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2014 (10) TMI 422 - ITAT PANAJIBasic deduction u/s 80P - Co-operative society registered under the Karnataka State Co- operative Societies Act – Effect of amendment - Whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) and whether the Assessee is hit by the provisions of Sec.80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007 - Held that:- If a co-operative society is engaged in carrying on these activities/facilities for the persons other than its members, the co-operative society will not be eligible for deduction u/s 80P(2)(a)(i) on the income which it derives from carrying on the activities not relating to its members - where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilities to its members will only be eligible for deduction u/s 80P(2)(a)(i) - There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members. Status of assessee - Whether the Assessee is a co-operative bank or not – Held that:- Banking means accepting deposit of money from the public which is repayable on demand or otherwise and withdrawal of these deposits by cheque, draft, order or otherwise and these deposits are accepted for the purpose of lending or investment - These deposits must be accepted from the public, not only from the members - These deposits must be repayable on demand or otherwise and could be withdrawn by the depositor by cheque, draft or otherwise - the Assessee has categorically accepted before the authorities below that the Assessee was accepting deposits of money only from members - The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal - the types of the deposits which the assessee has accepted as per bye-laws are the same as are being accepted during the course of the carrying out the banking activities - the paid up share capital and reserves in the case of the Assessee is more than ₹ 1 lac - Therefore, the Assessee satisfies the second condition - Sec.16 of The Karnataka State Co-operative Societies Act, 1959 permits admission of any other co-operative society as a member. The society being a co-operative bank providing banking facilities to members is not eligible to claim deduction u/s 80P(2)(a)(i) after the introduction of sub-section (4) to section 80P - Section 80P(4) clearly excludes primary agriculture credit society from its domain - the Assessee has not to be regarded to be a primary co-operative bank as all the three basic conditions are not complied with, therefore, it is not a co-operative bank and the provisions of Sec.80P(4) are not applicable in the case of the Assessee and Assessee is entitled for deduction u/s 80P(2)(a)(i) - the order of the CIT(A) is to be set aside and the AO is directed to allow deduction to the assessee u/s 80P(2)(a)(i) on the income generated for providing banking or credit facilities to its members – Decided in favour of assessee.
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