TMI Blog2017 (7) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary cooperative bank. Now what is banking has been defined in section 5(b) of the Banking Regulations Act, 1949 and section 56, nowhere states that the context in which primary cooperative bank has been defined is in context different from that as contemplated u/s 5(b) of the Banking Regulations Act, 1949. Therefore, only those transactions of banking business come within the ambit of clause (ccv) of section 56 which meet the mandate of section 5(b) of the Banking Regulations Act, 1949. As find in the case of Shri Laxmi Credit Souhard Sahakari Ltd. (2015 (11) TMI 647 - KARNATAKA HIGH COURT ) has upheld the claim of assessee under identical circumstances and, therefore, respectfully following the decision of Hon’ble Karnataka High Court, the assessee’s claim is allowed. - ITA No.1794/Del/2015 - - - Dated:- 17-2-2017 - SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER For The Appellant : Shri Akhilesh Kumar, Adv. For The Respondent : Shri S. K. Jain, Sr.DR ORDER PER S.V. MEHROTRA, A.M : This is an appeal filed by the assessee against the order dated 09.12.2014 passed by the Commissioner of Income Tax (Appeals), Ghaziabad, u/s 143(3) of the Income Tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ld. CIT(A) dismissed the assessee s appeal by observing as under :- 5.3 I find that in the bye laws of society, it has used the term bank/society which shows the intention of society to conduct banking transactions. I also find that the society has charged interest at the rate of 12% whereas the bank has charged interest at 10%. The profit and loss account of the society shows that it has earned interest of ₹ 82,07,335/- during the year but has paid interest of ₹ 5757555/-. Besides, it has earned a dividend of ₹ 499767/- from Bank. All these facts clearly prove that the society exists for profit making and principle of mutuality does not apply in this case. The paid capital of the society is ₹ 10293500/t and by virtue of Section 56(ccv) of Banking Regulation Act, 1949 a cooperative society other than the primary agricultural credit society would be deemed to be a primary cooperative bank if it fulfills following condition:- Primary co-operative bank means a co-operative society, other than a primary agricultural credit society- ( 1) The primary object or principal business of which is the transaction of banking business; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs Ltd. Employees (salary owners) Cooperative debt and credit society ltd.. Further, scope of society is limited to the employees of M/s Sri Ram Pistons and Rings Ltd.. Ld. counsel submitted that before any co-operative society can be treated as co-operative bank, the various conditions of the Banking Regulations Act, 1949 (BRA) have to be fulfilled. In this regard, ld. counsel referred to page 33 of Paper Book, wherein, BRA is contained, and referred to section 5(b) of the same which reads as under :- 5. Interpretation. - [In this Act], unless there is anything repugnant in the subject or context, - ( b) banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; 6. With reference to above definition of banking, ld. counsel pointed out that unless the deposits of money are received from general public, the cooperative society cannot fall within the definition of banking. Ld. counsel further referred to page 39 of Paper Book and referred to section 22 of the Banking Regulations Act, 1949, sub-section (1) of which reads as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other cooperative society as a member: PROVIDED that this sub-clause shall not apply to the admission of a cooperative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose. Explanation.--If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final; 8. With reference to aforementioned mandate of Banking Regulations Act, 1949, ld. counsel submitted that if the dispute arises as to the primary objects of principle business of any co-operative society i.e. a primary credit society or a co-operative bank then the dispute is to be resolved by RBI and this cannot be done by the Assessing Officer. 9. In view of the aforementioned sections of the Banking Regulations Act, 1949, ld. coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961. 1. Please refer to your letter No.DCUS/30688/2007, dated 28.03.2007 addressed to the Chairman, Central Board of Direct Taxes, on the above given subject. 2. In this regard, I have been directed to state that sub-section (4) of section 80P provides that deduction under the said section shall not be allowable to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. For the purpose of the said sub-section, cooperative bank shall have the meaning assigned to it in part V of the Banking Regulations Act, 1949. 3. In part V of the Banking Regulation Act, Co-operative Bank means a State Co-operative Bank, a Central Co-operative Bank and a Primary Co-operative Bank. 4. Thus, if the Delhi Co-op Urban T and C Society Ltd. does not fall within the meaning of Co-operative Banks as defined in part V of the Banking Regulation Act, 1949, sub-section (4) of Section 80P will not apply in this case. 7. Insofar as the first question of law is concerned, there are a series of decisions of this court wherein it has been repeatedly answered in favour of the assessee. Two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Can open savings bank account, current account, overdraft account, cash credit account issue letter of credit, discounting bills of exchange, issue cheques, demand drafts (DD), Pay orders, Gift cheques, lockers, bank guarantees etc. 2. Society cannot open savings bank account, current account, issue letter of credit, discounting bills of exchange, issue cheque, demand draft, pay orders, gift cheques, lockers, bank guarantees, etc. 3. Co-operative Banks can act as clearing agent for cheques, DDs pay orders and other forms. 3. Society cannot act clearing agent, for cheques, DDs, pay orders and other forms. 4. Banks are bound to follow the rules, regulations and directions issued by Reserve Bank of India (RBI) 4. Society are bound by rules and regulations as specified by in the cooperative societies act. Filing of returns Co-operative banks have to submit annual return to RBI every year Society has to submit the submit annual return to Registrar of Societies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not a cooperative bank in terms of Section 80P(4) of the IT Act, shall hold the field and shall bind the authorities unless held otherwise by the Reserve Bank of India. In the result, the above questions are answered in favour of the assessee and the present appeal of the revenue is dismissed. 2. ACIT vs. Palhawas Primary Agriculture Co-op. Society Ltd., (2012) 23 taxmann.com 318 (Delhi), wherein, the Tribunal held as under :- Head Notes : The assessee was a registered agriculture co-operative society carrying out banking activities like borrowing, raising or taking up money and lending or advancing money for the purpose of agriculture, sale and purchase of seeds and fertilizers, etc. It was accepting deposits from non-members also. However, credit facilities and supply of seeds, urea, etc. for the purpose of agriculture were given only to the members of the assessee-society. The assessee claimed deduction under section 80P(2)(a)(i) and 80P(2)(a)(iv). The Assessing Officer rejected the assessee s claim holding that income of the assessee was not attributable to the qualifying activity of carrying on the business of banking or providing credit facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese activities are entitled for deduction. On the basis of foregoing discussion, the AO was not justified in disallowing deduction on this sole ground that the income declared by the assessee includes income from business of banking from its non-members because there was no income from the same activities as the assessee accepted only deposits from nonmembers on which the assessee bank was under obligation to pay interest, therefore, these deposits from non-members, in any way, never brought any income to the assessee. Accordingly, the Commissioner (Appeals) rightly allowed the deduction and accepted the appeals of assessee societies and there was no reason to interfere with the impugned orders. 3. Sikar Sahakari Bhoomi Vikas Bank Ltd. vs. ITO, (2016) 69 taxmann.com 356 (Jaipur-Trib.), wherein, the Tribunal held as under :- 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 inserted to provide that the provisions of the said section shall not apply in relating to any co-operative bank other than a primary agricultural cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Therefore, we reverse the order of ld. CIT(A). Assessee is entitled to deduction under section 80P(2)(a)(i) of the IT Act. 10. Ld. counsel further submitted that in earlier year Revenue has allowed deduction 80P and, therefore, following the rule of consisting also, the assessee should not have been denied deduction u/s 80P. In this regard, He referred to the assessment order for assessment year 2009-10 contained at page 109 of Paper Book, wherein, deduction u/s 80P had been allowed to assessee. 11. Ld. DR submitted that assessee was carrying on banking activity as it was receiving deposits and providing credit facilities to its members. He referred to ld. CIT(A) s order and pointed out that it was evident from the conduct of assessee of charging interest @ 12% from its employees that it was primarily carrying on banking transactions. He submitted that the case relied upon by assessee are with reference to banking licence which is to be decided by RBI. 12. I have considered the submissions of both the parties and perused the record of the case. There is no dispute about the nature of activity carried on by assessee viz. providing credit facilities to its membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct interpretation is to be made. 14. Now coming to section 5 of the BRA. This reads as under :- 5. Interpretation (In this Act) unless there is anything repugnant in the subject or context 15. This implies that the terms defined in section 5 shall have same meaning throughout the Act unless the context otherwise requires. Therefore, the term banking as defined in section 5(b) cannot be understood in any other manner throughout the Act other than as defined in section 5(b), which reads as under :- 5(b) banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; 16. Admittedly, this condition and also other aspects, as noted above, in ld. counsel s argument have not been fulfilled in the case of assessee and, therefore, at the very threshold it can be concluded that the assessee does not come within the ambit of term banking . For a co-operative society to come within the ambit of section 80P(4), it is necessary that it should come within the term banking as mandated under BRA. On examination of the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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