, the appellant entity is a co- operative bank and if so, it would be covered within the scope and meaning of sub-section (4) of section 80P and therefore, would not be eligible to the benefit of deduction as provided therein. 15.4 Having regard to the Explanation to sub-section (4) of section 80P, it is necessary to consider Chapter V of the BR Act, 1949 which states that the said Act shall apply to co-operative societies subject to modifications made thereunder. section 56 begins with a non-obstante clause and states that notwithstanding anything contained in any other law for the time being in force, the provisions of the said Act shall apply to, or in relation to, co-operative societies as they apply to, or in relation to banking companies subject to the following modifications, namely, • in clause (a) throughout the said Act, unless the context otherwise ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 13 requires,- (i) references to a \"banking company\" or \"the company\" or \"such company\" shall be construed as references to a co-operative bank. • in clause (c), it is stated that in section 5 as per clause (cci), \"co- operative bank\" means a state co-operative bank, a central co- operative bank and a primary co-operative bank. • clause (ccv) defines \"primary co-operative bank\" while clause (ccvii) defines \"central co-operative bank\" and \"state co-operative bank\" to have the meanings assigned to them in the NABARD Act, 1981. Since the expression 'banking company' is defined under the BR Act, 1949, it would be useful to consider the definition of banking company in section 5(c) thereof which means any company which transacts the business of banking in India. \"Banking\" is defined in section 5(b) of the said Act to mean the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Therefore, a banking company must transact banking business vis-à-vis the public. Thus, in the first place a co-operative society must be engaged in banking business as defined in section 5(b) of the said Act. For that, section 22 of the BR Act, 1949, speaks about licence to be obtained by a bank to do banking business which is modified as per clause (o) of section 56 thereof which states that no co-operative society shall carry on banking business in India unless it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose. Secondly, a co-operative society must obtain a licence under section 22 of the BR Act, 1949, only if it functions as a co- operative bank and not otherwise. Thus, a co-operative society including a co-operative credit society which is not a co-operative bank does not require a licence to function as such. 15.5 Further, section 2(d) of NABARD Act, 1981 defines central co- operative bank while section 2(u) defines a state co-operative bank to mean the principal co-operative society in a State, the primary object of which is financing of other co-operative societies in the State which means, it is in the nature of an apex co-operative bank having regard to the definition under section 56 of the BR Act, 1949, in relation to co-operative bank. The proviso states that in addition to such principal society in a State, or where there is no such principal society in a State, the State Government may declare any one or more co-operative societies carrying on business of banking in that State to be also or to be a state co-operative bank or state co-operative banks within the meaning of the definition. section 2(v) of NABARD Act, 1981 defines state land development bank to mean the co-operative society which is the principal land development ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 14 bank (by whatever name called) in a State and which has as its primary object the providing of long-term finance for agricultural development. 15.6 section 2(w) states that words and expressions used in the NABARD Act, 1981 which are not defined therein but defined in the RBI Act, shall have the meanings respectively assigned to them in that Act. section 2(x) of the said Act states that words and expressions used in the NABARD Act, 1981 and not defined either in the said Act or in the RBI Act, but defined in the BR Act, 1949, shall have the meanings respectively assigned to them in the BR Act, 1949. Therefore, we revert back to BR Act, 1949. 15.7 What is central to the controversy in this batch of cases is, whether, the appellant bank is a co-operative bank. What is of significance to know is, a state co-operative bank or central co-operative bank under the NABARD Act, 1981 is essentially a principal co-operative society either in a district or in a State, respectively, the primary object of which is the financing of other co-operative societies in the district or the State respectively. Further, NABARD Act, 1981 does not define banking business. Hence, reliance is to be placed, on the definition of banking business in terms of clause (w) of section 2 of NABARD Act, 1981 which means the RBI Act has to be seen. When the RBI Act is perused, it is noted that clause (i) of section 2 defines \"co-operative bank\", \"co-operative credit society\", \"director\", \"primary agricultural credit society\", \"primary co- operative bank\" and \"primary credit society\" to have the meanings respectively assigned to them in Part V of the BR Act, 1949. Therefore, we have to again fall back on Part V of the BR Act, 1949 which has defined a co-operative bank in section 56 (c)(i)(cci) to be a state co-operative bank, a central co-operative bank and a primary co-operative bank and central co- operative bank and state co-operative bank to have the same meanings as NABARD Act, 1981. 15.8 Since the words 'bank' and 'banking company' are not defined in the NABARD Act, 1981, the definition in sub-clause (i) of clause (a) of section 56 of the BR Act, 1949 has to be relied upon. It states that a co-operative society in the context of a co-operative bank is in relation to or as a banking company. Thus, co-operative bank shall be construed as references to a banking company and when the definition of banking company in clause (c) of section 5 of the BR Act, 1949 is seen, it means any company which transacts the business of banking in India and as already noted banking business is defined in clause (b) of section 5 to mean the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Thus, it is only when a co-operative society is conducting banking business in terms of the definition referred to above that it becomes a co-operative bank and in such a case, section 22 of the BR Act, 1949 would apply wherein it would require a licence to run a co-operative bank. In other words, if a co- ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 15 operative society is not conducting the business of banking as defined in clause (b) of section 5 of the BR Act, 1949, it would not be a co-operative bank and not so within the meanings of a state co-operative bank, a central co-operative bank or a primary co-operative bank in terms of section 56(c)(i)(cci). Whereas a co-operative bank is in the nature of a banking company which transacts the business of banking as defined in clause (b) of section 5 of the BR Act, 1949. But if a co-operative society does not transact the business of banking as defined in clause (b) of section 5 of the BR Act, 1949, it would not be a co-operative bank. Then the definitions under the NABARD Act, 1981 would not apply. If a co- operative society is not a co-operative bank, then such an entity would be entitled to deduction but on the other hand, if it is a co-operative bank within the meaning of section 56 of BR Act, 1949 read with the provisions of NABARD Act, 1981 then it would not be entitled to the benefit of deduction under sub-section (4) of section 80P of the Act. 15.9 section 56 of the BR Act, 1949 begins with a non-obstante clause which states that notwithstanding anything contained in any other law for the time being in force, the provisions of the said Act, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to certain modifications. The object of section 56 is to provide a deeming fiction by equating a co-operative society to a banking company if it is a co-operative bank within the meaning of the said provision. This is because Chapter V of the BR Act, 1949, deals with application of the Chapter to co-operative societies which are co-operative banks within the meaning of the said chapter. For the purpose of these cases, what is relevant is that throughout the BR Act, 1949, unless the context otherwise requires, - references to a \"banking company\" or \"the company\" or \"such company\" shall be construed as references to a co- operative bank. Therefore, while considering the meaning of a co-operative bank inherently, such a co-operative society must be a banking company then only it would be construed as a co-operative bank requiring a licence under section 22 of BR Act, 1949 in order to function as such a bank. 15.10 Further, while considering the definition of a co-operative bank under section 56(cci) of the BR Act, 1949, to mean a state co-operative bank, a central co-operative bank and a primary co-operative bank which is defined in (ccviii) thereof, to have meanings respectively assigned to them in the NABARD Act, 1981 would imply that if a state co-operative bank is within the meaning of NABARD Act, 1981 then it would be excluded from the benefit under section 80P of the Act. Conversely, if a co- operative society is not a co-operative bank within the meaning of section 56 of the BR Act, 1949, it would be entitled to the benefit of deduction under section 80P of the Act. 15.11 Looked at from another angle, a co-operative society which is not a state co-operative bank within the meaning of NABARD Act, 1981 would ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 16 not be a co-operative bank within the meaning of section 56 of the BR Act, 1949. In the instant case, as already noted in A.P. Varghese case (supra), the Kerala State Co-operative Bank being declared as a state co-operative bank by the Kerala State Government in terms of NABARD Act, 1981 and the appellant society not being so declared, would imply that the appellant society is not a state co-operative bank. 15.12 In fact, in Citizen Co-operative Society Ltd., (supra) this Court held that the appellant therein was having both members as well as nominal members who were depositing and availing loan facilities from the appellant therein and therefore, appellant therein was not entitled to the benefit of section 80P of the Act as it was functioning as a co-operative bank. But, the appellant herein is not a co-operative bank and neither has it been so declared under the provisions of NABARD Act, 1981 or the State Act. On the other hand, under the provisions of State Act, 1969, the Kerala State Co-operative Bank has been so declared by the Government of Kerala as a co-operative bank. 15.13 Further, under the provisions of the State Act, 1984, 'agricultural and rural development bank' means the Kerala Co-operative Central Land Mortgage Bank Limited, registered under section 10 of the Travancore- Cochin Co-operative Societies Act, 1951, which shall be known as Kerala State Co-operative Agricultural and Rural Development Bank Limited i.e. the appellant herein. Thus, from a conjoint reading of all the relevant statutory as alluded to hereinabove, it is quite clear that the appellant is not a co-operative bank within the meaning of sub-section (4) of section 80P of the Act. The appellant is a co-operative credit society under section 80P(2)(a)(i) of the Act whose primary object is to provide financial accommodation to its members who are all other co-operative societies and not members of the public. 15.14 Therefore, when the definition of \"co-operative bank\" in section 56 of BR Act, 1949 is viewed in terms of sections 2(u) of the NABARD Act, 1981, it is clear that only a state co-operative bank would be within the scope and meaning of a banking company under section 2(c) of the BR Act, 1949 on obtaining licence under section 22 of the said Act. Conclusion: In the instant case, although the appellant society is an apex co-operative society within the meaning of the State Act, 1984, it is not a co-operative bank within the meaning of section 5(b) read with section 56 of the BR Act, 1949. 4.2. The Ld.AO during the assessment proceeding issued notices under section 142(1) on various dates to verify deduction claimed by the assessee. It is noted that, there is a specific query made by ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 17 the Ld.AO in respect of deduction claimed under Chapter VI A. The assessee also responded to the same by furnishing necessary details. Based on the same the assessment order was passed accepting the return filed by the assessee after necessary verification. Further, the view taken by the Ld. AO is in conformity with the decisions of Hon’ble Supreme Court in case of decisions referred to herein above. 4.3. We now refer to the decision of Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. Vs. CIT reported in (2000) 243 ITR 83, inter alia laid down that, the prerequisite for the exercise of jurisdiction by the CIT under section 263 is that, the order of the Ld.AO must be erroneous in so far as it is prejudicial to the interests of revenue. The Ld. CIT(A) has to be satisfied of twin conditions, namely : (a) The order of the AO sought to be revised is erroneous, and (b) It is prejudicial to the interests of the Revenue. 4.4. If one of them is absent i.e; if the order of the AO is erroneous, but is not prejudicial to the revenue or if it is not erroneous, but is prejudicial to the interest of the revenue, recourse cannot be had to section 263(1) of the Act. It was further held that, the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO. 4.5. Further, in case of Jamnadas T. Mehta Vs. ITO reported in (2002) 257 ITR (AT) 90 (Pune) (TM), it was held that, the ambit of interference under section 263 is not to set aside merely ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 18 unfavourable orders and bring to tax some more money to the treasury. The section is not enacted to get a sheer escapement of revenue which is taken care of in other provisions of the Act. Prejudice that is contemplated under section 263 is the prejudice to the income-tax administration as a whole. Section 263 is to be invoked not as a jurisdictional corrective or as a review of a subordinate’s order in exercise of the supervisory power, but it is to be invoked and employed only for setting right distortions and prejudices to the revenue, which is a unique conception, which is to be understood in the context of and in the interests of the revenue administration. 4.6. In view of the aforesaid legal precedents and factual analysis of the proceedings before the authorities below, the provisions of section 263 of the Act, could not be invoked in the present facts of the case. We therefore quash the notice issued in consequence to which the impugned order passed by the Ld.PCIT also stands quashed. Accordingly the grounds raised by the assessee stands allowed. In the result the appeal filed by the assessee stands allowed. Order pronounced in the open court on 19-12 -2024. Sd/- Sd/- RENU JAUHRI BEENA PILLAI ACCOUNTANT MEMBER JUDICIAL MEMBER ITA No.771/MUM/2021 Bombay City Postal Clearks Co.op. Credit Society Ltd. ;A. Y.2017-18 Page | 19 Place: Mumbai, Dated:19.12.2024 Snehal C. Ayare, Stenographer/Dragon Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. Ld.DR, ITAT, Mumbai 4. Guard File 5. CIT //True Copy// BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "