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2016 (4) TMI 27 - ITAT AHMEDABAD

2016 (4) TMI 27 - ITAT AHMEDABAD - TMI - Deduction u/s 80P(4) - Held that:- Assessee is not coming under the purview of co-operative bank and its activities are confined to its members whereas in case of co-operative bank dealings are done with members as well as nonmembers and the operational activities of co-operative bank is quite similar with the other scheduled bank working under the strict guidelines and norms of RBI as mentioned in the Banking Regulation Act, 1949.

We, therefor .....

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to assess the assessee cooperative society as a co-op. society falling under the category of provisions of section 80P(2)(a)(i) of the Act and not under the provisions of sec.80P(4) of the Act and accordingly frame fresh assessment order after providing reasonable opportunity of being heard to the assessee who will file financial statement and details of income earned and then decide the quantum of deduction available, if any, to assessee u/s 80P(1) of the Act. - ITA No. 2445/Ahd/2012 - Dated:- .....

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in this appeal :- 1. The order passed u/s 250 on 8.8.2012 for AY 2008-09 by CIT(A)-GNR, Ahmedabad upholding the disallowance of deduction u/s 80P(2)(a)(i) of the Act to the extent of ₹ 1,42,963 is wholly illegal, unlawful and against the principles of natural justice. 2. The ld. AO has grievously erred in law and or on facts in restricting the deduction u/s 80P(2)(a)(i) to R.2,23,877 on the ground that interest income earned on surplus funds did not constitute the operational income. Sinc .....

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Briefly stated facts as culled out from the material on record are that the assessee is a Co-operative Society engaged in the activity of providing credit facilities to its members and it e-filed its return of income on 30/9/2008 declaring total income at Rs.NIL after claiming deduction u/s 80P at ₹ 2,42,211/-. The case was selected for scrutiny assessment on CASS and notice u/s 143(2) of the Act was issued on 29/09/2009 and served upon the assessee. During the course of assessment proceed .....

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in providing credit facilities to its members. We find that CIT(A) has held that the assessee society is a credit co-op. society falling under the provisions of section 80P(2)(a)(i) and is not a co-op. bank and therefore, section 80P(4) is not applicable to the assessee. To arrive at this conclusion ld. CIT(A) has observed as under :- "6. All the grounds are related to the disallowance of claim of deduction of income u/s 80P(2)(a)(i). I have gone through the facts of the case, the assessmen .....

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he public and do other banking activities as defined in the sec.5(b) of Banking Regulation Act would qualify to be a co-op. bank. I agree that taking deposits from public cannot be equivalent to taking deposits from members of the society only which has got a much restricted meaning and the relationship between a society and a public has to be understood in a much larger sense. In this connection, it would be useful to refer to the decision of the Hon'ble Jurisdictional High Court wherein th .....

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ivity viz., business of banking or providing credit facilities to its members. On a plain reading it becomes apparent that the two activities are distinct and separate activities. The first activity viz., carrying on the business of banking connotes a larger activity than the activity of providing credit facilities to its members. The latter is restricted qua the members of the society while the former is wide enough to take within its sweep as its potential customers, both the members and non m .....

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eport, the following has been narrated : "7.1 Cooperative credit structure in India is characterized by a plethora of institutional segments. Leaving aside the agricultural cooperative credit institutions, in the urban cooperative credit fold itself, there are 3 types of institutions recognized by the Banking Regulation Act 1949 (As Applicable to Cooperative Societies). As discussed else where in the Report, these are. (i) primary credit societies, who virtually function like banks. but who .....

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e deals with these cooperative credit society. 7.2 Under the provisions of Section 5(ccii) of Banking Regulation Act, 1949 (AACS), a cooperative credit society is defined as a cooperative society, "the primary object of which is to provide financial accommodation to its members and includes a cooperative land mortgage bank." This type of institutions are thrift societies. The distinction between a primary credit society and a cooperative credit is with reference to their nature of busi .....

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be granted to it." The above report clearly defines the circumstances in which a credit society can be allowed to carry on banking business. These are primary credit society, which can carry on business of banking until it is granted a license or notified that a license cannot be granted to it. These credit societies would not get the benefit of the deduction u/s *)P(2)(a)(i). Considering the above facts, it is clear that the appellant is not allowed to do banking business as defined under .....

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ctfully agree with the decision of the ITAT Banglore "B" bench in the case of ACIT vs. M/s Bangalore Commercial Transport Credit Co-op. Society Ltd. in ITA No.1069/Bang/2010 for AY 2007-08 dated 8/4/2011 which has decided the issue in favour of the appellant. Therefore, it is held that the appellant is entitled to the benefit of deduction u/s 80P(2)(a)(i) of the IT Act." 4. We have heard the rival contentions and perused the material on record. From going through the assessment or .....

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rative bank or whether it is a credit co-op. society. After going through the finding of ld. CIT(A) we find that for a co-op. society to be covered u/s 80P(4) of the Act, it is necessary that assessee needs to obtain license from Reserve Bank of India (RBI) for running the activities as co-op. bank as per Banking Regulation Act, 1949. From going through the submissions of ld. AR we find that assessee society is duly registered under the Gujarat Co-op. Societies Act and is providing credit facili .....

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members and other customers at reasonable rates to open stores make arrangement and following rules constructed by management committee as well as recognized rules by Hon. Registrar, provide debit facilities to members. 4.a As its own members occupation employment business and Gruh Udhyog may be get encouragement provide loan advance facilities against the form of that goods and in that related if required need in that connection purpose to make whole sale purchasing take agency or and for othe .....

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