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Commissioner of Income Tax, Panaji. Versus M/s VPK Urban Co-Op Credit Society Ltd.

2016 (5) TMI 691 - BOMBAY HIGH COURT

Benefit of deduction under Section 80P(2)(a)(i) - Held that:- Section 80P(1) of the Act restricts the benefits of deduction of income of cooperative society to the extent it is earned by providing credit facilities to its members. Therefore, to the extent the income earned is attributable to dealings with the nonmembers are concerned the benefit of Section 80P of the Act would not be available.

Considering the concurrent findings of facts in the present appeal, and no perversity has b .....

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r the respondents: Mr. Nitin Sardesai, Senior Advocate with Ms. G. Kakodkar, Advocate ORAL ORDER : (PER F.M. REIS, J.) Heard Ms. A. Desai, learned Counsel appearing for the appellant and Mr. N. Sardessai, learned Senior Counsel appearing for the respondent. 2. The above appeal challenges the orders passed by the authorities below whereby the respondent/assessee was held to be entitled for deduction as provided under Section 80P(2)(a)(i) of the Income Tax Act. Th .....

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s of the definition of a primary co-operative Bank. The learned Counsel has extensively taken us through the impugned order of the Appellate Tribunal to point out that the Tribunal has found that the respondent/assessee was not carrying out banking business. The learned Counsel, as such, submits that the substantial questions of law as proposed by the appellant be framed and the appeal be admitted. 3. On the other hand, Mr. Sardessai, learned Senior Counsel appearing for the responden .....

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it was not accepting deposits from the persons who were not members." The learned Senior Counsel further submits that this itself suggest that the Appellate Tribunal has rightly come to the conclusion that condition one of the definition of the primary co-operative Bank has not been satisfied and as such, the learned Counsel points out that this aspect has been duly covered by the judgment of the Division Bench of this Court in the case of Qupem Urban Co-operative Credit Society .....

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o:p> 9. There is no dispute between the parties that the appellant is a cooperative society as the same is registered under the Co-operative Societies 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 bank the provisions of Section 80P(4) of the Act would not exclude the .....

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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 reserves should not be less that r .....

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der after referring 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 appellant did deal with non me .....

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y permits the society to accept deposits 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 busines .....

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ue of primary object of the appellant is 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. 11. .....

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tion from admitting any other cooperative society as its member. In fact the bye-laws of the appellant society originally in bye-law 9(d) 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. 12 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 thr .....

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erative society. As rightly pointed out on behalf of the appellant the word society as referred to bye law 9(d) would include the cooperative society. This is so as the definition of a society under the Co-operative Act is co-operative society registered under the Cooperative 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 mus .....

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