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2014 (7) TMI 557 - AT - Income TaxDeduction u/s 80P(2)(i) of the Act - 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 the co-operative society is engaged in carrying of business of banking or providing credit facilities to its members, the co-operative society is entitled for deduction on whole of the income relating to any one or more of such business the section denies deduction to a co- operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank - 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) - 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. Whether the Assessee is a co-operative bank or not Held that:- In case, the assessee does not comply with the three conditions of being a cooperative society, it cannot be regarded to be a co-operative bank and the provisions of Sec. 80P(4) will not be applicable in the case of the Assessee - Once, the Assessee will not fall within the provisions of Sec. 80P(4), the Assessee, will be eligible to get deduction u/s 80P(2)(a)(i) in respect of whole of the income which the Assessee derives from carrying on the business of banking or providing credit facilities to its members - it is not necessary that the co-operative society should have a banking licence as per the definition under the Income Tax Act - The Income Tax is not concerned whether the banking business carried on by the assessee is legal or illegal - 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 bye-laws of society does permit the admission of other co-operative society as member - Since the assessee society did not comply all the three conditions, therefore the assessee society cannot be regarded to be a primary co-operative bank as all the three conditions are not complied with and in consequence it is not a co-operative bank and the assessee is not hit by the provision of section 80P(4) thus, 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) is upheld 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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