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2016 (5) TMI 627 - ITAT PANAJI

2016 (5) TMI 627 - ITAT PANAJI - TMI - Deduction under sec. 80P(2)(a)(i) - claim of the assessee for deduction under sec. 80P(2)(a)(i) was rejected by AO on the ground that the assessee was a cooperative bank, and hence, not entitled to claim deduction by virtue of sec. 80P(4) - Held that:- The Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act after following the decision in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. .....

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e to dealings with the non-members are concerned the benefit of Section 80P of the Act would not be available. Thus 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. - ITA Nos. 19 & 20/PAN/2016, CO Nos. 15 & 16/PAN/2016 - Dated:- 26-4-2016 - Shri N. S. Saini And Shri George Mathan For the Petitioner : Shri R.M. Desai - CA. For the Respondent : Shri K .....

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61. 3. The facts of the case, in brief, are that the assessee filed its return of income after claiming deduction under sec. 80P(2)(a)(i) of the Act at NIL for the Assessment Year 2010-11 and Rs. 1,051/- for the Assessment Year 2011-12. It was claimed that the society is entitled to deduction under sec. 80P(2)(a)(i) as it was a Cooperative Society carrying on the business of banking or providing credit facilities to its members. However, the claim of the assessee for deduction under sec. 80P(2)( .....

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denied deduction u/s.80P(2). On this issue, The Hon ble High Court has decided as under: There is no dispute between the parties that the appellant is a co-operative society as the same is registered under the Co-operative 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 ban .....

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the appellant is not a State Cooperative Bank, a Central Cooperative Bank Thus what has to be examined is whether the appellant is a Primary Cooperative Bank as defined in Para V of the Banking Regulation Act. Section 5(ccv) of the Banking Regulation Act defines a primary cooperative bank to mean a cooperative society which cumulatively satisfies the following three conditions: 1) Its principal business or primary object should be banking business of Banking, 2) Its paid up share capital and res .....

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erring to the definition of Banking Business as defined in Section 5b of the Banking Regulation Act, held that the principal business of the Appellant is Banking Section 5b of the Banking Regulation Act defines banking to mean accepting of deposits for the purpose of lending or investment, of deposit of money from the public repayable on demand or otherwise. The impugned order juxtaposes the above definition with the finding of fact that the apel1ant did deal with non members in a few cases by s .....

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sits 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 erroneo .....

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s concerned the impugned order gives no finding on that basis to deprive the appellant the benefit of Section 80P of the Act The impugned order sets out the object clause of the appellant, which has 24 objects but thereafter draws no sequiter to conclude that the primary object is banking. Consequently there is no occasion to deal with the same as that is not the basis on which the impugned order holds that it is a Primary Cooperative bank. In the above view, the alternative contention of the ap .....

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ct the bye-laws of the appellant society originally in bye-law 9(b) clearly provided that no co-operative society shall be admitted to the membership of the society. Thus there was a bar but the same was amended w.e.f. 12th January, 2001 as to permit a society to be admitted to the membership of the society. Therefore for the subject assessment years there is no prohibition to admitting a society to its membership and one of three cumulative conditions precedent to be a primary cooperative bank .....

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as referred to bye law 9(d) would include the co-operative society. This is so as the definition of a society under the Co-operative Act is co-operative registered under the Co-operative Act. Besides the qualifying condition 3 for being considered as a Primary Cooperative Bank is that the bye laws must not permit admission of any other cooperative society This is a mandatory condition i.e. the bye laws must specifically prohibit admission of any other cooperative society to its membership. The .....

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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-member 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 .....

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