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2014 (9) TMI 263 - AT - Income TaxGrant of deduction u/s 80P(2)(a)(i) – Failure to consider that as such no prohibition in the bye-laws – Held that:- The provisions of Sec. 80P(4) mandates that the provisions of Sec. 80P will not apply to any co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank but as per the provisions of Sec. 80P(2)(a)(i), a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is entitled for deduction - it cannot be said that a co-operative society cannot carry on business of banking facilities to its members even if it is not a co-operative bank - every co-operative society engaged in carrying on business of banking even for its members is regarded to be a co-operative bank, then, the provisions of Sec. 80P(2)(a)(i) will become redundant. Status of assessee - Co-operative society or not - Whether the Assessee is a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank – 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, it 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 facilties 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. 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 - The Assessee did not file copy of its bye-laws before us; neither are the provisions of Sec. 17 of The Karnataka State Co-operative Societies Act, 1959 - In case the bye-laws permit for the admission of any other co-operative society as a member, the Assessee will not be not treated as a co-operative bank and the provisions of Sec. 80P(4) will not apply to the Assessee – the matter is remitted back to the AO for determination of status of assessee – and to decide as to whether the Assessee is entitled for deduction u/s 80P(2)(a)(i) for ascertaining from the copy of the rules and bye-laws of the co-operative society whether the bye-laws of the assessee permit admission of any other co-operative society - In case the AO finds that the bye-laws do not permit the admission of any other co-operative society, the Assessee will be regarded as a primary co-operative bank and will not be entitled for deduction u/s 80P(2)(a)(i) – Decided in favour of Assessee.
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