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The Asst. Commissioner of Income Tax, Circle-7 (1) , HYDERABAD Versus M/s. Metrocity Criminal Courts Employees Mutually Aided Cooperative Credit Society Ltd.,

2015 (8) TMI 1034 - ITAT HYDERABAD

Disallowance made under section 80P(4) - non applicability to a co-operative bank other than a Primary Co-operative Agricultural and Rural Development Bank or Primary Agricultural Society - CIT(A) delted the disallowance - Held that:- No reason to interfere with the order of the learned Commissioner of Income-tax (Appeals). Obviously, the assessee is a co-operative society engaged in the business of providing credit facilities to its members. There is no dispute with reference to the transaction .....

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any reason to disallow the deduction under section 80P. The Revenue has raised the grounds that the provisions under section 80P(4) were applicable to the assessee. We do not see any reason to consider this ground as the restrictions brought out subsequently under section 80P(4) is applicable in the case of a co-operative bank not a co-operative society. - Decided against revenue. - I.T.A Nos. 1328, 1329 & 1330/HYD/2012, I.T.A. No. 1448/HYD/2013 - Dated:- 4-3-2015 - SHRI B. RAMAKOTAIAH AND S .....

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e-tax (Appeals)-VI, has passed the order in the assessment year 2010-11 dated July 20, 2013. Since common issues are involved, these appeals are considered together disposed of by this common order. Assessment years 2007-08, 2008-09 and 2009-10 2. The Revenue has raised the following common grounds in all the impugned assessment years. "1. The order of the learned Commissioner of Income-tax (Appeals) is erroneous in law and in the facts and circumstances of the case in allowing the assessee .....

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vities." 3. Briefly stated, the assessee is a co-operative society registered under the Andhra Pradesh Mutually Aided Co-operative Societies Act (APMACS Act) with membership consisting of all criminal court employees of twin cities and other towns. It collects interests from its members on loans provided and receives interests from banks/societies where it has placed fixed deposits. In the impugned assessment years, the assessee claimed deduction under section 80P(2)(a)(i) of the Income-ta .....

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to regional rural banks and does not apply to the assessee's case. Further, the learned Commissioner of Income-tax (Appeals) analysed the facts of the case with reference to the decision of the co-ordinate Bench at the Income-tax Appellate Tribunal, Bangalore, in the case of ACIT v. Bangalore Commercial Transport Credit Co-operative Society Ltd., in I. T. A. No. 1069/Bang/ 2010 and held that the assessee is a co-operative society engaged in the business of providing credit facilities to its .....

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stration Under the Banking Regulation Act, 1949 and the Co-operative Societies Act, 1959. Co-operative Societies Act, 1959. Nature of business 1. As defined in section 6 of Banking Regulation Act. 1. As per the bye laws of cooperative society. 2. Can open savings bank account, current account, overdraft account, issue letter of credit, discounting bills of exchange, issue cheques, demand drafts (DD), pay orders, gift cheques, lockers, bank guarantees, etc. 2. Society cannot open savings bank acc .....

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he Co-operative Societies Act. Filing of returns Co-operative banks have to submit annual return to Reserve Bank of India every year. Society has to submit the annual return to Registrar of Societies. Inspection Reserve Bank of India has the power to inspect accounts and overall functioning 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 co-operative banks. Part V of the Banking Regulation .....

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dence to the contrary, that it is not engaged in the activities of opening savings bank accounts, current accounts, issuing letter of credit, demand drafts, pay orders, bank guarantees, etc., which would lend it the character of a bank. (c) I have called for the assessment records and a perusal of the annual report does not reflect any activity of this kind. (d) It has been submitting its annual report to the Registrar of Societies and not to the Reserve Bank of India. 5.6 In view of the above, .....

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rs, then this section would have been deleted. The new provision to section 80P(4) which is brought into statute is applicable to co-operative banks and not to credit co-operative societies. The intention of the Legislature to bring co-operative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-operative society and not a co-operative bank, the provisions of section 80P(4) will not have applicable in the assessee's case and therefo .....

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ax (Appeals). Obviously, the assessee is a co-operative society engaged in the business of providing credit facilities to its members. There is no dispute with reference to the transactions with the members, as the Assessing Officer has not considered that issue at all in the order. Therefore, the assessee being a co-operative society registered under the Andhra Pradesh Mutually Aided Co-operative Societies Act is eligible for deduction under section 80P(2)(a)(i) of the Act. Not only that, the a .....

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o-operative bank not a co-operative society. This issue is also discussed in the co-ordinate Bench at Hyderabad decision in the case of Asst. CIT v. Advocates Mutually Aided Co-operative Society Hyderabad" pronounced on 20-02-2015, as under : "22.1. Ground No. 3 regarding deduction under section 80P(2)(d) is in respect of interest received from co-operative societies and the co- operative banks. We are unable to understand why the co-operative banks are not considered as co-operative s .....

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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.' 22.1. As per this section, the exemption provided under sub-section (2) or sub-section (3) does not apply to the incomes of the co-operative ba .....

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-operative society. Therefore, in the case of the assessee-society, sub-section (4) is not applicable and deduction under section 80P(2)(d) is certainly eligible to the assessee. In the assessment of a co-operative bank, the incomes may not be exempt after April 1, 2007, by virtue of sub-section (4), but the assessee is not a co-operative bank. Therefore, the Revenue ground is not only illogical but also not supported by the facts of the case. Moreover as seen, the recommendation made by the Ass .....

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quot; 5. In view of the above, we do not see any merit in the Revenue's grounds. Accordingly, the Revenue's appeals are dismissed. Assessment year 2010-11 6. In the assessment year, the Assessing Officer had passed little detailed order holding that the assessee has violated the Andhra Pradesh Co-operative Societies Act, 1964, therefore not eligible for deduction. The Assessing Officer however, allowed the deduction under section 80P(2)(d) of an amount of ₹ 51,45,018. The learned C .....

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ly Aided Cooperative Society, governed by the Andhra Pradesh Mutually Aided Co-operative Societies Act, 1995, but not the Co-operative Societies Act. Hence, the reasons attributed by the Assessing Officer, for rejecting the deduction under section 80P(2)(a)(i) are not applicable to the appellant- society. This has been clearly held by my predecessor, in the case of the appellant's own case for earlier assessment years. Hence, the reasons assigned by the Assessing Officer for rejecting the cl .....

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co-operative banks and not credit co-operative societies. Considering the finding given by the Income-tax Appellate Tribunal, Bangalore (supra), it is held that the appellant-society being a cooperative credit society is eligible for deduction under section 80P(2)(a)(i). However, it may be relevant to note that in this case, while furnishing the return of income, the appellant claimed deduction of ₹ 1,72,46,463 under section 80P(2)(a)(i) which was disallowed by the Assessing Officer. The s .....

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rdingly, the claim of deduction under section 80P(2)(a)(i) is restricted to ₹ 1,66,13,779 and this ground of appeal is treated as partly allowed. 6. The next ground of appeal relates to restriction of claim of deduction under section 80P(2)(d). As per the appellant, the Assessing Officer has allowed the deduction under section 80P(2)(d) to ₹ 51,45,018 as against the claim of ₹ 1,72,46,463 made under section 80P(2)(a)(i) of the Income-tax Act, whereby a separate ground of appeal .....

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from other sources (Total profits - profits from business) i.e., ₹ 2,32,63,447- ₹ 1,66,13,779 66,49,668 Interest from Co.op. Societies x Income from other sources Total interest receipts 13,42,472 x 66,49,668 = 7,03,784 1,26,84,283 Based on the facts of the case, the quantification of the deduction under section 80P(2)(d) in this case is justified and upheld at ₹ 7,03,784. However, the fact remains that the total deduction claimed under section 80P by the appellant while furni .....

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ricted to the total amounts of deduction of ₹ 1,72,46,463, as claimed in the original return of income, in order to avoid the situation that the assessed income is less than the returned income. 7. The appellant made the additional claim of deduction under section 80P(2)(c) being eligible for deduction, as cooperative credit society, which was omitted to be claimed in the original return of income. Though, on facts the appellant is eligible for deduction under section 80P(2)(c), for the re .....

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disallowed, for statistical purpose. 8. In the result, the Assessing Officer is directed to allow the deduction under section 80P(2)(a)(i), for ₹ 1,66,13,779 and the deduction under section 80P(2)(d), to the extent of ₹ 6,32,684 being the difference between the original claim under section 80P (Rs.1,72,46,463) and revised deduction under section 80P(2)(a)(i) (Rs. 1,66,13,779), without any further deduction under section 80P(2)(c). In the result, the appeal is allowed." 7. In vie .....

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