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The Income Tax Officer, Ward 1 (3) , Hubli Versus Bhavasar Kshatriya Co-operative Credit Society Ltd.

2015 (7) TMI 762 - ITAT BANGALORE

Entitlement to exemption u/s. 80P(2)(a)(i) - CIT(A) allowed claim holding that the assessee is a co operative society and not a co-operative bank and therefore the provisions of section 80P(4) of the Act are not applicable - Held that:- In the judgment of CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot [2015 (1) TMI 821 - KARNATAKA HIGH COURT] the Hon’ble jurisdictional High Court took the view that when the status of the assessee is a co-operative society and not a co-op .....

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cided in favour of assessee. - ITA No.1037/Bang/2014 - Dated:- 3-7-2015 - Shri N.V. Vasudevan and Shri Jason P. Boaz , JJ. For the Petitioner : Shri P. Dhivahar, Jt. CIT(DR) For the Respondent : None ORDER Per N.V. Vasudevan, Judicial Member This appeal by the Revenue is against the order dated 20.5.2014 of the CIT(Appeals), Hubli relating to assessment year 2010-11. 2. In this appeal, the Revenue has challenged the order of CIT(Appeals), whereby the CIT(Appeals) allowed exemption to the assesse .....

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ncome from carrying on the business of banking or providing credit facilities to its members, the same is allowed deduction. By the Finance Act, 2006 w.e.f. 1-4-2006, Sub-section (4) was inserted in Sec.80-P which provides as follows: (4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation : For the purposes of this sub-section,- (a) &quo .....

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y the Finance Act, 2006 w.e.f. 1.4.2007 by which sub-section (4) was inserted, the Assessee which was a co-operative society carrying on banking business was not entitled to deduction u/s.80P(2)(i) of the Act. According to the AO, the assessee was a co-operative bank and therefore the deduction u/s. 80P(2)(a)(i) cannot be allowed. In coming to the above conclusion, the AO noticed that the nature of the activity of the assessee, though registered as a credit co-operative society, is that of a ban .....

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only to primary agricultural credit societies or primary co-operative agricultural and rural development banks; and that the benefit of such deduction is not available to institutions like the assessee society. The AO also referred to section 5(b) of the Banking Regulation Act to hold that, if one of the two conditions of the appellant i.e. its primary object should be banking or its principal business must be transaction in banking business, is sufficient to bring the appellant into the concep .....

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₹ 10/- to ₹ 100/- for membership and no other condition is imposed. In other words, membership as is available in any banking institution is available in the case of the appellant society. ii) The purpose of accepting deposits from the public is for making investments and for lending to members. Confining the lending only to members makes no difference. iii) Deposits collected from the depositors are repayable on demand and do not go into the corpus of the appellant. iv) The assessee .....

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spect of income arising from the transactions only with its members. The Assessee relied on the order of the Tribunal in ITA No.8/Bang/2012 for the A.Y. 2008-09 in its own case wherein the issue was decided in favour of the assessee. Reliance was also placed on the on the decision the Tribunal in the case of Bangalore Commercial Transport Coop. Society Ltd., ITA No.1069/Bang/2010, in support of its claim that the Assessee is not a cooperative bank. 7. The CIT(A) agreed with the submissions of th .....

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dit Co-operative Society Ltd. in ITA No.1069/Bang/2010, wherein this Tribunal held that section 80P(4) is applicable only to cooperative banks and not to credit cooperative societies. The intention of the legislature of bringing in cooperative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a cooperative society and not a cooperative bank, the provisions of section 80P(4) will not have application in the assessee s case and therefore, it .....

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imary cooperative agricultural and rural development bank. Explanation: For the purposes 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 cooperative 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 .....

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ive Bank and a Primate Cooperative Bank. 9.2 From the above section, it is clear that the provisions of section 80P(4) has 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 a cooperative society carrying on credit facility to its members. This view is clarified by Central Board of Direct Tax vide its clarification No.133/06/2007-TPL dated 9th May, 2007. The difference between a .....

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ssue letter of credit, discounting bills of exchange, issue cheques, demand drafts (DD), Pay Orders, 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 follow the rules, regulations and directions issued by Reserve Bank of India (RBI). 1. As per the bye laws of the cooperative society. 2. Society cannot open savings bank account, current account, issue letter of credit, discounting bills o .....

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ning of the bank. Registrar has the power to inspect accounts and overall functioning of the bank. Part V Part V of the Banking Regulation Act is applicable to cooperative banks. Part V of the Banking Regulation Act is not applicable to cooperative banks. Use of words The word bank , banker , banking can be used by a cooperative bank. The word bank , banker , banking cannot be used by a cooperative society. 9.3 If the intention of the legislature was not to grant deduction u/s 80P(2)(a)(i) to co .....

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provisions of section 80P(4) will not have application in the assessee s case and therefore, it is entitled to deduction u/s 80P(2)(a)(i) of the Act. Hence, we are of the view that the order of the CIT(A) is correct and in accordance with law and no interference is called for. 10. The Hon ble Gujarat High Court in the case of Tax appeal No.442 of 2013 with Tax appeal No.443 of 2013 with Tax appeal No.863 of 2013 in the case of CIT Vs. Jafari Momin Vikas Co-op Credit Society Ltd. by judgment date .....

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agricultural credit society or primary co-operative agricultural and rural development bank. As per the explanation, the terms cooperative bank and primary agricultural credit society shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949. 5. Assessing Officer held that by virtue of section 80P(4), the respondent assessee would not be entitled to benefits of deduction under section 80P. CIT(Appeals) as well as the Tribunal reversed the decision of th .....

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erative banks other than those mentioned therein were meant to be excluded for the purpose of deduction under section 80P, a question would arise why then Legislature specified primary agricultural credit societies along with primary cooperative agricultural and rural development banks for exclusion from such exclusion and in other words, continued to hold such entity as eligible for deduction. However, the issue has been considerably simplified by virtue of CBDT circular No.133 of 2007 dated 9. .....

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al credit society or a primary co-operative agricultural and rural development bank. For the purpose of the said sub-section, co-operative bank shall have the meaning assigned to it in part V of the Banking Regulation Act, 1949. 3. In part V of the Banking Regulation Act, Cooperative Bank means a State Co-operative bank, a Central Co-operative Bank and a primary Co-operative bank. 4. Thus, if the Delhi Co op Urban T & C Society Ltd. does not fall within the meaning of Co-operative Bank as de .....

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