TMI Blog2015 (6) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... Banking Regulation Act, 1949, are to be satisfied cumulatively and except condition (2) the other two qualifying conditions are not satisfied. Ergo, appellant cannot be considered to be a co-operative bank for the purposes of Section 80P(4) of the Act. Thus, the appellant is entitled to the benefit of deduction available under Section 80P(2)(a)(i) of the Act. The contention of Ms. Dessai, learned Counsel for the revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cannot be upheld. This for the reason that Section 80P(1) of the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. As at the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction under Section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. - Decided in favour of assessee. - TAX APPEAL NOS. 22 TO 24 OF 2015 - - - Dated:- 17-4-2015 - F.M. REIS AND M.S. SANKLE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 80P(4) of the Act which excluded the benefit of Section 80P of the Act to cooperative banks. Consequently, the appellant was assessed to a income of ₹ 1.65 crores by the order dated 14 February 2014 of the Assessing Officer under Section 143 of the Act. (c) Being aggrieved by the order dated 14 February, 2014 of the Assessing Officer, the appellant preferred an appeal to the Commissioner of the Income Tax (hereinafter referred to as 'CIT(A)). By an order dated 15 July, 2014, the CIT(A) allowed the appellant's appeal holding that the appellant is not a Cooperative Bank but a Co-operative Credit Society. Thus, not hit by the exclusion provided under Section 80P(4) of the Act. Consequently, the Assessing Officer was directed to extend the benefit of deduction under Section 80P(2)(a)(i) of the Act to the appellant. (d) Being aggrieved by the order dated 15 July, 2014 of the CIT(A), the Revenue preferred an appeal to the Tribunal. By the impugned order dated 26 November, 2014, the Tribunal allowed the appeal of the Revenue to the extent it held that the appellant is a Cooperative Bank and therefore, not entitled to the benefit of Section 80P(2)(a)(i) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reserves of which are not less than one lakh of rupees : and (3) 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 to the share capital of such Co-operative society out of finds provided by the State Government for the purpose. ' 6. Mr. Chythanya K. K., the learned Counsel for the appellant in support of the appeals submits as under : (a) The appellant is admittedly a co-operative society registered under the Co-operative Societies Act and is engaged in providing credit facilities to its members. Consequently, the income earned by the appellant from its activity of providing credit facilities to its members, is entitled to deduction under Section 80P(2)(a)(i) of the Act. The appellant is not a co-operative Bank and thus, the exclusion provided under Section 80P(4) of the Act would have no application. (b) The impugned order erroneously holds that the appellant to be a primary co-operative Bank, on the ground that it does satisfy Section 5(1)(ccv) of the Banking Regulation Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two activities i.e. banking business or providing credit facilities to its members. We are not concerned with the other subclauses of Subsection (2) or Subsection (3) of Section 80P(4) of the Act for the purposes of this case. Subsection (4) provides that Section 80P of the Act will not apply in relation to a cooperative bank other than a primary agricultural credit society or primary agricultural and rural development bank. Before us, the appellant is not claiming to be a primary agricultural credit society or primary agricultural and rural development bank but it claims to be engaged in providing credit facilities and not a banking society. Thus not hit by subsection (4) of Section 80P of the Act. 9. There is no dispute between the parties that the appellant is a cooperative society as the same is registered under the Co-operative Societies Act. The appellant is claiming deduction of income earned on providing credit facilities to its members as provided under Section 80P(2)(a)(i) of the Act. It is appellant's case that, it is not carrying on the business of the banking. Consequently, not being a co-operative bank the provisions of Section 80P(4) of the Act would not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concerned it is submitted that the Bye-law 43 only permits the society to accept deposits from its members. It is submitted that Bye laws 43 does not permit receipt of deposits from persons other then members, the word any person is a gloss added in the impugned order as it is not found in Bye law 43. It is undisputed that the transactions with non members are insignificant/miniscule. On the above basis it cannot be concluded that the appellant's principal business is of accepting deposits from public and therefore it is in banking business. In fact, the impugned order erroneously relies upon bye-law 43 of the society which enables the society to receive deposits to conclude that it can receive deposits from public. However, the impugned order relies upon bye-law 43 to conclude that it enables the appellant to receive deposits from any person is not correct. Thus in the present facts the finding that the appellant's principal business is of Banking is perverse as it is not supported by the evidence on record. So far as the issue of primary object of the appellant is concerned the impugned order gives no finding on that basis to deprive the appellant the benefit of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... membership. The Revenue has not been able to show any such prohibition in the bye laws of the appellant. Thus even the aforesaid qualifying condition (3) for being considered as a primary cooperative bank is not satisfied. Thus, the three conditions as provided under Section 5 (CVV) of the Banking Regulation Act, 1949, are to be satisfied cumulatively and except condition (2) the other two qualifying conditions re not satisfied. Ergo, appellant cannot be considered to be a co-operative bank for the purposes of Section 80P(4) of the Act. Thus, the appellant is entitled to the benefit of deduction available under Section 80P(2)(a)(i) of the Act. 13. The contention of Ms. Dessai, learned Counsel for the revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cannot be upheld. This for the reason that Section 80P(1) of the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. Therefore, to the extent the income earned is attributable to dealings with the non-members are concerned the benefit of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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