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2014 (10) TMI 501 - AT - Income TaxDeduction u/s 80P – Assessee is a co-operative society registered under the Karnataka Souharda Sahakari Act, 1997 - 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:- Sec. 80P(2)(a)(i) provides two types of activities in which the co-operative society must be engaged to be eligible for deduction under sub-clause (i) - These two activities are not alternates ones because the section allows deduction to the co-operative society on the whole of profits and gains of business attributable to any one or more of such activities - 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. Nature of assessee - Whether the Assessee is a co-operative bank or not – Held that:- The Assessee has accepted that the Assessee was accepting deposits of money not only from the members but also from the general public who are non-members - The deposits so accepted are used by the Assessee co-operative society for lending or investment - the Assessee society was not carrying on banking business as it was accepting deposits from the persons who were not members - 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. 20 of The Karnataka Souharda Sahakari Act, 1997 permits admission of any other co-operative society as a member - The word used in Sec.21A is 'may'. Section 21A further states that the co-operative society can be admitted as nominal or associate member for any specific purpose for any specific period as may be mentioned in the bye-laws - in case the rules and bye-laws of the other co-operative society provides otherwise, the co-operative society may not be admitted as a member of the co-operative society. The provisions of Sec. 80P(2)(a)(i) are applicable to a co-operative society which is engaged in carrying on banking business facilities to its members if it is not a co-operative bank – relying upon DCIT vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. [2012 (8) TMI 185 - ITAT PANAJI] - 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) – thus, the order of the CIT(A) in not allowing deduction u/s 80P(2)(a)(i) to the assessee is set aside and 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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