INCOME TAX OFFICER, WARD 3(1), KALYAN, KALYAN V. VEEJ COMPANY SEVAKANCHI SAHAKARI PATH SANSTHA LTD, KALYAN

ITA 2024/MUM/2025

AI Insights

The case involves the Income Tax Officer, Ward 3(1), Kalyan as the appellant and Veej Company Sevakanchi Sahakari Path Sanstha Ltd as the respondent. The dispute arose from the assessment year 2016-17, where the Assessing Officer (AO) disallowed a deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961, considering the assessee as a 'Co-operative Bank' under the Banking Regulation Act, 1949, and thus not eligible for the deduction. The Commissioner of Income Tax (Appeals) [CIT(A)] reversed the AO's decision, leading to the revenue's appeal before the Tribunal. The Tribunal found that the assessee, being a cooperative society without a banking license, was eligible for the deduction under section 80P(2)(a)(i) for income derived from credit facilities to its members but needed further examination for income from fixed deposits under section 80P(2)(d).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 361142 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: Citizen Co-operative Society vs. Union of India
• Laws Referred To: Maharashtra Co-operative Societies Act, 1960, Banking Regulation Act, 1949, Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSHANT ALME
• Assessee Lawyers: KAVITHA KAUSHIK
• Keywords: Business income; Co-operative Credit Society
• Section: 144

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SMT. RENU JAUHRI (ACCOUNTANT MEMBER) I.T.A. No. 2024/Mum/2025 Assessment Year: 2016-17 Income Tax Officer, Ward 3(1), Kalyan 2nd Floor, Rani Mansion, Murbad Road, Kalyan West, Maharashtra-421301 Vs. Veej Company Sevakanchi Sahakari Path Sanstha Ltd Usha Sankul, Vallipeer Road, Oppo Sagar International Hotel, Kalyan Maharashtra-421301 PAN:AAAAM2266M (Appellant) (Respondent) Appellant by Shri Sushant Alme Respondent by Ms. Kavitha Kaushik, SR. D.R. Date of Hearing 15.05.2025 Date of Pronouncement 20.05.2025 ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the department arises out of order dated 24/12/2024 passed by NFAC, Delhi for assessment year 2016-17 on following grounds of appeal : 2 ITA No.2024/Mum/2025; A.Y. 2016-17 Veej Company Sevakanchi Sahakari Path Sanstha Ltd “1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred not setting aside the appeal to the table of the AO considering the fact that the assessment order under question was passed u/s.144 i.e. ex-parte. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in not giving an opportunity to the AO considering the fact that the assessment order under question was passed u/s. 144 i.e. ex-parte. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have remanded the matter to the AO considering the fact that the assessment order under question was passed u/s. 144 i.e. ex-parte. 4. The appellant craves leave to add, amend or alter any ground/grounds, which may be necessary.” Brief facts of the case are as under: 2. The assessee is an Employees Co-operative Credit Society and is registered under Maharashtra Co-operative Societies Act, 1960. The members of the Society are the employees of various Public Sector Electricity Companies of Maharashtra. The Society submitted its Return of Income for AY 2016-17 on 17/10/2016, declaring total income as NIL, after claiming deduction u/s. 80P(2)(a)(i) for Rs. 2,54,50,023/-. The case was selected for limited scrutiny. During scrutiny proceedings, the assessee furnished submission, Registration Certificate and annual report for FY 2015-16. 2.1 The Ld.AO noted that, assessee did not make any compliance to explain its return, and claim of deduction u/s. 80P(2)(a)(i). The Ld.AO, complete the assessment on Best Judgment Method u/s.144 on 19/12/2018. The Ld.AO noted that the assessee fits-in, in the definition of a “Co-operative Bank” as provided in Section 5(cci) & (ccv) of Part 5 of Banking 3 ITA No.2024/Mum/2025; A.Y. 2016-17 Veej Company Sevakanchi Sahakari Path Sanstha Ltd Regulation Act, 1949. The Ld.AO thus concluded that, in terms of Sec. 80P(4), the assessee should be considered as a Cooperative Bank and is not eligible to get the deduction u/s. 80P(2)(a)(i). Aggrieved by the order of the Ld.AO assessee preferred appeal before the Ld.CIT(A). 3. The Ld.CIT(A) after considering the issue observed and held as under: “2.3. I have considered the case. The issue have been clarified in the decision of the Hon’ble Supreme Court in the case of the Citizen Co- operative Society, decided on 08/08/2017 in civil appeal No. 10245 of 2017. In such order, the Hon’ble Apex Court decided that it is a matter of common knowledge that in order to do the business of a Co-operative Bank, it is imperative to have a license from the Reserve Bank of India. The Reserve Bank of India has itself clarified that until and unless a proper license is given, no Co-operative Society can be declared as a Co- operative Bank. I have verified the list of Co-operative Bank, having license for performing as a Bank, as issued by Reserve Bank of India for the State of Maharashtra. The assessee Co-operative Society’s name is not appearing in such list. Therefore, the assessee does not have any license to do the business as a Co-operative Bank. In absence of such license, the Society has to be considered as a primary Co-operative Society, engaged in the business of providing credit facilities to its members. Therefore, in my considered opinion, the assessee is qualified to get deduction u/s. 80P(2)(a)(i), as the AO did not indicate any other defect in the performance of the Society, which makes it disqualified to get such deduction. Therefore, I direct the AO to delete the disallowance made in the order dated 19/12/2018 for Rs. 2,54,50,023/-.” Aggrieved by the order of the Ld.CIT(A) revenue is in appeal before this Tribunal. 4. The Ld.DR at the outset submitted that, assessing officer did not get an opportunity to verify the claim of assessee under 4 ITA No.2024/Mum/2025; A.Y. 2016-17 Veej Company Sevakanchi Sahakari Path Sanstha Ltd 80P(2)(a)(i). She submitted that, the claim also include interest earned from fixed deposits which cannot be considered under 80P(2)(a)(i) of the Act. She thus submitted that, the issue was not verified in respect of the claim though Ld.CIT(A)/NFAC has co- terminus power with that of assessing officer. 4.1 On the contrary, the Ld.AR vehemently relied on the order passed by the Ld.CIT(A). He submitted that, the entire income earned by the assessee is out of credit facility extended to the its members alone and therefore assessee being Co-operative society as observed by the Ld.CIT(A), the entire amount is eligible for claiming deduction under 80P(2)(a)(i). We have perused the submissions advance by both sides in the light of record placed before us. 5. There is no dispute in respect of the fact that assessee is Co-operative Society, based on the verification carried by the Ld.CIT(A). As consequence assessee is eligible to claim deduction u/s.80P(2)(a) in respect of the business income earned by the assessee out of the activity carried on by it as per its object clause. 5.1 However, the Ld.AR submitted that, the some portion of the claim includes interest earned by the assessee out of fixed deposits with other co-operative societies as per the requirement under the Maharashtra Corporation Societies Act. In respect of such the interest the assessee’s the claim has to be considered under 80P(2)(d) of the Act because such income is said to be derived by the assessee from its investment activity. As the there 5 ITA No.2024/Mum/2025; A.Y. 2016-17 Veej Company Sevakanchi Sahakari Path Sanstha Ltd is specific clause under to consider such kind of income, the same cannot form part of the claim under 80P(2)(a)(i) of the Act. 5.2 We therefore, remit this issue back to the Ld.AO in order to consider the interest/dividends earned by the assessee from the investments made in other Cooperative Societies u/s. 80P(2)(d) of the Act. The assessee is directed furnish all requisite details in respect of the same, and consider the claim in accordance with the law. In respect of the balance amount earned by the assessee out of carrying on the business of banking or providing credit facilities to its members the same is allowed u/s.80P(2)(a)(i) of the Act. With the above direction we remit this issue back to the Ld.AO. Accordingly the grounds raised by the revenue stands partly allowed for statistical purposes. In the result the appeal filed by the revenue stands partly allowed for statistical purposes. Order pronounced in the open court on 20/05/2025 Sd/- Sd/- (RENU JAUHRI) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 20/05/2025 Poonam Mirashi, Stenographer Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. 6 ITA No.2024/Mum/2025; A.Y. 2016-17 Veej Company Sevakanchi Sahakari Path Sanstha Ltd True Copy By order (Asstt. Registrar) ITAT, Mumbai "