TMI Blog2015 (2) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... rative bank, therefore, it cannot be a co-operative bank and therefore the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee shall be entitled for deduction u/s 80P(2)(a)(i). We, therefore, set aside the order of CIT(A) and allow deduction to the Assessee u/s 80P(2)(a)(i). - Decided in favour of assessee. - ITA NO. 392/PNJ/2013 - - - Dated:- 11-2-2015 - Shri P.K. Bansal And Shri D.T. Garasia JJ. For the Appellant : Shri P.Y. Vaidya, Adv. For the Respondent : Shri B. Bala Krishna, Ld. D.R. ORDER Per P.K. Bansal This appeal has been filed by the assessee against the order of CIT(A), Belgaum dtd. 19.11.2013. The only issue involved in this appeal relates to the claim of the deduction u/s 80P(2)(a)(i). 2. After hearing the rival submissions and pursuing the orders of the authorities below, we noted that the issue involved in this appeal is duly covered by the decision of this bench in ITA No.325/PNJ/2013 for the assessment year 2010-11 in the case of the assessee in which this Tribunal vide order dated 28.02.2014, has held as under :- 2.3 We have heard the rival submissions and carefully considered the same alongw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the statute by the Finance Act, 2006 w.e.f. 1.4.2007. The explanation to the section defines the co-operative bank and primary agricultural credit society to have the same meaning as assigned to them in Part-V of the Banking Regulation Act, 1949. It is not the case of either of the parties that the Assessee is a primary co-operative agricultural and rural development bank. It is also not the claim of the Assessee that Assessee is a primary agricultural credit society. If we read both the sections, Sec. 80P(2)(a)(i) and Sec. 80P(4) together, we find 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. After the insertion of Sec. 80P(4), the provisions of Sec. 80P(2)(a)(i) were not amended, rather the co-operative society engaged in carrying on business of banking facilities to its members continued to be entitled for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in carrying on these activities/facilities for the persons other than its members, the co-operative society, in our opinion, 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. Therefore, 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. 2.3.2 Now, the question before us is whether the Assessee is a co-operative bank or not. Co-operative Bank‟ is defined in Part V of the Banking Regulations Act, 1949 as under : Co-operative bank means a state co-operative bank, a central co-operative bank and a primary co-operative bank: 2.3.3 From the definition of Co-operative bank it is apparent that Co-operative bank means state‟ co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the Assessee, for this we have to look into the bye-laws of the Assessee. The objects of the Assessee in this case are enumerated as under :- (a) To finance artisans and industrialists interested or engaged in the establishment and conduct of cottage industries, village industries or small scale industries. (b) To promote thrift, self-help and mutual help amongst members. (c) To perceive deposits of every king from members. (d) To raise loans from the Belgaum District Central Co-op. bank upto its borrowing limit. (e) To raise loans to members of terms decided upon by the Board, subject to the provisions of these Bye-laws and the rules approved by the Registrar of Co-operative Societies. (f) To create funds by means of depositors and borrowing hereafter to lend to members of the society at moderate rates of interest. (g) To open Branches, sub-branches, offices etc., by whatever name called within the area of operation of the society, with the prior permission of the Registrar and to frame rules for their working. (h) To become members of the District Central Co-op. Bank Ltd., and District Co-operative Union Ltd., for the furtherance of its objects. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-operative society [and is residing in the area of the operation of the society] and is competent to enter into contract under the Contract Act, 1872 (Central Act IX of 1872);] [(a-1) a depositor;] (b) any other co-operative society; (c) the State Government or the Central Government; (d) the Life Insurance Corporation of India, State Warehousing Corporation and such other institutions as may be approved by the State Government; (e) a firm, a company or any other body corporate constituted under any law for the time being in force including a society registered under the Karnataka Societies Registration Act, 1960 (Karnataka Act 17 of 1960); (f) a Market Committee established under the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (Karnataka Act 27 of 1966); (g) a local authority. Explanation.-For the purpose of this clause, local authority means, a Municipal Corporation, Municipal Council, Town Panchayat, Zilla Panchayat, Taluk Panchayat or Grama Panchayat constituted under any law for the time being in force] (2) No co-operative society shall, without sufficient cause, refuse admission to membership to any person duly qualified ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive bank providing banking facilities to members is not eligible to claim deduction u/s 80P(2)(a)(i) after the introduction of sub-section (4) to section 80P. In view of this finding, the Assessee was denied deduction u/s 80P(2)(a)(i). We have also gone through the decision of the Bangalore Bench of the Tribunal in the case of ITO vs. Divyajyothi Credit Co-operative Society Ltd. (supra) in ITA No. 72/Bang/2013. In this case, we noted that the Hon'ble Tribunal confirmed the order of CIT(A) following the decision of the Tribunal in the case of ACIT, Circle 3(1), Bangalore vs. M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. in ITA No. 1069/Bang/2010 holding that Sec. 80P(2)(a)(i) is applicable only to a co-operative bank and not to credit co-operative society. With due regards to the Bench, we are unable to find any term credit co-operative society‟ u/s 80P(2)(a)(i) or u/s 80P(4), therefore, this decision cannot assist us. We noted that the Hon'ble Gujarat High Court in the case of CIT vs. Jafari Momin Vikas Co-op. Credit Society Ltd. in Tax Appeals no. 442 of 2013, 443 of 2013 and 863 of 2013 (supra) vide order dt. 15.1.2014 took the view that S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and objects allows the assessee cooperative society to accept deposits of money from public for the purpose of lending or investment. In our opinion until and unless that condition is satisfied, it cannot be said that the prime object or principal business of the assessee is banking business. Therefore, the assessee will not comply with the first condition as laid down in the definition as given u/s. 5(ccv) of the Banking Regulation act, 1959 for becoming primary cooperative bank . The assessee, therefore, cannot be regarded to be primary cooperative bank and in consequence thereof, it cannot be a co-operative bank as defined under part V of the Banking Regulation Act 1949. Accordingly, in our opinion the provisions of section 80P (4) read with explanation there under will not be applicable in the case of the assessee. The assessee, therefore, in our opinion will be entitled for the deduction u/s 80P(2)(a)(i). We accordingly confirm the order of CIT(A) allowing deduction to the assessee. 2.3.9 We, therefore, in view of our aforesaid discussion hold that since the Assessee cannot be regarded to be a primary co-operative bank, therefore, it cannot be a co-operative bank and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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