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TMI Blog2012 (8) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... operative agricultural and Rural development Bank (PCARDB) The inserted sub section 80P(4) does not allow deduction to any other co-operative bank. From the submission of assessee, it is clear assessee is not claiming exemption for being PACS or PCARDB. However assessee has taken a very hyper technical ground that assessee is co-operative society for the purposes of income tax act but not a Co-operative bank. Assesse's only contention is that exemption has been withdrawn from Co-operative Bank but assessee is not a Co-operative Bank within the meaning of section 80P(4). Without prejudice to discussion in Para-l now it will be established that assessee is a co-operative bank for the purposes of income Tax Act also. As per section 80P(4) "Co-operative Bank" has been defined to mean "Co-operative Bank" as defined in Part - V of the Banking Regulation Act. 1949. As per Banking Regulation Act, 1949 Part V APPLICATION OF THE ACT TO CO-OPERATIVE BANKS (c) in section 5,- (i) after clause (cc), the following clauses shall be inserted, namely."- _ '(cci) "co-operative bank" means a State co-operative bank, a Central co-operative bank and a primary co-operative bank, (ccv) "primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee has submitted that there are no members and assessee is only a deemed society under RRB act. The basic composition of the assessee is very close to the composition of a company. In case of assessee the composition has been defined in RRB act as under :- (2) Of the capital issued by a Regional Rural Bank under sub-section (1), fifty per cent. shall be subscribed by the Central Government; fifteen per cent by the concerned State Government and thirty five per cent by the Sponsor Bank. In case of assessee only share holders of the assessee can be inferred as members of the assesse bank. Also from, the annual report following are the observations. Share Capital The authorised share capital of banks is Rs. 5.00 Crore. The paid-up capital is Rs. 1.00 Crore, subscribed by Govt. of India, Govt. of Madhya Pradesh & State Bank of Indore (Sponsor Bank) in the ration of 50: 15: 35 respectively. Also proviso to condition-3 (that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of Such cooperative society out of funds provided by the State Government for the purpose) mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of business of banking has been brought under Section 80P of the Act for all the Co-operative societies except PACS and PCARDB. Hence no deduction u/s 80P is allowed to the assessee. The exemption and deduction clauses of the act cannot be interpreted liberally and these should be allowed strictly only to those for whom these clauses are really meant for RRBs are Banking institutions performing as par with the commercial banks and the amendment has been brought u/s 80P(4) to withdraw such deduction all such profit earning banks. The legislative intent is very clear from the blow part of speech given by then Hon'ble Union minister of finance Shri P. Chidambram on 28.02.2006 presenting the budget and proposing the said amendment :- XIV TAX PROPOSALS Direct Taxes 166. Cooperative banks. like any other bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies CPA CS) and Primary Cooperative Agricultural and Rural Development Banks (PCARDB) stand on a special footing and will continue to be exempt (from tax under section 80P of the Income Tax Act However, I propose to exclude all other cooperative banks from the scope of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 80P on the ground that they are co-operative societies covered by section 80P(l) read with Board's Circular No. 319, dated January 11, 1982. 5. It is, therefore, reiterated that regional rural banks are not eligible for deduction under section 80P of the Income-tax Act, 1961, from the assessment year 2007-08 onwards. Furthermore, Circular No. 319, dated January 1 I, 1982, deeming any regional rural bank to be co-operative society stands withdrawn for application with effect from the assessment year 2007-08. The field officers may take note of this position and take remedial action, if required. " In view of the above circular, I am not inclined to interfere with disallowance of 80P made by the AO and the disallowance of Rs. 5,30,07,997/- is, accordingly sustained. This ground of the appellant is dismissed." 4. Against the above order, the assessee is in further appeal and has taken following grounds :- 1. That the Id. CIT(A) erred in confirming re-opening of the assessment u/s 147 and further holding that the notice u/s 148 was not issued without jurisdiction. 2. That the learned CIT(A) erred in maintaining disallowance of Rs.5,30,07,997- claimed as deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich have been registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State Societies, or any other Central or State law relating to Co-operative Societies for the time being in force. (Kindly refer section 56(c)(i)(cciia) of Banking Regulation Act. The assessee, being a Regional Rural Bank constituted under special provisions of RRB Act is not a Cooperative Bank registered under any Cooperative Act. The provisions of Part V of Banking Regulation Act does not apply to a Regional Rural Bank constituted under a statute other than Cooperative Acts. The A.O. has admitted that the assessee cannot be covered in Part V of Banking Regulation Act under the category (1) State Cooperative bank and Central Cooperative bank. The only recourse left with him to some how cover the assesse under the definition of primary Co-operative Bank. For this purpose he has labored under erroneous assumptions and stretched the limited legal fiction created by Section 22 of RRB Act for the purpose of Income -tax Act to provisions of the Banking Regulation Act and Cooperative Act. The analysis given by the A. O. in deeming the assessee a 'primary Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of law that a departmental circular is not a law. It may bind IT authorities but the appellate authorities, Tribunal and Courts are not bound to take a judicial notice of circular. (Kindly refer 228 ITR 463(SC)- CIT Vs. Hero Cycle Ltd; 195 ITR 485(All)- Indo Gulf fertilizers & Chemicals Ltd. It is respectfully submitted that Provisions of Part V of Banking Regulation Act are not applicable to our Bank. Our Bank is not covered under the definition of" Cooperative Banks" as defined in Part V of Banking Regulation Act. The provisions of Section 80(P) (4) excluding the benefit of Section 80P to certain Cooperative bank is not applicable in our case and we are entitled to claim benefit of Section 8OP which allows us benefit of deduction of entire profit earned from banking activities carried by our Bank. Therefore, in view of the clear cut provisions, the assessee is entitled to deduction u/s 80P of the Act because the exclusion must be specific and is to be construed strictly. " 6. Ld. Authorized Representative placed reliance on the decision of Coordinate Bench in the case of M.P. State Coop. Agricultural. And Rural Development Bank Limited order dated 1st February, 2012. 7. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot fulfilling the second condition also. Hence, assessee is not PCARDB. Assessee is not PACS, as per the explanation to section 80P(4) PACS has been defined as in Part-V of the Banking Regulation Act, 1949. 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. Hence, assessee is neither PACS nor PCARDB hence no exemption is available to the assessee u/s 80P. It was also submitted by the assessee during the assessment proceedings, "the assessee is a Regional Rural Bank carrying on banking activities in Bhopal and Vidisha District. Under the Provisions of section 22 of the RRB Act. 9. It is also not in dispute that the assessee is not claiming exemption as PACS for PCARDB. To clarify the amended provisions as brought by the Finance Act, 2006, the C.B.D.T. has also issued circular dated 28.12.2006, according to which after insertion of sub Section (4) in Section 80P, the benefit of provisions of Section 80P shall not apply in relation to any cooperative bank other than primary agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are co-operative societies covered by section 80P(l) read with Board's Circular No. 319, dated January 11, 1982. 5. It is, therefore, reiterated that regional rural banks are not eligible for deduction under section 80P of the Income-tax Act, 1961, from the assessment year 2007-08 onwards. Furthermore, Circular No. 319, dated January 1 I, 1982, deeming any regional rural bank to be co-operative society stands withdrawn for application with effect from the assessment year 2007-08. The field officers may take note of this position and take remedial action, if required. " 11. Now coming to the decision of the Coordinate Bench in the case of M. P. State Agricultural Rural Development Bank relied on by the ld. Authorized Representative, we found that action of CIT(A) to allow benefit of Section 80P was confirmed by Tribunal on the finding that the assessee is an Agricultural and Rural Development Bank. It was also observed that as per the findings recorded by the ld.CIT(A), the assessee is a co operative land mortgaged bank, therefore, the benefit of Section 80P was available to the assessee despite insertion of sub Section (4) of Section 80P. Thus, the facts of this case are quite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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