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TMI Blog2012 (9) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... ad reservation in allowing claim to the assessee u/s. 80P(2)(a)(i) of the Act. A.O. referred to the clause (viia) to Sec. 2(24) of the I.T. Act which has been inserted to include the profit and gains of any business of Bank (including providing credit facilities) carried on by a cooperative society with its members extending the scope of definition of income. In the opinion of the A.O. the definition of the business of banking is enlarged under the Income Tax Act to include such Co-operative Societies which are engaged in providing credit facilities to the members. The A.O. has observed that in view of insertion of the of sub-sec. (4) to Sec. 80P with effect from 1.4.2007, the said section will not apply to any Co-operative Bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank. As per interpretation given by the AO, in view of sub-section-4 to Sec. 80P, the assessee is not entitled to deduction u/s. 80P(2)(a)(i) in respect of profits and gains from its business providing credit facilities to its members as activity of the assessee is in the nature of the banking business. A.O. also referred to part-V of the Banking Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely assigned to them in Part V of the Banking Regulation Act, 1949 (30 of 1949) (b)** ** ** 6.1 In view of the above explanation, the cooperative bank shall have the meaning stated in part V of the Banking Regulation Act. According to section 56 of the Banking Regulation Act - "co-operative bank" means a State Cooperative Bank, a Central Cooperative and a Primary Cooperative Bank. 6.2 In view of the above provision in part-V of the Banking Regulation Act, it is clear that cooperative society is not regarded as "co-operative bank". Further, it has also been laid down in section 56(ccii), part-V of Banking Regulation Act, that "Co-operative Credit Society" means a co-operative society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank. In view of this provision, it is clear that the meaning of co-operative credit society is separately given and it does not include co-operative bank other than co-operative land mortgage bank. 6.3 Further, CBDT circular bearing No. 3/2008 dated 12/03/2008 also makes it clear that the amendment to section 80P(4) has withdrawn the deduction u/s 80P in respect of co-operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation - For the purpose of this sub-section,- (a) "co-operative bank" and "primary agricultural 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 agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities." 5. It is to be mention here that up to A.Y. 2006-07, any Co-operative Society which was engaged in the business of carrying on banking was eligible for deduction in respect of the whole of the amount of profit attributable to its banking activities. For the benefit of deciding the present issue, it is necessary to consider the legal position as applicable up-to the A.Y. 2006-07, more particularly in view of Sub-Section (2) of Sec. 80-P. Section 80 P (2) reads as under :- "80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative society out of funds provided by State Government for the purpose." On careful perusal of above definition it is seen that basic mandate any co-operative society to cover in definition of 'Primary Co-Operative Bank' is that it's primary object or principal business should be transactions of banking business. The term 'banking' is defined in B.R. Act and as per said definition there is no restriction that depositor should be member of said society but it is public at large with whom business transactions can be carried out. Other two conditions as mentioned in cls. (ii) & (iii) are on fulfilling first condition given in cl. (i). In present case nothing is on record to suggest that all three conditions are fulfilled to hold that assessee which is a co-operative society is a "Primary Co-Operative Bank. 8. It is pertinent to note here that the definition of the Co-operative Credit Society is given in Clause (ccii) of Sec. 5 which reads as under : "co-operative credit society" means a Co-operative Society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank; " 9. The Banking Regulation Act, 1949 def ..... X X X X Extracts X X X X X X X X Extracts X X X X
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