TMI Blog2014 (2) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-society – thus, there is no reason to interfere with the order of the CIT(A) – Decided against Revenue. - ITA No.174/Mds/2013 - - - Dated:- 23-8-2013 - N S Saini And V Durga Rao, JJ. For the Appellant : Shri T N Betgiri, Jt.CIT For the Respondent : Shri S Sridhar, Adv. ORDER:- PER : N S Saini This is an appeal filed by the Revenue and the cross objection filed by the assessee against the order of the ld. CIT(A)-I, Coimbatore, dated 1.11.2012. 2. The Revenue has taken the following grounds of appeal: 1. The order of learned Commissioner of Income-tax (Appeals) is erroneous and opposed to law. 2. The learned CIT (A) failed to appreciate the fact that the assessee's principal business is banking only after the considering the profits and it is not a credit society within the meaning of explanation below section 80P(4) and hence the assessee is not eligible for deduction u/s 80P(2)(a)(i). 3. The learned CIT (A) didn't call for any remand report and no opportunity was given to the AO to explain. 4. The learned CIT(A) didn't look into the facts which had been distinguished clearly before allowing the appeal. 5. For these and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shall have the meanings assigned to them in Part V of the Banking Regulation Act, 1949 (BR Act). Thus, the assessee does not fall within the meaning of Co-operative Bank or Primary Co-operative and Rural Development Bank so as to fall within clause(b) to the Explanation. Hence, what is left for consideration is as to under what definition the assessee falls. In other words, whether the assessee falls within the meaning of Cooperative Bank or Primary Agricultural Credit Society . It was submitted that under the BR Act, section 5(cci), Co-operative Bank means a State Co-operative Bank, a Central Co-operative Bank and a Primary Co-operative Bank . Further section 5(ccv), a Co-operative Bank means 1) The primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities(including the marketing of crops) and 2) The bye-laws of which do not permit admission of any other co-operative society as a member. PROVIDED 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank may deed fit to impose PROVIDED THAT nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a Co-operative Bank carrying on banking business at the commencement of the Banking Laws(Application to Co-operative Societies) Act, 1965[23 of 1965], for a period of one year from such commencement. D) It can be seen that no license is required for banking business in the case of a co-operative society which is a primary credit society, whereas for other co-operative societies to carry on banking business, they should be cooperative banks and they should hold license issued in that behalf by the Reserve Bank of India. [AIR 2003 KER 299]. E) The assessee, admittedly, does not fall under Primary Credit Society as defined in section 5(cci) of the BR Act. Therefore, it was argued that the assessee, admittedly, does not also fall within the meaning of Co-operative Bank as defined in section 5(cci) of the BR Act and does not hold a license issued in that behalf by the RBI. Hence, it cannot be said that the assessee has been carrying on the banking business and it cannot denied deduction u/s 80P of the Act by invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the business as one of banking, it was submitted that the mere presence of the word bank either in the return of income or its name is not determinative of its character. 12. It was further submitted u/s 5(b) of the Act, the term banking has been defined as accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise . Thus, in essence, the banking business is receiving money on current ac for deposit from the public repayable on demand and withdrawable by cheque, drafts or otherwise. In other words, the essence of the relationship of banker and customer is the affording of the facility to the customer to draw funds from the bank by issuing cheques. This is the primary characteristic of a banking business. Without it, the business is not banking as known. 13. It was further argued that to put it otherwise, an ordinary money lender who does not accept money on terms enabling a depositor to draw cheques upon him would not, therefore, be a bank or banker properly so called. The provisions of the Act would, therefore, apply only to limited class of cases wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) as got its application only to cooperative banks. Section 80P(4) does not define the word 'Cooperative Society'. The existing sub section 80P(2)(a)(i) shall be applicable to cooperative society carrying on credit facility to its members. This view is clarified by Central Board of Direct Taxes vide its clarification No.133/06/07/TPL dated 9th May 2007. The difference between Cooperative bank and Cooperative society are as follows: Nature Cooperative Society registered under Banking Regulation Act, 1949. Cooperative Society registered under Karnataka Cooperative Society Act, 1959 Registration Under the Banking Regulation Act, 1949 and Cooperative Societies Act, 1959 Cooperative Societies Act, 1959 Nature of business 1. As defined in Section 6 of Banking Regulation Act. 2. Can open Savings Bank account, current account, overdraft account, cash credit account, issue letter of credit, discounting bills of exchange, issue cheques, demand drafts (DD), Pay order, gift cheques, lockers, bank guarantees, etc. 3. Cooperative banks can act as clearing agent for cheques, DDs, pay orders and other forms. 4. Banks are bound to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Limited and is entitled to deduction u/s 80P(2)(a)(i). 15. The ld.D.R supported the order of the Assessing Officer whereas the ld. AR of the assessee reiterated the submissions made before the ld. CIT(A) and supported the order of the ld. CIT(A.) 16. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. In the instant case, deduction claimed u/s 80P of the Act by the assessee was denied by the Assessing Officer on the grounds that firstly, with effect from 1.4.2007 sub-section (4) of section 80P was inserted to provide that deduction u/s 80P shall not be allowed in case of a Co-operative Bank and secondly, that the assessee has two sets of members (i) normal members who became members by paying Rs. 10/- and Rs. 1/- with voting rights; and (ii) nominal members who became members by paying a nominal amount of Rs. 5/- and Rs. 2/- without voting rights and are the assessee s customers. 17. On appeal, the ld. CIT(A) allowed the deduction u/s 80P of the Act to the assessee by observing that new sub-section(4) was brought into the statute for prohibiting deduction to Co-operative Banks only and not to Co-operative C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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