TMI Blog2012 (8) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80P. The assessee is neither PACs nor PCARDB and hence not eligible for deduction U/S 80P as the object of the assessee and the range of the activities is not confined to taluk but is extended to entire district of Bhopal & Vidisha - Primary object of principal business of PACS is to finance for agricultural purposes or purposes connected with agricultural activities. The primary object as well as activities of assesse are not confined to agricultural purposes but other purposes also - against assessee. - I.T.A.No. 215 & 216/Ind/2011 - - - Dated:- 18-6-2012 - SHRI JOGINDER SINGH, AND SHRI R.C.SHARMA, JJ. Appellant by : Shri Anil Khabya, C. A. Respondent by : Shri Keshave Saxena, CIT DR O R D E R PER R. C. SHARMA, A.M. These are appeals filed by the assessee against the orders of CIT(A) dated 4.7.2011 and 8.7.2011 for the 2007-08 2008-09, respectively. 2. Rival contentions have been heard and records perused. Common grounds have been taken in both the years under consideration which basically pertains to decline the claim of deduction u/s 80P. The assessee is a Kshetriya Gramin Bank i.e. Regional Rural Bank, which claimed deduction u/s 80-P of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be a Cooperative society for the purpose of "the Income tax act 1961. For the purpose of the Income Tax act 1961 (43 of 1961) or any other enactment for the time being in force relating to any tax on income, profits or gains, a regional rural bank shall be deemed to be a Co-operative society. Hence assessee is a Co-operative society for the purposes of Income Tax act 1961 ;.and full filing all the 3 conditions mentioned above. The fulfillment of all the 3 conditions is discussed as under :- Condition -1 In para-1(b) it has been established that primary object or principal business of the assessee is the transaction of Banking business. Hence condition 1 of "primary cooperative bank" is fulfilled. Condition - 2 As per RRB act 1976, :- 6. Issued capital.- 4*[(1) The issued capital of each Regional Rural Bank shall, in the first instance, be such as may be fixed by the Central Government in this behalf, but it shall in no case less than twenty five lakhs of rupees or exceed one crore of rupees.] The assessee has paid up share capital of Rs. 1.00 Crore and Reserve Surplus of Rs.24.81 Crores as on 31.03.2007 as per the annual report. Hence condition- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P is allowed to the assessee. I am also satisfied that inaccurate particulars of income were furnished and hence penalty u/s 27l(l)(c) is initiated separately. Para-3 As per the CBDT circular on finance act 2006 Circular no. 14/ 2006, dated 28-12-2006. 22.1 Section 80P, inter alia, provides for a deduction from the total income of the Co-operative societies engaged in the business of banking or providing credit facilities to its members, or business of a cottage industry, or of marketing of agricultural produce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc. 22.2 The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new sub-section (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The expressions "cooperative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80P to regional rural banks Section 80P of the Income-Tax Act, 1961, provides for a deduction from the income of cooperative societies referred to in that section. 2. As regional rural bank (RRB) are basically corporate entities ( and not cooperative societies ), they were considered to be not eligible for deduction u/s 80P when the Section was originally introduced. However, as Section 22 of the Regional Rural Bank Act provides that a RRB shall be deemed to be Cooperative Society for the purpose of the Income-tax Act, 1961, in order to make such banks eligible for deduction under section 80P, the CBDT issued a beneficial Circular No.319, dated January 11, 1982*, which stated that for the purpose of section 80P, a Regional Rural Bank shall be deemed to be a Cooperative Society. 3. Section 80P was amended by the Finance Act 2006, with effect from April 1, 2007, introducing subsection (4), which laid down specifically that the provisions of section 80P will not apply to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Accordingly, deduction under section 80P was no more available to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80P was made available to Regional Rural bank till Ass. Yr. 2006-07. However, an amendment was made by Finance Act, 2006 inserting sub-section (4) to section 80P w.e.f. 1-04-2007. The subsection (4) provided : (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agriculture and rural development bank. Explanation- For the purpose of this sub-section- (a). 'Cooperative bank" and "primary agriculture credit society" shall have the meanings respectively assigned to them in Part-V of the Banking Regulation Act, 1949(10 of 1949); (b) "primary co-operative agriculture and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provided long term credit for agriculture and rural development activities. From the plain reading of amended provision it emerges:- (1) Provision of section 80P would not apply to any Cooperative bank other than a primary agriculture credit society or a primary co-operative agriculture and rural development bank. (ii) " Cooperative bank" and "primary agriculture credit society" have been defined under the explanation to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssume all those facts and consequences which are incidental or inevitable corollaries to the giving effect to the fiction. But in so construing the fiction it is not to be extended beyond the purpose for which it is created, or beyond the language of the section by which it is created. It cannot be extended by importing another fiction. And a legal fiction in terms enacted 'for the purpose of a particular Act' is normally restricted to that Act and cannot be extended to cover another Act. A legal fiction must be carried to its logical conclusion and not to an illogical length. (Kindly refer: CIT Vs. Elphinstore Spinning Weaving Mills Co. (1960) 40 ITR 142, 154(SC); Rajputana Trading Co. Ltd V. CIT (1969) 72 ITR 2S6(SC); Dr. Baliram Waman Biray V. Justice B. Lentin (1989) 176 ITR 1,27(SC); CED v. Krishna Kumari Devi (1988) 173 ITR 561,565 (All); Gulab Chand Motilal v. CIT (1988) 174 ITR 117,122 (M.P.); CST v. Mohanlal Anil Kumar (1984) 57 STC 145 -149 (Born). The CIT(A) did not allow the benefit of section 80P on the ground that the circular No. 319 dt. 11-11-1982 has been withdrawn by the Board and therefore benefit of deduction could not be allowed to the appellant. The CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alia, provides for a deduction from the total income of the Co-operative societies engaged in the business of banking or providing credit facilities to its members, or business of a cottage industry, or of marketing of agricultural produce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc. After insertion of sub Section (4) of Section 80-P, by Finance Act, 2006, w.e.f. 1.4.2007, this deduction is available only to - 1. Primary Agricultural Credit Society (PACS) 2.Primary Co-operative Agricultural and Rural Development Bank (PCARDB) Further, a new sub-clause (viia) has been inserted in clause (24) of section 2 to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition of income'. Section 80P has been amended by Finance Act, 2006, and sub Section (4) has been inserted. As per finding recorded by lower authorities , the assessee is neither P ACs nor PCARDB and hence not eligible for deduction U/S 80P. A society fulfilling two conditions is a PCARDB as per explanation to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010, provided as under :- Section 80P of the Income-Tax Act, 1961, provides for a deduction from the income of cooperative societies referred to in that section. 2. As regional rural bank (RRB) are basically corporate entities ( and not cooperative societies ), they were considered to be not eligible e for deduction u/s 80P when the Section was originally introduced. However, as Section 22 of the Regional Rural Bank Act provides that a RRB shall be deemed to be Cooperative Society for the purpose of the Income-tax Act, 1961, in order to make such banks eligible for deduction under section 80P, the CBDT issued a beneficial Circular No.319, dated January 11, 1982*, which stated that for the purpose of section 80P, a Regional Rural Bank shall be deemed to be a Cooperative Society. 3. Section 80P was amended by the Finance Act 2006, with effect from April 1, 2007, introducing subsection (4), which laid down specifically that the provisions of section 80P will not apply to any cooperative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Accordingly, deduction under section 80P was no more available to any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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