GOPMAHAL SAMABAY KRISHI UNNAYAN SAMITY LTD.,MEDINIPUR V. ACIT, CIR. 38, MIDNAPORE

ITA 76/KOL/2024

AI Insights

The case involves Gopmahal Samabay Krishi Unnayan Samity Ltd., a Primary Agricultural Co-operative Society, appealing against the orders of the Commissioner of Income Tax (Appeals) which denied them deductions under section 80P of the Income Tax Act for the assessment years 2015-16 and 2017-18. The primary contention was whether the society, which provided credit facilities to both members and non-members, was eligible for deductions under section 80P(2)(a)(i) and 80P(2)(a)(iv). The Tribunal considered the Supreme Court's decision in The Mavilayi Service Co-op Bank Ltd. case, which favored a liberal interpretation of section 80P, and directed a re-examination of the society's activities in light of this precedent.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469559 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Other Referred Cases: Citizen Co-Op Society Ltd. vs. ACIT, Circle-9(1), Hyderabad, The Mavilayi Service Co-op Bank Ltd vs. CIT, Calicut & Anr.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Business income; Opportunity of being heard; Rectification of order; Competent authority; Co-operative Credit Society
• Section: 143(3); 250; 13; 80P; 20

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'एसएमसी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA श्री संजय शमाा, न्याधयक सदस्य एवं श्री राक ेश धमश्र, लेखा सदस्य क े समक्ष Before SHRI SONJOY SARMA, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Vs. ACIT, Circle-38, Midnapore (Appellant) (Respondent) PAN: AABAG2985Q Appearances: Assessee represented by : Amit Agrawal, Adv. Department represented by : S.B. Chakraborthy, Addl. CIT, Sr. DR and Somnath Das Biswas, Sr. DR. Date of concluding the hearing : December 18th, 2024 Date of pronouncing the order : March 18th, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: The captioned appeals filed by the assessee are against separate orders of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2015-16 & 2017-18 respectively dated 09.06.2023, which have been passed Page | 2 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 2 of 17 against the assessment orders u/s 143(3) of the Act dated 11.12.2017 and 24.12.2017, respectively. 2. The Registry has informed that both the appeals filed by the assessee are barred by limitation of time by 161 days. The assessee has filed an application seeking condonation of delay dated 06.01.2024 which is as under: “This is to certify that we have no formal Board of Directors since 14/03/2018. At present the Co-operative Society has neither any Board of Director nor Special officer to take any higher decision. So we were confused that whether to file an Appeal in the Hon’ble Income Tax Appellate Tribunal or not. In the meantime, as per guidance of our Tax consultant, we filed a ‘Rectification of orders passed by CIT’ (Rectification Reference Number: 344103570020723) as on 2nd July, 2023 and was waiting for reply from respective Authority. But no reply has been received till date. Therefore it is very difficult for us to take any decision to file an appeal before The Hon’ble Income Tax Appellate Tribunal, Kolkata. Finally in discussion with our Ex-Board of Directors, we decided to file an appeal before The Hon’ble Income Tax Appellate Tribunal, Kolkata. Hence there is 160 days delay in filing the appeal which may be condoned.” 2.1. Considering the application for condonation of delay and the reasons stated therein, we are satisfied that the assessee was prevented by reasonable and sufficient cause from filing the instant appeals within statutory time limit. We, therefore, condone the delay and admit the appeals for adjudication on merit. 3. The assessee is in appeal before the Tribunal raising the following grounds of appeal: I. I.T.A. No.76/KOL/2024; AY 2015-16 “1. That the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi was not justified in upholding the action of the Assessing Officer denying the deduction of Rs. 18,12,400/- u/s. 80P(2)(a)(i) and 80P (2)(a)(iv) of the Income Tax Act, 1961 although the Page | 3 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 3 of 17 assessee is not a Co-operative bank, but a Primary Agricultural Co-operative Society. 2. That the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi erred in law as well as in facts, in not allowing the deduction u/s.80P(2)(a)(i) to the extent of the profit earned on providing credit facilities to its members. 3. That on the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi was wrong in facts and law in not allowing the deduction u/s.80P(2)(a) (iv) to the extent of the profit earned on supplying the agricultural implements, seeds, livestock or other articles intended for agriculture to its members. 4. That on the facts and in the circumstances of the case the learned Commissioner of Income tax (Appeals) should have allowed the deduction u/s.80P(2)(d) to the extent of whole income by way of interest or dividends derived by the society from the investments with other co-operative societies. 5. That on the facts and in the circumstances of the case the learned Commissioner of Income tax (Appeals) should have allowed the expenditure of “Provision of Gratuity Payable” of Rs.3,00,000/- u/s 40A(7) of The Income Tax Act,1961 as the assessee maintained its books of accounts on accrual basis, it should be allowed as expenditure paid or payable. There is no sense to add back the ‘Provision of Gratuity Payable’ with the profit because, the appellant is a Primary Agricultural Co-operative Credit Society and is eligible to claim deduction of its 100% profit u/s 80P (2) under Chapter VI-A. The relevant portion of the Circular No.37 2016 dated 02 11 2016 issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, relating to the subject Chapter VIA deduction on enhanced profits, is quoted hereunder The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VIA deduction has been claimed, the deduction needs to be allowed on the enhanced profits. 6. The hearing notice under section 250 has been served thru email on 01 06 2023 was not received by the appellant. Because it was communicated to very old email id which is not at their profile as primary email id. The primary email id is different. Even the appeal order has been served again to the wrong email id, The appellant found the Appeal order only after logged in to their income tax portal Therefore there was no communication to appellant email id. Therefore, the appeal order is invalid without given any opportunity of being heard. Page | 4 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 4 of 17 7. That in exercise of the power to grant deductions under aforementioned sub- sections of Section 80P of the Income Tax Act, 1961, the learned Commissioner of Income tax (Appeals) should have applied his judicial mind and examine the records of the case and could have come to the conclusion that the conditions precedents u/s 80P were satisfied and requirements of law are fulfilled on the facts and circumstances of the case. 8. That the appellant craves leave to supplement, amend, add, substitute, cancel, delete or otherwise modify all or any of the grounds herein before or at the time of hearing, if necessary, so arises.” II. I.T.A. No.77/KOL/2024; AY 2017-18 “1. That the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi was not justified in upholding the action of the Assessing Officer denying the deduction of Rs. 10,70,476/- u/s. 80P(2)(a)(i) and 80P(2)(iv) of the Income Tax Act, 1961 although the assessee is not a Co-operative bank, but a Primary Agricultural Co-operative Society. 2. That the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi erred in law as well as in facts, in not allowing the deduction u/s.80P(2)(a)(i) to the extent of the profit earned on providing credit facilities to its members. 3. That on the facts and in the circumstances of the case, the learned Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi was wrong in facts and law in not allowing the deduction u/s.80P(2)(a) (iv) to the extent of the profit earned on supplying the agricultural implements, seeds, livestock or other articles intended for agriculture to its members. 4. That on the facts and in the circumstances of the case the learned Commissioner of Income tax (Appeals) should have allowed the deduction u/s.80P(2)(d) to the extent of whole income by way of interest or dividends derived by the society from the investments with other co-operative societies. 5. That on the facts and in the circumstances of the case the learned Commissioner of Income tax (Appeals) should have allowed the “Provision for NPA” of Rs.23,80,656/-. The Provision for NPA is a statutory provision as per NABARD guidelines. The Provision made at the time of Statutory Audit by The West Bengal Government Co-operative auditors, which is again eligible for deduction under section 80P of The Income Tax act,1961. There is no sense to add back the ‘Provision for NPA-SUBSTANDARD’ with the profit because the appellant is a Primary Agricultural Co-operative Credit Society and is eligible to get deduction of its 100% profit u/s 80P(2) under Chapter VI-A. Page | 5 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 5 of 17 The relevant portion of the Circular No.37 2016 dated 02 11 2016 issued by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, relating to the subject Chapter VIA deduction on enhanced profits, is quoted hereunder. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VIA deduction has been claimed, the deduction needs to be allowed on the enhanced profits. 6. The hearing notice under section 250 has been served thru email on 01.06.2023 was not received by the appellant. Because it was communicated to very old email id which is not at their profile as primary email id. The primary email id is different. Therefore there was no communication to appellant. Even the appeal order has been served again to the wrong email id, The appellant found the Appeal order only after logged in to their income tax portal. Therefore the appeal order is invalid without given any opportunity of being heard. 7. That in exercise of the power to grant deductions under aforementioned subsections of Section 80P of the Income Tax Act, 1961, the learned Commissioner of Income tax (Appeals) should have applied his judicial mind and examine the records of the case and could have come to the conclusion that the conditions precedents u/s 80P were satisfied and requirements of law are fulfilled on the facts and circumstances of the case 8. That the Penalty Proceeding u/s. 270A of the Income Tax 1961, will not be initiated as there was no under reporting of Appellants Income as the accounts has been audited by Co-operative Auditor, Government of West Bengal. 9. That the appellant craves leave to supplement, amend, add, substitute, cancel, delete or otherwise modify all or any of the grounds herein before or at the time of hearing, if necessary, so arises.” 4. We will first take up the appeal for A.Y. 2015-16. Brief facts of the case are that the assessee had filed the return of income for the AY 2015-16 disclosing total income of Rs. ‘NIL’ and the case was selected for limited scrutiny under CASS. The assessee is a Samabay Krishi Unnayan Samity i.e. a Credit Cooperative Society working in Ghatal. The assessee had computed net profit at Rs. 18,12,404/- and the entire amount was claimed as deduction u/s 80P of the Act. In the course of assessment proceedings, it was noted by Ld. AO on verification of the Page | 6 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 6 of 17 books of account that the assessee Society had earned income by providing credit facility to outsiders i.e. non-members as well. Therefore, the Ld. AO issued a show cause notice to the assessee requiring the assessee to explain as to why the deduction as claimed u/s 80P of the Act should not be disallowed. It was also required to explain why the income should not be computed after disallowing deduction on account of gratuity payable and provision for leave salary. The assessee responded that it was a Primary Agricultural Credit Society and the banking business was not governed by the Banking Regulation Act, 1949 and the same was mentioned in the bye-laws. It was stated that the banking business and its area of operation was confined to a taluk and the principal object of which was to provide for long term credit for agricultural and rural development activities. It was stated that in banking business the area was limited but the customers could not be limited to members only and non-members were also customers. The assessee disputed the applicability of the decision in the case of Citizen Co-Op Society Ltd. vs. ACIT, Circle-9(1), Hyderabad as they have multi-states banking business. A reference was also made to the clarification made by the CBDT vide Circular No. 133 of 2007 dated 9th May, 2007 wherein it was stated that sub-section (4) of section 80P of the Act will not apply to an assessee which is not a cooperative bank. The assessee also relied upon Circular No. 18 of 2015 dated 2nd November, 2015 with the subject ‘Interest from non-SLR securities of banks’ which was not found to be relevant by the Ld. AO. The Ld. AO noted that in the Bye-laws of the Society it was stated that the Society would provide credit facility to the members i.e. the facility should be confined to the members only. But the Society was engaged in the activities of accepting deposits under various schemes and giving loans against such deposits to non-members also. In reality, such activity of Page | 7 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 7 of 17 the Society was that of finance business and could not be termed as a cooperative Society which is meant only for its members and providing credit facility to its members. Therefore, the deduction claimed by the assessee Society u/s 80P of the Act to the tune of Rs. 18,12,404/- was disallowed and added back to the total income of the assessee. As regards a sum of Rs. 3,00,000/- on account of gratuity payable, the assessee accepted that it was a mistake while preparing the accounts. Hence, an amount of Rs. 3,00,000/- was added back to the total income of the assessee u/s 40A(7) of the Act and the total income was computed at Rs. 21,12,400/-. 5. Aggrieved with the assessment order the assessee filed an appeal before the Ld. CIT(A). In response to the notice of hearing issued, the assessee only prayed for early hearing. The finding of the Ld. CIT(A) is as under and accordingly he partly allowed the appeal of the assessee: “7.1 Ground No.1 raised by the appellant relates to challenging the findings of the AO where, the AO has denied the claim of deduction of Rs. 18,12,404/- in terms of section 80P(2)(a)(i)/80P(4) of IT Act. I have considered the submission of the appellant carefully. The main issue under dispute is regarding denial of deduction u/s.80P(2)(a)(i)/80P(4) of IT Act, as according to AO, the assessee has been engaged in providing credit facilities to non-members i.e. the persons who are not registered as Member of the Society and working as a Co-op. Bank. At the outset, it is mention that the long standing controversy on this issue have finally been settled recently by the decision of Hon'ble Supreme Court in the case of The Mavilayi Service Co-op Bank Ltd dated 12.1.2021 wherein, benefit of section 80P has been extended even in those cases, where credit facilities have been provided to non-members if providing credit facilities to non-members are incorporated in the memorandum of activities of the society and which is duly registered by the Competent Authority of the concerned State Government. 7.2 While deciding the issue, Hon'ble Supreme Court in para 45 onwards in its judgement has held the issue as under. 45. To sum up, therefore, the ratio decided of Citizen Cooperative Society Ltd. (supra), must be given effect to Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and Page | 8 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 8 of 17 reasonable, and if there is ambiguity, in favour of the 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 the Revenue in the present case 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, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assesses in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i) notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non-member profits attributable to such loans obviously cannot be deducted. 46. It must also be mentioned here that unlike the Andhra Act that Citizen Cooperative Society Ltd. (supra) considered, nominal members are members as defined under the Kerala Act. This Court is U.P. Cooperative Cane Unions Federation Ltd., Lucknow v. Commissioner of Income Tax, Lucknow-I (1997) 11 SCC 287 referred to section 80P of the IT Act and then held: 8. The expression members is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression members in Section 80-P(2)(a) (i) must, therefore, be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary construe the expression members of Section 80-P(2)(a)(i) of the Act in the light of the definition of the expression as contained in Section 2(n) of the Cooperative Societies Act. The said provision reads as under: 2.(n) Member means a person who joined the application for registration of a society or a person admitted to membership after such registration in accordance with the provisions of this Act, the rules and the bye-laws for the time being in force but a reference to members anywhere in this Act in connection with the possession or exercise of any right or power or the existence or discharge of and liability or duty shall not include reference to any class of members who by reason of the provision of this Act do not possess such right or power or have no such liability or duty, Considering the definition Page | 9 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 9 of 17 of member under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction under section 80P(2)(a)(i). 47. Further, unlike the facts in Citizen Cooperative Society Ltd. (supra), the Kerala Act expressly permits loans to non-members under section 59(2) and (3), which reads as follows: 59. Restrictions on loans (i) A society shall not make a loan to any person or a society other than a member: Provided that the above restriction shall not be applicable to the Kerala State Co-operative Bank. Provided further that, with the general or special sanction of the Registrar, a society may make loans to another society. (2) Notwithstanding anything contained in sub-section (i), a society may make a loan to a depositor on the security of his deposit. (3) Granting of loans to members or to non-members under sub-section (2) and recovery thereof shall be in the manner as may be specified by the Registrar. Thus, the giving of loans by a primary agricultural credit society to non-members is not illegal, unlike the facts in Citizen Cooperative Society Ltd (supra). 7.3 Considering the above, the AO is directed to verify and examine the West Bengal State Co-operative Societies Act, under which the assessee is registered, and find out whether extending credit facilities to non-members are also one of the activity of the assessee, which is duly approved and registered by the West Bengal State Co-operative Societies Act, then the assessee will be entitled to avail deduction in terms of section 80P(2)(a) (i)/80P(4) of IT Actin light of the judgement of Hon'ble Supreme Court in the case of The Mavilayi Service Co-op Bank Ltd. (Supra). As a result, Ground of appeal are partly allowed. 8. Ground No.2 of the appeal is in respect of disallowance of Rs.3,00,000/- which was claimed by the assessee on account of \"Provision for Gratuity Payable\" in their profit and loss account. The AO disallowed the same under section 40A(7) of the Act. In this reference, it is pertinent to see the provision of section 40A(7) which read as under:- “(7) (a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of a provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason. Page | 10 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 10 of 17 (b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year. Explanation For the removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on their retirement or termination of their employment for any reason has been allowed as a deduction in computing the income of the assessee for any assessment year, any sum paid out of such provision by way of contribution towards an approved gratuity fund or by way of gratuity to any employee shall not be allowed as a deduction in computing the income of the assessee of the previous year in which the sum is so paid.\" The plain reading of this section, as reproduced above would show that no deduction shall be allowed in respect of any provision made by any name for the payment of gratuity to his employees. 8.1 During the appellate proceedings, the assessee has claimed that their books of accounts are maintained on accrual basis and hence the claim made should be allowed. It is mentioned that when any kind of expenditure is specifically barred by the provisions of the Act, \"Provisions for Gratuity Payable\" being one, the claim for same cannot be allowed. Accordingly, the action of AO is upheld and ground No.2 of the appeal is dismissed. Nevertheless, in view of the decision given in respect of Ground No.1 of appeal under para 7.3 above, this issue becomes only of academic nature. 9. In the result, the appeal is partly allowed. Order passed u/s 250 r.w.s. 251 of the Act.” 6. Rival contentions were heard and the submissions made have been examined. During the course of appeal the Ld. AR submitted that the Ld. CIT(A) remanded the matter relating to section 80P of the Act to the Ld. AO. It was submitted that the appellant is a Primary Agriculture Cooperative Society registered under West Bengal Cooperative Society Act, 2006. In the statements of fact filed along with the memo of the appeal the assessee has submitted as under: “The Appellant is a Primary Agricultural Co-operative Society (PACS) has been registered under West Bengal Co-operative Society Act, 2006, carrying on business of fertilizer, pesticides, seeds and other agricultural Page | 11 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 11 of 17 implements, providing KCC, SHG loans and carrying on the business of banking to its farmer member and local areas village people. The case was selected for Scrutiny Assessment u/s.143(2) of the Income Tax Act,1961, for the Assessment Year: 2015-16 and the Authorized Representative of the assessee appeared before the Assistant Commissioner of Income Tax Office time to time and submitted all relevant papers and documents. In the assessment order, the learned Assessing Officer simply disallowed all the Net Profit. He also added back expenditure made on gratuity provisions without giving any deduction under section 80P(2)(a)(i) and 80P(2)(a)(iv) of the Income Tax Act 1961.As the assessee banking business with Member and Non-member, he treated assesses banking business as Co-operative Bank governed by the Banking Regulation Act,1949. He made the following disallowance:- A Net Profit as per P and L Account Rs.18,12,404.00 B Gratuity Payable (Disallowed u/s 40A(7) of The Income Tax Act,1961) Rs. 3,00,000.00 C Total Rs.21,12,404.00 Less: Deduction allowed u/s 80P NIL Total Income Rounded Off U/s.288A Rs.21,12,400.00 The above income (Excluding Rs. 3,00,000.00) Rs. 18,12,400.00 is normal Business Income of assessee, as the assessee has engaged in business of Fertilizers, seeds and providing credit to member and Banking activities by maintaining all rules and regulations as mentioned in Co-operative Society's Bye-laws. Hence whole income of the assessee society should be allowed as deduction as per the Section 80P(2)(a)(i) and 80P(2)(iv) of the Income Tax act 1961. The sentence \"Carrying on business of banking or providing credit facilities to its members \" the whole of the amount of profit and gains from such business is clearly allowed as deduction under section 80P(2)(a)(i) of the Income Tax act 1961.The word \"business of banking\" covers everything i.e. member as well as non-member. The credit facilities in terms of KCC loan etc. provided to members only. Therefore, the assessee is eligible for claiming deduction u/s 80P(2)(a)(i) and 80P(2)(a)(iv). Being aggrieved the assessee lodges this appeal on grounds herein after mentioned.” 7. During the course of appeal the Ld. AR requested that the disallowance of the claim of deduction u/s 80P of the Act may be restricted to that relating to non-members only and the Ld. AR relied upon the decision of the Coordinate Bench of ITAT, Kolkata in the case of Enayetpur SKUS Ltd. vs. ACIT in ITA No. 712/KOL/2022 order Page | 12 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 12 of 17 dated 15.04.2024. The finding of the Coordinate Bench in this regard are extracted as under: “12. We have heard the rival contentions and perused the records placed before us. The effective issue before us is that whether the assessee is eligible for deduction u/s. 80P of the Act on the income earned from providing credit facilities to its members and profit from trading activity of fertilizers sale and income from other related activities. First, we must see the provisions as contained in section 80P of the Act which reads as under: “Deduction in respect of income of co-operative societies. 80P. [Deduction in respect of income of co-operative societies. [Inserted by Act 20 of 1967, Section 33 and Schedule III (w.e.f. 1.4.1968).] (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- (a) in the case of a co-operative society engaged in- (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or [(iii the marketing of the agricultural produce of its members, or] (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities: Page | 13 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 13 of 17 Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:- (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government; (b) in the case of a co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to- (i) a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,- (i) where such co-operative society is a consumers' co-operative society, one hundred thousand rupees] and (ii) in any other case, fifty thousand rupees Explanation. - In this clause, \"consumers co-operative society \"means a society for the benefit of the consumers;] (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers' society or a society carrying on transport business or a Page | 14 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 14 of 17 society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities or any income from house property chargeable under section 22. Explanation. - For the purposes of this section an \"urban consumers' co- operative society\" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a case where the assessee is entitled also to the deduction undersection 80-HH or section 80-HHA or section 80-HHB or section 80- HHC or section 80-HHD or section 80-I or section 80-IA or section 80-J, the deduction under sub-section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under section 80-HH, section 80-HHA, section 80-HHB, section 80-HHC, section 80-HHD, section 80-I, section 80-IA, section 80-J and 80-JJ. (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.” 13. Section 80P(2)(i) of the Act, provides that where co-operative Society is engaged in providing credit facilities to its members, the whole of the amount is entitled for the deduction u/s 80P. In the present case though the assessee has provided the list of persons to whom the credit facilities were provided but failed to establish to the satisfaction of the ld. AO that all such persons are its members. Further from the perusal of the financial statements also it appears that appellant Society has income from trading activity and some other income also. 14. The hon’ble Supreme court in the case of The Mavilayi Service Cooperative Bank Ltd. & Ors. Vs. CIT, Calicut & Anr. (supra) has observed as under: Page | 15 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 15 of 17 “45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the 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 the Revenue in the present case 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, which proviso now specifically excludes co-operative banks which are cooperative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Cooperative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm’s way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture. Also, in case it is found that there are instances of loans being given to non- members, profits attributable to such loans obviously cannot be deducted.” 15. In view of the facts of the case also by respectfully following the judgement of Hon’ble Apex court in the case of Mavilayi Services Coperative bank ltd. (supra) where the hon’ble court opined that even if the credit facilities were provided for non-agricultural purposes to its members, the Society is entitled for the benefit us/ 80P(2)(i) of the Act. Accordingly, we are of the view that the appellant Society is eligible for deduction u/s 80P(2)(i) of the Act but to the extent of the income which has been earned from the facilities extended to its members only. As observed by us, that the appellant Society has failed to satisfy the lower authorities whether those credit facilities were provided to its members only and not to non-members, therefore, assessee is directed to file the necessary details to the AO and the AO is directed to allow deduction u/s 80P(2)(i) to the assessee for the income earned through/from its members as per the directions given hereinabove but needless to mention that assessee should be provided reasonable and proper opportunity of being heard. 16. In the result, appeal filed by the assessee is allowed for statistical purposes.” 8. Respectfully following the decision of the Coordinate Bench in the case of Enayetpur SKUS Ltd. (supra) and since the facts are identical, we are of the view that the assessee Society is eligible for deduction u/s Page | 16 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 16 of 17 80P(2)(i) of the Act but to the extent of the income which has been earned from the facilities extended to its members only. The finding of the Ld. CIT(A) is not correct as the order has been set aside in the guise of issue of directions to the Ld. AO which power has been withdrawn from the CIT(A) with effect from 01.06.2001. However, the Revenue is not in appeal. As the assessee has failed to satisfy both the Ld. AO as well as the Ld. CIT(A) that the credit facilities were provided to its members only and not to non-members, therefore, the assessee is directed to file the necessary details to the Ld. AO and the Ld. AO is directed to allow deduction u/s 80P(2)(a)(i) ad 80P(2)(a)(iv)of the Act to the assessee for the income earned through/from its members as per the directions given herein above. Needless to mention, the assessee shall be provided a reasonable and proper opportunity of being heard. 9. As regards ground no. 2 related to gratuity, The Ld. CIT(A) has decided this issue against the assessee in view of the provision of section 40A(7) of the Act. This ground was not pressed, hence, this ground is dismissed as not pressed. Hence, the appeal for A.Y. 2015-16 is partly allowed for statistical purposes. 10. Since the facts for AY 2017-18 are also identical, therefore, this appeal is also partly allowed for statistical purposes. 12. In the result, both the appeals filed by the assessee are partly allowed for statistical purposes. Order pronounced in the open Court on 18th March, 2025. Sd/- Sd/- [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 18.03.2025 Bidhan (P.S.) Page | 17 I.T.A. Nos.: 76 & 77/KOL/2024 Assessment Years: 2015-16 & 2017-18 Gopmahal Samabay Krishi Unnayan Samity Ltd. Page 17 of 17 Copy of the order forwarded to: 1. Gopmahal Samabay Krishi Unnayan Samity Ltd., Gopmahal, Ghatal, Paschim Medinipur, West Bengal, 721212. 2. ACIT, Circle-38, Midnapore. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "