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2015 (11) TMI 739 - ITAT JAIPUR

2015 (11) TMI 739 - ITAT JAIPUR - [2015] 42 ITR (Trib) 176 (ITAT [Jai]) - Deduction under section 80P(2)(a)(i) denied - Held that:- After considering the aims and objects of the assessee, it is held that the assessee is not a co-operative bank in terms of the Banking Regulation Act.

The case law relied upon by the Commissioner of Income-tax (Appeals) are not squarely applicable on the case of the assessee. Therefore, we reverse the order of the learned Commissioner of Income-tax (Appe .....

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he order of the learned Commissioner of Income-tax (Appeals)-III, Jaipur dated August 29, 2011 for the assessment year 2008-09. The grounds raised in the appeal are as under : (1) The impugned additions and disallowances made in the order under section 143(3) of the Income-tax Act, 1961 dated August 29, 2011 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same may kindly be deleted. (2) ₹ 50,32,224 : The learned Commissioner of Inco .....

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of deduction made by the society under section 80P(2)(a)(i) of the Act. The claim of deduction so denied, being totally contrary to the provisions of law and facts kindly be allowed as claimed. 2. The assessee-society is engaged in the business of banking. The Assessing Officer observed that the assessee filed its return of income on September 30, 2008 declaring total income at nil. The case was scrutinised under section 143(3) of the Income-tax Act. The Assessing Officer gave show-cause notice .....

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entitled for deduction by virtue of section 80P(4) of the Income-tax Act. He also considered the Central Board of Direct Taxes Circular dated September 20, 2010 on this issue. The Assessing Officer held that the assessee-bank has not furnished any documentary evidence in respect of its claim and has not furnished the objects of the bank wherefrom its claim that it is an agricultural and rural development bank can be verified. The assessee after this amendment is not entitled for deduction under .....

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ner of Income-tax (Appeals) who had confirmed the addition by observing as under : "2.3. I have carefully considered the observations of the Assessing Officer and also the submission made by the learned authorised representative in this regard. The basic controversy in the present appeal is about the admissibility of section 80P(2)(a)(i) of the Act, in the case of the appellant-bank. The Assessing Officer has mentioned that after the amendment in section 80P, with effect from April 1, 2007, .....

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0P(2)(a)(i) of the Act. On the other hand the learned authorised representative through his written submission, contended that a liberal interpretation of relevant sections with proper understanding of the facts would lead to a conclusion, which would support the appellant's case. In the light of the above delib erations, eventually, I find that the Assessing Officer is quite justified, while holding that the appellant-bank is not entitled for the benefit extended under section 80P of the Ac .....

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bank should be providing a long- term credit for the 'agriculture and rural development' activities. 2.3.1 In view of the divergent understanding of law on the part of the Assessing Officer and the learned authorised representative, to perceive the exact meaning and ambit of the above provisions, the help of the principle of interpretation of law was considered relevant and essential, under the given circumstances. The cardinal rule of interpretation of law suggests that when the meaning .....

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In this regard the reliance is placed on following decisions : (i) Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) ; (ii) Patil Vijaykumar v. Union of India [1985] 151 ITR 48 (Karn); (iii) CIT v. T. N. Aravinda Reddy [1979] 120 ITR 46 (SC) ; and (iv) IPCA Laboratory Ltd. v. Deputy CIT [2004] 266 ITR 521 (SC). The learned authorised representative, in his submission, contended that the interpretation of law should be done, in a manner, which is beneficial to the assessee, .....

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relevant provisions in different manner than what they appear from their plain meaning of relevant phrases used therein, is found untenable and rejected accordingly. 2.3.2 In view of the above legal position, the factual position of the appellant is examined and the outcome of the same is being discussed as under : Sr. No. Conditions of the relevant sections, i.e., 80P(2)(a)(i) and 80P(4) Appellant s factual position i.r.o. such conditions (as mentioned in the manual of the bank) Remarks 1. The .....

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everal objects of the appellant-bank, thus the condition is not found fulfilled. 3. Being not an ordinary co-operative bank, the eligible bank/society cannot accept loans/deposits from its member s/non-member s. The manual of the appellant-bank authorises them to accept such deposits also. In view of such fact, the appellant-bank assumes the characteristic of a ordinary co-operative bank thus does not qualify for deduction under section 80P of the Act. 2.3.3 As far as the issue of allowability o .....

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r. Accordingly, in the current year the claim of the appellant for impugned deduction has been considered in the light of the amended relevant provisions, as discussed hereinabove. Under the above facts and circumstances, it is evident that the appellant-bank has not fulfilled the necessary criterions and condi tions, therefore, they are found not eligible for the deduction under section 80P(2)(a)(i) of the Act. Accordingly the Assessing Officer's stand, in this regard, is upheld and the pre .....

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section 80P(2)(a)(i). The assessee is a co-operative society and has been providing credit facilities to its members. The assessee is not a co-operative bank or not a primary co-operative bank or not even a Regional Rural Bank. The assessee is not engaged in the business of banking inasmuch as it has not obtained licence required from the Reserve Bank of India. The Assessing Officer wrongly interpreted section 80P(4). Only a primary agricultural co-operative society (PACS) or a primary co-operat .....

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es all types of credit societies including those which are primary agricultural credit society, engaged in providing credit facilities to its members, eligible to the deduction. Thus the assessee's case is covered under section 80P(2)(a)(i). Section 80P(4) was inserted by the Finance Act, 2006 with effect from April 1, 2007, i.e., for and from the assessment year 2007-08. However, the learned Assessing Officer allowed the deduction under section 80P(2)(a)(i) in the assessment year 2007-08. T .....

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Central Board of Direct Taxes Circular No. 14 of 2006 dated December 28, 2006 ([2007] 288 ITR (St.) 9 ) . He further drew our attention to definition of "banking", "co-operative bank". He further relied on the following cases : (i) Deputy CIT v. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. [2012] 137 ITD 163 (Panaji) (ii) CIT v. Jafari Momin Vikas Co-op. Credit Society Ltd. [2014] 362 ITR 331 (Guj) ; (iii) CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niy .....

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il 8, 2011 ; (viii) ITO v. Jankalyan Nagri Sahakari Pat Sanstha Ltd. [2012] 33 CCH 475 (Pune-Trib.) ; and (ix) CIT v. Surat Vankar Sahakari Sangh Ltd. Tax Appeal No. 1150 of 2013 dated January 17, 2014 [2014] 43 taxmann.com 431 (Guj). 5. The authorised representative further drew our attention to the objects of the assessee, the definition of "agriculture" as provided under the NABARD Act and definition of "co-operative bank", primary agricultural credit society, primary co-o .....

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aw that every word used by the Legislatures is significant and has to be given due weightage. The courts cannot supply something missing. Therefore, following the principle of strict interpretation of fiscal statute, the word "taluk" has to be understood in its plain grammatical meaning and there is no scope of any inference. Had the Legislatures intended, it could have used the word "tehsil". Thus, even if the operation was spread to 6 tehsils, it was, in any case within one .....

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llow the deduction under section 80P(2)(a)(i) of the Act. 7. At the outset, the learned Departmental representative supported the order of the learned Commissioner of Income-tax (Appeals). 8. We have heard rival contentions and perused the material on record. The intention of the amendment made in section 80P(4) has been explained by the Central Board of Direct Taxes vide Circular No. 14 of 2006 dated December 28, 2006 which is reproduced as under (page 9 of 288 ITR (St.)) : "Circular No. 1 .....

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otal income of the co-operative societies engaged in the business of banking or providing credit facilities to its members, or business of a cottage industry, or of marketing of agricultural produce of its members, or processing, without the aid of power, of the agricultural produce of its members, etc. 22.2 The co-operative banks are functioning at par with other commercial banks, which do not enjoy any tax benefit. Therefore, section 80P has been amended and a new sub-section (4) has been inse .....

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in clause (24) of section 2 to provide that the profits and gains of any business of banking (including providing credit facilities) carried on by a co- operative society with its members shall be included in the definition of 'income'. 22.4 Applicability-From the assessment year 2007-08 onwards." 9. The assessee is a co-operative society registered under the Rajasthan State Co-operative Societies Act, 1953. As per copy of memorandum and rules and regulations of the assessee, the n .....

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ank' means a co-operative society, other than a primary agricultural credit society." 10. As per this Board's circular this amendment was applicable from the assessment year 2007-08. In the assessment year 2007-08, the Assessing Officer had allowed the benefit under section 80P(2)(a)(i) of the Act in the case of the assessee. This issue has been considered by the various High Courts as well as the Income-tax Appellate Tribunals particularly in the case of Asst. CIT v. Bangalore Comm .....

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not to credit co-operative societies. The intention of the Legislature to bring in co-operative banks into the taxation structure was mainly to bring in par with commercial banks. Since the assessee is a co-oper ative society and not a co-operative bank, the provisions of section 80P(4) will not have application in the assessee's case and, therefore, it is entitled to deduction under section 80P(2)(a)(i) of the Act . . . The facts being similar, the decision squarely applies." 11. The .....

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