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Commissioner of Income Tax Versus The Kalpadi Co-operative Township Limited

2016 (9) TMI 952 - MADRAS HIGH COURT

Claim of deduction u/s 80P - Assessee is a Co-operative Society - whether the Assessee falls within the ambit and four corners of the expression 'Co-operative Bank' or it is merely a credit society which is carrying on its business by making available credit facilities to its members? - Held that:- If we spare a look at the provisions of Tamil Nadu Co-operative Societies Act, 1983 henceforth called as Co-operative Societies Act, 1983 as well as its immediate predecessor namely Tamil Nadu Co-oper .....

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xtending certain credit facilities on the basis of Co-operative Principles, such a credit society is liable to be registered under the provisions of the 1983 Act as well as its predecessor 1961 Act. As is now made out such societies essentially render certain services or facilities for purposes of the benefit and promotion of the welfare of its members. In other words the basic theme behind the formation of such a society and its registration is to promote the objectives for which it is establis .....

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e of money is intended for the purpose of lending or investment by itself. Therefore, the crucial expression relevant for making one answer the description of banking is that it is capable of accepting money from the general public but not necessarily confined to its members. Any such activity carried on by anybody requires, apart from licensing, to answer the regulatory domain prescribed under the 1949 Act. Even a Co-operative Bank which carries on banking activity requires to be regulated by t .....

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stant case the Assessee being, a Co-operative Credit Society which in turn is providing for certain credit facilities to its members alone but not to the general public at large and which also does not receive monies by way of deposit from the general public, it does not answer the description of a Co-operative Bank. Consequently, the main provision contained under sub-section (i) of Section 80P gets attracted and consequently the Assessee is entitled to seek the deduction which has been provide .....

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in four different I.T.A.Nos. 2034, 2035, 2036 and 2037/MDS/2015 on its Bench. The Substantial Questions of Law raised in these Tax Case Appeals are as follows:- (i) Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal was right and justified in allowing the claim of deduction u/s 80P to assessee on the basis of a decision in the case of the Coimbatore District Central Co-operative Bank which was on the issue of tax deduction u/s 194A? (ii) Whether on .....

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tles such Societies? 2. In all the four cases, the Assessee is a Co-operative Society. Pursuant to a notice served on it by the Assessing Officer under Section 148 of the Act, the Assessee has made a claim that its income is not liable to suffer any assessment it being a Co-operative Credit Society, but not a Co-operative Bank. 3. Section 80P of the Act deals with all aspects relating to deduction in respect of income of Co-operative Societies. Sub-section (1) thereof clearly spelt out that in c .....

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its members, the whole of the amount of profits and gains of business attributable to such activities, becomes the total income of such a society. If, thus a Co-operative Society is providing facilities to its members alone then the income generated thereby is not liable to be taken into account and shall be deducted from its gross total income. Sub-section (4) of Section 80P is however, provided that the provisions of Section 80P shall not apply in relation to any Co-operative Bank other than .....

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y which is carrying on its business by making available credit facilities to its members. 4. If we spare a look at the provisions of Tamil Nadu Co-operative Societies Act, 1983 henceforth called as Co-operative Societies Act, 1983 as well as its immediate predecessor namely Tamil Nadu Co-operative Societies Act, 1961, which have provided for the registration of Co-operative Societies. Under Section 4 of the 1983 Act, a society can be registered which has as its objects of promotion of the econom .....

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w made out such societies essentially render certain services or facilities for purposes of the benefit and promotion of the welfare of its members. In other words the basic theme behind the formation of such a society and its registration is to promote the objectives for which it is established for the benefit of its members only. In contrast to the above principles, if we examine the expression 'banking' as defined in Section 5 (b) of the Banking Regulation Act, 1949 the distinction be .....

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ing of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise and such acceptance of money is intended for the purpose of lending or investment by itself. Therefore, the crucial expression relevant for making one answer the description of banking is that it is capable of accepting money from the general public but not necessarily confined to its members. Any such activity carried on by anybody requires, apart from licensing, to an .....

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of the said provision. Sub-section (4) of Section 80P therefore, in its application is confined in relation to Co-operative Banks only. In the instant case the Assessee being, a Co-operative Credit Society which in turn is providing for certain credit facilities to its members alone but not to the general public at large and which also does not receive monies by way of deposit from the general public, it does not answer the description of a Co-operative Bank. Consequently, the main provision co .....

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